STARTUPS: The somewhat rose-tinted spectacles worn by many a startup founder(s) can have an unfortunate habit of breaking quite easily. This is never more so than when venture capital companies get involved and, rightly, want to see some return on their investment. READ MORE on the NewYorkTimes.
Entrepreneurs dream of selling their company for millions of dollars. But a nasty secret of venture capital is that the dream can be dashed as the venture capitalists make millions in a sale, leaving the founders with nothing.
A recent court case in the US, arising from the 2011 sale of Bloodhound Technologies, illustrates how this happens. Bloodhound was founded in the mid-1990s by Joseph Carsanaro to create fraud-monitoring software for health care claims.
After several years of going it alone with a handful of colleagues, Carsanaro was able to raise Bloodhound’s first venture capital round for $1.9 million in 1999, followed by a second $3.1 million round in 2000.
But when the Internet bubble burst, the company underwent rocky times.
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