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How much power do the VCs typically have? Don't founders often have the ability to overrule and make their own decisions? Chris is already financially indepen

How much power do the VCs typically have? Don't founders often have the ability to overrule and make their own decisions? Chris is already financially independent from the OKCupid sale, he could have open sourced the server code and/or reduced the overall burn to pivot to paid accounts. Though the weird Stellar wallet addition implied some vision/product issues anyway. Of course it's easy and probably unfair for me to say these things as an outsider with limited information and no real stake, it's definitely possible I'm wrong about important details that would change my mind. It'd be interesting to hear from Chris, but the sale probably restricts public communication? This reminds me a little about the OKC sale actually, they had a blog post about why charging for dating sites made them worse that they took down after selling to match (they used to do cool analysis and publish them as blog posts, most of the details ended up in the book a different cofounder published called Dataclysm). That's more understandable to me though since I think it was their first exit. Reading about Zulip - didn't you get bought by Dropbox before being open source? Is your current situation a lucky outcome - or was it a condition of the sale? [Edit] - To clarify since there are downvotes, my questions aren’t rhetorical - they’re genuinely asking.

tabbott 6y ago
> How much power do the VCs typically have? I think it's less about the power relationship, exactly, and more about the way VC-funded companies are setup to be run. As part of raising a round, you prepare a business plan that involves aggressively spending the money over a couple years. You're committed both internally and to your board to execute that plan, and it's cognitively difficult to do something different as there's social pressure to do so (and one of your VC's greatest sources of power over you is they're the reference for your next fundraising round). The result is that your company has planned to run out of money with potentially a multi-million dollar annual burn rate in two years. If as those two years are approaching, the company and/or market situation don't support raising more capital and the company isn't close to profitable, the momentum of that burn rate applies a great deal of pressure for a sale, destructive layoff, or total change in goals to "anything that improves the bottom line". Also, the search for a story to help raise your next round can have a big effect on companies -- my view is most of Dropbox's problems when I was there (2012-2014) resulted from the search for a totally new business bigger than Dropbox Business that could justify a bigger valuation than $10B starving more obvious investments (Carousel, the now-dead photo sharing app, at one point had ~10x the engineering resources of Dropbox Business). > Reading about Zulip - didn't you get bought by Dropbox before being open source? Is your current situation a lucky outcome - or was it a condition of the sale? It's an extremely lucky outcome. There's a combination of factor that made this possible: * Dropbox leadership prioritized doing the right thing by their users, and so we were able to get permission from both leadership and legal. I'm sure my personal position as a leader at the company who had a personal relationship with the people who had approve it made a difference (Though Luke Faraone made a big difference by asking legal if we could and inviting me to the meeting!). But I think Dropbox deserves a lot of credit, because they spend significant time from expensive resources (legal, etc.) making this happen, and I don't know of many companies that would ever do that. * Our users were big fans, enough so that 10 of them flew to Dropbox HQ for a week to help us do the technical work required to do an open source release with all 10,000 commits of history intact and with a scripted installation process. This was essential to Zulip being usable after that release. https://zulipchat.com/history/ https://zulipchat.com/history/ has a bit more background on the early history (though it's a bit out of date).
- fossuser 6y ago
  Thank you - I really appreciate the detailed answer. I think I have a better understanding of how the incentives to cooperate would be hard to overcome even if you technically have the power as a founder (and even if you’re already financially independent). The personal experience was also interesting - thanks!
  - redis_mlc 6y ago
    Well, that was an interesting anecdote. But usually VC-funded companies have a board majority of said VC's, so they can overrule the founders anytime they want to. Most commonly that's used to fire the founders and appoint a pet CEO (sorry, professional manager) who happened to go to school with one of the VC's. So taking a story to them about "giving away our source code" would end up with the same result in most cases.
wpietri 6y ago
The power depends on the board structure and the ownership. But even if a founder owns 51% of the company, and so in theory can do anything, they still have an obligation to do right by the minority shareholders. This is generally known as fiduciary duty, and is a complex area of law. Here's a short summary: https://www.nolo.com/legal-encyclopedia/fiduciary-responsibility-corporations.html https://www.nolo.com/legal-encyclopedia/fiduciary-responsibi... In a case like this, a founder can't just give away the source code. They'd have to believe that doing so was in the best interests of the company. And unless they wanted to risk a lawsuit, they'd have to persuade the shareholders of that too.
- rhizome 6y ago
  >they still have an obligation to do right by the minority shareholders Fiduciary duty is extremely rare to be the subject of a suit against a, let's say, CEO. It's a complex area of law because it isn't actually a law, nor specified anywhere, and not a requirement for corporate existence. So, it's a set of court decisions that future cases are built upon, but in general a house of cards in that it could be invalidated by a) legislation; and b) adverse rulings at any level of a suit. It's a myth that the only purpose of executives is to maximize profit for the shareholders. It's a canard. PBCs are a counterfactual here, full stop. https://en.wikipedia.org/wiki/Public-benefit_corporation https://en.wikipedia.org/wiki/Public-benefit_corporation [note the significant use of "goal" in describing traditional corporations]
  - kirillzubovsky 6y ago
    Can you clarify your statement about the PBCs? I can't figure out if you're saying they are a good thing, or just a theatrical performance. I am curious because B-corps have been popularized in the recent years, but when I looked into what B-corps are, it seems to me those are just bogus certificates that aren't doing any good, except enriching the people who print certificates for these types of corporations. I don't really know whether I am right or wrong here, but I weren't able to find anything that actually makes a B corp different than any other. Would love to hear your thoughts.
rhizome 6y ago
>How much power do the VCs typically have? I wanna say we don't know. Has there ever been an instance of any company getting their tranche(s) and saying FU to the VC, and there being any repercussions? It's a two- or three-level hypothetical, but I think it's worth exploring to give you a complete answer.
mlatu 6y ago
You can downvote here?
- jessaustin 6y ago
  You're getting some amusing downvotes now! You have to have a certain level of karma [0] (500? 750? I'm not sure...) in order to have this ability. [0] https://news.ycombinator.com/user?id=mlatu https://news.ycombinator.com/user?id=mlatu
notpushkin 6y ago
> Though the weird Stellar wallet addition implied some vision/product issues anyway. Stellar integration was weird indeed, but it blended really nicely into the chat, and it would totally work for Keybase if there was an easier way to cash in / cash out. That said, any cryptocurrency would do the job, but if this particular one helps monetize the product, why not?

tabbott 6y ago

> How much power do the VCs typically have? I think it's less about the power relationship, exactly, and more about the way VC-funded companies are setup to be run. As part of raising a round, you prepare a business plan that involves aggressively spending the money over a couple years. You're committed both internally and to your board to execute that plan, and it's cognitively difficult to do something different as there's social pressure to do so (and one of your VC's greatest sources of power over you is they're the reference for your next fundraising round). The result is that your company has planned to run out of money with potentially a multi-million dollar annual burn rate in two years. If as those two years are approaching, the company and/or market situation don't support raising more capital and the company isn't close to profitable, the momentum of that burn rate applies a great deal of pressure for a sale, destructive layoff, or total change in goals to "anything that improves the bottom line". Also, the search for a story to help raise your next round can have a big effect on companies -- my view is most of Dropbox's problems when I was there (2012-2014) resulted from the search for a totally new business bigger than Dropbox Business that could justify a bigger valuation than $10B starving more obvious investments (Carousel, the now-dead photo sharing app, at one point had ~10x the engineering resources of Dropbox Business). > Reading about Zulip - didn't you get bought by Dropbox before being open source? Is your current situation a lucky outcome - or was it a condition of the sale? It's an extremely lucky outcome. There's a combination of factor that made this possible: * Dropbox leadership prioritized doing the right thing by their users, and so we were able to get permission from both leadership and legal. I'm sure my personal position as a leader at the company who had a personal relationship with the people who had approve it made a difference (Though Luke Faraone made a big difference by asking legal if we could and inviting me to the meeting!). But I think Dropbox deserves a lot of credit, because they spend significant time from expensive resources (legal, etc.) making this happen, and I don't know of many companies that would ever do that. * Our users were big fans, enough so that 10 of them flew to Dropbox HQ for a week to help us do the technical work required to do an open source release with all 10,000 commits of history intact and with a scripted installation process. This was essential to Zulip being usable after that release. https://zulipchat.com/history/ https://zulipchat.com/history/ has a bit more background on the early history (though it's a bit out of date).

fossuser 6y ago
Thank you - I really appreciate the detailed answer. I think I have a better understanding of how the incentives to cooperate would be hard to overcome even if you technically have the power as a founder (and even if you’re already financially independent). The personal experience was also interesting - thanks!
- redis_mlc 6y ago
  Well, that was an interesting anecdote. But usually VC-funded companies have a board majority of said VC's, so they can overrule the founders anytime they want to. Most commonly that's used to fire the founders and appoint a pet CEO (sorry, professional manager) who happened to go to school with one of the VC's. So taking a story to them about "giving away our source code" would end up with the same result in most cases.

wpietri 6y ago

The power depends on the board structure and the ownership. But even if a founder owns 51% of the company, and so in theory can do anything, they still have an obligation to do right by the minority shareholders. This is generally known as fiduciary duty, and is a complex area of law. Here's a short summary: https://www.nolo.com/legal-encyclopedia/fiduciary-responsibility-corporations.html https://www.nolo.com/legal-encyclopedia/fiduciary-responsibi... In a case like this, a founder can't just give away the source code. They'd have to believe that doing so was in the best interests of the company. And unless they wanted to risk a lawsuit, they'd have to persuade the shareholders of that too.

rhizome 6y ago
>they still have an obligation to do right by the minority shareholders Fiduciary duty is extremely rare to be the subject of a suit against a, let's say, CEO. It's a complex area of law because it isn't actually a law, nor specified anywhere, and not a requirement for corporate existence. So, it's a set of court decisions that future cases are built upon, but in general a house of cards in that it could be invalidated by a) legislation; and b) adverse rulings at any level of a suit. It's a myth that the only purpose of executives is to maximize profit for the shareholders. It's a canard. PBCs are a counterfactual here, full stop. https://en.wikipedia.org/wiki/Public-benefit_corporation https://en.wikipedia.org/wiki/Public-benefit_corporation [note the significant use of "goal" in describing traditional corporations]
- kirillzubovsky 6y ago
  Can you clarify your statement about the PBCs? I can't figure out if you're saying they are a good thing, or just a theatrical performance. I am curious because B-corps have been popularized in the recent years, but when I looked into what B-corps are, it seems to me those are just bogus certificates that aren't doing any good, except enriching the people who print certificates for these types of corporations. I don't really know whether I am right or wrong here, but I weren't able to find anything that actually makes a B corp different than any other. Would love to hear your thoughts.

rhizome 6y ago

>How much power do the VCs typically have? I wanna say we don't know. Has there ever been an instance of any company getting their tranche(s) and saying FU to the VC, and there being any repercussions? It's a two- or three-level hypothetical, but I think it's worth exploring to give you a complete answer.

mlatu 6y ago

You can downvote here?

jessaustin 6y ago
You're getting some amusing downvotes now! You have to have a certain level of karma [0] (500? 750? I'm not sure...) in order to have this ability. [0] https://news.ycombinator.com/user?id=mlatu https://news.ycombinator.com/user?id=mlatu

notpushkin 6y ago

> Though the weird Stellar wallet addition implied some vision/product issues anyway. Stellar integration was weird indeed, but it blended really nicely into the chat, and it would totally work for Keybase if there was an easier way to cash in / cash out. That said, any cryptocurrency would do the job, but if this particular one helps monetize the product, why not?