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Why do founders and VCs get different stocks? I just do not get this logic. I am fine with you getting your money out first, however if that is the case, you sh
by rokhayakebe 15y ago
Why do founders and VCs get different stocks? I just do not get this logic. I am fine with you getting your money out first, however if that is the case, you shouldn't have any sort of vote on the outcome of the company. You should just be a silent partner.
- tptacek 15y agoWhy is one startup worth $10MM and the other $20MM? Because prices, like terms, are set by the market. Is there any fundamental reason a VC gets participating preferred stock? No! By all means, when you fund your next company, refuse that term. Obviously, every VC you talk to may then walk away. But maybe not. The question of "why do VCs demand this term" is closely related to your question (and maybe what you intended). The answer appears to be "to protect from the risk of putting $5MM into a company and having an outcome that is lucrative for the founders but loses money for the VCs". The idea is to align the interests of the company operators and the investors, by taking the money the VCs themselves put into the company out of the equation for the outcome.