A startup I advise is going to shut down soon. Their first investor, a friend of mine, is asking me a very good question. Call him Mr.X.<p>Mr.X was the first investor, and his convertible note is due in a couple of months. The startup raised about 1M in a first seed (of which he was first investor), and another 1M in another seed, at a higher valuation.
The startup has approx. 0.5M left.<p>How should the startup treat him?<p>1) They should give each investor approx. 1&#x2F;4 of the money they invested (2M invested, 0.5M left = 1&#x2F;4).<p>2) They should consider the different valuations of the two seeds, and therefore give the investors in the first seed more than what they give to investors in the second seed.<p>3) They should consider how old the convertibles are, and do a weighted average.<p>4) None of the above: they should instead...<p>Any help (from past experiences, or just opinion), is much appreciated.
I don&#x27;t want to reveal what my inclination is to avoid adding bias to your comments.<p>I think this is a very interesting discussion that is not often covered on HN, and therefore useful even besides the specific advice for these guys.
Ask HN: Startup shutting down; how should investors be treated?