5 ms·
I still don't understand why the last investor is the first one to be able to cash out. Is this common in startup? I was thinking the first investor is the one
by baoha 7y ago
I still don't understand why the last investor is the first one to be able to cash out. Is this common in startup?
I was thinking the first investor is the one that took the big risk investing in the company, shouldn't they have the rights to cash out first when there is a liquidation event?
- wmf 7y agoLIFO is designed to prevent Ponzification (for lack of a better term). Imagine if earlier investors could just vote to issue dividends after a later round, effectively taking money from later investors that was supposed to fund company operations and putting in their own pockets.
- techslave 7y agofor startups without meteoric growth (most of them), it becomes harder to raise money later. especially in an area with no real moat (commodity wifi). if the revenue growth is not a hockey stick it’s harder and harder to sell your story. this translates into stiffer preference