Balderton, AVP suffer early blow in ‘unfair prejudice’ case

2026-05-27 · Source: Sifted · Field: Legal & Regulatory — Litigation & Dispute Resolution, Corporate Law & Business Legal Services, Entrepreneurship & Start-ups · Depth: Intermediate, short

Summary

Balderton Capital, AVP, and other investors recently lost a strike-out hearing in an "unfair prejudice" case initiated by Cognism's former CEO and founder, of the B2B sales intelligence platform. The judge determined that elements of the founder's claim possess "a real prospect of success." Cognism, established in 2016, secured over \$130M in funding, including a £24M round in 2021, before its acquisition by Hg in 2023. The founder alleges "unfair prejudice" against investors like Balderton, New York, Octopus, Salesforce Ventures, and AVP, claiming his 3% stake was diluted to under 1% and a "sweet-spot clause" designed to protect his equity was disregarded. He also asserts a "sham sale" to Hg, orchestrated by investors to circumvent a potential "down round" and further dilute his ownership, leading to his removal from the board in December 2022.

Key takeaway

For founders negotiating investment terms, ensure your equity protection clauses, like "sweet-spot" provisions, are robust and clearly defined. This case highlights the legal risks investors face when perceived actions, such as pushing for a "sham sale" or excessive dilution, are challenged. You should meticulously document all investor communications and understand your legal recourse under "unfair prejudice" claims to safeguard your stake and company vision.

Key insights

A judge found "real prospect of success" in a founder's "unfair prejudice" claim against investors over equity dilution and company sale tactics.

Principles

• Founder equity protection clauses are critical.
• Investor actions face legal scrutiny.
• Dilution can trigger "unfair prejudice" claims.

In practice

• Review equity protection clauses.
• Document investor communications.
• Understand "unfair prejudice" grounds.

Topics

• Venture Capital
• Founder Disputes
• Equity Dilution
• Unfair Prejudice Claims
• Startup Acquisitions
• Corporate Governance

Best for: Investor, Entrepreneur, Legal Professional

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Editorial summary, takeaway, and curation by AIssential. Original article published by Sifted.