[chetanahuja]

"If you take all that money in with a massive string like that attached.."

Not to mention, this happens when you already have outside board members from your previous round of investment. So it's not just one dumb CEO making the deal, it's aided and abetted by (presumably wiser and cannier) prior investors. Yeah... that part rang the most untrue in that whole scenario.

Take that out, and the rest of the story is basically a parable explaining what liquidation preferences mean. Is there any VC that would do a deal without 1x liquidation pref?

[notahacker]

In fairness, the newish VC needing an apparent success to help raise their next fund back back-story sounds like a worryingly plausible reason for them to be able to overlook the fact that Hoopli should never have been allowed liquidation preferences in addition to a contract guaranteeing they got their funds back through platform spend.

I'd love to know how often this kind of 'instead of giving you free inventory, how about we "invest" conditional on you "buying" from us' shell game actually happens in the Valley though.

[brudgers]

I am not saying that it's happening or has happened or will happen, but Google, Facebook, Yahoo, etc. would certainly be the sort of investors who are in position to benefit from such an arrangement.