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Founders realistically have to pick and choose their battles. If a founder raises a seed round from 10 investors who each invest a five figure amount, and eight

Founders realistically have to pick and choose their battles. If a founder raises a seed round from 10 investors who each invest a five figure amount, and eight of those 10 investors do little to nothing after writing a check, it's difficult to expect the founder to go to bat for them if push comes to shove.

tptacek 12y ago
Are you sure you're not moving the goalposts here, like, a lot? If you make a promise, keeping it doesn't constitute "going to bat for someone".
- 7Figures2Commas 12y ago
  In an ideal world, everyone would honor their agreements. In the real world, the behavior Aaron is describing is happening whether we like it or not. Angel investors who are concerned about their pro rata rights can't pretend that they exist in an ideal world. They can do one of two things: passively accept whatever they get, or take action in an effort to get what they want. If you recognize the motivations of founders (and the pressures they may be put under), it is clear that the behavior of the angels themselves can either incentivize or disincentivize founders when it comes to honoring the obligations they made under different circumstances.
  - idlewords 12y ago
    It's possible to behave ethically in a fallen world. It's not even that hard. Your pose of hard-nosed realism is actually more repugnant than just straight up saying "I'm breaking my agreements because I want to".
    - 7Figures2Commas 12y ago
      > It's possible to behave ethically in a fallen world. You're absolutely right. It is. But as an investor, you are bound to get hurt if you assume that everybody you're conducting business with will do so. Again, you can either deal with the world as it exists, or lament the fact that it isn't perfect. In boxing, fighters are instructed to protect themselves at all times. That approach is a decent one outside of the boxing ring too.
      - tptacek 12y ago
        What parts of your life are subject to ethics, then? Is it just investment, or are there are other circumstances where you feel like you have to choose between ethics and the law of the jungle?
        7Figures2Commas 12y ago
        > ...are there are other circumstances where you feel like you have to choose between ethics and the law of the jungle? I can choose to conduct myself in an ethical manner. I can't assume you will do the same. Get it? If you go through life under the mistaken assumption that nobody is willing to hit below the belt, and you never take action to prevent and defend against such blows, you will eventually be hurt. There's nothing wrong with accepting the fact that some folks will play dirty, and please don't fall into the trap of believing that taking action to protect your interests requires you to play dirty too. It doesn't. Once again, if you acknowledge the motivations of other individuals and the pressures they might come under, you are less likely to be caught off guard by actions they might take in response to them. If you adjust your behavior accordingly, you can often incentivize them to do the right thing when they otherwise wouldn't had you acted passively and/or obliviously.
        tptacek 12y ago
        Am I misreading you? It sounded like earlier you were saying that it's justifiable to ruthlessly renege on agreements because if you don't, you're sure to take losses. If that wasn't what you were saying, I made a mistake, and apologize.
        7Figures2Commas 12y ago
        To be fair, I can see how my original comment could be misread. I wasn't endorsing the behavior being discussed, I was simply trying to convey the idea that investors should accept reality: most founders are going to pick and choose their battles. Realistic investors shouldn't expect founders to go to bat for them unless they have an incentive to. Example: if you invested $25K in a $250,000 seed round and haven't talked to the founder in six months, don't be surprised if he doesn't fight tooth and nail for your pro rata rights.
ScottBurson 12y ago
If you want to write a contract to the effect that the investor retains pro rata rights provided he/she does X, Y, and Z, you can certainly do that. If the contract doesn't say that, then that wasn't your agreement. -- Ah, I understand. Your comment is addressed to the seed investors, not to the founders. As such, it's a fair point. The question of how the investors should behave is not what we're discussing, though.

tptacek 12y ago

Are you sure you're not moving the goalposts here, like, a lot? If you make a promise, keeping it doesn't constitute "going to bat for someone".

7Figures2Commas 12y ago
In an ideal world, everyone would honor their agreements. In the real world, the behavior Aaron is describing is happening whether we like it or not. Angel investors who are concerned about their pro rata rights can't pretend that they exist in an ideal world. They can do one of two things: passively accept whatever they get, or take action in an effort to get what they want. If you recognize the motivations of founders (and the pressures they may be put under), it is clear that the behavior of the angels themselves can either incentivize or disincentivize founders when it comes to honoring the obligations they made under different circumstances.
- idlewords 12y ago
  It's possible to behave ethically in a fallen world. It's not even that hard. Your pose of hard-nosed realism is actually more repugnant than just straight up saying "I'm breaking my agreements because I want to".
  - 7Figures2Commas 12y ago
    > It's possible to behave ethically in a fallen world. You're absolutely right. It is. But as an investor, you are bound to get hurt if you assume that everybody you're conducting business with will do so. Again, you can either deal with the world as it exists, or lament the fact that it isn't perfect. In boxing, fighters are instructed to protect themselves at all times. That approach is a decent one outside of the boxing ring too.
    - tptacek 12y ago
      What parts of your life are subject to ethics, then? Is it just investment, or are there are other circumstances where you feel like you have to choose between ethics and the law of the jungle?
      - 7Figures2Commas 12y ago
        > ...are there are other circumstances where you feel like you have to choose between ethics and the law of the jungle? I can choose to conduct myself in an ethical manner. I can't assume you will do the same. Get it? If you go through life under the mistaken assumption that nobody is willing to hit below the belt, and you never take action to prevent and defend against such blows, you will eventually be hurt. There's nothing wrong with accepting the fact that some folks will play dirty, and please don't fall into the trap of believing that taking action to protect your interests requires you to play dirty too. It doesn't. Once again, if you acknowledge the motivations of other individuals and the pressures they might come under, you are less likely to be caught off guard by actions they might take in response to them. If you adjust your behavior accordingly, you can often incentivize them to do the right thing when they otherwise wouldn't had you acted passively and/or obliviously.
        tptacek 12y ago
        Am I misreading you? It sounded like earlier you were saying that it's justifiable to ruthlessly renege on agreements because if you don't, you're sure to take losses. If that wasn't what you were saying, I made a mistake, and apologize.
        7Figures2Commas 12y ago
        To be fair, I can see how my original comment could be misread. I wasn't endorsing the behavior being discussed, I was simply trying to convey the idea that investors should accept reality: most founders are going to pick and choose their battles. Realistic investors shouldn't expect founders to go to bat for them unless they have an incentive to. Example: if you invested $25K in a $250,000 seed round and haven't talked to the founder in six months, don't be surprised if he doesn't fight tooth and nail for your pro rata rights.

ScottBurson 12y ago

If you want to write a contract to the effect that the investor retains pro rata rights provided he/she does X, Y, and Z, you can certainly do that. If the contract doesn't say that, then that wasn't your agreement. -- Ah, I understand. Your comment is addressed to the seed investors, not to the founders. As such, it's a fair point. The question of how the investors should behave is not what we're discussing, though.