"You think of the offer of cram down funding as a lifeline, but they’ve handed you a noose." Uh oh, cram downs are back. 😬 “While a few cram downs have been turned around (though I can’t think of any), given you haven’t found enough customers by now, the odds are you’re never going to be a successful enterprise. Your cram down investors will likely sell your technology for piece parts and/or use your company to benefit their other portfolio companies.” 🎯 Steve Blank nails it. Off the top of my head I can’t think of any big comebacks that came after a cram down. If that’s the offer on the table you’re likely screwed. https://lnkd.in/eVQ6hrVY #venturecapital #vc #startups #entrepreneur #entrepreneurship #funding
Thanks for sharing. It‘s probably the return of economic principles Part 3. In a conversation 7 years ago I was a bit puzzled when a VC got angry after me talking about enjoying building functioning business models with founders. „Investing is an arbitrage game“, he explained „it is not about business models. It is about selling shares at a higher price.“ Now that the FED ends the party probably it will be about product/market fit and positive FCF again for a few years.
I have been involved in a few cram-downs that went on to great success. 8 years after we crammed down Redlen while I was at Pangaea (which was itself 12 years after I first looked at the deal when I was at Mitsubishi), we sold the company to Canon, realizing a high return on our investment and even returning the capital of the investors who got crammed down.
Can you explain what this is, not familiar with this term
Great article by Steve Blank thanks for sharing Michael Jackson. Big fan of Steve and team at BMNT, Ltd. & BMNT
Silly me thought they never had gone away but remember when they were common occurrence.
Just here for the dodgeball meme LaFleur
Cofounder & CEO of SiliconANGLE Media; Executive Editor SiliconANGLE.com and Host of @theCUBE
2yIt's that time in the cycle for downturn mania. My observation and experience in down markets is that VCs led companies will react to press and market pressure differently than founder led companies. If the founder isn't in control the VCs will get scared and will move too soon to a down round. If founder is in control then more likely the company will navigate the waters of shifting markets. Experienced VCs have the playbook down - when valuations are high raise as much as you can to survive which means get that product/mkt fit and customer revenue moving to cash flow positive.