Steve Blank does not like cram downs. Well, frankly, no one likes cram downs. But Steve Blank thinks founders should go full Samson and pull down their company around their ears rather than accept a cram down. We disagree. Risk is a commodity, and when someone agrees to take risk by investing in your company they need to be fairly compensated. If the total value pie of unallocated equity is not big enough to provide that compensation then some earlier stakeholders have to lose out. There is no alternative. In a situation like this a founder needs to negotiate hard and think clearly. Is a cram down the only possible option or can the company transition to slower growth and pass on new funding? Can a cram down save the company? If not, then do not go through the pain. We are now seeing some VCs offering cram down terms to healthy companies that have long runways. Smart founders will walk away from such offers - they are truly predatory. https://lnkd.in/gvMzP7Vr #venturecapital #startups? #angelinvesting? #emergingmarkets #emergingmarketsventurecapital #emergingmarketsangelinvesting #funding #raise #recession #layoffs #winterHasCome #crash #downturn #downRound #cramDown
