Dennis Crowley didn’t get the big personal payday he would have if he had sold Foursquare to Facebook, which he almost did. But Crowley and co-founder Naveen Selvadurai did okay with the $20 million Series B funding they raised from Andreessen Horowitz, Union Square, and O’Reilly AlphaTech. According to an SEC filing (first spotted by Dan Frommer at SAI), the two founders personally took home $4,636,688 from that round, or 23 percent of the total amount raised.
Under a part of the filing titled “Use of Proceeds,” the company had to disclose “the amount of the gross proceeds of the offering that has been or is proposed to be used for payments to any of the persons required to be named as executive officers, directors or promoters in response to Item 3 above.” There are only three people listed as “executive officers, directors or promoters”: Crowley, Selvadurai, and board director Albert Wenger of Union Square. It would be highly unusual for one of the VCs on the board to take personal liquidity out of a deal before his firm does. And Union Square put more money into this round.
No wonder Crowley flew to South Africa to watch some of the World Cup games right after the round closed. (To be fair, it was also his first vacation after 18 months “of straight up hustling,” he says. Might as well do it in style).
With the IPO markets not as attractive as they once were and companies staying private longer, it is becoming increasingly common for founders to take some money off the table during later venture rounds. (Other recent venture rounds saw much bigger sums going to founders). As long as the company does well, nobody will blame them. But if the company hits on hard times when that cash could be helpful, well . . . then a different story will be told.
Update: Foursquare says the founders sold shares essentially so that investors could buy more. Spokesperson Erin Gleason sent me the following statement:
As is common in Series B financings, Dennis and Naveen sold a small portion of their personal equity as a secondary offering to allow our investors to achieve their ownership objectives.