Dear SaaStr: What Happens When One Founder Invests Cash and The Others Don’t?
In both my start-ups, I was the only co-founder that invested cash.
It didn’t matter that much, but.
- First, you often can get reimbursed in the first venture round — if amount is small — if that’s what you want. This is what I did the first time. As the amount I put in exceeded my savings. 🙂
- Second, you can find some formula to convert it to more stock — often relatively cheaply. This is what I did the second time. I came out way ahead and made 10x on this amount. Although it didn’t seem risk-free at the time.
It’s good to be equally committed. But this doesn’t mean everything has to be equal. You do what you have to, to win in a start-up. What that means for each founder can vary.
If nothing else, if one founder puts in material cash and another doesn’t, convert that amount to stock at a fair price.
I see that all the time on cap tables.
Dear SaaStr: Is It a Bad Idea for Founders To Invest Their Own Money Into a Funding Round?
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Jason Lemkin, Khareem Sudlow
