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Boards are dangerous to founder/CEOs

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Re: Boards are dangerous to founder/CEOs

#311

Post by mleonhard »

hinkley wrote: post #219
low_common wrote: post #165

Earlier quoted context omitted.

How does share dilution work? Does that mean issuing more shares? How does depreciating shares happen?

It's not a publicly traded company so the paper is worth exactly as much as the people who hold most of the paper decide it's worth. They need some sort of majority to vote to change the rules, and since the employees with unexercised shares control exactly 0.0 repeating percent of the company, you're going to lose that vote. It's a democracy where the wolves vote that the sheep will be dinner.

Could an employee union balance out the power of the board? They could attend board meetings and veto deals that harm the employees via strike or mass resignation.

Re: Boards are dangerous to founder/CEOs

#312

Post by Cpoll »

coldtea wrote: post #223
WastingMyTime89 wrote: post #62

Earlier quoted context omitted.

Of course, I invite readers to treat Carl Jung quotations as having a credibility proportional to the amount of efforts he made during his life to properly prove and establish the facts he was enunciating: not much.

Not all insights come as ready-for-consumption statistics and prepared-for-you facts wrapped in a nice red bow, nor they always come with numbers and figures attached. Often, the most interesting insights come from experience and reflecting upon it. You know, old fashioned thinking.

> Often, the most interesting insights come from experience and reflecting upon it. You know, old fashioned thinking.

That _sounds_ nice, but the Ancient Greeks (and others, but I've got to pick on someone) tried it and didn't succeed in much more than setting back the scientific method and thinking up all sorts of plausible things like "everything is made of air" and "the first humans were born inside a fish." The problem is that something can sound completely plausible, be internally logical, and also be completely wrong.

Ironically, you don't need to look farther than psychology's reproducibility crisis to see this in action. Tons of great and interesting insights that came from experience and reflection, that led to some bad studies and are completely unreproducible. In fact, they were so interesting and insightful that most people still think they're true. See: Stanford Prison Experiment, most of the stuff in Kahnemann's book, anything Freud said, Myers-Briggs, etc.

You know, making up some shit that sounds good.

Re: Boards are dangerous to founder/CEOs

#313

Post by cutemonster »

CapitalistCartr wrote: post #201
magicalhippo wrote: post #192

Earlier quoted context omitted.

> 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 th…

It's often hubris, but I have personally seen it done to dispose of competition. They could have decided to be better at running their own company, but, of course, big corporations don't work that way. Nope, buy that troublesome startup, run it out of gas, problem solved.

If there're any texts to read about this that you like, it'd be interesting to hear

Re: Boards are dangerous to founder/CEOs

#314

Post by yawnxyz »

dangrossman wrote: post #18
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.

I was firmly in the Basecamp camp until I found out they were basically given a large "grant" from Jeff Bezos that allowed them to continue bootstrapping

Re: Boards are dangerous to founder/CEOs

#315

Post by jacquesm »

javajosh wrote: post #302
jacquesm wrote: post #268

Earlier quoted context omitted.

It's all about who you do business with. Some VCs are ethical, some aren't. Some are horrible and turn around to become a pest the day after they invest, some go out of their way to help the companies they invest in succeed.

Yes, but it seems that the terms give the VC the power to do whatever they want, and so you are really just hoping they won't hurt you, and you have no way to protect yourself if they choose to. Why would a VC not strike a deal with a founder, fund 2 years of your blood/sweat/tears and then when they feel like they've got enough value from you, simply take away your equity and fire you? Isn't that just good business?…

Track record is everything. Every VC that is worth their LPs is going to do due diligence (tech, commerce, finance, legal) on the company they are about to invest in. As a company executive, you could do much worse than to return the favor and research them for a bit. Talk to other founders that they have invested in, see how that went, look at past exits, see how the original founders were treated.

Re: Boards are dangerous to founder/CEOs

#316

Post by shard »

jyscao wrote: post #156
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…

>If nothing happens in a board meeting because it’s scripted, why do they exist? He actually answers that later on. >Of course, you have already told them all this on the phone, one by one, so you know how they will react. They will want to talk anyway, because part of the meeting is them performing for each other, but, again, no surprises. Except instead of only "part of the meeting", perhaps it might even be more f…

For anyone not aware, this method of discussing individually with stakeholders ahead of time before any decision or approval meetings is a common way to make the meetings go smoothly. Stakeholders won't be surprised by any items you bring up, you won't be surprised by anything they bring up and can address issues ahead of time, nobody will be embarrassed at the meeting (you really don't want to surprise a VP with some fact which might be construed as his team not performing well, especially in front of other VPs), and everyone will be able to see that everyone else agrees with the conclusions of the meeting.

Re: Boards are dangerous to founder/CEOs

#317

Post by anamax »

mleonhard wrote: post #311
hinkley wrote: post #219

Earlier quoted context omitted.

It's not a publicly traded company so the paper is worth exactly as much as the people who hold most of the paper decide it's worth. They need some sort of majority to vote to change the rules, and since the employees with unexercised shares control exactly 0.0 repeating percent of the company, you're going to lose that vote. It's a democracy where the wolves vote that the sheep will be dinner.

Could an employee union balance out the power of the board? They could attend board meetings and veto deals that harm the employees via strike or mass resignation.

Unions don't necessarily get board observer status, let alone board seats, AKA a board vote. Having a board vote isn't the same has having a veto over every possible decision.

Re: Boards are dangerous to founder/CEOs

#318

Post by martinald »

JanisL wrote: post #280
martinald wrote: post #149

Earlier quoted context omitted.

It seems quite crazy that this hasn't happened earlier. It seems to me most VC rounds are usually used to mostly finance sales and marketing growth, which if they have a positive RoI should really be debt, as that's the whole point of it! 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.

I think the reverse repo situation sheds some light on why this wasn't happening as much earlier: https://fred.stlouisfed.org/series/RRPONTSYD/ Put simply there's now a glut of money that is waiting to be invested via loans in anything that has a good ROI with low enough risks. In the past due to higher interest rates and various other factors (including regulatory) this glut of money just didn't exist before.

Well, go back a few decades and all businesses were pretty much debt financed. VC wasn't around - maybe a few friends and family rounds, but bank debt was the only option for growing a business (at least until you got to the public markets).

This seems to have been lost over the past 20+ years. I wouldn't even think about going to a bank with a smallish business for financing, you'd instantly think of equity funding instead. Hopefully this changes because debt really is more sensible for many startups.

Re: Boards are dangerous to founder/CEOs

#319

Post by sirspacey »

Stellar advice and completely agree.

My Series A was freshly inked and six months later I was removed. The company’s fundamentals never improved and the company was later acquired-hired.

Here’s the question to ask yourself as a founder:

What am I doing all this work for?

There is only one job an investor board member has - to enable you to raise the next round. All their advice boils down to that.

Yet the most common case is that an unknown investor will lead your next round, not your current.

So all this massive overhead on your time & attention is just the cost of capital.

Your team needs you. Your customers need you. Your mission needs you.

Your investors do not need you. They just need an outcome.

Even this article is tame. I routinely hear that board members do not read prep materials, fail to understand how the business is evolving, and pontificate. It’s a living nightmare when time is of the essence.

Read Blueprint to a Billion. Companies with too many investor seats die.

Re: Boards are dangerous to founder/CEOs

#320

Post by ido »

mavelikara wrote: post #306
ido wrote: post #289

Earlier quoted context omitted.

that's the problem with anecdotal evidence - you can't really tell for sure a company is going to become a massive unicorn often until very close to the point it does. I've worked at companies that raised many millions of $s and seemed very promising and a few years later went out of business. Who becomes a winner is also not always completely "fair" (as in it depends somewhat on circumstances/fortunate happenstance)…

> you can't really tell for sure a company is going to become a massive unicorn often until very close to the point it does. I don't contest this point. > I've worked at companies that raised many millions of $s and seemed very promising and a few years later went out of business. The only narrative I contest with my anecdata is drawing a universal truth from this experience of yours. As a sibling comment said: > Sal…

I think it's the other way around - we comparatively hear a lot more about the successes than the failures. For every unicorn that made 400 people millionaires there are probably >1000 startups that either went out of business, never had a liquidation event, or never at the scale that rank and file employers got anything significant.

Obviously not literally "nobody", someone at some point joins google/microsoft/facebook/amazon/etc at an early stage and exists a millionaire many times over. Just like every week somebody wins the lottery. It's just not as likely to happen to you personally as the people selling you on joining their early startup would like you to believe.

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