FanDuel's $465M acquisition by Paddy Power Betfair paid out $559M in liquidation preferences to investors first, leaving founders with nothing. A cautionary tale about how preference stacks can wipe out founder equity even in a successful exit.
Do you know how the founders of FanDuel got screwed? They raised too much money? Something like that. So when the FanDuel founders raised funds, 2 key investors received a liquidation preference that entitled them to the first $559 million in an acquisition. Founders and employees would be paid only if the acquisition exceeded $559, 'cause they're— these guys are first in line, right? Because the Paddy Power Betfair was for just $465 million, the founders received nothing. So the question is, should people raise in this environment right now? You can raise if you're going for a moonshot thing, but I think for the vast majority of people, you probably shouldn't.
