161–170 of 339 posts
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.
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All the horror stories around VC money and shennanigans like this make bootstrapping look not just appealing, but required. It's an iterated game that they play a lot, and you play once, and they have no incentive to play fair. I'm glad some of them were named and shamed in this thread, though. Like, why would anyone take money from someone who has acted in bad faith many times in the past? It reeks of unaccountable…
Though in the business world it is always like that, whatever you do. Whatever kind of deal you are doing you have to be careful and attentive. Bootstrapping is great, but it also has challenged to overcome. Many fail to do it.
Ooh, this is spot on. > The fact that early-stage founders continue to take their money has to be some sort of delusional grandiosity, in my humble opinion. “Well yes, they fire half the CEOs they back, but surely not me.” Having started companies, delusional grandiosity is almost a requirement, especially if you're going to take venture capital. I mean, just look at the odds. So it makes perfect sense to me that the…
On one hand, you have a 50% chance of being fired.
On the other hand, you’re raising from Sequoia.
Is raising from Sequoia going to change the direction of your company so much (in a positive) direction that it’s worth taking on the 50% chance you’ll be fired?
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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…
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?
Percent ownership matters, certainly: it's what allowed you to make that deal in the first place. At that point your ownership becomes a little bit less about control, and perhaps a little more about economic interest.
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…
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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.
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…
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.
So with crowdfunding cap now at 5 mil. in US sounds like a good way to avoid this whole thing?
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.
https://arstechnica.com/tech-policy/2021/11/holmes-parents-s...
“The family’s wealth, power and political connections date to the 1890s, when Christian Rasmus Holmes, a Danish immigrant and physician, married Bettie Fleischmann, heiress to the namesake yeast fortune and a Cincinnati socialite with a fondness for Chinese bronzes.” - from NYT article: https://archive.vn/aMCpe
The interesting thing is that the future fortune depended on a “yeast fortune”, i.e. while you might not be born into wealth and power, perhaps your grandchildren or descendants can be.