[fpgeek]

I wouldn't say founders selling is a red flag. Often the overwhelming majority of their net worth (plus a decent chunk of their future professional earnings) is tied up in their company. At some point they need diversification far more than they need to maximize returns on company stock.

Early investors are another matter, of course. They usually have other ways of diversifying so that's not a plausible motive for sales in most cases.

[jacquesm]

Ok, reword that: 'founders selling a substantial chunk of their stock'.

If it is a relatively small portion then it makes sense as a risk diversification strategy.

[Ntrails]

If I had 10 million dollars worth of stock in my company and was otherwise pretty much poor, you'd see me selling a good 50% regardless of how confident I am in the company.

When people float companies they built and worked at for a long time with little tangible reward it is not unreasonable for them to want to take their money and actually enjoy it.