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> "It might be okay for founders who take a couple million off the table at the B round or VCs who keep the IRR on their books, but for employees it’s a fail."

> "It might be okay for founders who take a couple million off the table at the B round or VCs who keep the IRR on their books, but for employees it’s a fail." Does that actually happen? I've always wondered if founders walked away from failed startups having made a couple million off the funding rounds... How common is that?

mahyarm 10y ago
Way more common than you think. Founders do not talk or advertise this part of startups, and often hide it from the employees themselves. Often the only way you find out is if you have access to and read through the company documents. Another way is having a friend that works in finance and has visibility into this kind of stuff / you monitor SEC filings or other finance services or heard it through the rumor mill. The logic is to incentivize the founders to go for the big wins that the VC formula is set up for.
- rubicon33 10y ago
  I've never been a founder of a startup, so my perspective as an employee is clearly somewhat biased. That said, I can't help but feel, that taking hundreds of thousands, if not millions of dollars, from a failing startup, should be considered fraud...
  - mahyarm 10y ago
    They don't do it when it's failing, because no investors would do it. It usually happens when the startup is on an upward trend. It's usually done as part of an investment round of some sort. It's not fraud, it just isn't obviously public.
ci5er 10y ago
It didn't used to much in the late-PC rah-rah of the 80s or the dot-com 90s, but I understand it's increasingly common now. Not wanting to be beholden to the VC's growth paradigm handcuffs[1], especially going into an economic downturn[2], and wanting to share a "taste" all the way around as we expand are two of the reasons I've been trying very hard to avoid VC this time to the party. [1] The VCs are bound to an business model and we who take their money are bound to support their outcomes. That's not a bad thing, but it constrains options. [2] I found out early on (this is about to be a conclusion based on extremely limited data) that any VC that hadn't himself been through three down-turns, two as a VC, were 1000% worse than useless on the board. You don't want to get stuck to the hip with a wet-behind-the-ears rockstar-wannabe VClet going into a downturn.

mahyarm 10y ago

Way more common than you think. Founders do not talk or advertise this part of startups, and often hide it from the employees themselves. Often the only way you find out is if you have access to and read through the company documents. Another way is having a friend that works in finance and has visibility into this kind of stuff / you monitor SEC filings or other finance services or heard it through the rumor mill. The logic is to incentivize the founders to go for the big wins that the VC formula is set up for.

rubicon33 10y ago
I've never been a founder of a startup, so my perspective as an employee is clearly somewhat biased. That said, I can't help but feel, that taking hundreds of thousands, if not millions of dollars, from a failing startup, should be considered fraud...
- mahyarm 10y ago
  They don't do it when it's failing, because no investors would do it. It usually happens when the startup is on an upward trend. It's usually done as part of an investment round of some sort. It's not fraud, it just isn't obviously public.

ci5er 10y ago

It didn't used to much in the late-PC rah-rah of the 80s or the dot-com 90s, but I understand it's increasingly common now. Not wanting to be beholden to the VC's growth paradigm handcuffs[1], especially going into an economic downturn[2], and wanting to share a "taste" all the way around as we expand are two of the reasons I've been trying very hard to avoid VC this time to the party. [1] The VCs are bound to an business model and we who take their money are bound to support their outcomes. That's not a bad thing, but it constrains options. [2] I found out early on (this is about to be a conclusion based on extremely limited data) that any VC that hadn't himself been through three down-turns, two as a VC, were 1000% worse than useless on the board. You don't want to get stuck to the hip with a wet-behind-the-ears rockstar-wannabe VClet going into a downturn.