What else are you going to do when you are at round X, when the original investment could be considered a lost cause? You could sell the assets into a new venture. I've seen that done. Then the original investors take the asset sale revenue, lick their wounds, and move on.
Or, if new investors give a new investor a liquidation preference, they could ride along with an outside chance of seeing some upside. In that light, an investor with a liquidation preference is preferable to an asset sale.
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What else are you going to do when you are at round X, when the original investment could be considered a lost cause? You could sell the assets into a new venture. I've seen that done. Then the original investors take the asset sale revenue, lick their wounds, and move on.
Or, if new investors give a new investor a liquidation preference, they could ride along with an outside chance of seeing some upside. In that light, an investor with a liquidation preference is preferable to an asset sale.