

Rovio's $42M Investment In 2011 Actually Went To Its Owners - bond
http://www.arcticstartup.com/2012/05/21/rovio-missing-42m-investment

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petenixey
Why are people bothered when founders of hot companies take money off the
table during a financing? They own a load of personal stock and then they sell
it. Why does this so often cause pushback and discomfort?

I could understand if it were a down round or if the available capital was
limited but these stories almost always centre around companies (AirBnB,
Rovio) doing very well and raising an unconstrained financing round.

The only remaining reason I can think of is the concern that once cashed out,
founders will cease to work as hard but there's little evidence of that and
plenty of founders who were rich to begin with.

Is there something I'm missing or is this just frugal guilt?

~~~
Tuna-Fish
It signals distrust in the company. People equate it with pump-and-dump
schemes, grabbing the money before value creation and running.

In strictly rational terms, it almost always makes sense. Even late funding
round startups are risky -- when you have that kind of risk, the sanest thing
you can do is to diversify early and often. Losing half of your potential
future payout is nothing if you can exchange it for guaranteed middle-class
lifestyle (or the funding for your next startup...).

~~~
petenixey
And that cash-out-early logic is assuming that each subsequent dollar has the
same utility which doesn't. I can't remember the exact figure but I think that
economists drop capital utility by a factor of 10 for each zero. The first
million has ten times more utility than the tenth which means that it makes
terrific sense to cash out.

Compound that with the fact that the utility of cash is, like the value of
health an integral over time and you have more reason still to cash out early.
Every if the utility were the same, five extra years of your life with the
end-cash is five extra years of utility.

I get your point about pump and dump and if it was a no-name hustler ringing
up a round for a just-arrived company I'd understand that but none of these
companies ever are. I feel there's something deeper driving the reaction - it
seems more resentful than rational.

