Who benefits when startup money is ‘taken off the table’?

The sort of transaction in 2016 that benefited Nathan Eagle, who ran Boston-based Jana, is not unusual in the local startup scene.

Nathan Eagle had to convene an uncomfortable all-hands meeting in 2016. The startup he ran, Boston-based Jana, had raised a massive $57 million funding round that February. But employees had started to learn that several million dollars had ended up in Eagle’s bank account — a Securities and Exchange Commission filing reported that it was $12 million, but it isn’t clear that all of that money went to Eagle, the company’s cofounder and CEO. Several months later, however, Eagle did purchase a $3.75 million penthouse condo in the Ritz-Carlton residences, with views of the Boston Common and State House.

“The optics weren’t great, to be honest,” says one former Jana employee, who asked for anonymity. “Cracks had already started to show in the company,” which was building an advertising network on mobile phones used in developing countries. This employee was laid off from Jana in June 2017, and there were more severe cutbacks earlier in 2018.

The sort of transaction that benefited Eagle is not unusual in Boston’s startup scene. It’s sometimes called “taking money off the table,” a “secondary sale,” or “early liquidity.” And investors who put money into startups are often the biggest proponents of it.