{"id":29,"date":"2007-11-29T16:22:16","date_gmt":"2007-11-29T20:22:16","guid":{"rendered":"http:\/\/blog.payne.org\/2007\/11\/29\/sometimes-investors-should-let-entrepreneurs-partially-cash-out\/"},"modified":"2018-07-17T20:10:06","modified_gmt":"2018-07-17T20:10:06","slug":"sometimes-investors-should-let-entrepreneurs-partially-cash-out","status":"publish","type":"post","link":"https:\/\/payne.org\/blog\/sometimes-investors-should-let-entrepreneurs-partially-cash-out\/","title":{"rendered":"Sometimes, investors should let entrepreneurs partially cash out"},"content":{"rendered":"<p>I recently got a small dividend check from a venture-funded startup.<\/p>\n<p>This was unusual:\u00a0 why is a startup giving out precious cash to stockholders?\u00a0 It seems counter-intuitive;\u00a0 the company should be (re) investing any cash into growth.<\/p>\n<p>But in some cases, this move can address a real problem.\u00a0 I&#8217;ve <a href=\"http:\/\/wiki.payne.org\/index.php\/Risk-Return_Divergence\" target=\"_blank\" rel=\"noopener\">written before about the risk problems<\/a> when you pair entrepreneurs (e.g. all eggs in one basket) with VCs (e.g. a whole portfolio of eggs).\u00a0 For entrepreneurs with no previous exit, a startup with real traction creates a wealth concentration problem.\u00a0 With 95% of her net worth tied up in the startup, the entrepreneur starts to get conservative (as she should).<\/p>\n<p>This scenario is certainly a good problem to have, but is far from hypothetical:\u00a0 there&#8217;s a recent unnamed but well-known startup exit, where the widely-held view is that the CEO pushed to sell out too early.\u00a0 A major factor (insiders say), is the 8-figure personal outcome for the CEO &#8212; he didn&#8217;t want to risk losing that.<\/p>\n<p>Unfortunately, many investors let emotions dominate, and won&#8217;t let anyone make money before they do.\u00a0 A rational investor will understand founder wealth concentration.\u00a0 If the company is doing well, is solidly capitalized and is cash-flow positive, it&#8217;s a reasonable idea to give entrepreneurs some diversification and re-align interests for a &#8220;go long&#8221; play. <\/p>\n<p>If you want to know more about profitable selling in business read <a href=\"https:\/\/sellersplaybook.com\/reviews  \">Sellers Playbook<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I recently got a small dividend check from a venture-funded startup. This was unusual:\u00a0 why is a startup giving out precious cash to stockholders?\u00a0 It seems counter-intuitive;\u00a0 the company should be (re) investing any cash into growth. But in some &hellip; <a href=\"https:\/\/payne.org\/blog\/sometimes-investors-should-let-entrepreneurs-partially-cash-out\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-29","post","type-post","status-publish","format-standard","hentry","category-entrepreneurship"],"_links":{"self":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts\/29","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/comments?post=29"}],"version-history":[{"count":2,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts\/29\/revisions"}],"predecessor-version":[{"id":707,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/posts\/29\/revisions\/707"}],"wp:attachment":[{"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/media?parent=29"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/categories?post=29"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/payne.org\/blog\/wp-json\/wp\/v2\/tags?post=29"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}