The Trapped Capital Illusion

Introduced in D.11 (Rollover Equity — Skin in the Game or Trapped Capital?). The founder thinks rollover is an investment. It isn't. An investment gives you exit options — you can sell, redeem, or force a liquidity event. Rollover without protections gives you a number on a statement and a promise that someone else will eventually decide what it's worth. James rolled $7M into Ridgeline's entity with no minority protections, no board seat, no consent rights, no liquidity provisions, and a drag-along clause that forced him to sell at whatever price Ridgeline negotiated. Eighteen months post-close, his stake was worth whatever Ridgeline's auditors said it was, reported on a schedule he didn't control.