I keep getting crammed in down-rounds and recaps and it's making it hard to remain positive about angel investing. Just a reminder to founders put in this position— you *can* protect the earliest people who believed in you and your company from Day 0 by having pay-to-play provisions only applicable to VCs, or investors over a certain check size. Your angels would appreciate it 🙏
Jonathon Feit
3mo
Thoughts on investing in profitable companies that don't have to worry about down rounds, Halle?
Prasid Pathak
3mo
Halle, came here to ask a question related to @nick pott's point. Does this also impact early employee equity? And how can founders also be protecting their early employees from being crammed-down?
Dana Young
3mo
Halle Tecco, such an important point and discussion. There's a reason why you are called angel's. You are often coming in at a time when almost no one is willing to invest. You would think everyone would support their angel's, but as you are sharing here, unfortunately it's not the case...actually more often it's not the case.
Sid Viswanathan
3mo
Halle Tecco, MPH, MBA There's like some meme waiting to be created here between pay to play rounds, investors, founders, angels - someone is losing out! In practice though, it's not always feasible for a founder to look out for their angels when they themselves are often getting cooked as part of the pay to play round. Most founders don't even know how to look out for themselves first, especially after the years of blood,sweat,tears that went into building the company gets wiped away.
Scott Hartley
3mo
One mature argument I’ve seen founders make is “let me create a pay to play carve out for investors under X% amount to have a safe harbor.” The rationale is 1) to protect your smaller, earlier backers who maybe can’t afford a pay to play provision and 2) additionally it saves you the founder and new lead investor a lot of legal cost and admin burden of chasing every last small participant on your cap table. Win win.
You are right, Halle. Both Founders and investors can create protections around this. In the past 4 years my small Venture Funds have invested in 23 firms. So far, 2 failures, no down rounds for my LPs. Knock on wood. I’ve completed my investing from these funds, so now focused on creating as many successes as possible. BTW, bless you for your optimism and for putting your money towards it.
Trey Lauderdale
3mo
Not only the right thing to do, but a smart thing to do. It’s a small world and angels remember those entrepnuers that did what’s right.
Iyah Romm
3mo
Agreed, Halle Tecco, MPH, MBA, making me extremely hesitant to write angel checks… happening over and over…
Board Member, Adjunct Professor, Healthcare Optimist ✨
3moMichael Esquivel and I did an episode on down rounds that I highly recommend listening to: https://podcasts.apple.com/us/podcast/closing-time-podcast/id1700451079?i=1000634101642