Even the YC 'Series AA' model document terms include protective provisions where a majority of the preferred shareholders have veto power over any merger/acquisition.
It's a customary provision, and this previously-supportive investor may have had the majority of an early round. So even if his shares, if converted, would only be a small percentage of the company, he may have effective veto power.
In the end you're counting on the decency and reputation of your investor(s) that they don't turn out to be the kind of people who think, "can I squeeze a few more bucks out of this deal if I'm willing to blow it up, and don't care what people think of me?" (Or even if, in the investor's real peer group, he can tell it as an impressive war story of his negotiating prowess.)
It'll be dressed up as something else – "I'm not receiving a proper premium for my preferred privileges!" – but is really just a bet that their toughness/ambivalence can force other shareholders to cave.
I suspect it's a more likely tactic with investors whose background is in other older, and more zero-sum industries. (The similar experience I mentioned in my other comment was with someone from the government-granted telecom franchise field.)
Even the YC 'Series AA' model document terms include protective provisions where a majority of the preferred shareholders have veto power over any merger/acquisition.
It's a customary provision, and this previously-supportive investor may have had the majority of an early round. So even if his shares, if converted, would only be a small percentage of the company, he may have effective veto power.
In the end you're counting on the decency and reputation of your investor(s) that they don't turn out to be the kind of people who think, "can I squeeze a few more bucks out of this deal if I'm willing to blow it up, and don't care what people think of me?" (Or even if, in the investor's real peer group, he can tell it as an impressive war story of his negotiating prowess.)
It'll be dressed up as something else – "I'm not receiving a proper premium for my preferred privileges!" – but is really just a bet that their toughness/ambivalence can force other shareholders to cave.
I suspect it's a more likely tactic with investors whose background is in other older, and more zero-sum industries. (The similar experience I mentioned in my other comment was with someone from the government-granted telecom franchise field.)