Cap Table Kills Exits

Sam Parr and Shaan Puri discuss how early cap table decisions can significantly impact founder outcomes, sharing experiences about founders who received minimal exits despite large company sales.

Key Points:

• Real Example of Poor Cap Table Management:

  • Friend sold company for $1B but only walked away with $3M
  • Had 4-5 co-founders and raised significant money early
  • Dilution from early fundraising severely impacted founder ownership

• Impact on Founder Motivation:

  • Sam questions how founders stay motivated with small ownership
  • Suggests it's difficult to maintain drive when potential payout is limited
  • "I don't understand how you get motivated when you're not gonna get paid"

• Different Perspectives on Motivation:

  • Some founders motivated by mission regardless of ownership
  • Others continue due to sunk cost mentality
  • Some don't do the ownership math early enough

• Shaan's View on Recovery:

  • Cap table issues can be recoverable
  • Some founders equally motivated at 50% or 35% ownership
  • Motivation can come from regret of giving away too much equity

• Lessons for Founders:

  • Be careful with early equity decisions
  • Consider long-term implications of fundraising
  • Understand ownership implications before raising money
  • Plan cap table strategy from the beginning