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I always thought there was another reason for VCs encouraging founders to sell shares: giving them a taste of wealth. If you're a founder that sold 2M in stock

by varenc 2y ago

I always thought there was another reason for VCs encouraging founders to sell shares: giving them a taste of wealth. If you're a founder that sold 2M in stock a year ago and a 200M acquisition offer comes along, you'd be less tempted now that you appreciate the difference between small millions and big millions. If you thought you had a real chance of going much bigger, having cash already makes you more willing to take that risk. And since VCs tend to make most of their money off a couple very big wins, it's worth it to have founders that won't settle for less than billions.

JumpCrisscross 2y ago
> another reason for VCs encouraging founders to sell shares: giving them a taste of wealth VCs are wealthy. Some of them weren't born wealthy. The best among them recognise that removing the worry about e.g. paying rent will make a better CEO.
- repomies69 2y ago
  It is about aligning risk preferences. Being "all-in" is not likely a good thing for a founder. The founder prefers to take less risk which results to mediocre exit for the investor. The investor would rather have bigger exit or nothing, and giving the founder some money is helping to aling the risk preferences a bit towards the same direction. As for employees? They are typically not calling the shots about company direction. I don't see a reason why investors would care about employees.
  - mezyt 2y ago
    > As for employees? They are typically not calling the shots about company direction. They can be motivated or not, knowing that the founder made big bucks and they made nothing is bound to lower motivation. Thus the title of the article, founder's liquidity is a well guarded secret.
- blitzar 2y ago
  > removing the worry about e.g. paying rent Only once the startup has matured at least a little, too much money too early and your hungry founders become lazy.

by varenc 2y ago

JumpCrisscross 2y ago

> another reason for VCs encouraging founders to sell shares: giving them a taste of wealth VCs are wealthy. Some of them weren't born wealthy. The best among them recognise that removing the worry about e.g. paying rent will make a better CEO.

repomies69 2y ago
It is about aligning risk preferences. Being "all-in" is not likely a good thing for a founder. The founder prefers to take less risk which results to mediocre exit for the investor. The investor would rather have bigger exit or nothing, and giving the founder some money is helping to aling the risk preferences a bit towards the same direction. As for employees? They are typically not calling the shots about company direction. I don't see a reason why investors would care about employees.
- mezyt 2y ago
  > As for employees? They are typically not calling the shots about company direction. They can be motivated or not, knowing that the founder made big bucks and they made nothing is bound to lower motivation. Thus the title of the article, founder's liquidity is a well guarded secret.
blitzar 2y ago
> removing the worry about e.g. paying rent Only once the startup has matured at least a little, too much money too early and your hungry founders become lazy.