Not to disagree with Ron Conway OR agree with Sean Parker, but I think I disagree with this findamental VC tenet:

Basically:

1. Entrepreneurs who invest their own money, reduce the risk profile of a startup should have that option if they want to dilute some more.

VC/angels come in late and think that history starts with their entry into the landscape... it does not.

2. If indeed it costs less to start a company and financing needs are lesser, why not allow investors to earn a larger piece of the pie by letting the founders to earn a portion of the proceeds?

3. The argument that entrepreneurs lose appetite and drive is nonsense... these are risk takers by nature...

4. Lastly, it allows entrepreneurs to remain patient and not sell out for little cause we have debts to pay etc.

I wrote about it here:
http://www.watchmojo.com/web/blog/?p=1663

I guess it's different when a founder does not need VC money. When I found out what a term sheet entailed, I pretty much realized VCs and very respectfully, angels such as Ron Conyway need to show flexibility.

If this means biding my time to get terms that I'm comfortable, then so be it. Why should only the investors be comfortable in a deal?

Please tell me if I'm wrong on this one folks...

if sean is trying to build a reputation as 1) an investor who'd like to see entrepreneurs stay in the CEO chair of the companies they create, and 2) an investor who doesn't mind a partial cash-out for entrepreneurs who've increased the value of their companies prior to liquidity event, then i'd say he's building a pretty darn entrepreneur-friendly reputation... which is basically what VCs are supposed to do.

not sure why Moritz and Conway are trying to grind an ax on these topics... guess they're entitled to their opinions, but regardelss if you're an investor doesn't seem like good marketing.

maybe i'm missing something...?

Because it is easier and cheaper to start a company than in the past, founders have more leverage. Add to that the fact the end game for so many companies is a sale rather than an IPO, and the entire environment is different.

Sitting around grumbling about the decline in their clout or lack of respect from the youngsters serves no one. Investors of all types must adapt to new conditions if they want to survive and prosper.

besides, i'm sure the entrepreneurs would also like to be able to foot a bill at the type of restaurant ron and kara seem to be at during this interview when he's preaching the "we all make money at the same time" mantra...

or, does kara (the press) pick up the tab to begin with?

Founders Fund is the most innovative fund out there. As with all innovations, the folks embracing the status quo can not understand them. Sean Parker is a creative guy and the FF shares are not bribes, but a way to focus entrepreneurs who may have taken two mortages on their houses and hundreds of thousands of dollars in debt. Providing them with a little relief is good for the LP's and GP's. Becasue if the entrepreneur is distracted by his personal debts, then he or she can not focus on building the company.

Go ahead, the more you detract Founders, the more succesful they will be.

Mike Moritz gave them publicity by putting their name up on a slide at the Sequoia annual meeting. The result, LP's are now clamoring to get in. Mike, thanks for advertising Founders.

What makes a "third rate VC"? A "first rate" VC who has fallen behind times.

Too bad, Ron Conway.

there's a notion out there that people need to be disabused of: just because it's cheaper to start a company these days doesn't mean that VCs are any less relevant. no, it doesn't take venture capital to start a company. but ask facebook: it sure as hell takes a lot of capital to SCALE a company. follow the logic: 1. it's cheaper to start a company 2. more people start companies i.e., more competition 3. companies need scale to compete and be successful 4. scale requires $$$ hence: to scale a company, you need $$$. does that mean that every successful company needs to take VC? no. for example, it can self-fund. however, last time i checked, most tech startups are not profitable. even if they were, it would be SLOW going. by definition, tech startups are successful because of explosive growth, and explosive growth only comes from investing serious capital. the only leverage that founders have these days is because there's a lot of capital out there chasing the same small # of good deals, not because it's cheaper to start a company.

After getting completely swindled in a "pay to play" round after selling a business to a "startup" funded by first tier VCs, I don't see where any of these people have the right to bitch about entrepreneurs mitigating their risks by taking some money out in follow on financing events.

A lot of these investors and the crony managers they install in their portfolio companies are selfish crooks. So entrepreneurs are right to hedge their bets.

Memo to entrepreneurs, don't be misled by a firm's sterling reputation. The reason it is sterling is people who've been screwed over are too fearful to vent about it for fear of payback. You're probably better off with a second tier firm whose dirty laundry and asshole partners are public knowledge. At least you'll see it coming before it's too late...

I hope the Founders Fund formula becomes standard. It spreads the risk around, and for people who are not already wealthy, encourages longer-term thinking.

I think this is a self-serving, self-interested diatribe against innovative financing.

As a serial entreprenuer, I can say that this guy does not understand the day-to-day tribulations of the early-stage CEO. I can safely say if Sean and Sean had some personal capital during their time at Napster, the outcome could have been dramatically different.

This is like the rich guys on Wall Street telling the young guys don't be so concerned with money.

What a hypocrite.