This is also a really valuable post when considering raising money for a startup.
Buying businesses and investing in the private market // Founder, PE & RE Fund, Advisor #BuyThenBuild
The FanDuel founders built a $500M company but walked away with $0. Here's how investment terms eradicated their equity (from analyzing hundreds of deals): Most founders only focus on running their business, completely missing the slightly sneaky game happening in the fine print. When you raise money, you're actually playing two separate games: • Running the business • Protecting your equity After analyzing 250+ private equity deals, here are the 4 most dangerous terms that can destroy founder equity: 1. Liquidation Preferences Investors get paid back 2-3x their investment before founders see a penny. Think of it as investors cutting to the front of the line at exit. 2. Board Flipping Rights These let investors control the board with a minority stake. One missed milestone? You're suddenly "Director of Marketing" at your own company. 3. Drag-Along Rights Forces you to sell when investors want out. Wrong timing? Too low price? Doesn't matter. You have zero say. 4. Anti-Dilution Protection If valuations drop, investors get MORE shares to maintain their ownership %. You're playing poker where only founders can lose chips. The real danger is how these terms compound: • Multiple layers of preferences stack up • Board control shifts away • Anti-dilution keeps hitting By Series C, your cap table becomes a minefield. Here's how to protect yourself: • Map total capital needs upfront • Build leverage before raising (revenue, unit economics, path to profitability) • Get a lawyer who's seen hundreds of venture deals • Consider alternatives (venture debt, strategic partnerships, revenue-based financing) The harsh truth: Running a business and protecting your equity require completely different skillsets. Most founders master the first but ignore the second until it's too late. Want to learn how to play both games and win? Join 50,000+ entrepreneurs getting weekly insights on deal structures, wealth building, and acquisition opportunities. Get started here (includes free chapter of my WSJ bestseller): walkerdeibel.com -- About me: WSJ bestselling author, bought 7 companies in 10 years. I help entrepreneurs skip the start-up phase by buying profitable businesses.