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Tell HN: Our VC turned the process of getting acquired into a nightmare

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Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#21

Post by phlux »

davidu wrote: post #16
phlux wrote: post #10

Earlier quoted context omitted.

Exactly, The only leverage this guy has left is to reveal the antics of the VC in public, and potentially leave the company. At this point, I would anonymously blog about the entire situation regarding the VC's behavior while never revealing your own name nor the name of the company - only the name of the VC. Sure, the internet will find out the company name in due coarse, but you will have several days or so of the…

There is a lot more leverage here than that.

I am sure you're right... I don't have a good enough perspective to give much more of an opinion than I did though :)

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#22

Post by throwaway5317 »

gojomo wrote: post #18

Had a similar thing happen to a company I was involved with a long while ago. (The VC involved was far from the valley.) In fact, the partner even resigned from our board during acquisition negotiations, because the squeeze he was attempting, enriching his firm at the expense of other shareholders, wouldn't mesh well with the fiduciary responsibilities of a board member. Some people think using every lever at their d…

It was very valuable to hear of a similar situation. I'm happy to hear that you were able to rescue the deal, albeit paying a heavy price.

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#23

Post by throwaway5317 »

tptacek wrote: post #5
klochner wrote: post #4

If he doesn't want to participate in future rounds, you could try to raise a new round to cash him out, or you could take a down round and dilute him.

How hard will it be to take another round with the original VC refusing to participate? Supposedly, it's pretty hard.

Yes, I believe it will be very hard for us to raise another round. The VC's story is that they changed their strategy since investing in us. True or not, it is a high liability since it is easy for prospective financers to read something else into the fact.

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#24

Post by dctoedt »

mikeryan wrote: post #14
earlyresort wrote: post #3

The VC controls (and always controlled) the outcome for your company. I can't say I understand his behavior - blocking an acquisition but also refusing to participate in a future round makes both liquidity and fundraising impossible. Perhaps he plans to drive the company to the brink and then do a down round. The only leverage you have over him is the damage his behavior, if public, could do to his reputation - since…

I generally agree but both VCs and entrepreneur's rely on reputation. I'm not sure a public airing of grievances will do the OP much good. The threat of doing so is really the only thing that would have any benefit, perhaps encouraging the VC to move faster with future deals, actually posting may damage the OP's standing with potential VCs in the future. There is likely another side to this story and I lean towards k…

1. Agreed on their likely being another side of the story; that seems to be the case more often than not.

2. Outing the VC could provoke him to retaliate by filing a lawsuit for defamation, and/or for tortious interference with prospective economic advantage. The OP doesn't need that kind of grief right now.

3. It might be worth spending a few bucks to talk to a savvy business litigator -- this sort of thing comes up fairly often in closely-held corporations. Maybe Grellas will put in an appearance on this thread?

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#25

Post by gojomo »

throwaway5317 wrote: post #22
gojomo wrote: post #18

Had a similar thing happen to a company I was involved with a long while ago. (The VC involved was far from the valley.) In fact, the partner even resigned from our board during acquisition negotiations, because the squeeze he was attempting, enriching his firm at the expense of other shareholders, wouldn't mesh well with the fiduciary responsibilities of a board member. Some people think using every lever at their d…

It was very valuable to hear of a similar situation. I'm happy to hear that you were able to rescue the deal, albeit paying a heavy price.

I believe the net price wasn't that heavy, but it stung, because it broke the all-in-it-together logic that otherwise had ruled.

It was already a good result for the investor – the last-minute extras demanded weren't a part of any prior negotiated preference, they were just new things extracted in return for not vetoing a deal everyone else wanted.

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#26

Post by throwaway5317 »

bmh100 wrote: post #6

This is only two cents' worth, but there are a few things you must first discover: What do you personally want out of life, our of your career, out of this company, out of this deal? What does the VC want, in as much detail as you can understand? It may be critical to understand why your VC behaved that way and what his reasoning was for doing so. Also, it sounds like you are describing a liquidation preference, whic…

Thank you for very valuable advice all over. It aligns very much with my thoughts but lays it out with perfect clarity. Your advice also focuses on process rather than ends, which I appreciate as a complement to all the (also very valuable) alternatives proposed by other commenters.

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#27

Post by throwaway5317 »

ajju wrote: post #2

Sounds like a crappy situation. Hindsight is 20/20 but what I learnt from your story is that it's important to ask investors the minimum valuation and cash/equity split they will accept before engaging a potential buyer. In general, knowing your own limits is important going into any negotiation. Before quitting and losing control over so many years of hard work, I would recommend putting your recent frustration with…

Thanks for the empathy with the situation. It is very good advice to make it perfectly clear what the intents of our VC is going forward. I sure will take the experiences from this process with me in future ventures.

Niels Bohr said that "An expert is a person that have made all the possible mistakes in a narrow field". Sometimes I feel like I'm getting there...

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#29

Post by dools »

I was slightly unclear as to the circumstances, but basically I read you have an existing investor who is basically inactive in the business, but is being difficult during further acquisition.

You have 10 staff, and you're profitable. It sounds as though it might be best to try and sever ties with this investor if he's making things difficult for you.

One way of doing this would be to cut costs in order to offer to buy out this investor after some period of time, eg. you have 10 people, if you can redistribute the equity held by the current VC/Angel whatever to your employees as restricted stock with a vesting period of two years you may be able to save enough money to buy out the "toxic investor".

Taking this approach depends, of course, on your staff's ability/willingness to withstand a paycut for that, long, the ability to make that kind of decision independently of the existing VC and whether or not you could buy out this dude after some reasonable period of time (eg. 2 years).

The other thing I would point out is if you already have a profitable business and 10 employees, you really shouldn't need any new funding to build a new product. If you have half your team work Fridays on new product development you'll have something in 6 months or so that you can sell.

Re: Tell HN: Our VC turned the process of getting acquired into a nightmare

#30

Post by vessenes »

dctoedt wrote: post #24
mikeryan wrote: post #14

Earlier quoted context omitted.

I generally agree but both VCs and entrepreneur's rely on reputation. I'm not sure a public airing of grievances will do the OP much good. The threat of doing so is really the only thing that would have any benefit, perhaps encouraging the VC to move faster with future deals, actually posting may damage the OP's standing with potential VCs in the future. There is likely another side to this story and I lean towards k…

1. Agreed on their likely being another side of the story; that seems to be the case more often than not. 2. Outing the VC could provoke him to retaliate by filing a lawsuit for defamation, and/or for tortious interference with prospective economic advantage. The OP doesn't need that kind of grief right now. 3. It might be worth spending a few bucks to talk to a savvy business litigator -- this sort of thing comes up…

Speaking of 2) Tortious interference claims can go both ways, but I agree that it's not what a startup CEO needs.
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