I had a usual week with a lot of meetings. One was with two young entrepreneurs. They raised some angel money, and while they’ve made good progress, they think the likely path is to sell the company to a strategic because progress has been slower than planned.
As I’ve written before here, entrepreneurship is hard. Today, Facebook has gone public. Many, many people will have a lot of paper wealth (in an IPO, employees cannot sell until after a “lock up” ends, and that is usually 6 months–it makes for a very long 6 months of stock ticker watching!). A few of my b-school classmates are at Facebook, including COO Sheryl Sandberg, and I congratulate them. What amazing results from so much hard work!
But, most entrepreneurs aren’t in the 1%. They are in the 99%.
What struck me most about the two founders whom I met was they wanted to sell because they were not willing to do a down round that would drastically reduce their angels’ ownership (the most likely scenario I think from VCs in this particular situation).
Nor were they willing to negotiate a “carve out” of money for themselves if the price of the sale were to be less than the dollar amount the angels put in. As one founder said, “I don’t want to pull out money if they’re not making all of their money back.”
I really admire these guys. I really want to find a way to work with them on their next start-up. I suspect most of their angels will feel the same. They’re doing “the right thing.”