It’s that day.
It is the company meeting where the CEO and management team stand up before you, the valuable employees, and announce they have closed a new equity round, perhaps round D, E, F or G.
Here are the comments from your management and the VC, followed by the translation:
CEO: “We are really pleased that XYZ Ventures has invested in our company because they share our vision, our values, our direction and want to be a part of it.”
Translation: XYZ Ventures. Ever heard of them? Probably not. The reason you have never heard of the VC is because they are a bottom feeder and they could not get into a really cool, A round, hot, high payoff deal. Why didn’t your CEO pal there get Sequoia, Accel Partners, Andreesen? Ask him. If this deal is so hot, why crap VCs?
Translation: “share our vision, culture, values, direction.” Right. Like they care a bit about that crap. They only looked at your juiced up Salesforce forecasts and saw they could lock you down with preferences so even if you did not hit those made-up numbers, they could still take all the dough off the table if they could get you sold in 2 years or less.
Translation: “share our direction.” Look, you have not made a profit in 7-8 years. What direction did they like so much? That black hole? No, they saw that the space is getting hot and the A Tier VCs are getting into the profitable companies, so they know everyone will be in play. Even that crappy place you work. The top VCs are in A rounds. The low end VCs are in E, F, G rounds, like yours. No, they did not care about your direction. They are following the herd who did NOT invest in you — who invested in your competitor.
CEO: “During the process, we met many times and shared our vision for market leadership. We really clicked and though they asked very tough questions, they bought into what we have been doing and wanted to be part of our family.”
Translation: The VCs came and visited after you begged them and 20 other VCs to invest. Your existing board, knowing they could not invest and keep the valuation the same, got some other bottom feeders who invest in crap E, F, G rounds to pony up. Yeah, there were a lot of meetings, but more to figure out if they would keep the management team who has not made a profit in 7 years. They also wanted to see if you told the same story more than once.
Translation: (VC Partner Meeting): “We are going to throw some dough into the F round of this 7 year, unprofitable company. These guys have been at it a long time and haven’t made a dime. BUT, the A Tier VC guys just made an investment in their competitor so the real estate across the street, even if it is a dump, is now more valuable. We can link to the success of the other guy and get a pretty good return if we can flip this baby in 2 years or less.”
CEO: “This investment will give us the chance to continue our market leadership, provide great working environments for our employees, who we love, and exert market dominance.”
Translation: “I get to keep my CEO job a few more quarters. Phew! Almost had to get a real job doing something that produced a profit. We will have paychecks for the next two years. We will now build another web site to tell the world what we do.”
Venture Associate to Company Meeting: “We were really excited to make this investment. We think the space is really exciting and we know you are going to dominate it. We want to be part of that. We invested in great part because of your fantastic management team.”
Translation: The venture partner is too busy to come to your meeting so they send the grunt, who is called an associate. This is what he says at all these company meetings.
He is really thinking that your competitor just got $50 million in an A round from a Top Tier VC. Thus the space is hot. We are a crap VC and can only get into D, E, F rounds and this one is about the only game in town. We also gave the members of your management team more stock options because we do not want anyone to quit. We, of course, did not give you, the employees more options to make up for the 40% dilution you just took. But, be happy, you do have a job after all.
CEO: “You, our employees are our most important asset and we made sure the investors saw that. They were so impressed with what they saw.”
Translation: You the employees are the ones who just took a 40% haircut in equity. We, the management team got more stock so we could screw you and it would not feel so bad.
Your stock options are now worth much less than yesterday, but you have to work just as hard. We really care that you think we really care about you. So we valued the cost of some free lunches, cool T shirts, free beer on Fridays.
We have internal HR people who will tell you how great you have it because of our culture. But, stock options? You are screwed on those but since we never tell you their real value anyway, who’s to know?