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Wouldn’t a16z get preferential returns where even if a firm does a down round, a16z still ends up getting a return on invested cash at the cost to employees/fou
by bushbaba 4y ago
Wouldn’t a16z get preferential returns where even if a firm does a down round, a16z still ends up getting a return on invested cash at the cost to employees/founders?
- SilverBirch 4y agoIt's absolutely true that a16z will have preferential terms to their investments and will screw a lot of the founders they invested in, but that just mitigates downside, it doesn't stop it. Firstly, because VC returns are meant to be dominated by the 100x-er, mitigating downside doesn't really impact their returns too much. Secondly, because it puts firms in a death loop. When a company is in a position where all the founders and early staff are going to be washed out they suddenly have no upside. You've been slaving away at a start up for years hoping for your payday, but you're forced to raise a down round, suddenly there's no upside, even if the business succeeds you don't get the financial returns, it's time to leave. So these companies that would generally survive, suddenly have no staff.