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I'm 100% the opposite. It's wrong for one group to expect preferred stock for their capital contributions, while they ask the usually less experienced CEO to ma
by vessenes 1y ago
I'm 100% the opposite. It's wrong for one group to expect preferred stock for their capital contributions, while they ask the usually less experienced CEO to make a tacit capital contribution (lower than market salary) and then on top to ask them to put cash in that won't be given the same terms -- nah.
Now, if the founder capital went in pre-round, and a round was raised, I'm with you -- that's fine - and between the founders at that point; they got paid in equity valuation. But otherwise; nope.
- tptacek 1y agoWe're talking about arrangements between founders, not arrangements between operators and investors. Investors don't ask you to put up cash; that is literally the opposite of what they do.
- vessenes 1y agoActually they do it all the time - asking to ‘top up’ employee stock option pools before a round is closed, keeping exec salaries low, or cutting them when the company is running low on money - these are all forms of founder capital contribution that are not compensated. I’m not saying they’re not market, or even that they’re a bad idea. But, consider an exec who could make $300k base plus ISOs at a public company going from $170k to $100k for lean times — what would raising that 70k cost the company in stock? A fully level capital stock playing field would see the 70k investment from the founder independently priced in a fair round and deliver preferred stock. I’m unaware of this ever happening in my last 25 years of startup and venture experience.