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Because the founders assumed they'd be able to turn the money invested into more than a 2x return
by petesergeant 3y ago
Because the founders assumed they'd be able to turn the money invested into more than a 2x return
- b112 3y agoIndeed. And the founders agreed to this, and to the liquidation preference too. They knew the terms, knew what they were getting, and could have decided to not engage. (They took millions, and surely must have engaged an excellent lawyer and sought advice, right? So they knew, or should have known.) I agree that this can suck, but at the same time... would anyone be sad for the investors if they lost it all too? At least the founders and employees likely received some form of salary. If anything, it is the employees that are out. The founders negotiated these terms, knew of what they committed to. The employees took options, likely without full optics into all of this. edit: other parts of this say the CEO agreed to the terms, after the founders were pushed out. Still, what I say stands. The employees are the ones losing here, everyone else had optics into what the deal was. Something to always think of when an employee and being offered terms. Insistence to know the funding arrangement seems key. Even perhaps the contractual option to be able to get your shares out, cashed, as part of any new funding deal seems prudent.