Some Free Advice to the Founder Seeking Protection Against Getting Fired

By Doug Collom, Vice Dean, Wharton | San Francisco

Doug Collom

There is a question that most founders ask when organizing their startup companies in preparation for fundraising with the angel and venture capital community.   “Should I protect myself against getting fired from my position with the company?  Maybe a severance payment clause or a clause accelerating the vesting of my stock if the VC’s fire me without cause?”  After all (so the argument goes), it is the founder who is inviting the VCs to the party—it is the founder’s company, and it is the founder who spent years working in a garage on weekends and late nights putting together the magic that will guarantee the success of the startup.

Right at the outset, it should be noted that protective provisions like this favoring founders in venture-backed companies are definitely an exception to the general industry convention.  In most startups—and I would conjecture on the order of more than 90%–there are no such protections.

Although this state of play in the startup arena might cause some anxiety for founders, here are a few factors that will shed some light on the subject:

  • Investors usually seek to establish a level-playing field in negotiating the general terms for an investment.  Agreeing to protective provisions favoring a founder in the event things don’t work out, in the VC’s view, violates this goal.  There is no guaranty to the investors that their investment will be successful, and there should be no guaranty to a founder in terms of severance or accelerated stock if the company’s board of directors determines that it needs to terminate the founder’s employment.
  •  Almost every VC will tell you that the caliber and experience of the management team are in the top mix of factors they evaluate in making a decision to invest in the company; and in some cases, this capability is the top factor and the only one they won’t compromise on.   This means that if a VC or group of VCs represented on the board determines that a founder has to be let go, in their view, it is usually the result of a failed company.  Not just a company that needs to “pivot” in response to the needs of the market or the customer or the dictates of the technology—but a company that regardless of the tweaks has no reasonable hope of success with that founder continuing in a management position.   Replacing a founder is one of the few levers that investors can pull to breathe new life into a company, and they do it as a last resort.
  •  The founder’s goal of raising money starts, of course, with pitching a viable plan—a great management team, a market with a huge sucking sound, a disruptive or compelling technology or approach, an effective market strategy, and a near term prospect of hitting key benchmarks.   But as any entrepreneur knows who has raised money from the VC community, establishing chemistry with the VC firm and particularly the partner who will be championing the startup to the firm’s partnership is equally important.  For the founder to suddenly condition the relationship on the inclusion of protective terms if things don’t work out is a tough sell.  It sours the chemistry and it tilts the playing field in favor of the founder—it’s probably like asking for a prenuptial agreement right in the middle of a courtship.  That is not to say the question isn’t raised, but the founder shouldn’t be surprised if the investor doesn’t respond well.

At the end of the day, everything is leverage.  For the founder who is fortunate enough to have several  VCs courting the company with term sheets and promises of fame and glory, asking for protective provisions in the event things don’t go smoothly might turn out in the founder’s favor.  But it shouldn’t come as a surprise if the investor declines the request.

Funding Your Company via the Wharton Network

By Chris Rodde (WG’99)

In 2009, I started, a service to help consumers find senior housing and senior care.  Since then, we’ve grown to 25 employees, operating in 50 states, funding the company by raising over $5M in capital.

2009-2010 was not a great time to be raising money as the financial markets were still in the midst of a global financial meltdown. The first quarter of 2010 (when we raised our A round) was the lowest amount invested in US venture investments in the last 35 quarters (since 2003)1. Nonetheless, my business partner and I were able to close a $1.6M Series A then. We did this with the help of the Wharton network.

Two-thirds of the funds we raised in our A round and half of the investors on our Series A cap table were either Wharton alumni or can be attributed to an introduction I received from Wharton alumni.

Here are a few tips for leveraging the Wharton network in your fundraising efforts:

  1. Reach out to your personal Wharton network. Even if you graduated years ago, trust that people will return your email. Go back through your facebook (with a lower case f) and see who either might be in a position to personally invest, invest via a fund they control, or have introductions for you.
  2. Use LinkedIn to find Wharton investors. You can search LinkedIn for free to find angel investors or venture capitalists who went to Wharton. It turns out most angel investors include “angel” on their LinkedIn profile and a simple search picks this up, likewise for “Venture Capital”.  We built a spreadsheet with 400 names of target angel investors, VCs, or people who could make introductions–a third of this list included Wharton intros or Wharton people, many of them found on LinkedIn.
  3. Pitch the “Wharton Friendly” VC funds. MentorTech Ventures (Michael Aronson, W’78, & Brett Topche, W’03), First Round Capital (Josh Kopelman, W’93), Felicis Ventures (Aydin Senkut, WG’96), and Shasta Ventures (Rob Coneybeer, WG’96) all have deep roots at Wharton and will likely take your call. If you aren’t a fit for their fund, they’ll introduce you to someone who might be.
  4. Reach out to your professors or former professors. This was the biggest win for us. I emailed Dr. David Reibstein, one of the few Wharton professors with whom I had kept in touch. Dave made an introduction to MentorTech, who led our Series A round and Dave now sits on our Board. Many Wharton professors are angel investors, like being involved in startups, and are incredibly well-connected so they can be a great source of introductions or capital.

Good luck!


Chris Rodde (WG’99)

Chris Rodde received his MBA from Wharton in 1999 and is the co-founder and CEO of, a nationwide service to help consumers find assisted living, independent living and memory care for themselves or their loved ones.

Sources: 1)


Challenges Student Entrepreneurs Face when Raising Seed Capital

By Sylvie Beauvais

Student entrepreneurs face specific hurdles particular to their dual status (as company founders and full-time students) when it comes to raising seed capital for their startups.  Here are some reflections from several Wharton graduate students/recent alums, Samir Malik, founder of 1DocWay and dual degree MBA and Master of Biotechnology (Class of 2013), Steve Lau, co-founder of  and Wharton MBA  (Class of 2013), and Austin Neudecker, Wharton MBA (Class of 2012).


  • Being a student also can signal to an investor that you have a lot of energy and that you are good at juggling multiple responsibilities and handling limited direction.
  • You have the ability to be more frugal and can make money last longer. i.e. you don’t have to pay yourself a salary while you are a student.
  • You are in a position to leverage professors in areas of expertise that are core to your business.
  • The reputation of the school carries some weight.
  • Your access to investors is great as a student. “Through treks, my positions in clubs, ISP projects, etc. I was able to talk to top level investors at ~40 great firms over my time at Wharton.”


  • School can be a hamper because investors would like to see a full-time commitment from the entrepreneurs they invest in.
  • From the investor’s perspective, graduate business school can be seen as a risk aversion technique for young professionals, which may not match the mental image of the “entrepreneur.”
  • VCs and angels have (highly rational) doubt about your devotion to the idea.  Many student entrepreneurs are willing to try concepts while they attend school (as they didn’t plan to take a salary anyway).  So many students foolishly admit (or imply) that they are testing the concept, and if they raise money before they graduate, they will go for it.  In investors’ minds – that’s not acceptable.  You must display your commitment to pursue the venture regardless of funding and they’ll often wait until graduation time to seriously consider the investment.
  •  Being a student is a clear distraction as you cannot spend 100% of your time and mind-share on the startup.
  • There is less perceived ‘urgency’ in your fundraising timeline as you are still a student.

There’s another factor: a student’s experience is often mitigated by the startup’s industry focus.  As Ashish Patil, Founder ARE 5 Apparel (in our Venture Initiation Program) and Master’s Student in the Executive Master’s in Technology Management (EMTM) program (Class of 2014), puts it:

“I’m working on my second startup, ARE 5 Apparel. Previously, I had a medical device startup. There’s a big difference in how me being a young student has been perceived. I’ve been relatively accepted as an entrepreneur in the apparel industry, despite having no direct experience. I think it’s the value of having a close connection to the target demographic and showing you are able to pick up industry nuances. Opportunities for seed funding have been discussed with us three months into the venture. However, I’m doing my best to grow organically and be self-sufficient, as this industry allows for that to a higher degree.

On the flip side, my medical device company (Medivity) took a longer time to get any traction. I was finding most medical device entrepreneurs started their first company after learning the ropes for a significant time in their healthcare discipline. It was difficult for us to convince investors and other decision makers to take our technology and venture seriously due to our lack of experience. In that situation, my team and I focused on aligning ourselves with experienced advisers and physicians to bring validity to the opportunity. With a stronger supporting cast, we were accepted into an incubator with a research grant and eventually had larger medical device companies evaluating our technology.”

So the question becomes, what are the ways students can increase investor confidence in them despite their student status?

Both Samir and Steve, ultimately, agree that as a student you have to be willing to discuss dropping out. There are compelling reasons to stay at school and complete your degree (as previously discussed here), but this needs to be balanced with your growing business’s needs.

Steve Lau reports that over the summer he and his co-founder Jon Dussel, MBA Student (Class of 2013), spoke with eight angel / seed investors. He felt that overall being a student in the position of fundraising was more of a negative than a positive, and others have agreed that on balance, it is a slightly more difficult sell to investors.

Steve suggests three strategies for delicate fundraising discussions with investors:

  1. Communicate that while you are in school you can still allocate a full workweek to the business.
  2. Convince them [the investors] that the school is providing you with considerable resources that are core to the startup’s success.
  3. Indicate that you are willing to do what is best for the business, including dropping out if necessary.

According to Jon, “We’ve seen two minds on this split ~ evenly (from angels).  Some are adamant about dropping out and being 100%, while others see staying in school as a good way to extend our burn rate.  I think it depends on their school experience and what they think they could or could not have accomplished while at school.”

According to Venture Initiation Program alum Mike Kijewski, Wharton MBA (Class of 2012), “I would say it made raising capital only slightly harder. Had I just graduated, and been able to spend 100% of my time on the company, more investors would have been likely to invest. But the traction we were able to get with customers while I was in school helped our investors feel a lot more comfortable about investing in a company run by a current MBA student.”