One of our older SaaStr Fund companies was recently acquired. It is selling for 3.8x what we paid to get in years ago. On paper that reads like a clean triple.
We won’t make 1.6x.
That gap, 3.8x on the marquee valuation versus under 1.6x in the bank, is one of the least understood dynamics in venture.
The headline number is not the number that gets divided
The press-release price is not distributable equity. What the cap table actually splits is the headline value, plus cash on the balance sheet, minus debt, minus accrued taxes, minus any net working capital shortfall, minus transaction expenses and accrued employee costs. Every one of those comes off the top before a dollar reaches shareholders.
On a large B2B deal, those line items are not rounding errors. A single working capital adjustment or tax accrual can move the per-share number by real percentage points. The number you read in the trade press is the gross. Nobody gets paid the gross.
Dilution is part of startup life. But it’s also the silent multiplier killer
This is the big one, and it is the part founders and even some investors consistently underweight.
A company does not travel to a 3.6x valuation for free. It gets there in part by raising more capital and issuing more shares. Every round after your entry dilutes your ownership. So enterprise value can more than triple while your ownership percentage quietly shrinks the whole way.
If your ownership gets cut roughly in half between entry and exit, which happens over enough rounds, a 3.6x on company value lands at under 2x on your invested dollars. That is not a fee problem or a mechanics problem. It is just share count. Enterprise value multiple and ownership multiple are not the same number, and the gap widens with every round you don’t fully defend with your pro-rata.
You can be right about the company, right about the category, and right about the outcome, and still watch a triple compress into a double purely through the cap table.
Escrow and holdbacks defer and risk a real slice
On this deal, close to a tenth of proceeds is held back in escrow for a full year, released only after claims are resolved. That is on the high side, and it tells you the buyer is self-insuring the risk rather than buying a policy.
Modern acquirers of B2B + AI companies also tend to carve out special indemnity for IP and data privacy, the exact reps that are hardest to insure on an AI-era business, and that carve-out can reach beyond the escrow into money you already banked. So the “net” figure is not fully in hand at close. Part of it is deferred, and part of it is genuinely at risk for 12 months or more.
A modest multiple over many years is a modest IRR
A 1.6x over nearly eight years is about an 7% IRR. For a position that carried real venture risk, a high-single-digit IRR is not what the marketing implied when the mark tripled on the quarterly report. The multiple is the headline. The IRR is the truth, and time is quietly working against you the entire hold.
The preference stack did nothing here, and that is its own lesson
One quiet detail from the mechanics. In this deal, every preferred series converted to common, so everyone took the identical per-share number. When an exit clears above the last round, preference buys you nothing.
For the most part, structure only shows up when the outcome is negative.
How to read your own portfolio after this
A few things this outcome should reinforce for any founder or fund looking at their own paper:
- Markups are not returns. TVPI is a promise. DPI is a fact. Only one of them buys anything.
- Model dilution from day one. Track your ownership percentage over time, not just the valuation on the last round.
- Read the waterfall, not the press release. The headline overstates net, sometimes badly.
- Assume a real slice sits in escrow, and assume some of it may not come back.
- Annualize before you celebrate. A 1.8x over six years and a 4x over three years are very different lives, even though both look like “wins.”
The best outcomes still clear all of this easily, and those are the ones that actually return a fund. But most “great on paper” exits look more like this one: a real win for the founders still at the company, and a fine-but-not-spectacular result for the investor who got in early and got diluted along the way. (And an often murky outcome for many employees).
