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Boards are dangerous to founder/CEOs

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Re: Boards are dangerous to founder/CEOs

#191

Post by achillesheels »

javajosh wrote: post #146
breischl wrote: post #133

Earlier quoted context omitted.

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…

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…

This is what my father informed me of after seeing the reality of a founder CEO being diluted to nothing in the 90's. All that risk-taking and life which can't be recovered just to pay for someone else's Tahoe ski-trips :(

Re: Boards are dangerous to founder/CEOs

#192

Post by magicalhippo »

rsweeney21 wrote: post #48

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…

> On the bright side, the new CEO ran the company into the ground.

I've seen this up close several times, and countless times afar. Successful company gets bought by bigger company, new owners replace the successful management, new management runs company into ground in short order. Remains possibly sold for scraps to former competitors.

Like... is there something they're getting out of this I don't fathom? Or are they just repeating the mistakes of others again and again and again?

Re: Boards are dangerous to founder/CEOs

#193

Post by Kranar »

jasode wrote: post #147
hinkley wrote: post #111

Earlier quoted context omitted.

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…

>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. 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 se…

Facebook did not lose any lawsuit. A settlement is a far cry from a loss and judging from the outcome, it looks like Saverin got screwed over.

So basically, the board will try to screw you over; if you're not in a strong enough position to do something about it then you're out of luck, if you are strong enough to do something about it, then you might be able to recoup some of what you're entitled to.

Re: Boards are dangerous to founder/CEOs

#194

Post by mindvirus »

rsweeney21 wrote: post #48

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…

Super curious about this - aren't there laws about fiduciary duty in most countries?

Re: Boards are dangerous to founder/CEOs

#195

Post by throwaway894345 »

rsweeney21 wrote: post #48

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…

Does anyone have a good idea about the laws for valuation tricks and the ways companies skirt them? A company for which I had stock options recently was sold to a larger company, but the deal seems to have been coordinated such that the investors with privileged shares (or whatever they're called) got their money, but the peasant shares (again, I forget the terms) were worthless--all of the "key employees" got generous bonuses and the employees still with the company were to be rewarded by the buyer with (presumably) valuable stock.

I wasn't really banking on these options as part of my financial plan, but surely this sort of thing is illegal, right? What are good search criteria for someone who just wants to learn more about these laws and loopholes for the future (I know I can talk to a lawyer if I want to pursue action in my specific case)? What are the ways a company can legally fuck me over?

Re: Boards are dangerous to founder/CEOs

#196

Post by spottybanana »

flenserboy wrote: post #58

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.

Just get born rich so you don't have to do anything.

I think it is no-brainer that founders would prefer to have full control and ownership. If you manage to bootstrap a profitable company with zero outside funding, great for you, but that's not the typical case. Most of us need some money to make money.

Re: Boards are dangerous to founder/CEOs

#197

Post by sbierwagen »

Waterluvian wrote: post #134

“ They will each feel like your special confidant. They will also see the other board members reacting calmly to the news and start to think that perhaps you actually have it under control. This will calm them down in the future.” This seems like obviously good advice. But also begins bordering on what feels like manipulation. And that makes me uncomfortable. In fact, this whole thing feels like manipulation. If noth…

Being somewhat manipulative, secretive, carefully managing flows of information and keeping an iron fist on the levers of control are table stakes for running a public corporation. If you don't have those skills, you will be replaced by someone who does.

When people describe upper management as a snakepit of politics, backstabbing, and backroom deals, this is why.

Re: Boards are dangerous to founder/CEOs

#198

Post by [deleted] »

rsweeney21 wrote: post #48

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…

[deleted]

Re: Boards are dangerous to founder/CEOs

#199

Post by amelius »

rsweeney21 wrote: post #48

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…

Why didn't it happen to Bezos or Musk?

Re: Boards are dangerous to founder/CEOs

#200

Post by achillesheels »

streetcat1 wrote: post #128
bluGill wrote: post #116

Earlier quoted context omitted.

That isn't always good advice. Often the money from going public is required to make it. You either go public, or someone else will take your idea, go public and use the money from it to eat your lunch and then you get nothing. Good ideas are easy. Unique good ideas are so rare as to be non-existent. Nearly all good ideas are obvious to anyone who knows the field and what can be done.

The market today is so big that many competitors can live side by side . At least in B2B. I mean there are hundreds of CRM companies. You can have other companies eat your lunch. All you need is to get into a default alive state. I.e. have 5-10K MRR. The rest is nice to have. It should be possible in any billion dollar market.

Also don't sleep on email marketing! :P
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