eirikur hallgrimsson ehmadscientistcom trend isnt news details ugliness interesting worth forking archives httpwwwnytimescom20020728businessyourmoney28venthtmltodaysheadlinespagewantedprintpositiontop july 28 2002 venture capitalists taking gloves lynnley browning venture capital world looking less like genteel club like brawling barroom venture capitalists offering companies bankroll increasingly hardknuckled deals leave little wealth startups managers original backers moves leading entrepreneurs desperate money decry todays investors bullies venture capitalists even suing rival venture firms asserting tough new terms wiping value previous investments people playing hardball said ted dintersmith general partner charles river ventures based waltham mass bursting internet stock bubble two years ago wiped many venture investments dotcoms amid bear market stocks limited prospects investors young companies make money soon venture capitalists looking novel ways make money result private companies facing onerous terms venture capitalists seen 20 years said steven e bochner securities lawyer wilson sonsini goodrich rosati palo alto calif represents venture firms boom late 1990s venture capitalists chose one two options could paid back invested capital share profits receive dividends could convert preferred shares common stock private company held initial public offering sold time huge payouts newly public acquired companies usually chose 2 markets dead initial public offerings mergers acquisitions venture capitalists silicon valley east coast increasingly demanding getting options double dip known participating preferred leaves far less potential wealth companys founders previous investors venture capitalists also negotiating deals heightened liquidation preferences startups agree pay back initial investment least two three times previously venture capitalists handed money startup lump sum parceling funds tranches new companies reach certain milestones sales target example hiring particular chief executive even trying protect investments veto rights permit block future investments venture capitalists might dilute stakes said mark g borden chairman corporate department hale dorr law firm based boston result mr borden said startup company casts lot particular venture capitalist group investors may find tethered backers unable raise new money elsewhere entrepreneurs particularly dislike one recent trend venture capitalists pushing young companies agree retroactively lower prices investors pay shares startup worth less tries raise money later move known full ratchet intended prevent investors stake diluted significantly reduce even wipe stakes companys original investors managers giving new investors company song first round investors generally get crushed startup raises money later said j edmund colloton general partner chief operating officer bessemer venture partners based wellesley hills mass consider mahi networks private optical networking startup three rounds financing september 1999 november 2001 mahi raised 110 million bluechip venture firms like benchmark capital sequoia capital ge capital unit general electric venture arm goldman sachs one point internet boom mahi valued 180 million last month though new group smallername investors led st paul venture capital minneapolis acquired threequarters company 75 million financing mahi valued 25 million said chris rust mahis president chief executive tied employee incentives including stock options leaving almost value existing investors despite nurtured mahi money advice early investors chose back company new lower valuation effectively value attributed previous investments said one venture capitalist whose firm early backer completely washed last round said investor spoke condition anonymity hard data prevalence newer tougher terms venture capitalists famously secretive deals private largely unregulated ask venture capitalists securities lawyers work startups tales onerous terms abound end day money coming strings attached said mark g heesen president national venture capital association trade group based arlington va shift turned conventional wisdom head venture capitalists loved risk internet bust wall streets slump left scrambling make money repay investors justify management fees venture capitalists clamored first door hot new company usually make money recent investor certainly looking laterstage deals get benefit previous investors taken risk said todd dagres general partner battery ventures wellesley mass entrepreneurs agree harsh new terms simply way raise cash survive managers shun investors call vulture capitalists bent picking meat young struggling startup todays venture capitalists want take advantage said george r waller chief executive strike force technologies employeefinanced software maker west orange nj mr waller said turned away 30 venture firms recent months demanded among things hardtoreach sales milestones george j nassef chief executive valetnoir startup based new york makes marketing software casinos said several venture firms even asked recent months potential investments secured receivables money owed valetnoir customers turned surprisingly shift financing terms upsetting venture firms early investors startups suffering companies seek raise additional money bargainbasement prices one highprofile case benchmark capital bluechip silicon valley firm sued canadian imperial bank commerce juniper financial month benchmark early investor juniper online financial services concern put 20 million early 2000 internet bubble burst also contributed second 94 million round september juniper based wilmington del seeking raise 50 million canadian imperial already owns around half company terms would sharply dilute benchmarks original unspecified stake benchmark sued prevent startup raising money parties declined comment case delaware judge threw last week friction rare boom venture capitalists operated like competitive tightknit fraternity channeling deals one another startups backers saw interests allied tighter markets theres lot ugly behavior coming said mr bochner wilson sonsini lawyer theres going much litigation like httpxentcommailmanlistinfofork sun 28 jul 2002 232056 0400 nyt venture capitalists taking gloves