

A very real and sad start up story - jefforsen
http://www.youtube.com/watch?v=f45BVbBnHIU

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stevenwei
Link to his full article: <http://thewebkid.com/Escapia.aspx>

At least the company is being acquired instead of simply running out of money
and shutting down.

Lesson 1: Don't invest money you can't afford to lose, especially in a high
risk startup.

Lesson 2: Don't work for free for 2 years for anyone (except yourself). Doing
it for 4% equity is _absurd_.

~~~
kreedskulls
I agree, I have been working for free for 3 years so far on my start-up but we
have been ramen-profitable from the start and I am a Co-founder who has Co-
founder stock. He sounds like he didn't know they were getting funded or
anything, and who will let someone invest 100k and he only held 4%. They
should have applied to Y-Combinator.

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answerly
It seems like the most likely scenario is that they burned through the VC cash
and couldn't raise more, so they were forced to sell. If the VCs had some high
liquidation preference it could easily explain how the common shareholders and
early investors (like his dad) were wiped out.

It is obviously a total bummer that his dad lost $100k in the process. But, he
tries to make it sound like he was tricked out of his pension or something.
This was a very high risk investment where the most likely outcome would be a
total loss.

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chadp
If there were four founders, did they not negotiate to set any other board
members up before to outnumber the one VC board member?

Sounds like they had bad legal advice.

So what was the term or terms that screwed them in the end that let the VCs
take control?

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kreedskulls
It's sad that they were taken advantage of but you have to have someone on
your side, it seems that he didn't know what was going on in his own company.

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jefforsen
Kind of a tool .... but i feel bad for him!

