[elsewhen]

how would she have done this? most ceos just get a salary and equity; if the equity goes to zero, which is increasingly looking likely, then all she got was a salary for all the years that she ran the company. i dont think that qualifies as diverting a "good chunk of her investors' money."

[simonw]

It's called "taking money off the table", and it's actually pretty common in later funding rounds. The founders sell some of their personal stock to investors for an often significant amount of money (multiple millions of dollars).

Investors agree to this for a few reasons. Firstly, it's a way for them to get a larger stake in the company. Secondly, it reduces the risk of the founders taking an early exit because they are strapped for cash. Finally, in a competitive deal (against other investors) it can be a way to sweeten the deal and get selected over the competition.

Investors don't want founders to be worrying about money - they want them to be focusing on their company.

[maxerickson]

She may have sold some of her equity in the company.