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I read the post but didn’t understand why they had to walk. Why did they not get their $800k back?

The didn't have to walk. Those chose not to, as $800k isn't worth the time/money for them (see others' post on the size of their funds).

Supporting the founder (and earning goodwill for it) is probably worth a lot more.

I assume the deal he negotiated with the buyer meant he got money and they didn't, and thus that was the only thing on offer.

I doubt the buyer cared one way or another whether the previous investors got their $800k back or not.

I'm guessing it's more that the buyer was only prepared to go to 4mil, and the _seller_ had run their numbers and came to the conclusion "4mil minus that $800k isn't enough to secure my families future, and I'd need to walk away from the deal unless they agree to forgive that $800k" so he asked them, and they agreed.

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