Hacker News Reader

Do early-round investors bank off of later ones? I don't really know anything about fundraising, so my perception is that money it just getting shifted around from one investor to the next.

View on HN

In this case, the later investors wanted to buy some early shares: http://techcrunch.com/2015/07/14/twilio-offers-early-shareho...

This is not always the case.

Sometimes a small portion of a round is used to buy out previous investors or sell some founder/early employee shares, but that's not the point of a round like this. If it's not for growth of the company, that would be a bad sign.

Sometimes it's a much larger portion. For example, when Twitter raised its last pre-IPO round of $800 million, half of that immediately went to cash out early employees and investors. FB also did this when DST invested. Most venture funds aren't set up for the current timeline to liquidity (I'm sure to VC's chagrin).

http://www.wsj.com/articles/SB100014240531119035202045764823...

Reply on news.ycombinator.com