alt Hacker NewsI'm not sure I'm following how anyone can target the angel investors specifically? Aren't all common share holders have the same fate? So if they screw the common share holders, early employees will get the same treatment as the angels? (dilution for example impacts all share holders). I understand that key employees can receive extra shares along the way, but most probably don't in their first 4 years.
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Yea the founders also have majority common stock. So there's not a normal scenario where the founders and other investors get paid out in an exit, but the angels don't.
The bigger fear is a non-exit scenario, where the company becomes profitable, possibly pays out large investors to maintain the relationship, and founders just take massive salaries. So no liquidation event that benefits angel investors.
You can do a pay to play where anyone who can’t follow on at a certain price gets wiped out
Yes, being an early employee is a sucker's game in much the same way as being an angel investor.
The way I've heard it is that later investors collude (descriptive, academic term, not value judgment) with founders via liquidation preferences, dilution, etc., and effectively wipe out all common shareholders (particularly employees) and all earlier rounds, and then give the founders some additional terms to compensate them specifically. How exactly that works, what they're giving the founders, and how this isn't hugely illegal are all details that I don't understand. I put a top-level comment asking exactly that.