Can someone explain to me why people return money to investors?
Legal reasons? Altruistic reasons? Selfish reasons (maybe that keeping it would hurt their reputation and make them feel guilty)?
Legal reasons? Altruistic reasons? Selfish reasons (maybe that keeping it would hurt their reputation and make them feel guilty)?
Each case is specific though, but at some point, if the product has no growth and key talent has left the building, even if you do have six-seven digits in the bank, new employees are not exactly knocking on your door, users are not over-running the servers, remaining employees quietly send out resumes, so what would you be spending that money on?
But I've known entrepreneurs who made the decision independently, feeling it was the right thing to do.
And it is the right thing to do if the company has no other prospects or the team is falling apart.
But even so, returning the balance just keeps some salt from the wound. It doesn't make anybody happy.
Why do you say that? If for moral/altruistic reasons, that doesn't make sense to me - if you have $x million, do you really think the best place to donate it would be to VCs? I don't know anyone who donates to VCs, so I assume the answer is no. (sorry if I come off as harsh, I don't mean to - I just don't know how else to put it)
I mean, unless you are talking about the money for the personal shares the founders sold, the money, as it was said, that they "took off the table" - if that's the case, then I'm completely with you (but I didn't see any indication that they were giving that money back.)
The thing is, though, even when you control the majority of the company you do have some legal and ethical obligations to the minority shareholders.
Really, one could ethically do either one of those things; it's just that depending on the situation and your perspective, well, probably one or the other is the better choice.
Now you seem to be arguing that the choice between continuing to run a company or not is not one that has an 'admirable' option. And maybe from you point of view, it doesn't really matter.
There's a stadium down the way from my house. when the football player makes a home run or whatever, well, personally, I don't see how that matters; I don't care, and I'm mildly pissed that I'm going to have to pay for the bonds to build the eyesore. But even so? I don't go to football forms and tell people that the large man getting the ball in the hole or whatever isn't an admirable achievement. It's the game those people want to play, and that's fine.
I personally find business really interesting, really in a similar way to the football fan. Most of this stuff doesn't really matter. Some of it does, but even that stuff doesn't matter as much as people say it does.
To me? the decision to give the money back to the founders, rather than shitting the money away when you know you have been beaten, is admirable because investors seem to select for overconfidence; quitting before you've spent every cent implies that you were able to project that overconfidence to the investors, but that you were able to remain a rational person.
I mean, it's not world peace, sure, but it implies some attributes which within the context of the business game are pretty important.
It does seem odd that he/she did that, but maybe it was just a mistake.
Anyway, thank you + others - I understand now. I now see that donating to others wasn't an option, and that the choice was between a) running the company into the ground or b) returning the money to investors. Given that, I'm inclined to agree that b) is the admirable choice. And probably also the selfishly strategic one too.
You want me to delete/edit my previous post? there, I did; I'm not sure if that's more appropriate or less.
You make a good point with the guidelines; I'm far too cynical and negative to participate in these sorts of discussions with this sort of a community.
The other option is they keep the company alive until $0 is left and return nothing.
Donating to charity isn't an option.
Spending it on any personal mission not related to core business (whether charity, space travel, new car or hookers) is a great way to get some headlines with your name attached to words fraud and embezzlement.
You can certainly try to circumvent that by paying yourself a bonus out of the company money, and then donating that to charity, but it seems even shadier and introduces wonderful tax compexities with IRS come next year.