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The Corrosive Downside of Acquihires

Both Sides of the Table

Let’s assume $2 million in seed money. If the money comes from professional investors it usually has a “liquidation preference” meaning that their money comes out before the founders or common stock. (If It says if you want to make “real” money - quit. Go do a startup.

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Series Seed or Convertible Note? Which one is more founder friendly? Which one do investors prefer?

Gust

Assuming the company is able to make effective use of the seed money to greatly increase the value of the enterprise, all of that value therefore accrues to the founder, rather than the investor. That is a swing of 15x from the investor’s point of view!

Valuation 150
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How to Fund a Startup

www.paulgraham.com

It wasnt because they werent accredited investors that I didntask my parents for seed money, though. When we were starting Viaweb,I didnt know about the concept of an accredited investor, anddidnt stop to think about the value of investors connections.The reason I didnt take money from my parents was that I didntwant them to lose it.