Even as Fixel played the role of a Godfather to the likes of Flipkart, he also encouraged entrepreneurs to cash out early.
Tiger Global’s Lee Fixel is credited by many for partly shaping India’s internet economy, especially when it came to backing startups such as Flipkart early. Over the years, Fixel acquired dominance in large deals by aggressively chasing and wooing founders of some of India’s biggest technology companies including Sachin Bansal, Bhavish Agarwal and so on.
Even as Fixel played the role of a Godfather to the likes of Flipkart, he also encouraged entrepreneurs to cash out early, and start selling off their shares to build their wealth. By the time these companies would reach Series B or Series C funding rounds, the founders would have made multiples of their annual salaries in one secondary sale.
“He encouraged founders to cash out early so they achieve financial freedom and focus on building their startups without worrying too much,” said an entrepreneur who counts Tiger Global among its investors.
Other VCs too, started making investment offers to startups they really wanted, by bundling “secondary deals” in the term sheets.
At least four entrepreneurs I spoke with in the past two weeks confirmed that their term sheets had lucrative secondary sale of founder shares bundled in the contract.
“When you see how you can actually cash out few crores within months or a year of signing the term sheet, it’s tempting,” said one of them. “But then, you soon realise that it’s actually trading your control and freedom,” said one founder who has bootstrapped his startup over years.
Over years, this also bred a culture of entrepreneurs turning angel investors much before they established their own businesses. With financial freedom and early cash, why wouldn’t you write out small cheques of capital and become an angel investor in other startups, after all?
The frenzy to become an angel investor has reached a point where founders have even started pledging their shares to raise money from the banks. As one of the most respected and a veteran angel investor in India pointed out few months ago, some founders have even started defaulting on their promised angel investments because investors are now beginning to question secondary sales and are tightening their purse strings.
Over years, this also bred a culture of entrepreneurs turning angel investors much before they established their own businesses.