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I think that might have opened them up to even more press. It would have also made the next investor not be as keen as to why Sequoia was pulling out in the fir

I think that might have opened them up to even more press. It would have also made the next investor not be as keen as to why Sequoia was pulling out in the first place... Looks like they weighed all their options and went with the one which would cause the least pain to them and the company.

jessriedel 7y ago
What's the argument you're making? That if Sequoia sold the stake for, say, $10M (taking a $11M loss), then outsiders might misinterpret that as Sequoia losing faith in Finix and trying to cash out? And this would be true for any amount larger than $0?
- aabhay 7y ago
  There’s honor at stake when you give another investor discounted shares. And if you think in 10+ year time horizons, honor is truly a more valuable asset than cash
  - jessriedel 7y ago
    Whose honor? I'm honestly confused about what the argument you're making. What's dishonorable about selling discounted shares if you can't keep them?
    - cmauniada 7y ago
      If they decided to cash out for any amount, that would go against their track record of holding on to companies and exiting when they are much larger in evaluation. This would not only raise eyebrows, but eventually the truth will come out. Put yourself in the shoes of a buyer, if you were buying out Sequoia's shares and after a few weeks/months news came out that they only sold their shares because of this. Not only that, but that Finix is pretty much competing with Stripe, which they have no chance of succeeding at, it would tarnish Sequoia's reputation and also open them up to litigation. As someone else in this thread pointed, $21 Million is a rounding error for them.
      - jessriedel 7y ago
        > news came out that they only sold their shares because of this. Why would this be kept a secret? Why doesn't Sequoia, upon realizing their conflict of interest, say "Attention everyone: we have to sell this investment for conflict-of-interest reasons. We can't reasonably give you our board seat and other influence, just the financial state, so we will sell it for a large discount." Why would any of that tarnish Sequoia's reputation or open them up to litigation? (I mean, other than the minor reputational hit they have already taken for not doing thorough due diligence, which is being revealed regardless.)
        cmauniada 7y ago
        Fair point, I am sure they have people much smarter than me in charge of making decisions like that. I am purely speculating at this point but that route could also lead to just being dragged out (if the offer was made public). There might be a lot of reasons, and I am sure there would have weighed all their options and gone with this decision.
- gkoberger 7y ago
  I'd be furious if the VC firm I gave a large portion of my company to wanted to give their equity, weeks later, to another firm. Even if it was a firm I liked.
  - jessriedel 7y ago
    Why? (No board seats, just the equity.)
    - gkoberger 7y ago
      All investors aren't equal, and Finix likely had a few term sheets and picked Sequoia over other VC firms. So it would be a bait-and-switch, even if unplanned. Wouldn't you want control over who owns you? VCs with equity, even without a board seat, still have a good amount of control or access to information. Plus, if it was at a discount, it immediately makes the stock feel "cheap". Doesn't matter what the reasoning is, it'll just feel devalued to everyone involved.
      - jessriedel 7y ago
        What control can't be abdicated? Like, why can't it just be a contract that says "this new VC firm gets x% of stock (and so x% of future dividends), but the stock has no voting rights"? (It doesn't make much sense to me that selling under these circumstances makes the stock feel cheap while throwing the stock in the trash bin doesn't. But I'll take your word on the psychology.)

jessriedel 7y ago

What's the argument you're making? That if Sequoia sold the stake for, say, $10M (taking a $11M loss), then outsiders might misinterpret that as Sequoia losing faith in Finix and trying to cash out? And this would be true for any amount larger than $0?

aabhay 7y ago
There’s honor at stake when you give another investor discounted shares. And if you think in 10+ year time horizons, honor is truly a more valuable asset than cash
- jessriedel 7y ago
  Whose honor? I'm honestly confused about what the argument you're making. What's dishonorable about selling discounted shares if you can't keep them?
  - cmauniada 7y ago
    If they decided to cash out for any amount, that would go against their track record of holding on to companies and exiting when they are much larger in evaluation. This would not only raise eyebrows, but eventually the truth will come out. Put yourself in the shoes of a buyer, if you were buying out Sequoia's shares and after a few weeks/months news came out that they only sold their shares because of this. Not only that, but that Finix is pretty much competing with Stripe, which they have no chance of succeeding at, it would tarnish Sequoia's reputation and also open them up to litigation. As someone else in this thread pointed, $21 Million is a rounding error for them.
    - jessriedel 7y ago
      > news came out that they only sold their shares because of this. Why would this be kept a secret? Why doesn't Sequoia, upon realizing their conflict of interest, say "Attention everyone: we have to sell this investment for conflict-of-interest reasons. We can't reasonably give you our board seat and other influence, just the financial state, so we will sell it for a large discount." Why would any of that tarnish Sequoia's reputation or open them up to litigation? (I mean, other than the minor reputational hit they have already taken for not doing thorough due diligence, which is being revealed regardless.)
      - cmauniada 7y ago
        Fair point, I am sure they have people much smarter than me in charge of making decisions like that. I am purely speculating at this point but that route could also lead to just being dragged out (if the offer was made public). There might be a lot of reasons, and I am sure there would have weighed all their options and gone with this decision.
gkoberger 7y ago
I'd be furious if the VC firm I gave a large portion of my company to wanted to give their equity, weeks later, to another firm. Even if it was a firm I liked.
- jessriedel 7y ago
  Why? (No board seats, just the equity.)
  - gkoberger 7y ago
    All investors aren't equal, and Finix likely had a few term sheets and picked Sequoia over other VC firms. So it would be a bait-and-switch, even if unplanned. Wouldn't you want control over who owns you? VCs with equity, even without a board seat, still have a good amount of control or access to information. Plus, if it was at a discount, it immediately makes the stock feel "cheap". Doesn't matter what the reasoning is, it'll just feel devalued to everyone involved.
    - jessriedel 7y ago
      What control can't be abdicated? Like, why can't it just be a contract that says "this new VC firm gets x% of stock (and so x% of future dividends), but the stock has no voting rights"? (It doesn't make much sense to me that selling under these circumstances makes the stock feel cheap while throwing the stock in the trash bin doesn't. But I'll take your word on the psychology.)