141–150 of 339 posts
Earlier quoted context omitted.
How is that possible? Shouldn't it be the number of voting shares you hold? I thought that was the entire reason for share classes. It can't be based on the number of bored members alone, can it?
Not all shares have the same voting rights. The VC might buy 20% of the company, but 50% of the voting rights. VC2 might buy another 20%, but get a different share of the rights.
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.
I'm happy and appreciative that this advice exists, but as a tech person who just wants to build new things, it makes running a company sound like a massive drain on the psyche.
There is a reason I "work for the man" instead of run my own company. I could make money, but I wouldn't be a programmer. It took me almost 20 years of a CS degree before I was earning more money programming than I could have earned if I had dropped out of school and stayed at McDonald's (they offered me a management job and the career path in the direction was obvious - and also why most people even on that track de…
But, if you want the big bucks it typicalle makes sense to hire and grow. If you want to stay small and do stuff yourself, it means less money.
Earlier quoted context omitted.
In theory, yes. But even that is no guarantee. Travis Kalanick had control through supervoting shares at Uber, but the investors forced him to resign and passed governance changes that made all shares equal in voting power. Even with founders having voting power, it's possible for the board or investors to exert other leverage.
How did they force him if he had control?
Boards are necessary too 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.
In many cases the law requires it. Check with your lawyer to see if this applies to you. Even if it doesn't apply, it is useful to get outside advice. The hard part is getting good advice. Boards should do this, but as the article points out, they rarely do.
I always thought stuff like this happened to OTHER founders, but would never happen to me. But my board fired me six months after closing our series A. The advice in this article is 100% spot on. I didn't know any of this. I was totally focused on building my company. But if you raise money you can't do that anymore. 50% of your time will always be occupied with working on your next round of funding or managing your…
Had this happen on a much smaller scale as an employee. I (foolishly) bought out some of my options when I left the company. Years later they sold it, but structured the deal such that the major investors got paid out all the proceeds, leaving zero for the common shares. Yes, I realize preferred shares and payout preferences and so forth. The really galling part is that the exec team (who had themselves acquired, not…
It reeks of unaccountable power and information asymmetry, two of my least favorite things.
I always thought stuff like this happened to OTHER founders, but would never happen to me. But my board fired me six months after closing our series A. The advice in this article is 100% spot on. I didn't know any of this. I was totally focused on building my company. But if you raise money you can't do that anymore. 50% of your time will always be occupied with working on your next round of funding or managing your…
They don't have to value the company at $0 to fuck you over once you're gone. The current board can depreciate all of the shares by 50% and then issue themselves twice their original shares so they break even. Then do the same thing a couple of rounds later. I haven't seen $0 but I knew a few people who got diluted to a joke. It doesn't take but a factor of 2-4 dilution of your outlook to drastically change your opin…
Mark Zuckerberg tried a variation of that game to cut out Eduardo Saverin's shares when they changed the company from a Florida LLC to a Delaware Inc. Well, Saverin sued and Facebook lost that lawsuit; they settled. Saverin got ~4% ownership worth $5+ billion at the time.
https://www.businessinsider.com/exclusive-heres-the-email-zu...
Earlier quoted context omitted.
Who was your investor? So other startups know who to avoid.
2017-10-04 Series A - Numetric $13M Insight Partners — lead investor Hack VC EPIC Ventures Draper Associates Aaron Skonnard https://www.crunchbase.com/funding_round/numetric-series-a--...
Earlier quoted context omitted.
It isn't unheard of for banks to get someone on your board as part of the debt agreement. Though probably only in deals far larger than anything in the VC range.
Many of the debt players are realizing their advantage over VC is lack of control over your company. For example, check out https://timiacapital.com/ . A lot of their marketing is around "Retaining control" and "No warrants and no harsh covenants".
Equity funding to me should be used less for that and more for R&D and product development where the RoI is harder to calculate, or may not exist at all.
Never stand between people and a pile of money. Your Board doesn't fire you when you're the best guide to a pile of money. Your Board will fire you if they think you're slowing their progress toward a pile of money. If you think your skills as a guide to piles of money are imperfect, don't put your life in the hands of people who need you to rapidly increase their pile of money.
Note that there should be quite many advantages for the current CEO to do the job well compared to some external guy. Typically it might take 2 years from a new CEO to learn the business, etc.
Boards don't fire on a whim, they genuinely have to believe that a replacement will do clearly better job - they don't want to go through all the hassle of finding a replacement just for fun.