[rachellaw]

one of the things that really struck me when fundraising:

"...that 25k he just gave you, could've gone to his kids' college fund or investing in blue chip stocks instead. It's amazing that you can raise money at all."

Angels give less money than VCs, some angels give low amounts (15-25k) especially in an early seed round. They're doing it for you. Screwing them over for more equity or YC makes you a shitty irresponsible human being and imho, should be considered a type of fraud.

Honestly I'm surprised at Sam's stance. Unless it's really justifiable, this seems like bad advice.

[biot]

On the flip side, an investor puts money into funding an idea which they (ought to) know has a 90% chance of not working out. I don't see anything morally or ethically wrong with saying "I/we gave it our best, but the idea didn't pan out" and returning any leftover funds, if any, before completely flushing that idea (discarding all assets associated with it), putting your thinking cap on, and looking for the next opportunity. I generally don't see a problem with starting over if you're going from an "Uber for Drones" idea to a "Custom CNC Furniture" idea, for example.

Of course, that's a completely different scenario from simply evolving the idea in a different direction but still keeping the core; in that case, I agree with your point of view. For example, I do see a problem if you're going from a "Custom CNC Furniture" idea to a "Custom CNC Cycling Parts" idea. It would be pretty shady to screw over your initial investors in that scenario. It also might be actionable by the original investors if you reuse any assets you developed using their funds.

[ScottBurson]

I think there are cases where the company spends pretty much all the money trying several pivots and never comes up with a viable product; but the founders still want to try again. At that point, if the company really isn't worth anything (in particular, has no IP) then I can see that it might be acceptable to scratch it and start over.

Your point is well taken, though. I wonder if there might not be a middle ground, where a new company is formed with the old company owning some of its stock. This gives the new venture a cleaner cap table while not completely screwing the original investors.

[meric]

It sounds like you are doing the right thing.