How to even the score between Entrepreneurs & Investors…
So every VC deal and fund looks a tad bit different - so i will generalize for now. As i’ve said earlier, a major issue in the financing of a young company is at what point, does it not make any sense at all to keep self-funding a company (if you can help it!!!) and the reason is your dollar as an entrepreneur is not worth as much as a professional investors’ dollar. My suggestion to solve this issue is to allow the entrepreneur to investor in preferred stock along with the investor from the day they take on their first dollar of outside capital. Now some people let this happen but most of the time, the entrepreneur doesn’t stop for a second to realize he’s pissing money away. This usually happens at the angel state when the entrepreneur is funding the company along with other people. My contention is the day you take on outside $ (as long as something tangible exists - it’s your job to get a demo/alpha product live to show to real investors, however if you have to do it) is the day you should be able to invest $ along with the outside investor so that everyones interests are aligned.
You have no idea how many entrepreneurs would have been much better off had that they throw their founders stock out the window and just took the same $ they put into the company and put it into the Series A preferred stock. Anyway… til next time …
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