Steve Blank
APRIL 26, 2022
For existing investors, sometimes it was a “pay-to-play” i.e. if you don’t participate in the new financing you lose. They offered desperate founders more cash but insisted on new terms, rewriting all the old stock agreements that previous investors and employees had.
blog.simeonov.com
FEBRUARY 22, 2010
The only way to remove their equity holding in the cap table is by buying them out or through a recapitalization of the company. In this case you have to consider whether they are common or preferred holders and, in the latter case, their anti-dilution protection, pay-to-play provisions and willingness to participate in the recap financing.
Feld Thoughts
JULY 14, 2015
So they recapitalize the company. It usually happens in a later round, when the company is in fact worth much less than the liquidation preference overhang and insiders use a pay-to-play and a low valuation to reset the preferences and the cap table. and the investors, who put up $1m in a convertible note, get 0.1%.
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