Yesterday, we publicly announced the news. We’ve raised $2 million from Mohr-Davidow Ventures and a couple of private investors for PBwiki, and I wanted to let you all know here, too. If you wonder why sometimes I don’t post for a few days, this is pretty much why.
- The first place it was announced (Valleywag, a Silicon Valley gossip blog)
- The official announcement on the PBwiki blog (we like to keep it short)
- The TechCrunch article with lots of interesting comments
The funny thing is yesterday, we were looking at our bank receipt, and there’s like a $4.25 charge for Doritos (or something), $18.00 for Target, then a Very Large Number with a Lot of Zeros.
The basic way venture capital works is this: Some professional investors come along, decide they like your company, and offer to give you money in exchange for a percentage of the company. The percentage they take is the result of negotiations between the company and the VC to determine the valuation. In general, early-stage VCs hope to make ~10x their money back in a few years, but they also assume that out of 10 companies, maybe 5 will fail, ~3 will trade sideways (i.e., basically do nothing), and maybe 1 or 2 will be a big hit. This is after seeing hundreds of companies and investing in only the chosen few. But the return of that One Big Company is enough to take the risks of investing in these very, very early-stage companies like us. And it allows us to hire people to execute on things we want to do. That, plus buying BENZES FOR EVERYONE!!!! No, not that.
As an interesting sidenote, here’s a little-known fact about venture capital: The average VC underperforms the market, just like a mutual fund. (Data taken from some research done at UCLA a couple years ago that I can’t find right now, but I can.) This doesn’t apply to top-tier VCs, who usually crush the market. When you tell VCs this little tidbit, their faces turn into what may most closely resemble a pumpkin after having hydrochloric acid poured on it. It’s quite funny. I didn’t try this with our VCs, though. Yet.
I probably won’t post too much about venture capital on this blog since it’s pretty esoteric and I’m still learning a lot of it, but I thought I’d let you know what else I’m up to. And congratulations to our whole PBwiki team for getting this far. There’s nothing like working with people who are the best at what they do.
Related: And then what?