Second, you can't settle for a crappy exit your VC doesn't believe in. You sold them board seats. They will stop you, and then they will fire you. Are there companies with terms that make this less likely? Yes; they also got dealt pocket aces. Did you?
My point? Why would VC's include cash-out terms for their typical investment? The whole investment is predicated on the idea that you're going to make their numbers.
Lets say an exit is possible after 4 years of more work. For all intents and purposes, your founders have blown through their savings and are watching as their former (regularly employed) friends are buying houses (at least putting down large down-payments) and driving nice cars while he/she is living in some crappy apartment to keep costs down.
In this scenario, the sane thing in my mind is to help out the entrepreneur so that he can focus on making the company huge instead of quitting the startup so he can get a job paying $300K which would let him buy a decent house for his kids.
Everything in life is negotiable. Even the present terms in a termsheet are negotiable and I feel that this could certainly be one of them.
CEOs of VC-funded companies make market wages.
Serious question: at that point what is the qualitative difference with being an employee with lots of stock options? Isn't the point of being an entrepreneur that you get to drive the bus?
My ideal anyway. But I'm pragmatic so if there comes a situation that "fits" and where the positives massively outweigh negatives, so be it. Large enough amounts of money could get me to say, "Where do I sign?"