Will Hsu has an interesting post on the jockeying and balancing that goes on between the outside financiers and founders (with respect to equity).
In a related area, I've sometimes been disturbed (not so much by the legal foundation) with respect to the "protections" for angel investors, non-founders, and early-in-the-game employees that get squeezed by later rounds of capital. Sometimes it seems like that the only real protection that these folks have come down to the integrity of the CEO, board members, and new investors in respecting what hard money (e.g., angel money) and hard sweat the employees have put in (for perhaps, very low wages). And where does the fiduciary responsibility of the board members fit with non-founders?
If you buy into my into my concept that it is impossible (or very hard) to provide legal protection to non-founders via investment rights agreements, etc., and if you further agree that board governance may be a little loose on obligations to non-founder employees, consider where the onus stands.
Update (8/18/05): BTW - in the case of non-founders I am conceptually all for performance-related structures, but the mechanics in today's world seem very difficult to execute. Always interesting to search for new practices.
