Comment by jasonhong
3 days ago
The last person in usually gets the best deal, in that they can get preference and push everyone else (previous investors, founders, and employees) down. If things goes south, they get their money out before anyone else.
Isn’t everyone “the last” at the moment they are taking participation in the round? If someone thinks they’re gonna get preferential treatment in Series C or D, and then comes someone in E with preferential treatement, then
Why don't early investors put clauses in their investment to protect themselves against being screwed over by later investors? It seems like an obvious thing to ask for if you're giving someone a lot of money, so I'm assuming there must be a very good reason it's not done.
Early investors (the main ones at least) usually get pro-rate rights - which means you can invest in later rounds to maintain your ownership percentage (i.e a later round dilutes your ownership, so you invest a bit until the ownership stays the same).
But the pref stack always favors later investors, partly because that's just the way it's always been, and if you try to change that now no one will take your money, and later investors will not want to invest in a company unless they get the senior liquidity pref.
The VCs should, they're called anti-dilution measures
Its less financially/legally saavy parties like angel investors and early employees who (sometimes) get screwed out of valuation