A very real and sad start up story

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8 points·jefforsen··6 comments

Link to his full article: http://thewebkid.com/Escapia.aspx

At least the company is being acquired instead of simply running out of money and shutting down.

Lesson 1: Don't invest money you can't afford to lose, especially in a high risk startup.

Lesson 2: Don't work for free for 2 years for anyone (except yourself). Doing it for 4% equity is absurd.

I agree, I have been working for free for 3 years so far on my start-up but we have been ramen-profitable from the start and I am a Co-founder who has Co-founder stock. He sounds like he didn't know they were getting funded or anything, and who will let someone invest 100k and he only held 4%. They should have applied to Y-Combinator.

It seems like the most likely scenario is that they burned through the VC cash and couldn't raise more, so they were forced to sell. If the VCs had some high liquidation preference it could easily explain how the common shareholders and early investors (like his dad) were wiped out.

It is obviously a total bummer that his dad lost $100k in the process. But, he tries to make it sound like he was tricked out of his pension or something. This was a very high risk investment where the most likely outcome would be a total loss.

If there were four founders, did they not negotiate to set any other board members up before to outnumber the one VC board member?

Sounds like they had bad legal advice.

So what was the term or terms that screwed them in the end that let the VCs take control?

It's sad that they were taken advantage of but you have to have someone on your side, it seems that he didn't know what was going on in his own company.

Kind of a tool .... but i feel bad for him!

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