David Frankel

If I said to you like, you know, for $10 million, like give me an option to buy 10% of 20 VC and I can decide if I want to do it or not. You wouldn't in a million years, right? But you've had to learn that. The amazing thing about entrepreneurs is they give pro rata. It's like the superpower thing for VCs. And I think it is terrible, terrible for entrepreneurs. You're selling options against you.

If I said to you like, you know, for $10 million, like give me an option to buy 10% of 20 VC and I can decide if I want to do it or not. You wouldn't in a million years, right? But you've had to learn that. The amazing thing about entrepreneurs is they give pro rata. It's like the superpower thing for VCs. And I think it is terrible, terrible for entrepreneurs. You're selling options against you.

So standard operating procedure is, you know, later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you, you know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for X, Y, Z?

So standard operating procedure is, you know, later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you, you know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for X, Y, Z?

So standard operating procedure is, you know, later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you, you know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for X, Y, Z?

And if you're doing great, if your revenues, if your rule of 20 is like, your rule of 40 is off the charts and you're doing great, amazing. Pro rider doesn't matter. If you're struggling, pro rider is terrible. Why is it terrible if you're struggling? Because you go to the market, you're a stalking horse for XYZ lifetime fund that's on your cap table already.

And if you're doing great, if your revenues, if your rule of 20 is like, your rule of 40 is off the charts and you're doing great, amazing. Pro rider doesn't matter. If you're struggling, pro rider is terrible. Why is it terrible if you're struggling? Because you go to the market, you're a stalking horse for XYZ lifetime fund that's on your cap table already.

And if you're doing great, if your revenues, if your rule of 20 is like, your rule of 40 is off the charts and you're doing great, amazing. Pro rider doesn't matter. If you're struggling, pro rider is terrible. Why is it terrible if you're struggling? Because you go to the market, you're a stalking horse for XYZ lifetime fund that's on your cap table already.

Everybody's going, I'll price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it, So I remember, I think of Coupang and Coupang went to Sequoia and said, look, it's a 4 billion pre. BlackRock will put in a billion. You don't get your pro rata.

Everybody's going, I'll price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it, So I remember, I think of Coupang and Coupang went to Sequoia and said, look, it's a 4 billion pre. BlackRock will put in a billion. You don't get your pro rata.

Everybody's going, I'll price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it, So I remember, I think of Coupang and Coupang went to Sequoia and said, look, it's a 4 billion pre. BlackRock will put in a billion. You don't get your pro rata.

When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the later stage investor goes, I want 20% ownership. And your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think pro rata is great for entrepreneurs.

When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the later stage investor goes, I want 20% ownership. And your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think pro rata is great for entrepreneurs.

When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the later stage investor goes, I want 20% ownership. And your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think pro rata is great for entrepreneurs.

I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone. But I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Kopperman, there was a time where he would say, I'll give you $2 million uncapped note ahead of the next round.

I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone. But I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Kopperman, there was a time where he would say, I'll give you $2 million uncapped note ahead of the next round.

I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone. But I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Kopperman, there was a time where he would say, I'll give you $2 million uncapped note ahead of the next round.

A lot of this was in his portfolio already where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are literally uncapped checks.

A lot of this was in his portfolio already where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are literally uncapped checks.

A lot of this was in his portfolio already where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are literally uncapped checks.