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Comment by CoffeeOnWrite | Hacker News Reader

Yep. For the founders in particular though, who had the most influence early on in taking the VC path, odds are they took some money out along the way, perhaps quite a bit more than had they stayed small.

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Sounds like perverse incentives? If your best coarse is to ruin your company and product to make a buck, you may as well be a telemarketing scammer or some other vulture of society that make bank off the mystery/rent seeking of others.

I have to hope that the original owners really wanted to make the best product possible and lost their heads with the power to create that they thought the investments would bring.

Theoretically it aligns the incentives of the founders with those of the VCs putting new money into the round (eg the founders are OK with the company taking more risk, because they have diversified their personal net worth somewhat). Now, the incentives of the VCs putting new money into the round, there's certainly an argument that they don't always benefit society or deliver the best possible product...

Is this typically possible? My understanding is that most VCs insist on being paid first in the case of an exit, at least to the point of getting back what they put in. Founders and employees are typically last in the line.

Yes, during the rounds where VCs are stepping over themselves to invest, founders can negotiate terms that permit them (and their employees and early investors) to sell some of their stock as part of the deal, in a secondary sale (https://rizstanford.medium.com/secondary-sales-in-vc-backed-...).

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