
Why didn't I get any money from my startup? - jlangenauer
https://www.reddit.com/r/startups/comments/a8f6xz/why_didnt_i_get_any_money_from_my_startup_a_guide/
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bsaul
Question : is it still possible to raise without following the practices of
the day ? Aka : no liquidation preferences, or shorter than average vesting
period, etc.

Or is the trend to give more and more safety nets to VC at the expense of the
people actually working in the company irreversible ?

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troydavis
> give more and more safety nets to VC at the expense of the people actually
> working in the company irreversible ?

There are logical arguments for both 1x non-participating and 1x
participating. Using 1x non-participating as an example because it’s simpler:
if a startup raises $5 million and then sells for $4 million, they traded $1
for $0.80. No enterprise value was created. Employees aren’t getting shorted
because there’s no gain to allocate in the first place.

Above 1x is not at all standard. You used the word “give,” but these terms
aren’t gifts, they’re negotiation outcomes. If a startup obtains multiple term
sheets and/or or is satisfied with a lower valuation, they’ll negotiate better
liquidation preferences. A startup which accepted a 2x liquidation preference
either pushed the valuation as high as possible, obtained no other offers, or
both.

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anoncoward111
Tldr because the big institutions and rich people demand liquidation
preference.

If your startup isn't sold for hefty multiples (e.g 100M sale price, 10M in vc
money), then employees and founders are the first to be negatively impacted
(see also: boned)

