Re:The Lessons Google Ventures Learned from Secret
by harryh on Wednesday May 06, 2015 @06:10PM
(#9502111)
1) That 8M of equity in your example is theoretical value, not cash you can spend. The 1.6M is real money. There are a lot of people that would trade the former for the latter. You're right about there being other ways to deal with this, but preferences are one of the cleanest.
2) If you have different classes of stock that pay out the same in a liquidation event you aren't going to be able to get a significant difference in their value.
3) Who's to say what's fair? We're talking about capitalism not an ethics textbook. Fair is whatever you can negotiate. And providing downside protection to the people putting in the cash enables you to enhance your upside reward. If you're raising 2M on 8M pre and you're more concerned about what happens if the company liquidates at 5M than what happens if you get to 50M or 100M then I do honestly wonder why you're starting a company in the first place.
2) If you have different classes of stock that pay out the same in a liquidation event you aren't going to be able to get a significant difference in their value.
3) Who's to say what's fair? We're talking about capitalism not an ethics textbook. Fair is whatever you can negotiate. And providing downside protection to the people putting in the cash enables you to enhance your upside reward. If you're raising 2M on 8M pre and you're more concerned about what happens if the company liquidates at 5M than what happens if you get to 50M or 100M then I do honestly wonder why you're starting a company in the first place.