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Comment by vibrunazo | Hacker News Reader

I haven't heard of that story about decoupling exits from liquidity before. At where I live, the mantra is that if you take money, you must have been looking to an exit. If someone put money on you, they must be eyeing for a quick exit - there's no way around it. In fact, I've heard many "mentors" and investors explicitly tell me exactly that.

Is this separation that Phil talks about a common knowledge in the Valley? Or anywhere else?

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This was actually forshadowed by pg in 2005[1]:

The most dramatic change, I predict, is that VCs will allow founders to cash out partially by selling some of their stock direct to the VC firm. VCs have traditionally resisted letting founders get anything before the ultimate "liquidity event."

[1] http://paulgraham.com/startupfunding.html

Founders selling a small percentage of their stock as part of a (usually late) financing round is pretty common. It's in the investors interest to see that the founders are focused on growth and not lured by an exit at an unattractive multiple. Letting founders take cash off the table by selling a small percentage of their stock as part of a late financing round keeps the founder focused on growth instead of creating liquidity for themselves. Secondly, capital gains tax on a stock sale is much lower than income tax that would be garnered by paying yourself a bigger salary.

A VC who has participated in an early round also often sells some stock in a late round to hedge their risk.

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