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I have seen lower-tier VCs who cared not a whit about their reputations take control, fire the founders and do a 100 to 1 reverse stock split in exchange for mo

I have seen lower-tier VCs who cared not a whit about their reputations take control, fire the founders and do a 100 to 1 reverse stock split in exchange for modest additional funding So... why was additional funding needed? Why were the founders not able to get it on their own? I have seen a young founder build up incredible value in a new venture How incredible? Maybe the partner believed the founder's estimate to be literally that... I don't want to defend the company described in the OP, but overconfidence is endemic to the startup culture. There's plenty of companies out there with nothing more than a clever gimmick, or worse yet, an imitation of someone else's clever gimmick, and that are destined to vaporize the carefully collected funds of their investors. Is it wrong to act decisively to turn such companies around? Or to collect whatever "value" remains when the end is nigh? It's easy to criticize the VC guys, and they certainly can act badly at times, but every entrepreneur thinks their company is the best thing in the world - or acts like they do - and can be a little blind about these things.

bad_user 16y ago
> every entrepreneur thinks their company is the best thing in the world Nevertheless, it is their company.
- helmut_hed 16y ago
  After they have received an investment it is not their company, but a company that belongs to both them and their investors. Indeed, unless those investors are individuals, they have a fiduciary responsibility to act when the company is being mismanaged.
  - btilly 16y ago
    Just because you legally can, doesn't make it right. There is no good excuse for maximizing your profits by suddenly changing the ownership structure of the company to your direct financial benefit. Doing so is wrong.
grellas 16y ago
I will readily acknowledge that investors can exercise their legal rights as they deem appropriate, There are times, though, when it makes you want to hold your nose as you experience it, and the 100:1 reverse split was clearly one of them (over the years, I have seen many, many down rounds and I would not make that statement about the overwhelming majority of them - so I understand and don't disagree with the general point you are making). The second situation was not only ugly but blatantly illegal and led to a major lawsuit with some pretty serious repercussions for the wrongdoing "partner" (settlement by having to pay a 7-figure sum to the founder plus later getting sued by the acquiring company for various wrongs, including the one described here).

bad_user 16y ago

> every entrepreneur thinks their company is the best thing in the world Nevertheless, it is their company.

helmut_hed 16y ago
After they have received an investment it is not their company, but a company that belongs to both them and their investors. Indeed, unless those investors are individuals, they have a fiduciary responsibility to act when the company is being mismanaged.
- btilly 16y ago
  Just because you legally can, doesn't make it right. There is no good excuse for maximizing your profits by suddenly changing the ownership structure of the company to your direct financial benefit. Doing so is wrong.

grellas 16y ago

I will readily acknowledge that investors can exercise their legal rights as they deem appropriate, There are times, though, when it makes you want to hold your nose as you experience it, and the 100:1 reverse split was clearly one of them (over the years, I have seen many, many down rounds and I would not make that statement about the overwhelming majority of them - so I understand and don't disagree with the general point you are making). The second situation was not only ugly but blatantly illegal and led to a major lawsuit with some pretty serious repercussions for the wrongdoing "partner" (settlement by having to pay a 7-figure sum to the founder plus later getting sued by the acquiring company for various wrongs, including the one described here).