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Founders may have given VCs too much power to block an IPO

TechCrunch · 1y ago

Founders may have given VCs too much power to block an IPO

Late-stage venture capitalists (VCs) may be hindering startups from going public in 2024 due to the power they hold through deal terms. In many VC deals, investors are given the ability to block an IPO or acquisition if they disagree with the timing or price. This control stems from preferred shares, which give investors greater power than common stockholders. Investors with preferred shares must support and agree to an IPO for it to proceed. Additionally, the changing landscape of the public markets and the availability of secondary markets for liquidity have further impacted IPO decisions. The uncertainties of the current global climate have also contributed to a decrease in anticipated IPO activity.

Related News

FTC Will Sue to Block Tempur Sealy’s Mattress Firm Buy

Livemint

Livemint · 1y ago

FTC Will Sue to Block Tempur Sealy’s Mattress Firm Buy

The US Federal Trade Commission (FTC) has decided to sue Tempur Sealy International in order to block its $4 billion merger with Mattress Firm. The FTC claims that the merger would give the combined company too much power, allowing them to stifle competition and raise mattress prices for consumers. Tempur Sealy has denied these claims and is willing to make changes to address the FTC's concerns. This lawsuit would be a rare challenge to a vertical merger, which involves companies in the same supply chain but not direct competitors.

Swiggy's top executives get ₹2,240 crore in ESOPs ahead of IPO

Inshorts · 9m ago

Swiggy's top executives get ₹2,240 crore in ESOPs ahead of IPO

Swiggy has awarded employee stock options (ESOPs) worth $270 million (₹2,240 crore) to its top executives ahead of IPO, reports said. CEO Sriharsha Majety, who previously owned 6.23% of Swiggy, has been given an additional 2.3% stake. Co-founders Nandan Reddy and Phani Kishan Addepalli, food marketplace CEO Rohit Kapoor, and Instamart CEO Amitesh Jha have also been awarded new shares.

Startup founders will face an 'unprecedented' crisis of mental health this year, VCs predict

Business Insider

Business Insider · 1y ago

Startup founders will face an 'unprecedented' crisis of mental health this year, VCs predict

Investors are predicting an epidemic of mental illness among startup founders as funding shortages and a lackluster IPO market threaten their survival. The emotional burden of running a startup is well-known, but the current challenging environment has made it even more difficult. Founders are experiencing unprecedented levels of stress, facing anxiety attacks, and struggling to find funding for their startups. Some investors are offering programs and support to address founder mental health, but many founders still suffer in silence, fearing it could harm their credibility or lead to their replacement.

Build for customers, not VCs

Ycombinator

Ycombinator · 3m ago

Build for customers, not VCs

It’s easy to analyze your way out of taking the first step. It’s something YC sees a lot, particularly when founders try to choose what to build based on what they think VCs will like. These founders will find a great problem that they could solve, only to convince themselves it’s not “venture scale.” Before they’ve written a line of code or even talked to a single person about it, they’re trying to predict market opportunities and exit strategies a decade down the road. That’s just not how early stage startups work. In this one, they talk about the risks of “thinking like a VC”, how to know when you’re stuck in this mindset, and how to unlearn it (spoiler: stop reading so much about who’s raising what.) They’ll also cover a short list of things that we’ve found actually matter when starting a company — it’s simpler than a lot of people think.

Loyal Reddit users could win big from its IPO

Business Insider

Business Insider · 1y ago

Loyal Reddit users could win big from its IPO

Reddit's most active users may have the opportunity to purchase the company's stock at the IPO price before it starts trading. Around 75,000 of Reddit's key users will be given the chance to buy shares in March, although the exact number available to them is currently unknown. This approach is unusual as IPO shares are typically sold to larger investment funds and organizations. However, companies like Robinhood have previously offered stock to their users during their IPO, resulting in increased volatility. Reddit aims to achieve a $5 billion valuation with its IPO.

Founders Vs VCs: The Race To Reset

Inc42 · 1y ago

Founders Vs VCs: The Race To Reset

The article discusses the struggle between founders and investors in the Indian startup ecosystem, with both parties vying to reach the "reset button" first. Many founders have stepped down from their companies, either voluntarily or due to investor pressure, as the business outgrows their leadership or corporate governance lapses occur. While this turnover can be seen as a natural evolution of startups, it can also lead to conflicts and ugly situations. However, the article also highlights the positive aspect of founders starting anew, promoting continuity of innovation in the ecosystem.

Investors taking 30% of a startup in a round are short-sighted

Startup News FYI

Startup News FYI · 1y ago

Investors taking 30% of a startup in a round are short-sighted

In a TechCrunch article titled "Short-sighted investors are hindering early-stage startups," the author discusses how investors who insist on taking large equity stakes in early-stage funding rounds can be detrimental to the startup's success. By diluting the founders too much, these investors hinder the company's ability to attract future investment and disincentivize the founders. The article emphasizes the need for investors to support startups instead of hindering their growth and jeopardizing future returns.

Amazon — like SpaceX — claims the labor board is unconstitutional

The Verge

The Verge · 1y ago

Amazon — like SpaceX — claims the labor board is unconstitutional

Amazon has filed a legal document claiming the National Labor Relations Board (NLRB) is "unconstitutional." This comes after facing labor complaints from employees. The e-commerce giant argues that the NLRB has too much power and violates the separation of powers. Amazon also contests the fact that NLRB hearings take place without a jury and with an administrative law judge, a common practice in administrative law proceedings. SpaceX has also made similar claims against the NLRB.

Redditors don't want to buy Reddit stock

Business Insider

Business Insider · 1y ago

Redditors don't want to buy Reddit stock

Reddit is going public with an IPO next month and has recently announced a $60 million annual deal with Google for content licensing. Interestingly, Reddit is giving moderators the opportunity to buy stock, a move that may add volatility to the stock's performance. However, reactions from Reddit's power users have been mixed, with some expressing disinterest and skepticism. While it's unclear how this will affect Reddit's IPO, online sentiment seems to lean towards skepticism and humor.

Honasa Consumer listing puts focus on investors’ returns, unrealised gains

Economic Times

Economic Times · 1y ago

Honasa Consumer listing puts focus on investors’ returns, unrealised gains

Honasa Consumer, the parent company of Mamaearth, and the attention now being given to the returns made by its investors and the unrealized gains of non-selling shareholders. Fireside Ventures, an early investor, has raised Rs 258 crore from the IPO and still holds unsold investments worth Rs 821.49 crore. Stellaris Venture Partners, another early investor, sold a stake worth Rs 437.3 crore, including Rs 355 crore from the IPO. Angel investors, including Snapdeal founders, also saw significant returns.

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