

Tony Hseih wanted to stay independent, Sequoia wanted liquidity event - marcamillion
http://www.pehub.com/45388/zappos-ceo-wanted-to-stay-independent-sequoia-wanted-liquidity-sources/

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staunch
Now that we know this is true it really puts Mike Moritz in a different light.
He's always been considered one of the top VCs. This takes him way down the
list as far as I'm concerned.

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marcamillion
Well...I mean...to be fair..you can't really blame him. His fiduciary
responsibility is to maximize returns for his shareholders.

So, to be quite honest, he is actually doing a great job at that. The issue is
that it seems that the VC game is numbered. Entrepreneurs are being more and
more turned off of VC - and this definitely won't help the VC's case.

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marcamillion
What's even more interesting....Sequoia had a 3X - 3.5X liquidation
preference. That's INSANE!!!

That means, that if they put in $5M, and the company is sold for $100M, they
get $15M - $17.5M before their stock gets converted to common shares. Then, on
top of that, they get X% of the rest. X% representing their portion of common
stock out of the outstanding.

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jboydyhacker
Are you sure that's not just 3x on their last round? If they had done a lot of
prior rounds with cash in that may be covering old money for their LPs. i.e.
if they had done 5m in their last round, but 10m in two prior rounds--3x is
just getting the money they put in back.

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marcamillion
I haven't seen the term sheets, but according to the article (and the one in
Inc.) it seems that they jumped in fresh in the Series E, because Tony's
investment firm basically did all the other rounds.

If I am not mistaken, Series E was the first round that outsiders joined. I
could be mistaken on that though. However, I am reading his book now so if I
find out I will be sure to let you know :)

