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Boards are dangerous to founder/CEOs

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Re: Boards are dangerous to founder/CEOs

#241

Post by streetcat1 »

pfarrell wrote: post #106
gonehome wrote: post #101

Earlier quoted context omitted.

Can’t you structure things like Zuckerberg or Palantir and just have the founder retain unilateral company control?

Sure... If your company is so attractive that the investors will go along with it. IMHO, Facebook's history is an outlier. Most startups aren't positioned with the leverage they had when raising money. I don't know enough about Palantir's history to comment.

This kind of depends on the interest rates and the Nasdaq (50%). The number of VC in the market(30%) and the allocation of LP to VC (10%).

I see the VC asset class as an arbitrage on private company valuation. As the number of VC increase the arbitrage opportunity disappear and switch sides, from the buyer to the seller. I.e. founders are getting to arbitrage the VCs.

Personally I think that there is a market failure here, where the government protect mom and pop investors from making risky bets on early stage startups, and yet allow them to invest on some crypto scams with no questions.

I envision that, like cannabis, this will be solved soon in the form of some sort of public stock exchange for startups.

Re: Boards are dangerous to founder/CEOs

#242

Post by streetcat1 »

hinkley wrote: post #115
pfarrell wrote: post #106

Earlier quoted context omitted.

Sure... If your company is so attractive that the investors will go along with it. IMHO, Facebook's history is an outlier. Most startups aren't positioned with the leverage they had when raising money. I don't know enough about Palantir's history to comment.

When the orders of magnitude change, so does the correct solution. In other words: Stop comparing your startup to FAANG. You are not FAANG. If you were, everyone else would know it. Since you aren't, their strategies don't work for you.

Well, the FAANG did not know that they will be a FAANG in the first years.

Re: Boards are dangerous to founder/CEOs

#243

Post by lumost »

redshirtrob wrote: post #206
jiveturkey wrote: post #185

Earlier quoted context omitted.

well to be fair, you should never exercise if it isn't early exercise. the odds are very much against you. I mean, by the odds you shouldn't early exercise either but at least you don't get hit by the AMT bullet.

That's certainly not true. You should evaluate the investment just like any other investment and decide if you can afford to lose the money and stomach the risk. Part of your evaluation should be consulting a tax professional to determine if there are any immediate, negative tax consequences. You're not guaranteed to get hit by AMT just because you exercise some stock options.

There are very few times where the finances work out for options. Most employees lack access to the necessary company financials to make an informed financial decision, there is a 100% downside risk and barring early stage founder equity stakes - it's unlikely that the equity will do better than getting lucky on a top stock pick.

I have yet to hear a single case of an employee purchasing their options when they left and thinking it was the right decision later on.

Re: Boards are dangerous to founder/CEOs

#244

Post by kragen »

munificent wrote: post #138
anthropodie wrote: post #26

Earlier quoted context omitted.

“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…

I intensely dislike the cynicism of this and other similar statements. It's a truism of American culture that any group of people is somehow stupider, meaner, and more hurtful than any of its individual members. Yet our lived daily experience is that often our most rewarding, beneficial, and joyful experiences come when being a member of a group. I mean, we are a group right here and right now in this thread and I as…

> I assume everyone participating still feels it is a net positive for them to do so.

No, I don't, and I think some of the other people who think that are probably wrong.

Re: Boards are dangerous to founder/CEOs

#245

Post by tdfx »

distribot wrote: post #207
jasode wrote: post #147

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. 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…

Anyone know how Zuckerberg avoided the same thing happening to him? Bezos was a 30 year old with a decade of experience in finance, I assume he was quite savvy. But Zuckerberg was a teen.

As far as I can tell, Zuckerberg's true talent is being thrown into situations he has no life experience to handle and appropriately picking the right people to surround himself with and listen to.

Re: Boards are dangerous to founder/CEOs

#246

Post by smallerfish »

throwaway894345 wrote: post #195
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 genero…

Everybody doing startups should pick up and read Venture Deals. It explains the various tiers of stock well.

PS the last VCs who funded us have a 2x preference (we were out of options and it was the only money on the table.) In retrospect we should have just shut down and gotten a few years of our lives back.

Re: Boards are dangerous to founder/CEOs

#249

Post by mavelikara »

lumost wrote: post #243
redshirtrob wrote: post #206

Earlier quoted context omitted.

That's certainly not true. You should evaluate the investment just like any other investment and decide if you can afford to lose the money and stomach the risk. Part of your evaluation should be consulting a tax professional to determine if there are any immediate, negative tax consequences. You're not guaranteed to get hit by AMT just because you exercise some stock options.

There are very few times where the finances work out for options. Most employees lack access to the necessary company financials to make an informed financial decision, there is a 100% downside risk and barring early stage founder equity stakes - it's unlikely that the equity will do better than getting lucky on a top stock pick. I have yet to hear a single case of an employee purchasing their options when they left…

> I have yet to hear a single case of an employee purchasing their options when they left and thinking it was the right decision later on.

I know at least a dozen ex-colleagues of mine who fit this criteria. When the company in question exited, it created 400 millionaire employees.

Re: Boards are dangerous to founder/CEOs

#250

Post by wly_cdgr »

secondaryacct wrote: post #209
javajosh wrote: post #148

Earlier quoted context omitted.

If firing the CEO is a (the?) major degree of freedom for investors/boards, why are these events not recorded on crunchbase? That would seem to be a natural addition. I'd also like to see events related to dilution using valuation and any other major DoF that a board might have.

But firing the CEO, even a founder, is the right of investors who paid for it... I mean what else do you sell them? If they like the business but not the guy, why should they forever be forced to have him as a parasite in their mind ? Dilution seems wrong though, because they were supposed to buy something, not steal it.

You sell them the opportunity to gamble a large amount of their money with better odds and/or a more appealing returns distribution than any casino will give them, and for barely any more effort on their part. If anything, it's really very presumptuous of them to ask for any measure of say over the outcome beyond a good faith promise from the founder to try their best
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