21–30 of 139 posts
Judging by the tweets mentioned and linked in this thread, there are going to be some interesting articles come out of this. I for one would love to see the intricacies of investor influence. This sounds like it was a total fluster cluck.
> fluster cluck Does the extra "l" bother anyone else?
Sounds like they signed a relay bad contract. I'm sorry for them.
Almost any significant round outside of seed would come with liquidation preference. CrunchBase says a total of $20.9 was raised, so if the final sale price was less then $20,900,001.00, there's likely no money left for common stock.
I used to ignore finance and bureaucracy, but the industry has changed a lot. The popular quote 'just passionately build something' is nothing but a trap. Although something like YC doesn't fit this profile, one will eventually find himself in a hostile situation.
Earlier quoted context omitted.
Almost any significant round outside of seed would come with liquidation preference. CrunchBase says a total of $20.9 was raised, so if the final sale price was less then $20,900,001.00, there's likely no money left for common stock.
Interesting. I didn't know that. I understand that if expectations are not met there have to be consequences. But leaving the founders of a company with nothing while others earning money feels completely wrong.
Without liquidation preferences, the founders could earn a profit even if the investors lost money.
(Plus the founders and employees earn salaries, often paid from the invested funds.)
Earlier quoted context omitted.
Almost any significant round outside of seed would come with liquidation preference. CrunchBase says a total of $20.9 was raised, so if the final sale price was less then $20,900,001.00, there's likely no money left for common stock.
Interesting. I didn't know that. I understand that if expectations are not met there have to be consequences. But leaving the founders of a company with nothing while others earning money feels completely wrong.
1) Debt holders
2) Most senior shareholders and their liquidation preference
3) Less senior shareholders and their liquidation preference
...
99) Common stock holders
This is actually to align the founder incentives in shooting for a big exit. Insert any other order of preferences, and the founders have a stronger incentive to flip the company as quickly as possible in order to create a payday for themselves, screwing investors in the process (which also happens to be a very irrational proposal for investors, which is why you rarely see a round on those terms).
Earlier quoted context omitted.
Almost any significant round outside of seed would come with liquidation preference. CrunchBase says a total of $20.9 was raised, so if the final sale price was less then $20,900,001.00, there's likely no money left for common stock.
Interesting. I didn't know that. I understand that if expectations are not met there have to be consequences. But leaving the founders of a company with nothing while others earning money feels completely wrong.
They got something before. They are paying for that now.
Earlier quoted context omitted.
Interesting. I didn't know that. I understand that if expectations are not met there have to be consequences. But leaving the founders of a company with nothing while others earning money feels completely wrong.
Depending on the terms and the sale price, the investors may have lost money too. Without liquidation preferences, the founders could earn a profit even if the investors lost money. (Plus the founders and employees earn salaries, often paid from the invested funds.)
Unfortunately, the only way to afford that luxury is to not actually need the money, but be in high demand for investors to keep pinging you, and relent at some point with "alright, we don't need money, but if y'all agree to X valuation with common stock, we'll take your money".
As a technical founder, I'd be very careful to start a company again. I used to ignore finance and bureaucracy, but the industry has changed a lot. The popular quote 'just passionately build something' is nothing but a trap. Although something like YC doesn't fit this profile, one will eventually find himself in a hostile situation.
It looks like Get Satisfaction raised $20mm. Why that much? Did all that money contribute towards success? Or was a good chunk of that money not utilized well? Why did the company tank? Were they not acquiring enough customers? Was their business model unsound? What forced the fire sale?
I don't think founders are supposed to get a big payout for a failure, but we need more info before agreeing with this sob story of founders who didn't get a dime.