On the Nature of Things

Pursuit of entrepreneurs threatens start-up ecosystem as investors target personal assets to claw back funding

Typhoon wrote: ↑06 Jan 2025 08:24 FT | Chinese venture capitalists force failed founders on to debtor blacklist

Pursuit of entrepreneurs threatens start-up ecosystem as investors target personal assets to claw back funding

One question that arises in my mind is why would any entrepreneur agree to a redemption clause that includes personal liability in a contract.

Doc wrote: ↑09 Jan 2025 22:11

Typhoon wrote: ↑06 Jan 2025 08:24 FT | Chinese venture capitalists force failed founders on to debtor blacklist

Pursuit of entrepreneurs threatens start-up ecosystem as investors target personal assets to claw back funding

One question that arises in my mind is why would any entrepreneur agree to a redemption clause that includes personal liability in a contract.

Typically venture capitalists invest with the idea that most of the investments will be money losers. But maybe one in ten will be so good that it will much more than make up for the 9 that failed. They also how that if an investment fails that it fails quickly so they can move on to the next investment.

A company founder will lose credibility with the venture capitalists if they fail. But it often is not a complete loss of credibility Especially if they have a clear explanation for exactly why they failed.

Typhoon wrote: ↑10 Jan 2025 20:24

Doc wrote: ↑09 Jan 2025 22:11

Typhoon wrote: ↑06 Jan 2025 08:24 FT | Chinese venture capitalists force failed founders on to debtor blacklist



One question that arises in my mind is why would any entrepreneur agree to a redemption clause that includes personal liability in a contract.

Typically venture capitalists invest with the idea that most of the investments will be money losers. But maybe one in ten will be so good that it will much more than make up for the 9 that failed. They also how that if an investment fails that it fails quickly so they can move on to the next investment.

A company founder will lose credibility with the venture capitalists if they fail. But it often is not a complete loss of credibility Especially if they have a clear explanation for exactly why they failed.

Quite. That is the usual well-known arrangement ex-PRC.
The start-up has corporate liability, however, if the startup goes broke, the founders are not personally liable.

The point of the article is that the VCs in PRC are holding not only the startups liable [unusual in itself], but also the founders personally liable for the VC's losses.