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Bad preferences happen when Founders are overoptimistic or focused on optics (like a postmoney of $1.00B). Even the standard 1x/nonparticipating reflects a mism
by paulsutter 8y ago
Bad preferences happen when Founders are overoptimistic or focused on optics (like a postmoney of $1.00B). Even the standard 1x/nonparticipating reflects a mismatch in optimism. Few founders would accept the valuations that would come with an all-common investment, so it's rarely discussed.
Yes employees suffer along with the founders when bad preferences are chosen. But that's still the founders fault, not the investor.
- adventured 8y agoYou're arguing against something I didn't make a point of. I never said it was the investor's fault that the founder signs a bad term sheet. Investors will generally pursue the best terms they can get, founders should do the same. My obvious point is that founders and employees should conspire whenever possible - acting in their shared interest - to eliminate investor-favorable liquidity preferences as a common part of start-up term sheets.