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Y Combinator Cast

12/17/21

@ Y Combinator

Investors are generally incentivized to encourage companies to grow quickly, which can lead to misalignment of incentives if a company is profitable but not growing fast enough.

Video

Understanding Investor Terms & Incentives || Rookie Mistakes with Dalton Caldwell and Michael Seibel

@ Y Combinator

Understanding Investor Terms & Incentives || Rookie Mistakes with Dalton Caldwell and Michael Seibel

12/17/21

Related Takeaways

Michael Seibel

05/07/22

@ Y Combinator

Investors often have different incentives than founders, which can lead to misalignment in priorities.

Y Combinator Cast

08/23/24

@ Y Combinator

Investors often chase opportunities in startups, hoping to profit from future growth, which can lead to inflated valuations that may not be sustainable.

Michael Seibel

05/07/22

@ Y Combinator

Investors are biased towards metrics that may not prioritize the startup's survival, focusing instead on growth and revenue.

Russ Roberts

08/07/19

@ Y Combinator

The stock market's expectations can create a treadmill effect for founders, where they feel pressured to achieve continuous growth, often leading to a loss of focus on their original mission.

Andrew Mason

10/15/14

@ Y Combinator

The incentives to think short-term in a public company are overwhelmingly strong, leading to detrimental trade-offs for business and entrepreneurship.

Y Combinator Cast

05/07/22

@ Y Combinator

It's important for founders to understand that the perception of needing to grow rapidly can lead to poor decision-making, such as overspending or neglecting financial health.

Y Combinator Cast

03/09/18

@ Y Combinator

Founders sometimes prioritize their own interests over the company's, which can lead to poor governance and decisions that harm investors, such as structuring deals that favor themselves disproportionately.

Y Combinator Cast

09/24/24

@ Y Combinator

If investors are dictating actions to a founder, it indicates a deeper problem within the company structure that needs to be addressed.

Michael Seibel

12/17/21

@ Y Combinator

Investors know that founders want high valuations and often leverage this by offering a desired valuation while asking for unfavorable terms.