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Raised money from VCs for my last startup. Series A investor made all sorts of overtures about how founder friendly they were and how supportive they would be.
by rsweeney21 6y ago
Raised money from VCs for my last startup. Series A investor made all sorts of overtures about how founder friendly they were and how supportive they would be.
The week after we closed our series A they told me I had to hire a COO. I asked, "You trying to get me to hire my replacement?" "No, we'd never do that. How could you even think that?"
Less than two months after we hired the COO they fired me. The COO was made the CEO and he ran the company into the ground.
The lesson for founders is to never, ever, ever give up control of your board/company. Always maintain control of a majority of the board seats.
- cgb223 6y agoJesus... Did they at least buy you out or did they literally rob you of your company?
- throwaway98797 6y agoDid you make some money though?
- rsweeney21 6y agoNone.
- throwaway98797 6y agoThat really sucks. I think in the bubble of YC seems like this doesn’t happen but then there are counter examples like yours. Thank you for sharing.
- choppaface 6y agoI know of at least three successful YC companies that fired founders and then took a hit... YC isn't that special of a bubble, especially these days.
- deleted 6y ago[deleted]
- stanrivers 6y agoThis is not cool - I am sorry. Investor here - they should never do that. Make sure you tell others about how this went down. If they were planning on getting rid of you, that needs to be part of the upfront discussion etc.
- rsweeney21 6y agoThey are a large and very lawsuit happy VC. It's not worth the risk to warn other people about this VC.
- deleted 6y ago[deleted]
- covidthrow 6y agoIt would be a shame if someone else created a throwaway account to express similar sentiment about a similar firm and named them.
- throwaway9172 6y agoIt doesn't take a lot of insight to look at the crunchbase of OP's former company and look who lead the series A...
- fractionalhare 6y agohttps://www.crunchbase.com/funding_round/numetric-series-a--91f3fe48 https://www.crunchbase.com/funding_round/numetric-series-a--...
- stanrivers 6y agoYeah - I more mean... don't go out there and go out of your way to advertise that they did this. But founders should talk to other founders about their experience with different investors. The good, the bad and the ugly. In those situations, you can make it clear - in objective terms - what happened and why you would not take money from them again. Don't call them names or anything.
- vcvc 6y agoWhat VC?
- deleted 6y ago[deleted]
- fractionalhare 6y agoInsight Partners. They evidently led the Series A for OP's last startup, which according to their LinkedIn is Numetric. Crunchbase tells you what you need to know: https://www.crunchbase.com/funding_round/numetric-series-a--91f3fe48 https://www.crunchbase.com/funding_round/numetric-series-a--...
- choppaface 6y agoI'm aware of Max Levchin doing something similar to a YC founder, but with the involvement of another VC at the time.
- k__ 6y agoWhy would you even give up more than 49% of your company?
- sebmellen 6y agoYou might not realize that a 5% stake with two board seats is much more powerful than a 25% stake with one board seat. Corporate dynamics are weird.
- rsweeney21 6y agoIt doesn't matter what % of your company you own. What matters is whether or not you control a majority of the board seats.
- texasbigdata 6y agoWell....technically.... what matters is your ability to replace and/or appoint board members :)
- nradov 6y agoBecause you need the money and have a weak negotiating position. Not every startup is like Facebook.
- Andy_G11 6y agoDid you and your accountant review the shareholders' agreement thoroughly before finalising the fundraising with the new investors?
- jacquesm 6y agoSo, that's a bad trip, sorry to hear about this, and noted.
- DenisM 6y agoBeing friendly is much like being powerful - if you have to say that you are, you aren't. (with tons of apologies to Margaret Thatcher)
- InitialLastName 6y agoSame thing with honest.
- jasode 6y ago>The lesson for founders is to never, ever, ever give up control of your board/company. Always maintain control of a majority of the board seats. Maybe you're too close to the situation so what you say above feels to you like a universal truth but it actually doesn't help me as a reader. To raise the quality of discussion, we'd need to know what your realistic options were at the time you raised Series A. E.g... Did you have meaningful revenue making VC capital optional? Did you need VC money to have a runway and make payroll for a few months? In other words, if you're in a situation where rejecting VC money means your business shuts down, it becomes a moot point if you're still 100% in control of all board seats. As for board seats composition, was it something like You=1, VC=1, and Independent=1? If so, was the independent automatically on VC's side to fire you or were they truly independent? If you don't want to get into the details to maintain privacy, that's understandable. But also understand that your advice born out of your experience doesn't have enough context for us.
- choppaface 6y ago"To raise the quality of discussion..." To raise the quality of discussion, we need for all the email and Signal messages from the investors / VCs for a variety of deals to be made public. That would be a major step towards reducing the amount of information arbitrage in start-up funding (not to mention blog posts like the OP).