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At 1.5% ownership, YC has no say over the direction of the company (other than through the influence they have from being well-known and respected in the startu

by jgable 11y ago

At 1.5% ownership, YC has no say over the direction of the company (other than through the influence they have from being well-known and respected in the startup space). The conflict arises when your VCs sit on, or even control, your board. Then you, as the Founder/CEO, can be forced by your board in directions that you don't want to go. That situation simply does not exist here, with YC taking such a low ownership stake. Nor does it exist in the normal YC program, since again, they do not take board seats with their 7% stake.

bjornsing 11y ago
> Then you, as the Founder/CEO, can be forced by your board in directions that you don't want to go. In my experience that happens very rarely. If the board votes at all, and especially if in a direction that the CEO doesn't want to go, then it's usually a vote to dismiss the CEO. But the people you surround yourself with (and their incentives) do matter. "Control" is a lot more subtle and social than you might expect.
- jgable 11y ago
  Sure, the board may rarely actually hold a vote on a given direction, but their ability to vote to remove the CEO is a huge threat hanging over the CEO. If a majority of the board favors a certain direction, even if they don't hold a vote on it, that exerts enormous pressure on the CEO to follow that direction. In that sense, we are saying the same thing. I agree that "control" does not require voting by the board. I do assert that investors with board seats exert far more control that those without, and investors with higher equity positions exert more control than those with less. I also assert that an equity stake of 1.5% exerts very little control. Again, YC exerts _influence_ (call it control if you want) simply because of their reputation for being good at what they do, but 1.5% ownership barely changes that equation.

by jgable 11y ago

bjornsing 11y ago

> Then you, as the Founder/CEO, can be forced by your board in directions that you don't want to go. In my experience that happens very rarely. If the board votes at all, and especially if in a direction that the CEO doesn't want to go, then it's usually a vote to dismiss the CEO. But the people you surround yourself with (and their incentives) do matter. "Control" is a lot more subtle and social than you might expect.

jgable 11y ago
Sure, the board may rarely actually hold a vote on a given direction, but their ability to vote to remove the CEO is a huge threat hanging over the CEO. If a majority of the board favors a certain direction, even if they don't hold a vote on it, that exerts enormous pressure on the CEO to follow that direction. In that sense, we are saying the same thing. I agree that "control" does not require voting by the board. I do assert that investors with board seats exert far more control that those without, and investors with higher equity positions exert more control than those with less. I also assert that an equity stake of 1.5% exerts very little control. Again, YC exerts _influence_ (call it control if you want) simply because of their reputation for being good at what they do, but 1.5% ownership barely changes that equation.