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In a recent case, a startup founder went all the way and returned the money to one of the major investors due to differences in political stance. This is a rare incidence but not unheard of. At Instagram for example, one of the investors had backed the startup at a time when the company was into a much more basic check-in service. Later when Instagram emerged in its present day avatar, the same investor did not ask for money back, but simply refused to invest further. Whenever such cases of firing investors take place, it is due to one of two commonly cited reasons. One is when the startup loses money but still has some left in the bank, so it is returned to minimize investors’ losses as a measure of goodwill. The other is when companies change track and diversify into something else, so original investors are given such a chance to reassess. One such case of a pivot was with Next-door which had started out as Fan-base before a business innovation saw the model change. But such cases are rare due to the fact that all the key stakeholders need to agree on such terms.

Source:http://fortune.com/2017/03/30/startups-divest-investors/

Uploaded Date:02/06/2017

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