Ask HN: How do angel investors/VCs deal with “zombie companies”?

28 points

4 years ago

If it's clear that a portfolio company won't be able to reach venture scale, but founders refuse to sell/shutdown the company (maybe because it has already become a lifestyle/cashflow business), how do angel/VCs deal with this situation?

From the Internet, I've found a few data points:

1) "I don't care. No need to return money to me/us. Keep the money. Do whatever you want. Good luck."

- Seems Y Combinator and some good investors go this way [4]

2) "I'll sell our shares back to you for $1."

- KPCB sold their shares back to Gumroad for $1 [1]

3) "Return my/our original investment back. 1x return. No need to worry about inflation over the past 5 years. Just return the original dollar amount. Let's both move on."

4) "I'll sell our shares back to you for 120% ~ 500% returns. Pay me/us back within X months using your cashflow or just borrow money to pay me/us back."

- Buffer used cash to buy back investor shares [2]

- Wistia raised debt to buy back investor shares [3]

If you are an angel/VC, what did you do?