The 2015 interview at a start-up awards show linked [1] in the article is pretty interesting. Evan gives a few startup ideas who failed before he succeeded with Snapchat, how he initially marketed Snapchat with flyers in a local mall , and that the amount "his father was tired of paying" in Snapchat’s bills was around $5K a month.<p>[1] <a href="https://www.youtube.com/watch?v=R-UAjGVPFIE" rel="nofollow">https://www.youtube.com/watch?v=R-UAjGVPFIE</a>
What <i>exactly</i> would constitute founder-friendly seed / series A terms in the area of future investor participation rights? Are we literally saying <i>any</i> right of first refusal is onerous, or is it just the multiple that gave Lightspeed up to 50% of the next round (which sounds like a 2-2.5X multiple)?<p>Sam Altman has a right of first refusal provision in his "founder-friendly term sheet". At least I think he does.. he doesn't call it a ROFR, preferring the plainer language of "investor participation rights". But it's there and even the multiple is left as an open variable.[1]<p>So are @sama's terms actually spat-worthy?<p>[1] <a href="http://blog.samaltman.com/a-founder-friendly-term-sheet" rel="nofollow">http://blog.samaltman.com/a-founder-friendly-term-sheet</a>
This incident fails to explain why common stockholders should have <i>zero</i> voting power. That decision doesn't fall naturally from "an early VC had onerous terms that we didn't vet".
On the face of it, it seems that if existing investor VC1 has a ROFR, it only means that VC2 can't under-bid on the next round, and that minimizes dilution for founders on that round. That is, if VC2 says "We'll give you $2M at a $10M valuation" and VC1 says "We choose to exercise our ROFR at that price", clearly VC2 has set a valuation too low; if they want in, they'll have to make an offer that VC1 won't match. That all sounds good for the founders (and other early shareholders). What am I missing here?