[mikeryan]

I don't know it seems to me that Silicon Valley is littered with folks who've made a shit ton of money by founding companies and taking chunks off the table during funding rounds. Kevin Rose/Digg come to mind. This way if you become huge you still get a payday but even if it doesn't you're still a millionaire (and maybe an angel investor in companies that do become huge, Kevin Rose/Digg comes to mind).

[nostrademons]

You typically need leverage to do this too. Zuckerburg was famous for popularizing the practice, but he could only do it because Facebook was taking off like a rocket ship and everybody wanted in. It's very rare that a startup without traction could successfully negotiate founder cash-outs.

[midas007]

Another SV thing.. being able to fire your board: priceless.

[btrautsc]

This can happen for multiple reasons - but more often (IMO) is being driven by investors who know they need super outsized results, and at some point <insert giant tech co> will come shopping for the portfolio company.

So investors are willing to give founders significant liquidity so they are comfortable (or locked in to) "going all the way" (snapchat comes to mind [1]).

Remember, investors need billion dollar returns to return a fund. So giving founders a few million to pad their pockets, reduce their own risk, and extend their companies timeline is occasionally a simple decision.

1. http://www.businessinsider.com/snapchats-founders-pocket-10-...

[volodia]

What do you mean by "taking chunks off the table during funding rounds"?

[jdavis703]

As in the VC purchases shares directly from a founder, as opposed to from the company.

[mbreese]

I don't know all of the history, but I was under the impression that this was a relatively recent phenomenon. Does any one have any examples prior to Rose?

[jpmattia]

> I don't know all of the history, but I was under the impression that this was a relatively recent phenomenon.

It is. It used to be seen as a sign of lack of confidence in your company that you would take money out, because if you believed that your company was heading for the moon you would want every share possible. BTW, the same was true for earlier investors: Non participation was the kiss of death.

FD: Info from about 10 years ago.