These ultra-high value financing rounds are exits for founders though. Not for all of their stock, sure, but if your company is worth 1B+, you don't need to sell all that much to get a security blanket. So founders are doing these rounds not because it makes their personal fortune seem large, but because it actually allows them to get a mini-fortune (and presumably they think it is good for the company). This happened very publicly with snapchat [1], and I'm sure it happened to many of the other companies listed in the article.
This article also makes it seem like the difference in value between common stock and preferred stock is larger than it is. When a company is small and very high risk, the difference between the common and preferred is extremely large. But as the company value goes up, this gap shrinks by quite a bit, because generally companies with 1B+ valuations have a risk profile closer to a public company than an early startup.
As per the referenced link, I'm not surprised those sorts of deals backfire (where the founder takes money off the table) you lose a lot of urgency when 'rich' is assured (for some definition of rich).
I would hazard that it is unusual for the founders to take a 'soft' exit like this but admit I don't have any numbers to back that up. I know the Groupon founders did and got some harsh press but no long lasting damage.
Of course, when founders take some money off the table, they will no longer be tempted to take the first FU money offer that come along, so will be more willing to push for big home runs.
Comments
These ultra-high value financing rounds are exits for founders though. Not for all of their stock, sure, but if your company is worth 1B+, you don't need to sell all that much to get a security blanket. So founders are doing these rounds not because it makes their personal fortune seem large, but because it actually allows them to get a mini-fortune (and presumably they think it is good for the company). This happened very publicly with snapchat [1], and I'm sure it happened to many of the other companies listed in the article.
This article also makes it seem like the difference in value between common stock and preferred stock is larger than it is. When a company is small and very high risk, the difference between the common and preferred is extremely large. But as the company value goes up, this gap shrinks by quite a bit, because generally companies with 1B+ valuations have a risk profile closer to a public company than an early startup.
[1]: http://finance.yahoo.com/news/snapchats-20-something-founder...
As per the referenced link, I'm not surprised those sorts of deals backfire (where the founder takes money off the table) you lose a lot of urgency when 'rich' is assured (for some definition of rich).
I would hazard that it is unusual for the founders to take a 'soft' exit like this but admit I don't have any numbers to back that up. I know the Groupon founders did and got some harsh press but no long lasting damage.
Of course, when founders take some money off the table, they will no longer be tempted to take the first FU money offer that come along, so will be more willing to push for big home runs.