81–90 of 339 posts
1. Avoid going public if at all possible. 2. Avoid outside investors if at all possible. 3. Avoid having a board if at all possible. 4. Control the shares or the shares will control you.
If you give up your 51% share, sure.
Very few things in a VC-backed startup require a shareholder vote. Firing the CEO is not one of them (this is a board vote.) Electing directors to the board is not one of them (this is usually the subject of a voting agreement that ensures board representation by the VCs.) Let's say the company raises money from VC1, who buys 20%, leaving you with 80%. The contracts add VC1 and an independent to the board, alongside…
This is something you should really understand if you're starting a company. The board isn't your "friend" while individual board members may be, as an entity it probably isn't. The understanding that individuals can be "good" and the composite can be "bad" is usually encountered by most people when some government is doing something "bad" but the people who live where that government is in power are known to be "goo…
Good board needs to be able to act independently from the CEO. One reason for bad corporate governance in America is boards made from the friends of the CEO.
Think about it from a founder perspective with a bit of reality: who in their right minds would you hire an antagonistic board for the high-minded goal of making corporate governance in America better when you don't even know if your company is going to make another year?
People work for companies for three reasons: mission, people or money. If you enjoy working with the people at your company at least you have that covered. Most corporate companies don't have a real mission people can get behind and money is in the long run for founders.
Are they? I've run my own company without a board for 9 years (bootstrapped) and several friends who were CEOs of funded companies had board-driven horror stories ranging from getting the boot to forcing dissolution of the company.
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>Then a year after I got fired the series A investor led the next round of funding and decided to value the company at $0, so I got diluted by 99.99% Was it made impossible for you to be an investor in that round? Could you have prevented 99.99% dilution that way?
So the existing stock the CEO had, made through his blood sweat and tears, was worth nothing, but you'd expect him to want to pay for the ability to buy more stock in the company he was just kicked out of?
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…
Most people describe "50% + 1" as 51% even though its not quite right, but everyone understands 51% as a shorthand for "greater than half, not inclusive of half". Eg. a 51% attack on a crypto network is the same way.
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Question from someone uneducated on this topic: is it impossible to get VC levels of investment without giving away board seats? Is a board even required for private companies?
I'm not the most informed person on HN who can respond to this but as a general rule it's within the bounds of normality to raise single-digit millions in unpriced rounds ("seeds") that don't generally have board seats attached, but your first significant priced round (your "A" round) will essentially always give up board seats. Formal boards are not required for private companies.
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“A group experience takes place on a lower level of consciousness than the experience of an individual. This is due to the fact that, when many people gather together to share one common emotion, the total psyche emerging from the group is below the level of the individual psyche. If it is a very large group, the collective psyche will be more like the psyche of an animal, which is the reason why the ethical attitude…
Now, think about the wisdom of a democracy :-)