[dehrmann]

> Unsurprising, given the pool makes founders less reliant on them

How? The startup still need VCs for funding.

If I were a VC, one gripe would be that it might hurt a founder's motivation. At 1% of a founder's equity, it's not so much that they're not working to make the next big thing, but in the back of their mind, they know they might get $1M for it. My other concern is that this almost freerides on the VC model. It's a way for a founder to get the benefits of being an LP, but without the fee structure.

[csentropy]

Entrepreneurs free riding on the VC model is the opposite of what really happens: VCs free ride on founder risk.

We see VCs themselves encourage founders to take money off the table with a secondary sale in rounds as early as series A. They also look for founders with previous exits, and usually pay a premium for their startups or invest with a much lower threshold.

This idea that "founders that are not starving are going to be less motivated to succeed" is one of several silicon valley mythologies that don't stand up to scrutiny empirically or otherwise.

Most people don't start companies to sit back and chill as soon as they are financially secure. If they did, and you had invested in them and now have to force them to stay hungry, you should reconsider being a VC.

[nmfisher]

> How? The startup still need VCs for funding.

For precisely the reason you set out in your second paragraph.

Assuming your startup is in the VC bucket to begin with, you have two choices when you start floundering. Either ask for more money, or shut it down.

The latter practically guarantees you leave with nothing, so naturally, you prefer the former. This means VCs are almost always in a position of leverage to extract a larger share/more onerous terms/etc.

With a stake in a founder pool, "walking away" becomes a much more attractive option. You already have some baseline value that makes you far less reliant on whatever opportunistic VC you're in bed with.

[geoburke]

Here, walking away doesn't leave the entrepreneur wealthy, but we hope, covers some opportunity cost. A safety net. This can provide a source of strength in VC negotiations as well as a foundation for the founder to make calm, rational decisions rooted in long term success.

[geoburke]

Interesting take. Makes sense if the timeframe for startup success (profitable exit) was as truncated as startup death. Startups either die, show signs of dying, or get acqui-hired much more quickly than the startups that guarantee's (practically speaking) successful exit.