Venture capitalist Michael Arrington at Uncrunched asked around, and says Gowalla left many of its investors in the dark about its Facebook deal:
Some investors seem to know the terms of the deal – they’ll be getting 20 or 30 cents back for every dollar invested (the company has raised a little more than $10 million). But most of the investors I spoke with had no idea what was going on, and what if anything they’d be receiving back for their dollars in.
This is a tricky topic for me to write about, since I’m now an investor. But in 2010 I dove into the topic, noting a trend of startups being acquired for not much money, but founders and key employees were being given rich stock deals on the side.
…I was more blunt in 2010 when Facebook acquired Hot Potato – and noted that there’s a real issue of breach of fiduciary duty when a founder takes a side deal but doesn’t cut investors in.
Cutting out the investors and doing a side deal for yourself seems like a bad business move, but Arrington points out, “Gowalla was a goner anyway, so there’s no real harm done with the pennies-on-the-dollar acquisition.”
Grumbling investors just wish Gowalla had been more upfront.
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