Why Investors WANT Startups to Lose Money - Startups 101
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- เผยแพร่เมื่อ 20 ก.ย. 2024
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Why does everything you learned in Business School would NOT apply to the reality of startups?
For example, investors WANT startups to lose money; they say profits are BORING. What?!
Check out this video to understand this apparent nonsense.
#slidebean #startups #fundraising #startingabusiness
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Caya
Twitter: / cayahere
LinkedIn: / caya
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Did you realize you completely contradict yourself halfway through this video right... Venture capitalists selling their company within 7 to 9 years It's quite a long time for a return. I know business owners that got alone and paid off their loan within 3 to 6 years... By the way regardless of how the profit is made in general business or through the selling of stock. Taxes are collected. A venture capitalist still has to pay capital gains tax when the company is bought.... The only option for venture capitalists to avoid taxes is by not selling their stock after The company goes public or buyout... A venture capitalist might choose to take a loan out against the stock of the recently IPO company. That is the way to get around capital gains tax.... You're 100% contradicting your statement at the 10 minute mark. Thanks for making me aware any bs artist Can get money from venture capitalists. I also reported this video for misinformation because it is You're wrong. The information you are regurgitating is flat out incorrect.
I love how you're ignoring capital gains tax.
I know I keep saying this and am somewhat of a broken record now but this is BY FAR the most undervalued company and content. I am giving you guys a standing ovation
SAME
What are you talking about He's completely wrong a venture capitalist would still have to pay capital gains tax. At no point in time has anything this person said in the video made sense or been coherent. You should report this video for misinformation cuz that's what it is.
the A in EBITDA refers to Amortization and not Appreciation as referred to in the video. But great work overall !
This dude forgot about capital gains as well.
The “A” In EBITDA stands for Amortization not Appreciation - minute 3:54
So, if you can't beat them, buy them
If you can't make profit, be bought
If you can't scale, become a sale
Startups are so much fun😆
They're a wild ride for sure 😅
For short, they want market share. In beginning stage, they need to focus on more advertising to get more market impressions aka eye balls or brand awareness and build a good base of customers until the final stage of actually making money. Cheers happy learning
EBITDA is Earnings Before Interest Tax Depreciation and Amortization.
Note the A is Amortization not Appreciation as mentioned in the video.
I thought 💭 I was the only one who picked up the error!
When you realize just how much taxes come out of a lottery win of 1.8 billion dollars, once at the start, then again when you get the bulk amount, then again when you do the taxes for the next year. The government needs to step that back severally. I can see why that is a problem. I mean, I got $150K and that leaves me $94K? That is shameful.
It's a bit surreal to see this video being released in 2022, after the market collectively decides that high growth companies with negative profit deserves 1/5-1/10th of their 2021 valuation. There's something to be said about the exuberance surrounding VC and IPO'd high growth companies that is very much unprecedented and is largely accommodates by the extremely low interest rate.
Also, there are investors/funds who buy out the boring businesses as described by the video. Those are called private equity funds, and private equity are still much bigger than venture capital funds even in VC's heyday.
Slidebean, the place were we could all came to learn how to build a startup, thank you for democratize a topic that is unknown in poor countries, how to build a startup, and learn to do it well.
Fun to mention Instagram was bought with pre-IPO FB stock. (Typically tax-free until they cash out.) So possible they realized a further upside, though VCs probably begin taking cash once there's that "liquidity event"
Capital gains tax... Regardless of when this liquidity event happens the VCs and early investors still have to pay capital gains tax... Their taxed either way through profit or through capital gains... This video is 100% incorrect and this kid's lying and it's kind of sad how many of you think that this is a good video.
This is so motivating information for founders who are so much worried about the revenue from their brilliant but budding products. Honestly so useful/relaxing information mate!
It's motivating cuz it's incorrect venture capitalist and investors still have to pay capital gains... They're not avoiding taxes in any way shape or form.
This is an excellent realistic and believable economic summary of the startup value reality. Another well done educational content. Thanks from down under.
Lol did I just see a Paw-Paw meme at the start of this video? 🇳🇬 ✌🏾
Lol! We global fam
@@emmanuelorilade2025 Naija 🇳🇬 to the world 😂
Global shiiii
bro paw-paw don turn global celeb oh! 😂
Damn! He got my attention too🤣
I have to watch more of your vids to learn this raising money and expanding business. You know your sht my friend. More power to ya.
Amazing video,It shifted how I look at owning my own business
Forgot to mention that Vcs like companies to lose money because they then have to go back raise money within 12/18 months and sometimes the startup has to take the VC's terms. Not much room for nego. And the vc will bring its friends.... So it compounds the loss of control
Pulse Business Software is a good SaaS service to look at.
A great model for Market Burst again and again.
This was a terrific video! Very engaging and informative content. Ancillary question as we are part of a unicorn start-up... noticed there's an online retail component via the Slidebean shirts. Did you guys need to register to do non-SAAS business in selling physical products in all 50 states and remit sales tax in all 50 states given online sales can come from anywhere? There should be economic nexus however I'm curious if there are reporting and remitting obligations in states that you don't reach economic nexus in? Most online literature is for individuals, but not for large companies with SOC-1 & 2 compliance standards as it's difficult to find peers. Thanks!
this video has excellence information regarding how VC "betting" works.. kudos!
do a video on how Companies that create free software or Open-Source software make profit
Dividends is tax as capital gains after the first year. Capital gains has a maximum tax rate 23.4. So they would have additional 101878 in income
Slidebean >>> business school 🙌
We have a saying: who was last, he's the father.
In this case stupid one is the last to invest.
This is a bubble, as the system is based on infinite growth. While I like money, I don't think this is sustainable.
As a cult survivor, who's been looking at multilevel marketing schemes, it seems to me that venture capital uses many of the same strategies and tactics as many other fraudulent businesses, but since it's rebranded, has a slightly different legal structure, has less reputation and thus negative press, it gets away with doing things that just wouldn't be accepted in other places. "It's not a fraud" ver. 5.8 out now! if it was created 200 years ago, it would've been called the LDS church.
Seriously though, if this is the best capitalism can come up with nowadays, it just stands to reason that so many more people are going to become anti-capitalist, as it becomes ever more clear that the cruelty is the point.
Amazing video, helped me determine if i want to work for a startup or legacy
Liquidity isn't the only incentive for VCs to put startups on a path to run out of cash. It's also forcing another round in a 12-18 month window, marking up their investment and bolstering their sales pitch for raising more funds and collecting more fees.
What's more, only 8% of VC backed startups are expected to generate nearly 100% of the return.
VCs want you to swing wildly and almost certainly miss.
Thanks a lot for this video, it was a missing piece for me to choose my own way forward!💃
Glad it was helpful! Let us know if you ever need any help from us :)
A lot of the points presented here about the virtues of venture capital, the exact same points raised in your video "Why Recessions Happen" as negatives.
"Investors can't wait to exit", "owning a company and not doing an exit is cute". As a veteran of AR development put it: "What we have right now is a whole bunch of companies building technologies for someone else to use".
Take Google Cloud Platform. it was born for Google's own use, it now helps run TH-cam.
Take AWS. Same story.
Office. Same story.
These are "real" technologies. Things that Company A makes, to make Company A more efficient and more productive. They're not making these technologies for someone else to maybe/somehow find a purpose.
The startup-VC pipeline will be the cause of a recession. You've outsourced your ethics.
You are a good explainer. That is a great talent!
You didn’t mention reinvesting the cash
Such great content - consistently. Your channel is so dialled into subjects, lessons and details that founders like myself just absorb. We relate to you, because we know for years, you've been pushing hard, and that in turn keeps us pushing hard. Keep going. You got this.
Thanks for the kind words Brennon! We're just trying to share some of the information and experiences we've acquired on our journey, and hopefully, there's something valuable for other founders!
@@slidebean 3:51
EBITDA is
Earnings
Before
Interests
Taxes
Depreciation and
Amortization (NOT “Appreciation”)
Great!
Thank you guys for the Video
So in short, there are multiple ways founders and investors are benefitted other than profits when companies are buyed out.
This is why I’ve moved away from “startups” and focused more on small business. This double taxation can be avoided in several ways. And, frankly, this scheme relies on infinite growth. Which, is just unrealistic. At least, if you are going to stay in one market.
I’d rather build some conglomerate that is sustainable. I can reduce taxes by using some holding/operating company structure and loaning money from one company to another, which I think is much better than just not having a safety cushion in case of a recession. Having reserves also will give you the capital to scoop up other companies during bad times further expand your conglomerate.
You can still get acquired and/or IPO with this. Though I will admit it’s not as sexy.
And this is healthier for the economy also. when you grow you will create more job and more wealth, those ventures when they grow they create more greed and more speculation and more pocker tables.
@@marwenbenhadj6878 Notvto mention once you get to like $10M, the difference between that and $100M or $1B is just a few zeros. To buy whatever you want doesn’t eeally take as much money as people think.
Anything over that, you’ll use for investments or acquiring other companies. Or, if your like me, I wanna do a lot of R&D on some really cool stuff.
Excellent video. I thought I understood VCs before, still this video brought home a lot of life changing lessons.
Why are so many people obsessed with the video that's incorrect... It's kind of sad all of you clearly have no concept of capital gains tax.
I prefere the previous thumbnail that was on this video, lol.
Nice vid of course
I stumbled upon your channel and I have to say, you are a great guy. You have very interesting vids and I have to admit, that as a narrator you are far better than me.
Awesome insights and the video editing seems so cool with the financial analysis for better visual representation. Can you launch a course on how to edit videos like you?
I've noticed success has waaaaaaaaaaay more influence over your life than failure. I guess they live by that in silicone valley.
Great video, very informative
😍 Wow! Thanks for clarifying!
I am learning from your expérience. Great vidéo, full of valuables and Helpful idéas.
awesome you back as narrator
im a startup founder, owning 51% shares, raised some funds from investors and they also act as co founders. now i want to know who owns the money in the bank, what rights do we have over that money and how do we use it for business and personal use. thanks
Another interesting parallel with VCs/Startups and Tulipmania: Just like Kalvinists banned the outward expression of wealth, national economies have banned the insurance of savings accounts above certain thresholds. For example in EU that threshold is 100,000€. So you have a lot of private equity that's forced to be spent in stocks and bonds, which ends up managed by hedgefunds and VCs, and spent in startups with a mediocre or no future. Edit: And the bubble will pop only if people need their cash and have to sell in order to survive. Which many will, because currently everyone is a genius on the stockmarket.
Yup sounds about right, the counter argument to a stable currency ( with close to 0 inflation over a long period of time) and of course a system where you can get a decent return on saving accounts, is that people will not have any interest to invest. But, there also is the argument that by forcing investment by the constant depreciation of the currency, you are just inflating the whole market creating bubbles everywhere. The motivation for investment is no longer that after studying the market and one or more companies, you found some investment that you believe in, you take the decision to risk money in the search for gains. No, in the current market, you are forced to invest in something, and for more people ETF's are the solution, but if you think about it, they just distribute investments across the whole market, rising the price of everything...
Great episode 👍
Don't tell me this is all from his head without a script.
Cos this feels like a conversation with a friend
Discovered lately this channel
Recommended by mentor
Haha
Thanks both of you
4:11 That's 56 million 250 thousand net margin not 500k
exellent presentation! very staright forward
I learn so much from this channel, really helpes me relate to my courses
Glad we're able to help!
Now the FTC is preventing META from buying AR/VR companies so they dont destroy competition. Caya maybe I vote for a similar video to be done so we get this translated into Slidebean lingo
It's to get the startup to obtain more users and retain them right? Please someone confirm, don't wanna watch
You are amazing bro, learning a lot from here.
🫶🏼
- Caya
Excellent insights and great production
Gezz it sounds much easier to get a loan/credit card and fund it yourself... This whole investing thing is insane
That quip example I really didn't get it. 750 millions for ... a suite?
Rushed over for the office hours please😂
Here; app.slidebean.com/experts
Does a startup state in their business plan that they aim to be bought out by a competitor? And how can it prove the likely hood of this to happen?
Not typically in their initial business plan and what they present to their investors. Many startup founders do have an exit strategy but don’t advertise this
Super informative! 💯
Thank you Caya and team. Our exit strategy is IPO in 10 years
I am inspired
Good content but the title is misleading
Maybe your missed out on Taxbreak
Or perhaps VC depends a lot on speculative value of a company due to low interest rates and fewer public companies to invest in. This depends on finding someone else to buy it for a greater perceived valuation than the last investor… all the way to an IPO where the public holds the bubbly assets while the VCs exit profitably. An acquisition is the next best outcome but often not the optimal.
We are already seeing as interest rates rise and bubbles burst, VCs are now demanding a short road to profitability from founders or not get another round. Kids, if you want to learn more about the VC scene, read “The Cult of We” by Eliot Brown.
Video is very amazing gotta watch it 5x
love it
If you want a proper explanation watch patrick boyle's video on blitz scaling.
SUMMARY (if you don't have 20 minutes): Some startups prioritize growth and market share over profitability in the early stages of their development. The thinking behind this strategy is that by acquiring a large user base and dominating the market, they will be able to monetize their user base in the future through advertising, subscription revenue, or by selling the company. Additionally, some startups may have a long-term vision that may not be immediately profitable but has the potential to generate significant revenue in the future.
Very nice video well explained 👏👏
man just loved it
Pass the buck with better golden platting
Did that title change?
Great video
You’re a badass and I love watching your videos
VCS are supposed to take startups to a higher level. Not otherwise.
Another first-league class.
Love you platonic - hair is a product of the flow of brain juice - obviously. So it has context. I just got rid of most of my facial hair. Left the goatee. Started shaving clean. And my chin looks similar. I get a lot more respect in lines now. I was drawing allusions to Ted Kazinsky. Nice.
Thank you very much, Caya, for another extremely good video!
Uploading at 5am ain't the move
Gems 💎 🇬🇧
I came here to learn how to invest after listening to a guy on radio talk about the importance of investing and how he made $960,000 in 4 months from $160k, somehow this video has helped shed light on some things, but I'm still confused, I'm a newbie and I'm open to ideas.
Investing in stocks is a good idea, a good trading system would put you through many days of success.
It is possible to produce superior performance provided you do something different from the majority. However, most of us tend to pay more attention to the shiniest position in the market to the cost of proper diversification.
Interesting. I have a lump sum doing absolutely nothing at all in my bank account, I wanna get something started with it. You seem to be doing excellent for yourself, how do you achieve this?
@Erica Stewart Hello Do you trade on your own?
@Erica Stewart That's impressive. Are you giving her your money or the money stays in your trading account? What's really the idea behind copying trades.
One of my favourite video
I don't think I can make it through this video
Top video! Keep it up
Glad you enjoyed!
Y combinator watch your video dude 🔥
You should make a startup 101 Course man!
I think he actually has one.
Did you changed the title?
Rev Share with a cap is an option.
Great video!
So after watching almost the whole video with no answer. It finally came:
19:00 startup investing is extremely risky
Now this is still not a clear answer and there is no clear answer in the video.
Venture Capitalists want startups to lose money because: they are looking for a high risk high reward situation. They are not looking for startups that will slowly grow their profits.
I don't know about other people. But when a video starts with a question I have that question in my head the whole video. And I am paying attention to what the answer will be and what the explanation around it is. Everything else that is not relevant will be filtered out. So I know you had some stuff about how much money you would earn in certain situations. But that was not relevant. Essentially, you talked for 20 minutes but barely answered a pretty simple question.
You hinted to a lot of subjects I would find interesting. But I got zero insight into anything you were talking about.
Well the answer is there even if you didnt like it: investors prefer to have a high-growing company that can be sold to future investors or the public, if it´s profitable it´s irrelevant.
Watch Silicon Valley
@@Galopo 👍🏾👍🏾
😂😂😂Awesome content bro🇳🇬
Basically, it is all pump and dump.
I will gift you comb next time
Can they not get some money back from state for failing start-ups they invested in? I mean isn't there a mechanism for this that makes the risk even tinier...
Why discrimination Crossed out ?
Thank you Caya for explaining this concept so beautifully, I never considered acquisition for the purpose of acquiring a team. Wonderful stuff man!
Did I just see Paw-Paw's meme? 😂😂
Great!
"This is business"