[sethbannon]

This post doesn't mention what is perhaps the greatest benefit for founders of accepting a preemptive offer from an existing investor: getting a known and trusted person on the board.

At the Series A and later, founders typically have to give up a board seat in financing rounds. This is no bueno, because it means they're giving up control of the company. Board members are hard to get rid of, can often veto big moves, and after a certain point can even fire the founder CEO.

Ensuring only extremely trusted, founder friendly, values aligned people make it on to the board should be a top priority of every startup founder.

By accepting a preemptive offer from an investor the founders have worked with directly for months/years, the founders are limiting the risk of having the wrong people on the board. Founders can, of course, run reference checks with other founders on new investors, to try to gauge how they would act as board members, but there's no stand in for direct experience working with an investor.

Given that the most important things to optimize for during later stage financings are ownership and control, it makes sense that founders might trade some ownership to have more certainty about the control situation.