> Four others that raised money but with painful recapitalizations that effectively wiped out early shareholders
Does someone have a recommendation on reading that goes deeper on this point? What enables later investors to do this? What can early investors do to protect their investment?
There are a few different ways this can happen. It has to do with seniority of liquidation preferences -- basically, if you recap or you exit for less than your highest valuation, who gets paid first? This blog post is a pretty great summary of what can happen: https://heidiroizen.tumblr.com/post/118473647305/how-to-buil...
Does someone have a recommendation on reading that goes deeper on this point? What enables later investors to do this? What can early investors do to protect their investment?