Simple framework for diligencing investors with portfolio founders: - would happily give pro rata again (~10%) - happy they don’t have / wish didn’t have pro rata (~80%) - wish they weren’t on the cap table (~10%) When a founder waffles between 1/2, it’s a 2. Between 2/3, run.
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I disagree - I see the only reason it does not exist is historical norms. Lots of things in the modern term sheet are complex - and nothing makes this kind of term or transaction impossible here.
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Any company that hits escape velocity could/would force buybacks of shares (financed with revenue or debt) from early investors. It would decimate venture returns, which are driven by a few massively successful companies. Agreeing to this structure would be self-destructive.
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