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Why would investors have veto power? Did the founders and employees give up complete control over the company? In such a situation, might it make sense for all

Why would investors have veto power? Did the founders and employees give up complete control over the company? In such a situation, might it make sense for all workers to drop those investors and recreate a similar company without them?

BinaryIdiot 11y ago
> Why would investors have veto power? Did the founders and employees give up complete control over the company? Likely. Sometimes you'll do anything for the investment to keep your company afloat. I know of companies who gave up board control in their seed round.
- pc86 11y ago
  > I know of companies who gave up board control in their seed round. I mean I've never been in that position but that seems pretty blatantly... idiotic.
  - sawthat 11y ago
    Well if it's that or give up, a lot of people choose not to give up.
    - jacquesm 11y ago
      Some deals are better not made.
jedberg 11y ago
> Why would investors have veto power? They often sit on the board, and also often control enough shares to outvote the founders. > In such a situation, might it make sense for all workers to drop those investors and recreate a similar company without them? I'm not certain but that would probably be illegal? At least immoral.
- jsprogrammer 11y ago
  >They often sit on the board, and also often control enough shares to outvote the founders. I guess the better question is, "Why would workers give up control to investors?" >I'm not certain but that would probably be illegal? At least immoral. I guess it would depend on the specifics of the relevant contracts, however I don't really see the immoral aspect of it. If anything, it would be the investors who were acting immorally in this situation. Slavery has been abolished and everyone is free to dissociate with whomever they'd like. Investors have no claim to force you to only work for them, for their ends, yet that is exactly what happened in the situation you described.
  - mahyarm 11y ago
    > I guess the better question is, "Why would workers give up control to investors?" Because they gave you hundreds of millions of dollars. It's like saying why would a bank secure a mortgage with the house.
    - FireBeyond 11y ago
      They gave the company millions of dollars. They only paid my salary as they were legally obligated to do, 'at will'. Loyalty is a two way street, and can be earned or taken away... "what would the company do in the opposite situation, say 'we will look after you', or 'you are on your own'?" - if the latter you should know about how much loyalty you have if you choose to walk away.
      - jsprogrammer 11y ago
        Loyalty is easily defined in the cap table.
      - jedberg 11y ago
        I think you just said it yourself. They gave the company millions of dollars, and now the company is more loyal to them than you. The job of the company is to serve it's shareholders. At first, as a founder, you are the only shareholder. When you take investment, you are bringing in more shareholders. Sometimes you have to bring in enough shareholders that you aren't the majority anymore. But if your choice is to do that or have the company die, then you choose to give up control.
maxxxxx 11y ago
I have never heard of employees having any kind of control over the company.

BinaryIdiot 11y ago

> Why would investors have veto power? Did the founders and employees give up complete control over the company? Likely. Sometimes you'll do anything for the investment to keep your company afloat. I know of companies who gave up board control in their seed round.

pc86 11y ago
> I know of companies who gave up board control in their seed round. I mean I've never been in that position but that seems pretty blatantly... idiotic.
- sawthat 11y ago
  Well if it's that or give up, a lot of people choose not to give up.
  - jacquesm 11y ago
    Some deals are better not made.

jedberg 11y ago

> Why would investors have veto power? They often sit on the board, and also often control enough shares to outvote the founders. > In such a situation, might it make sense for all workers to drop those investors and recreate a similar company without them? I'm not certain but that would probably be illegal? At least immoral.

jsprogrammer 11y ago
>They often sit on the board, and also often control enough shares to outvote the founders. I guess the better question is, "Why would workers give up control to investors?" >I'm not certain but that would probably be illegal? At least immoral. I guess it would depend on the specifics of the relevant contracts, however I don't really see the immoral aspect of it. If anything, it would be the investors who were acting immorally in this situation. Slavery has been abolished and everyone is free to dissociate with whomever they'd like. Investors have no claim to force you to only work for them, for their ends, yet that is exactly what happened in the situation you described.
- mahyarm 11y ago
  > I guess the better question is, "Why would workers give up control to investors?" Because they gave you hundreds of millions of dollars. It's like saying why would a bank secure a mortgage with the house.
  - FireBeyond 11y ago
    They gave the company millions of dollars. They only paid my salary as they were legally obligated to do, 'at will'. Loyalty is a two way street, and can be earned or taken away... "what would the company do in the opposite situation, say 'we will look after you', or 'you are on your own'?" - if the latter you should know about how much loyalty you have if you choose to walk away.
    - jsprogrammer 11y ago
      Loyalty is easily defined in the cap table.
    - jedberg 11y ago
      I think you just said it yourself. They gave the company millions of dollars, and now the company is more loyal to them than you. The job of the company is to serve it's shareholders. At first, as a founder, you are the only shareholder. When you take investment, you are bringing in more shareholders. Sometimes you have to bring in enough shareholders that you aren't the majority anymore. But if your choice is to do that or have the company die, then you choose to give up control.

maxxxxx 11y ago

I have never heard of employees having any kind of control over the company.