alt Hacker NewsAs with all things, the horror stories just get the most attention. People love to rage. There are plenty of boring (good, even!) VCs out there. They just work more quietly, professionally.
I'll share a story, but its about a close friend and not me so I won't name any explicit actors and I'm going to round out the numbers. You either trust me or you don't, but this is a very direct relationship I have to both the founder and VC.
The story is this: the founder started their company outside of SV, so the lawyers weren't super familiar with startups and messed up the initial incorporation and stock plan stuff (actually super common: use Stripe Atlas or pay a startup-aware lawyer!). Went under the radar through years. This company ended up being bought for nearly $1B (with a B) after many rounds and a large board.
During the legal work to close the acquisition, they found out this messed up stock plan. Without going into the details, the effect was that instead of taking home $200M, the founder would take home ~$75M. The mistake the lawyer made almost a decade earlier was about to cost him $125M.
Most of the board basically said "too bad so sad, law is law." But one VC (the one I know, the one I'm talking about) basically strong armed and politicked the whole thing and eventually convinced everyone around the table to give up an equal share of their own holdings to make the founder whole.
Letter to the law: they didn't have to.
Spirit of being founder friendly: this VC went to bat hard and got everyone to yield to make things "right."
Also, look, you might argue $75M vs $200M is just "rich vs rich." Who cares? Sure. That's not the point.
You don't hear about stuff like this because honestly its not a big enough deal and feel good stories get way less clicks than pitchfork stories.
Replies
Thanks for that story.
I feel as if basic Personal Integrity is now considered an anachronistic weakness, in the tech industry, and it's heartbreaking. I know that VCs can probably share similar stories [to the OP] about some of the people that pitched them, or their behavior, after getting funded.
Lotta ass, being shown, all around.
At some point in the future, I may consider smaller-scale (local) angel investing, but it seems like such an ugly field, not sure if I'll ever do it. I don't need the money; I would do it to help folks get a leg up.
Could you ask the VC if you could name them in the story?
It's unfortunate that some VCs I respected turned out to repeatedly have their reputation tarnished by such negative stories. I'm not sure what compels founders and VCs to be polarizing and not diplomatic like the old days.
Right - and if I ever go to raise VC then that's a guy I'll want to talk to. Even if they themselves don't invest, their recommendation would be valuable.
Life's too short to screw people over - reputation is one of the few things that last after we're gone.
I wonder how the LPs in the fund felt when they heard they lost out on this?
PSA: Integrity is worth more than any amount of money. Anyone who doesn't prioritize that and keeping their word isn't worth anything. One appearance of a selfish move is all it takes to ruin reputations. The subset of big ego celebrity VCs whom cheat almost everyone are liabilities to run away screaming from... deal only with honest people because there's never getting a good deal with a viper.
Great story! What was the stock plan mess up that resulted in that?
This is awesome!
This is one for https://news.ycombinator.com/highlights!
(I mention this so more people can know the list exists, and hopefully email [email protected] when they see comments we should add.)