Dear SaaStr: If a Startup Raises $40 Million and Fails to Sell The Company, Do Founders Typically Exit With a Severance Package?

Very rarely in a failed start-up, irrespective of the amount raised, will the founders end up with anything.

If the start-up has raised a lot, e.g. here $40m, a small carve-out may be set aside to help wind down the company.  But it will be relatively small.

Now … a slightly different question is if a startup raises $40m and sells … but for less than $40m … do the founders make any money?

Typically, yes.  The ones that are still there, at least.  Typically any acquirer buying a startup for less that it has raised will try to get as much of that compensation tied up in long term vesting and incentives for the employees it wants to keep.  And to leave the investors with as little as possible.

That’s a complicated dynamic, where the investors lose but not everything, and the founders make something.  Assume some drama and stress here 🙂

But if you are acquired, even for a relatively small amount, most acquirers are going to make sure there are at least some financial incentives in place for the founders still there to make money.