Generally I wouldn't want to, but one possible reason is to take some money off the table. Just sell part (non-controlling) of your stake to have FU money personally. You don't want to sell the company, but you might want the life-changing amount of money that says you don't ever have to work again. That can be done by selling part of the company to another investor.
But is selling a part of your company really the only way to get some FU money, if the company is doing really good and is highly profitable? can't they payout the profits as some sort of dividends.
(Not claiming that this particular company has a lot of profits, the question is more meant to be general. lets take rovio as an example maybe)
Of course. But profits from say a year or two aren't going to be nearly as high as selling off 25% of the company for example.
To take this way past reasonable, consider Instagram. If they could convince someone to give them 250 Million for 25% of their company instead of selling the entire company, that would be huge FU money and they could keep running their company, while evening maintaining a majority stake. I could see that as a very tempting option.
Also, it allows the founders to diversify a bit. Consider that these people are multi-millionaires on paper, you wouldn't generally recommend they put all of their money into one investment, even if it is their own company.
Can someone with VC experience (on either side of the table) explain what part of an investment goes into the founder's pocket? Does it change with each deal or is there a standard percentage?
Obviously a $10MM investment does not equate to a $10MM deposit in the founder's personal bank account, but at what point is the founder no longer expected to live on Ramen?
I don't have first hand experience, but from what I've read I think it changes with each deal. For example, Rovio just did a deal where they took almost all of the cash out. They are very profitable so they don't need the money, but they wanted to cash out some. I think most deals are the opposite of this, with not very much being taken out.
