James Samuels's Linkedin Analytics

Startup sells for $50M. Founder walks away with $0. Wait, what? Yeah… welcome to venture capital, where everyone gets paid 𝗯𝗲𝗳𝗼𝗿𝗲 the person who actually built the thing. Let me break it down for the first-time founders out there chasing headlines and term sheets like it’s Coachella: Here’s how it happens 👇 💸 𝗟𝗶𝗾𝘂𝗶𝗱𝗮𝘁𝗶𝗼𝗻 𝗣𝗿𝗲𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 VCs get their money back first. You raise $20M? They get that $20M before anyone else sees a dime. Sometimes they want 2x back. That’s $40M off the top. 💀 𝗣𝗮𝗿𝘁𝗶𝗰𝗶𝗽𝗮𝘁𝗶𝗻𝗴 𝗣𝗿𝗲𝗳𝗲𝗿𝗿𝗲𝗱 In some deals, investors get their money back and still participate in the remaining proceeds like common shareholders. Basically, they double dip while you hold the empty bag. 📉 𝗗𝗶𝗹𝘂𝘁𝗶𝗼𝗻 You raise too many rounds, your 50% becomes 5% becomes “hey, what happened to my company?” ⚰️ 𝗘𝘅𝗶𝘁 𝗕𝗲𝗹𝗼𝘄 𝗟𝗮𝘀𝘁 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 You raised at a $100M valuation, but your exit is $30M. That $30M barely covers your liquidation stack. You’re getting zero. 🧑‍⚖️ 𝗕𝗼𝗮𝗿𝗱 𝗖𝗼𝗻𝘁𝗿𝗼𝗹 VCs often control the board. If they want to sell and you don’t? Tough. If they want to block a sale you do want? 𝗔𝗹𝘀𝗼 𝘁𝗼𝘂𝗴𝗵. 🧾 𝗦𝗮𝗹𝗮𝗿𝘆 𝗖𝗮𝗽 You’re now the CEO of a funded company… 𝗯𝘂𝘁 𝘆𝗼𝘂 𝗻𝗲𝗲𝗱 𝗽𝗲𝗿𝗺𝗶𝘀𝘀𝗶𝗼𝗻 to give yourself a $10K raise. And if growth slows? They’ll tell you to 𝗰𝘂𝘁 𝘆𝗼𝘂𝗿 𝗼𝘄𝗻 𝘀𝗮𝗹𝗮𝗿𝘆 while they protect their investment. So how do founders miss this Because nobody talks about this stuff 𝗘𝘃𝗲𝗿𝘆𝗼𝗻𝗲’𝘀 𝘁𝗼𝗼 𝗯𝘂𝘀𝘆 𝗳𝗹𝗲𝘅𝗶𝗻𝗴 on LinkedIn with: “Just closed a $5M seed 🙌 grateful and humbled blah blah” Meanwhile, they signed a term sheet — 𝘁𝗵𝗲𝘆 𝗱𝗶𝗱𝗻’𝘁 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱. Why? Because they needed more runway! Valuation? Great. Terms? Disaster. → 𝗿𝗲𝗮𝗹 𝘁𝗮𝗹𝗸: Raising VC is a trade Not a trophy You’re trading control, terms, and upside And if you don’t understand what’s in the deal… → you’re not the CEO → you’re the employee 𝘄𝗶𝘁𝗵 𝗮 𝗳𝗮𝗻𝗰𝘆 𝘁𝗶𝘁𝗹𝗲 Need examples? 𝗙𝗮𝗯.𝗰𝗼𝗺 – $330M raised, $1B+ valuation, sold for $15M 𝗝𝗮𝘄𝗯𝗼𝗻𝗲 – $900M raised, zero return 𝗦𝘂𝗴𝗮𝗿𝗦𝘆𝗻𝗰 – $50M+ raised, sold for < $10M 𝗖𝗼𝗹𝗼𝗿 𝗟𝗮𝗯𝘀 – $41M raised, shut down, founders walked away with nada Before you raise… know the stack Understand the game → ask yourself: “What happens if we don’t hit a billion?” Because exits don’t always mean freedom. Sometimes, they’re just 𝗮 𝗿𝗲𝗮𝗹𝗹𝘆 𝘄𝗲𝗹𝗹-𝗽𝗮𝗰𝗸𝗮𝗴𝗲𝗱 𝗳𝗮𝗶𝗹𝘂𝗿𝗲 🧠 Founders: want to build something that lasts and still keeps you in control? 𝗗𝗼𝗻’𝘁 𝗷𝘂𝘀𝘁 𝗿𝗮𝗶𝘀𝗲 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 𝗥𝗮𝗶𝘀𝗲 𝘄𝗶𝘀𝗱𝗼𝗺 𝗳𝗶𝗿𝘀𝘁 ~~~ Follow Gerald Duran for daily startup and VC insights—plus the occasional kick in the nuts. → To land a meeting with us, start here: CanaGlobal (.org) #startups #founders #venturecapital #entrepreneurship

"I'm shutting down after raising at a $85M valuation. My biggest mistake? Taking the highest valuation." A founder shared this with me over coffee last week as he prepared to lay off his final 45 employees. After 6 years, 3 funding rounds, and countless sacrifices, his journey was ending not with an exit, but with a wind-down. This is the valuation trap that's claimed more startups than anyone talks about. Here's exactly how it happened: - Started with reasonable seed round ($3M at $15M cap) - For Series A, had 4 term sheets ranging from $12M at $50M pre to $15M at $90M pre - Chose the highest valuation, generating massive PR and industry buzz - Subsequent product delays (normal startup turbulence) - Suddenly needed to raise again, but at 2X the previous valuation - No takers at the new price, no appetite for a flat or down round This is how your company dies. "I thought the higher valuation was validation," he told me. "Now I realize it was just a noose tightening around my neck with every setback." The rarely discussed truth: a large portion of his cap table was filled with momentum investors whose entire strategy was simple: - Inject capital at high valuations - Hype the company to their VC friends - Flip to the next investor at an even higher price Repeat When that music stopped, these investors vanished. No support, no help, no follow-on capital. Founders see high valuations as validation. Smart founders see them as expectations that must be met - or else. I've now watched this same scene play out with 5 different companies in my network. One founder put it perfectly: "I didn't realize I was being set up to fail until it was too late. That $80M valuation wasn't a compliment - it was a hurdle I could never clear." The often-ignored wisdom: - Valuation is not validation - it's a promise of future performance - Choose investors for the down rounds, not the up rounds - A reasonable valuation gives you room to stumble and recover The right investors at the right valuation will stick with you when things get hard. The rest will just move on to the next shiny object. #StartupLessons #VentureCapital #FounderAdvice