[RainyDayTmrw]

I understand that, particularly in a down round, investors can push to get more. What I don't understand is what allows founders to get a side deal. It seems like that would go against fiduciary duty to common shareholders and earlier rounds.

[propter_hoc]

It's because the investors still need the founders to run the business, usually.

[RainyDayTmrw]

More bluntly, why wouldn't/can't the other common shareholders sue?

[vkou]

Because then they'd be left with their original stake, but in a worthless, bankrupt company.

[kadoban]

Sounds like leverage to me.

[vkou]

They are always free to give the worthless, bankrupt company they own more money, and thus avoid dilution.