Thread by @mariodgabriele

Hearing of more founders selling secondary shares.

Some really interesting new incentives to think about:

- Founders don't have to sell to get rich
- Can 'swing for the fences' more
- Less downside in raising beyond means
- Upside in constant raising to 🔼 secondary prices

If I were an employee of a company where the CEO was aggressive at selling secondaries...I'd have a lot of questions.

- Should I be trying to sell my shares?
- Does the CEO believe in this long-term?
- What kind of signal does this put out to the market?

I think we're going to see a class of mega-wealthy founders that built...a fundraising company.

Folks that understand VC dynamics well enough to exploit them.

The result may be something like a "VC Ponzi Scheme."

A co that looks unbelievable on paper, but doesn't do much.

These companies become unicorns rapidly with valuation totally divorced from traction.

Instead, the *last round* is used as validation of the *next round.* No traction, just heat.

Eventually, these companies will reach a size where they either have to...

1. Get bought
2. Go public
3. Make money and justify valuation

Everyone wants #3, but that's hard. And very different than fundraising. So you go to #1 and #2...

Most of these companies price themselves out of being bought.

Who wants to buy a nice landing page that does $500K/year for $5B?

Maybe there's other asset value, but often there won't be.

So either you get #1 at a loss, or...

You consider #2.

But given the traction, that's not viable either...

So what happens?

The Ponzi Scheme breaks.

No new investors. An attempt to attain profitability and self-sustainability. Leadership that's already (partially) cashed out.

Startups have almost always delayed profitability for growth.

But that's a bet *every* stakeholder had to make.

Will CEOs be as set on reaching profitability if they've already amassed a fortune?

We may see more unicorns close for $0, while founders walk away with +$50M.

Ultimately, there's a balance I hope we reach.

Founders *should* be able to de-risk along the way.

But overdoing it (or engineering for it) could screw over your employees, investors, etc.

I hope you enjoyed this random musing.