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Boards are dangerous to founder/CEOs

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Re: Boards are dangerous to founder/CEOs

#11

Post by PeterCorless »

vmception wrote: post #2

when you get thrown off of the board you still have your shares. so the trade is still successful by my rubric. I consider all things to be trades, whether I invested in a publicly traded equity, or whether I created a bunch of $0.00 par value shares to sell to a bunch of other people. the rule is the same: don't get married to a company. a board removing you doesn't need any fanfare. you still have the shares.

This is a very self-centered "I got mine" view. Think more broadly: What did you do to the valuation and perception of your company? What have you done to the value of everyone's shares, including your own?

If you keep a role at the company, how will it be working with your team now that they see your position reduced? If you are walked out of the company without ceremony, what balls were in the air that aren't going to be caught? Who did you just leave in the lurch?

So will those shares be worth anything if you were phoning it in rather than focusing on your CEO performance, or successfully trying to navigate the CEO-to-other-role transition? Will your competition smell blood in the water and try to cast FUD in the face of your current customers and all future prospects?

What will your reputation be going forward? ("He was a difficult person to work with. We had to fire him.")

So sure, you may have your short-term gains in your stocks. But what will it do to your career? And the careers of everyone who had followed you to that point?

This article was very well-meaning. I just have a feeling that all-too-many short-term thinking people are going to follow your advice and say, "Well, to hell with it. At least I got mine."

Re: Boards are dangerous to founder/CEOs

#12

Post by onion2k »

throwaway55421 wrote: post #6

If you give up your 51% share, sure.

51% isn't quite right. For a start, it's really "more than 50%", which is often 50% + 1 share, but in some structures there are different classes of shares with different voting rights. It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else. There can also be shares that confer more than 1 vote to the owner. You really need > 50% of the votes rather than any particular amount of shares.

Re: Boards are dangerous to founder/CEOs

#13

Post by adventured »

bgroat wrote: post #3
vmception wrote: post #2

when you get thrown off of the board you still have your shares. so the trade is still successful by my rubric. I consider all things to be trades, whether I invested in a publicly traded equity, or whether I created a bunch of $0.00 par value shares to sell to a bunch of other people. the rule is the same: don't get married to a company. a board removing you doesn't need any fanfare. you still have the shares.

Headline - I agree with you. Just retire, or do something else. You own the shares. Fine Print: There's still some screwy stuff they can do diluting your shares in particular.

> There's still some screwy stuff they can do diluting your shares in particular.

And they also may run the company you founded into the ground by selecting a mediocre replacement (who will surround theirself with mediocre managers), making your shares potentially worthless in the end.

Re: Boards are dangerous to founder/CEOs

#14

Post by elliekelly »

bgroat wrote: post #3
vmception wrote: post #2

when you get thrown off of the board you still have your shares. so the trade is still successful by my rubric. I consider all things to be trades, whether I invested in a publicly traded equity, or whether I created a bunch of $0.00 par value shares to sell to a bunch of other people. the rule is the same: don't get married to a company. a board removing you doesn't need any fanfare. you still have the shares.

Headline - I agree with you. Just retire, or do something else. You own the shares. Fine Print: There's still some screwy stuff they can do diluting your shares in particular.

And often it’s not about a financial bruise so much as the ego/emotional bruise. Losing control is not a comfortable feeling for the CEO-type.

Re: Boards are dangerous to founder/CEOs

#16

Post by 0des »

It may be gauche to express this opinion on HN of all places and I hope it doesn't come off as tonedeaf disrespect, but does anybody notice VC is falling out of favor unless absolutely necessary?

I am noticing a lot of bootstrappers that are emerging with the ethos that VC isn't what it used to be for some markets, and often a poor choice of the right VC can be a detriment to a project's longevity, with some teams choosing to avoid it at all costs.

Re: Boards are dangerous to founder/CEOs

#17

Post by claytonjy »

0des wrote: post #16

It may be gauche to express this opinion on HN of all places and I hope it doesn't come off as tonedeaf disrespect, but does anybody notice VC is falling out of favor unless absolutely necessary? I am noticing a lot of bootstrappers that are emerging with the ethos that VC isn't what it used to be for some markets, and often a poor choice of the right VC can be a detriment to a project's longevity, with some teams ch…

I've noticed the same though I don't know what the split is; still lots of VC companies, and more companies of all flavors being started right now.

I've also seen some late stage cos raise a mix of equity and debt at favorable terms; is that becoming more common as part of the same phenomenon?

Re: Boards are dangerous to founder/CEOs

#18

Post by dangrossman »

0des wrote: post #16

It may be gauche to express this opinion on HN of all places and I hope it doesn't come off as tonedeaf disrespect, but does anybody notice VC is falling out of favor unless absolutely necessary? I am noticing a lot of bootstrappers that are emerging with the ethos that VC isn't what it used to be for some markets, and often a poor choice of the right VC can be a detriment to a project's longevity, with some teams ch…

I don't think that's a new sentiment around here. Anything published by 37Signals and its founders used to be mandatory reading on HN, and they were all about small teams eschewing outside investors. Their Getting Real book was published in 2006.

Re: Boards are dangerous to founder/CEOs

#19

Post by Jugurtha »

onion2k wrote: post #12
throwaway55421 wrote: post #6

If you give up your 51% share, sure.

51% isn't quite right. For a start, it's really "more than 50%", which is often 50% + 1 share, but in some structures there are different classes of shares with different voting rights. It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else. There can also be shares that confer more than 1 vote to the owner. You real…

>It's common to have a pool of voting shares that are issued to founders and preferred investors, and then non-voting shares that are issued to everyone else.

To your point about differences in classes, there may be a class with 10 votes per share, another class with 1 vote per share, and another class with 0 vote per share.

Re: Boards are dangerous to founder/CEOs

#20

Post by wayoutthere »

0des wrote: post #16

It may be gauche to express this opinion on HN of all places and I hope it doesn't come off as tonedeaf disrespect, but does anybody notice VC is falling out of favor unless absolutely necessary? I am noticing a lot of bootstrappers that are emerging with the ethos that VC isn't what it used to be for some markets, and often a poor choice of the right VC can be a detriment to a project's longevity, with some teams ch…

If you look at the most valuable tech companies today, most made it a significant way along the path without outside investment due to the financial position the founders were born into. While there are a few notable exceptions, nearly every one of them relied on early loans from parents to build their fortunes rather than early stage VC.
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