David Frankel

Every time there's a failure and I love the team and generally that's the nature of this business. Like, you know, I put teams before themes all the time. It doesn't work out and I love that team. Like I have to say to them, come back, please. Not because I'm an options junkie, but because I want to be in business with those people.

I still think of like pro-rot as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option?

I still think of like pro-rot as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option?

I still think of like pro-rot as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option?

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.

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.