
Startup Founders Are Getting Rich Before They Exit - prostoalex
http://www.businessinsider.com/startup-founders-are-getting-rich-before-they-exit-2014-12?op=1
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ChuckMcM
It is an interesting place to be, if the round is very competitive, then
including taking some money off the table might make sense. I think the
Groupon folks were the poster child for this. But really its a negotiation
between the investors and the founders, rather than something outside parties
really care about. Does it inform on the competitiveness of some rounds? Sure,
just like having 4x liquidation _and_ participation on termsheets in 2001 told
you that VCs understood getting money was very difficult.

It is a part of business that always rubs me the wrong way but I recognize
that puts me at a disadvantage. Later when money is hard to come by and some
VC is demanding extortionate terms or the company goes under, the founder
takes it "to get the deal" and moves on. The VC who finds themselves frozen
out of the round unless they agree to giving away some of the cash to the
founders, takes it "to get the deal" and moves on. Will these same two people
meet again with the roles reversed? Possibly, possibly not. Will it affect
their transaction? Hard to say. The constant is "got the deal, moving on."

It isn't like you can run the counter experiment and see how your life would
be different if you didn't make that choice. All you can do is have a code and
live by it.

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k7vin
This last sentence sounds weird to me: 'But he noted that he feels fine giving
founders a few hundred thousand dollars — just not millions.'

Is the question 'is it fine for founders to cash out at a round of financing
before their exit?' or 'how much founders should cash out before their exit?'?
They're two different questions.

And an investor who says to a founder 'if you sell some shares I sell mine
too' forgets that he has some eggs in other baskets while a founder spends
generally all his time to only one. Is it normal / fair / you name it that a
founder wants to put some eggs in other baskets too (if I mention the Buffer's
founders quote when they argue 'we'll invest some money in other startups'?

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getdavidhiggins
Wikipedia grab: "Opportunist behaviour can be self-reinforcing: if there is a
lot of opportunism, then not to be opportunist oneself would mean that
competitors take advantage of that, and therefore people can be forced into an
opportunist role as a defensive strategy."

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notacoward
Some of the scenarios described here sound dangerously like kickbacks.

"Hey, I know there are a bunch of other stakeholders who aren't in the room.
Our competitor might actually be offering a better deal for them. On the other
hand, we're going to make sure that _you personally_ benefit more from taking
our deal instead."

This is a classic conflict of interest. Ethically, the correct thing to do
would be to walk away. I'm not saying that I wouldn't succumb to the
temptation, but I'd sure have a hard time looking those other stakeholders in
the eye afterward.

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rdlecler1
I'm guessing that this is quite rare. Even then, ensuring the founder is
financially secure may avert an early exit scenario.

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LordHumungous
Everyone's partying like its 1999

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getdavidhiggins
Business Insider post - didn't click

Dotcom bubble 2.0? Hard to say - I'm not a silicon valley insider about to
divulge well earned punditry.

Opportunism will always be there - and it's healthy. The only thing out of
kilter is how brazen those investments are. You notice this - when investors
call iOS developers the _very moment_ an app gets popular on iTunes. Most
people cast a blind eye - but when you're an investor, it's very hard not to
notice tactics - the opportunism seems awry.

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LordHumungous
I'm no expert, but when investors are so desperate to put their money into hot
companies that they are willing to let the founders take some off the table,
that seems to indicate to me that there is some irrational exuberance going
on.

