Comment by 3pt14159

Liquidation preference is the number one way that founders end up with nothing. Works like this: VC invests $1m with a, say, 5x liquidation preference then if they company sells for, say $6m the VC gets the first $5m and the remaining $1m is split according to equity. http://www.gabrielweinberg.com/ has some really, really good articles on this kind of thing.