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PBwiki raises $2 million

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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.

PBwiki Small Logo

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?

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  1. Congrats (guys). You deserve it. I can’t wait to see what you do with all those zeros. 😉

  2. Congratulations Ramit. I use PBWiki for our team on a near-daily basis. Love the rich-text editor

  3. I would be interested to know some of the non-proprietary information you can share about the discussion you had. For example, I suspect they asked you explain your market advantage over free wikis as well as If you could respond here, or in a new posting I would find it quite interesting.

  4. Congrats Ramit & the PBWwiki team!!
    I would love to read more about Venture capitalism & Entrepreneurship on this blog:)

  5. Congratulations! Now you can go buy another new BMW 🙂

    There’s two models of getting rich that seem to prevail in blogs – the scarcity model where you live like a hermit and save your way to wealth and the prosperity model where you create new value (and wealth). I prefer the later and you seem to also.

    Good luck (BTW – I have several wikis in PBwiki and love the site)

  6. Congrats Ramit. I hope PBWiki is one of the homeruns for MDV, because that means you’ll probably be stinky wealthy too.

    You mentioned that VCs decide they like your company. I used to help entrepreneurs make VC pitches in the old days. It was rarely the case that the VC found you, mostly the entrepreneur had to chase the money. Was that the case here? The other thing is that sometimes the VC really took over parts of the business. Is the money coming in with few strings attached or will they replace/augment your management team and drive product direction?

    Would be neat to hear about that kind of insider, non-secret news; maybe in a different blog I guess.

  7. Congratz Ramit and PBwiki.

    I wonder with VCs how many are really in it for the money? I figure that most of the people in the job really want to make a ton of more money, but from what I understand, you don’t really get to be a VC partner until you’ve already hit is big and have plenty of money and personal success. So, that makes me think that a large portion of being a VC is helping others like you before you made it big climb up that ladder. Most won’t make it, but the enjoyment of working with that type of person is enough to compensate when the average VC doesn’t. Just a thought.

  8. Congrats! I’m so happy for you and your team — well deserved :).

  9. I feel like I’ve told you this myself earlier today, but in case I haven’t, congrats! You guys deserve it, and few people know better than I do how hard you guys have worked to get to this point.

    “So, that makes me think that a large portion of being a VC is helping others like you before you made it big climb up that ladder. Most won’t make it, but the enjoyment of working with that type of person is enough to compensate when the average VC doesn’t. Just a thought.”

    That’s a mighty generous view, but I’m going to hope you’re right, because I’m always cheered by the prospect of people aiding each other like that.

  10. I read about this on TechCrunch and remembered you were involved. Way to go, that’s a big break through. Now why do I need a Wiki again? Haha, best of luck, not that you need it.