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Investor and Entrepreneur Interest Alignment Challenges

Duration: 3:83 Added: Nov 5, 2009 Channel: Stanford ECorner
Rating: (0 ratings) Views: 5 Category: Business
One of the things that I frequently say is, you know, management’s interest and investor interest aren't always aligned. They're most typically aligned when things are going really really well. And anything else, which is most companies, you often have difficulties, disagreements. I've raised venture money not as many times as you have, but once from a very prestigious firm and I found that our interests weren't always aligned and those are some tough conversations. Do you have any experience with differing interests and how to work out those differences? Yeah. So I have not yet, touch wood, had the situation where I've been in a bad business situation - where the investor group felt I was primarily on the hook and responsible for that bad situation. So I haven't had the very difficult challenges people can have where you're sort of breaking up with your venture investors and no one feels good about the piece of their pie, so to speak. But my sense, in terms of the discussions that you have, it's really important to think through those outcomes. And it's fun to sit around and say, I got X percent, they got X percent. When this is a three billion dollar company, this is how much I get, and how much founder share should I buy in advance, think about my AMT. that's a fun kind of way to sit around and daydream. But I think it's really important that you go through and talk about the bad side and understand what's going to happen, what the expectations are on both sides if things don't work out. And the place where I think the, when things are a disaster, from a business standpoint, those really aren't that hard because there's no value. There's nothing to be carved up, everyone sort of goes their own way. Maybe there's a few last dollars and there's a discussion if you give that to employees, you pay back creditors. Very rarely do those VC's even want those last few dollars back. They've kind of written off the investment. The hard part is when you have ...

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