

Beware of Asshole VCs - joshfraser
http://www.sethlevine.com/wp/2011/07/beware-of-asshole-vcs

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pg
Can anyone guess who the VCs were in this case? (Create a throwaway account to
answer if you need to.)

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TimH
I'm just as interested to know who the lawyers were.

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danielpal
Agree, lawyers have the resposability to represent their clients regardless of
their own interest, its actually unethical and illegal to do otherwise. VC
were just asshole, lawyers committed malpractice.

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bfe
Considering how little we know of the facts, and that it's a "very well-known
Valley firm", it's a bit premature to conclude that the lawyers committed
malpractice.

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pgroves
Something that really bothers me about the startup V.C. ecosystem is that I
never read things like this from founders. There are lots of blog posts of
horror stories about investors, usually from the point of view of other
investors' (or people like Steve Blank).

I've heard Fred Wilson say that V.C.'s can't afford to be assholes anymore
because it would end up on twitter and their deal flow would dry up overnight.
Well... where are they? Where are the scorned founders? Do they not know how
to blog? When they get fired unfairly and screwed out of their stock (which
does not appear to be _that_ rare) are they banished from the internet? Is
there something in their contracts that says they can't talk about being fired
or they would have to give up what little scraps of compensation they are left
with?

As an outsider, the lack of anything but glowing recommendations of investors
from founders makes me think not all is as it seems. Is there an implicit fear
of being black listed if you speak up, ending your career as an entrepreneur?
Does hackernews, techcrunch, etc all suffer survivorship bias (and not waste a
single digital word on the losers)?

Where are they?

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bfe
They're not unheard of. Check out this classic of the genre from Philip
Greenspun:

<http://waxy.org/random/arsdigita/>

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asmithmd1
No actionable information in this rant. Why not either skip the name calling
and give us a factual account of what happened naming names; or tell us what
to look for to spot an asshole VC ahead of time.

~~~
r00fus
I read it like one of the commenters in the article - "get lawyers that work
for you".

As a founder you should question the relationship between the VCs and any
counsel you hire.

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bfe
The lawyers in this situation had a clearly defined client whom they had an
ethical obligation to represent zealously. I don't know any of the
particulars, but let's assume their official client was the corporation, and
the board, stacked with the VCs, duly voted on this course of action. The
lawyers were then just doing their job properly, under this assumption, and
serving their actual client, not making a calculated betrayal. The only ones
responsible for the VCs' decision are the VCs.

Of course founders could and probably should have their own lawyers advise
them in deals with outside investors.

~~~
TimH
A well known Palo Alto law firm I talked to last year made this point
abundantly clear in early discussions re engaging them. They wouldn't
represent the founders, they would represent the company. Even in those early
talks they mentioned there would sometimes be conflicts of interest where it
would be best the founders seek their own legal advice.

~~~
bfe
That's exactly right, and they're also doing their job right to recommend the
founders get their own separate counsel. I have seen some really surprising
conflicts of interest arise between founders and investors and even between
founders before the corporation exists to become the official client. Everyone
wants to be awesome buddies and not think about the chance of not always
getting along.

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andrewljohnson
Picking a lawyer that only serves start-ups, and not VCs, seems wise. Hacker
News favorite Grellas (also my lawyer) does it that way.

~~~
lcargill99
It's better when lawyers know both sides of the game well. I would think a
lawyer who starts out on the VC side, makes a pile, then goes to work for the
startup side would be better.

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d0ne
Always retain your own counsel. Regardless of your equity position or if the
business has counsel giving you advice.

If you have the ability to make material discussions ( vote yes or not ) this
should be one rule you never break or even slightly bend for that matter.

[EDIT]

Furthermore, if you are under the impression that your employment /
involvement with the company is to result in some form of equity compensation
spend the $750 for an hour of a solid business / securities attorney's time to
confirm this fact. These agreements are getting more complicated by the day.

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praptak
Wherever money's involved, there will be people willing to screw you. Too bad
he didn't out them - it's an unhealthy situation when assholes aren't named
and can continue their assholeish ways without any retaliation

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suking
Seth and the Foundry guys are so awesome and helpful. I think there is a
direct correlation to how accessible and helpful a firm is even if they don't
invest and how well their fund is doing. I believe the former gets them the
deal flow they need for the latter.

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rdl
I've never heard anything negative about Foundry or True Ventures. Every big
VC, even the best, seems to have someone eith a tale of woe, but not those
guys.

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joshfraser
You'll likely get a lower valuation from Foundry than you would from valley or
NY firms. But they're worth it. Hope to have them invest in one of my
companies someday. Those guys are awesome.

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suking
The simple way around that - if you still want Foundry - is to get multiple
term sheets and play them off each other. VC firms are like the Blue Angels -
they'll follow each other into the ground if one of them leads them that way.

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madaxe
Even better: Beware of assholes. They're everywhere, and you can't always
detect them.

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Geekette
Eh, to be more specific, it's the amount of shit they carry that is
undetectable. ;)

