It’s a battle that will never end. Entrepreneurs complain that venture capitalists are ripping them off when they do follow-on rounds at reduced valuations. VCs say they’re doing the entrepreneurs a favor just by doing the round, because the alternative is for the startup to go belly-up. You’ve heard a lot from VCs in this column explaining how they make sure that the management of a startup isn’t diluted to the point where it has no interest in seeing the startup succeed. I believe that’s the case in most situations. But, as always, there are some opportunists out there who are willing to shave a few extra points from management’s stake in order to line their own pockets. Enter Dan Mahoney, a corporate attorney with Snell & Wilmer. What follows is Mr. Mahoney’s advice about how a startup should deal with a down round.
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