Should Seed Investors Sell When Founders Take Money Off the Table?
David Tisch does not sell early, even when founders take money off the table. He works for the LPs who invest money in the firm, and his customers are founders. His job is to return as much money as he can, and getting out of a seed position early carries both financial risk and reputational risk.
He invests at the seed stage to join the founder for the journey. The journey can last 15 years, 20 years, or four years. If a founder does not want an early sale, selling risks the relationship. He rejects the idea that an investor should sell just because the founder is taking secondary. Founders live under a different set of economic conditions. A founder with debt, or living in a place that creates stress, becomes better at the company with money outside of work. With 10, 20, or 30 million dollars in pocket, the founder is willing to see the company through and take a bigger risk. The best companies compound the most at the end. Going from a 2 billion dollar company to a 4 billion dollar company and then an 8 billion dollar company is easier than going from zero to a billion, so an early exit leaves the most money on the table. Taking 20% of a position off so the math looks good is a different risk analysis.
When he or a partner still believes in a company, de-risking is the wrong answer. They are in the business of risk and should stay invested in companies that keep compounding, because every turn at the end is a big win for the LPs, the firm, and the founders.
