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MS

Michael Seibel

05/07/22

@ Y Combinator

Investors often have different incentives than founders, which can lead to misalignment in priorities.

Video

YC

Save Your Startup During an Economic Downturn

@ Y Combinator

Save Your Startup During an Economic Downturn

05/07/22

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The investment community has evolved, with more professional seed funds emerging that have obligations to their investors, which can create misalignment with founders' goals.

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Founders sometimes prioritize their own interests over the company's, which can lead to poor governance and decisions that harm investors, such as structuring deals that favor themselves disproportionately.

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Smart founders recognize that investors have their own goals and incentives, and they should consider these when evaluating investment pitches instead of accepting them blindly.

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If investors are dictating actions to a founder, it indicates a deeper problem within the company structure that needs to be addressed.

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Investors should maintain a supportive role, helping founders navigate challenges rather than prioritizing their own interests, which can lead to detrimental outcomes for the startup.

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MS

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Investors know that founders want high valuations and often leverage this by offering a desired valuation while asking for unfavorable terms.