I've been in the middle of the opposite. All numbers are synthesized. Founders set up company, initially fund it themselves, take some rounds of investment with preferred, gives up some control. Company runs low on cash, finds new investment from "trustworthy" investors, all preferred. The founders hit 49%, the investors gain control, and make a purchase offer for the precise value of the preferred shares to themselves, which they decide to accept. All common shareholders are instantly out in the cold, with nothing (including the founders, who were utterly screwed).
The first thing they did was fire the founders, of course.
So...foolish founders? Yes. But wait! Foolish investors? YES!!
Because they absolutely screwed every employee, almost all the employees walked the afternoon we were informed.
I've never been prouder of the people I worked with. I think there were four people (tech support/admin) left out of 20 or so. Hard to remember now...so long ago.
For several hours the shitball investors were exceptionally proud of themselves...and then they realized they'd bought a pile of PCs they had no idea how to use. Plus bonus shitty furniture! And goodbye investment, of course.
We all formed a new company within a few weeks. The original founders somehow got money to get us started again...which we did, from absolutely nothing. We rewrote a similar product suite (but better!) in about 9 months, and went to the next big industry show with it.
Shitball investors found out, and promptly sued us (mild shock), claiming without evidence that we must have stolen the code on the way out. Since I was there for every single line of code we wrote the second time around, it was infuriating.
The ball bounces through the courts...they continued to harass us...and all does not necessarily end well.
> I've been in the middle of the opposite. All numbers are synthesized. Founders set up company, initially fund it themselves, take some rounds of investment with preferred, gives up some control. Company runs low on cash, finds new investment from "trustworthy" investors, all preferred. The founders hit 49%, the investors gain control, and make a purchase offer for the precise value of the preferred shares to themselves, which they decide to accept. All common shareholders are instantly out in the cold, with nothing (including the founders, who were utterly screwed).
Usually you structure your board in a way that prevents this-- not to mention that you could likely prevail in litigation if these are the facts because the board has a fiduciary duty to all investors, not just preferred: only if there is no reasonable prospect for common to get something can you accept an offer like this. Not to mention that when a controlling shareholder enters into a transaction with the corporation they have the duty of showing that the transaction is fair for all involved.
The first thing they did was fire the founders, of course.
So...foolish founders? Yes. But wait! Foolish investors? YES!!
Because they absolutely screwed every employee, almost all the employees walked the afternoon we were informed.
I've never been prouder of the people I worked with. I think there were four people (tech support/admin) left out of 20 or so. Hard to remember now...so long ago.
For several hours the shitball investors were exceptionally proud of themselves...and then they realized they'd bought a pile of PCs they had no idea how to use. Plus bonus shitty furniture! And goodbye investment, of course.
We all formed a new company within a few weeks. The original founders somehow got money to get us started again...which we did, from absolutely nothing. We rewrote a similar product suite (but better!) in about 9 months, and went to the next big industry show with it.
Shitball investors found out, and promptly sued us (mild shock), claiming without evidence that we must have stolen the code on the way out. Since I was there for every single line of code we wrote the second time around, it was infuriating.
The ball bounces through the courts...they continued to harass us...and all does not necessarily end well.
In any case, don't lose control ;)