As competition among VCs increases, some founders sell shares in early funding rounds
vcs are apparently 100% neutered atm.
Context & Ripple Effects
This piece sits at the start of a decade-long arc of founders extracting value from venture backers. In late 2014, with too many funds chasing deals, founders began cashing out their own shares inside early funding rounds — turning term-sheet competition into personal liquidity.
The pattern only deepened from there: by 2018, US tech founders were wresting control from their VC backers and tying huge pay packages to IPOs, and the cycle's downside arrived for investors after 2022, when firms that held stakes through the bull market were left holding losses and renegotiating deals. The 2014 share sales were an early signal that pricing power had shifted toward founders.
First-order effects
- Founders in hotly contested rounds gain immediate liquidity and de-risked personal balance sheets while retaining operating control of the company.
Second-order effects
- VCs competing for allocation must accept diluted economics or founder-favorable terms, compressing fund returns just as later coverage shows firms like Sequoia, Menlo, and Altos absorbing post-IPO losses on retained stakes.
Third-order effects
- If founder leverage persists through the cycle, venture consolidates around fewer, strategically differentiated funds — a dynamic consistent with QED's Frank Rotman estimating up to 80% of VC firms are strategically challenged in the slowdown.
The trend: Venture capital has moved from scarce capital dictating terms to abundant capital conceding them, with founders converting competitive bidding into liquidity and control across successive cycles.