One truism in startup funding is that venture capitalists want to see a clean cap table before making a big investment. Some VCs don't like an excess of FFF investors - friends, family, and fools - who may pester the big-shot VCs and their hand-picked board members with juvenile questions. VCs sometimes ask founders to buy out their amateur partners so the cap table isn't so crowded. The "how" of this buyout is open for debate. I don't know if VCs expect the founders to commit whatever limited personal liquidity they have to a limited buyout, or if the VCs will allocate part of their own funding commitment for the FFF buyout.
I think VCs' cap table expectations are going to be increasingly frustrated as crowdfunding reaches its full potential. Crowdfunded companies are eventually going to raise a lot of early stage money from plenty of people. The FFF pool will grow exponentially and a lot of them won't be willing to sell until the startup reaches a mature exit. Crowdfunding portals that operate secondary markets will see more early trading of these limited stakes and VCs will have to get used to using the price action as a factor in their valuations.
The good news for startups is that crowdfunding will keep many of them alive longer and help more of them reach success earlier. The bad news for VCs is that they will have no choice but to tolerate more of those unwashed FFFs until the exit event. Founders whose business plans anticipate raising significant VC money in later stages will have to think seriously about implementing shareholder buyback agreements and other founders' agreements early in their company's life. VCs' attitudes toward some amateur investors didn't develop overnight and won't disappear until crowdfunding demonstrates its power to launch successful startups.
