If I remember correctly from another article yesterday, the company went through 7 more rounds of funding after the founders were kicked out. Most of the heavy lifting was done after their ouster, so quite frankly they don't deserve anything from the sale. The company could have easily folded and everyone could have gotten zero.
Basically blogspam version of the NYT article that was discussed yesterday:<p><a href="https://news.ycombinator.com/item?id=6764482" rel="nofollow">https://news.ycombinator.com/item?id=6764482</a>
The story is originally from the DailyMail [1]. For those who don't know it, the DailyMail is a tabloid.<p>EDIT: It seems the original source is actually the New York Times [2], so I stand corrected.<p>[1] <a href="http://www.dailymail.co.uk/news/article-2317924/Five-founders-left-split-just-36-000-tech-startup-gets-sold-82-million.html" rel="nofollow">http://www.dailymail.co.uk/news/article-2317924/Five-founder...</a><p>[2] <a href="http://dealbook.nytimes.com/2013/04/30/in-venture-capital-deals-not-every-founder-will-be-a-zuckerberg/" rel="nofollow">http://dealbook.nytimes.com/2013/04/30/in-venture-capital-de...</a>
I took a class at the University of Michigan called "Entrepreneurial Business Fundamentals for Scientists & Engineers" that goes into a lot of the mechanics behind different investment avenues and the risks/rewards of venture capital.<p>If you ever intend to seek venture capital, it would do you well to play around with the numbers in a capitalization table. You can find decent ones online from a search. What you'll likely realize is that venture capital is only good for the founders when things go perfect -- that is, when the business does nothing but grow and never has a low-growth moment. If you ever have a "down-round" (a round where the valuation of the company is lower than the previous), that will sabotage basically everything. Therefore, if you don't believe your product is going to be a complete revolutionary slam-dunk, please save yourself and the VCs pain and misery and seek means of finance elsewhere.<p>Another thing to remember is that VCs typically project out for a 7-10 year exit. If you don't do that, they consider it a failure on their end. Bloodhound got their Series A in 1999 and sold in 2011, so the VCs were likely in failure-mitigation mode by that point.
It doesn't matter if you're a founder or a janitor; what matters is how many shares do you have? Just because you're a "founder" doesn't give you any special fiduciary powers; you're just a person with lots of shares to start with.
Rule number one of business: do it because its fun.
Rule number two of business: rule number one is wrong.<p>Founders can get hung up in either of these two issues, I think, in the negotiation of early capital seeding. If you're doing it because the customer wants you to do it for them, then you've graduated. Hold on to everything you're making, and don't give it up: keep the customer always in your sights. So-called capital often costs soul. Good businesses, with soul, have it because their customers give it to them - not 'capitalists'.
Not a great article. I'm assuming it refers mainly to liquidation preferences but erroneously states "give away too much of their company too early".
investment is always a bad idea if you don't need it imo.<p>i don't particularly think venture capital is a 'morally upstanding' industry. its always painful to see rich people get richer because they are rich (even if it is because they are making smart investments and are really earning that money).
Its easy to say "Many founders give away too much of their company too early" but in how many of those cases do the founders really have a choice ? Most often raising money takes too long so you are left with "go with this or die" unless you are some rockstar startup.
It doesn't surprise me, many founders get carried away with the tide of funding money and associating with VC's that they loose track of their hold and control over a company that they built. Doing that at times you get hit by "Too much is too less" reality.
I'd rather make money from my company in smaller amounts while remaining unfunded than to fork over huge chunks to investors. Even if the overall amount was much less, the percentage of gains would be much higher.