There is a “two-points-makes-a-trend” (okay, four) piece in today’s Times on founders cashing out during venture investments. This would be interesting, if true, as VCs are usually chary about letting incoming capital in an early-stage financing round go to the company founders. For starters, it means founders are a) wealthier, and b) less tied to the financial success of the company, neither of which entirely align the company’s founders’ interests with interests of investors.
So, is it a trend? I’ll grant that the ugly technology IPO market has made founders look for other forms of liquidity, including having investors buy their shares from them. That, however, is more typically done by mezzanine folks, not by early-stage venture investors. The latter folks are still very concerned, post-boom, about capital efficiency — making sure their money gets used to grow the business — so they are uneasy about using cash to buy founder stock.
You can see that in the biggest examples Gary cites, Webroot and eHarmony, where both companies were at points (as evidenced by centi-million dollar transactions) where they would normally have done IPOs, but the offering window was not open — so the founders got liquidity by selling stock to investors.
To make a long story short, I’m not convinced that founders selling stock to venture investors is a trend — although there is no doubt many stock-rich, cash-poor founders will be furiously sending this article around to their venture investors trying to create a trend, ex post.