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Startup Founders Fret over Getting Fired Like Sam Altman

78 points by sam345 3y ago

sam345 3y ago
No paywall:https://archive.is/mxwly https://archive.is/mxwly
bedhead 3y ago
Easy solution: 1) Be a good CEO 2) Don’t take on questionable board members. 3) Don’t take on questionable equity partners. I don’t think this is easier said than done, just takes some discipline.
- snapcaster 3y ago
  1). Not actionable or even well defined 2). Not actionable, doesn't appreciate that questionable people won't present themselves as questionable in all cases or be easily detectable 3). Same thing
- anonreeeeplor 3y ago
  The human race works differently than you may expect.
- danielvaughn 3y ago
  It's virtually impossible to determine whether someone will be a good board member or equity partner. You can try your best, and some methods are undoubtedly better than others, but some people are just very good at lying.
  - bedhead 3y ago
    And yet, many people do it every year, over and over again, like magic.
    - networkchad 3y ago
      [dead]
  - yowlingcat 3y ago
    It's not virtually impossible. Whether it is possible or not is a function of that founder's relationships and information networks. If a founder is lacking in those categories, then yes, the deck is stacked against them.
- nashashmi 3y ago
  > just takes some discipline Step 0. Be committed to the principles even in the face of adversity and challenges when meeting goals, aka Don't cheat the rules to meet your goals. Step 0 is very very hard to do. When shit hits the fan, the shoulders drop and tummy swirls and the only thing left are the bones that make you the person you are. Your biggest challenges will be to be a "professional" for the job you took.
JCM9 3y ago
There are certainly exceptions, but in a very practical sense if the founder didn’t put the majority of capital into the business it’s unlikely and unrealistic that they’ll get some sort of special protection. The thing many founders struggle to comprehend when taking on outside capital is that there comes a point fairly early on when it’s not really your company anymore… you just work for it as a minority shareholder. The other investors have a fiduciary duty to their own stakeholders that generally comes before the founder’s desire for special treatment. Good founders that know they’re not the right ones to lead the next phase of the business know when to step aside. Founders that don’t and try to cling on when they’ve long passed the threshold of their own competence to lead aren’t doing anyone favors by trying to cling on.
- herewego 3y ago
  Agreed and well put. This is one reason why bootstrapping is such an attractive alternative for many who are able.
  - shortrounddev2 3y ago
    I've always been inspired by the story of id software, who funded their company by simply making a product and selling it. It seems like so many people in tech want to come up with an idea and immediately execute it at scale with tens of millions of dollars in seed money. It seems like profit is secondary to investment rounds at startups. Id software was able to remain independent and in control of the partners by making world class products and selling them directly to the consumer
    - bombcar 3y ago
      They call this a “lifestyle” business apparently - and part of the issue is that those who do that kind of bootstrapping are often comfortable stopping at some small millions. Who needs more? An example from another industry is successful restaurants - if you don’t franchise you’re basically capped, and some are quite content with that. A local bar “franchised” - each of the kids of the original owner has their own variation on the bar/restaurant.
alberth 3y ago
Sam Altman is not a founder (of OpenAI). Which means he probably doesn’t have voting shares to exert company control. Sam (+ Elon) were though initial board members.
- edgyquant 3y ago
  In what way is he not a founder?
  - alberth 3y ago
    > "[OpenAI] was founded by Ilya Sutskever, Greg Brockman, Trevor Blackwell, Vicki Cheung, Andrej Karpathy, Durk Kingma, Jessica Livingston, John Schulman, Pamela Vagata, and Wojciech Zaremba, ... with Sam Altman and Elon Musk serving as the initial board members" https://en.wikipedia.org/wiki/OpenAI#:~:text=It%20was%20founded%20by%20Ilya,as%20the%20initial%20board%20members https://en.wikipedia.org/wiki/OpenAI#:~:text=It%20was%20foun....
    - siva7 3y ago
      He is a founder. Someone should finally correct that wikipedia article with better sources and its wording as people get confused over and over that passage.
      - alberth 3y ago
        Sam has stated he doesn’t have an equity stake in OpenAI https://finance.yahoo.com/news/sam-altman-says-doesn-t-204324251.html https://finance.yahoo.com/news/sam-altman-says-doesn-t-20432...
        alberth 3y ago
        From OpenAI: > OpenAI’s research director is Ilya Sutskever, one of the world experts in machine learning. Our CTO is Greg Brockman, formerly the CTO of Stripe. The group’s other founding members are world-class research engineers and scientists: Trevor Blackwell, Vicki Cheung, Andrej Karpathy, Durk Kingma, John Schulman, Pamela Vagata, and Wojciech Zaremba. Pieter Abbeel, Yoshua Bengio, Alan Kay, Sergey Levine, and Vishal Sikka are advisors to the group. OpenAI’s co-chairs are Sam Altman and Elon Musk. https://openai.com/blog/introducing-openai https://openai.com/blog/introducing-openai
draw_down 3y ago
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kiba 3y ago
Altman is supposed to be following OpenAI 's charter. Quoted from the company website: OpenAI is an AI research and deployment company. Our mission is to ensure that artificial general intelligence benefits all of humanity.[1] The OpenAI Research Organization said pretty much the same thing.[2] I don't see how monopolizing the technology is supposed to benefit all humanity, such as letting microsoft have large investments in it. If I wouldn't know better, OpenAI is just another company that cared about making $$$. This is different from being a founder of a for profit company as opposed to being an employee of a foundation with a specific goal and mandate. 1. https://openai.com/about https://openai.com/about 2. https://www.openairesearch.org/about-us/ https://www.openairesearch.org/about-us/
- bombcar 3y ago
  Charters like that aren’t worth much at all because it’s down to the leader to decide what it means. You have to have one with teeth, like all code is GPL 3 or something, that can be concretely followed.
  - mminer237 3y ago
    Technically the state attorney general gets a say too, and the courts have the final say.
  - lolinder 3y ago
    It's supposed to be down to the board to decide what it means [0], and the CEO is supposed to follow the board's interpretation. In the event that a CEO fails to keep the mission in mind or has a major disagreement with the board about what the mission is, we should expect the board to remove that CEO and replace them with another. The board is the teeth to the mission. What happened here wasn't that the mission was vague, it was that the board turned out to be a paper tiger. [0] https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/board-roles-and-responsibilities https://www.councilofnonprofits.org/running-nonprofit/govern...
    - peteradio 3y ago
blitzar 3y ago
"Ries has a system of hurdles founders can set up that would make it harder for a board to move against a company’s mission or management." Odd to use OpenAi as an example here ... If anything the founders of OpenAi set it up appropriately to fire Sam.
cherryteastain 3y ago
OpenAI's controlling entity is a non profit, so not a startup. It does not have investors. Investors to OpenAI's for profit subsidiary entity did not move to undermine Sam Altman anyway. Moral of the story is, if you want more control over your company, don't try to trick people into thinking your startup is actually a nonprofit.
wolframhempel 3y ago
It's probably worth stressing that Open AI has a very unusual ownership and government structure that left Sam very vulnerable to this sort of board action - not just from a legal point of view, but from a fundamental conflict of interest one. After all, being the CEO of the SaaS offering with the fastest growing revenue ever (AFAIK) is inherently in conflict with a board that still believes its running a non-profit organisation. Having said that, there are any number of examples, from Uber's Travis Kalanick to Andrew Mason (Groupon), Jerry Yang (Yahoo) to - probably most famously - Steve Jobs from Apple. For founders, there's only really two ways to absolutely ensure to stay in control: - Retain 50%+1 of the business - Decouple monetary ownership from voting rights by having multiple share classes, then ensure you own 50% of the voting rights class It might also be helpful to: - Be indispensable. This should be a given if you're the founder/CEO, but if you feel there's a potential revolt brewing, there's some Machiavellian stuff you can do, e.g. by ensuring only you personally have some key relationships or- as Adam Newman at WeWork showed - by e.g. personally owning a lot of the real estate. (Not that that helped in the long run) - Play board politics. Ensure that you control (on a social and relationship level) a fraction of the board that adds up to 50%+ But ultimately, there's a different question: Yes, it's your baby and of course you should be the first one to run it. But why does your board think you shouldn't? Removing a Founder-CEO comes with very high risk, makes the VC fund look bad (if your board is composed of VCs) and will bring a lot of chaos to the company. So - what's so problematic about you that people feel compelled to consider it? Or maybe there's nothing problematic per se, but you're a great product-market-fit finder and growth CEO, but now it's a large company and it requires another set of talents? Would it really be so bad to do the Google/Eric Schmidt playbook and let someone else run things while you do what you enjoy the most, e.g. heading product? Or become an executive chair person that spends most of their days travelling between Tuscan vineyards?
Whiteshadow12 3y ago
You are most likely not Sam Altman.
_fat_santa 3y ago
The easiest way to not get fired like Sam Altman is to not take investor dollars. But like anything there are massive tradeoffs to either taking investor cash or not taking it (something I am personally grappling with right now). When you take investor capital, you suddenly have the power to do things you would not have had the ability to do for years. You can quit your job day job, hire other engineers, your development speeds up, you may even have a budget to spend on marketing. But the tradeoff here is your entire business shifts overnight, you are no longer the sole authority (ie. the benevolent dictator) and by that you no longer have complete say over the direction of your company. You might want one thing and your investors want another thing, and your job quickly becomes managing the relationship between your investors and the company you founded. Now if you decide to not take investor capital then you stay in absolute control. You call the shots, and only you (and your co-founder(s) if you have them). If you are just a founder with no co-founders then there is zero chance a Sam Altman situation will happen, and even with co-founders that scenario is extremely unlikely because you very likely own an equal stake in the business to your counterparts. The only problem with this scenario is the money, or lack thereof. Until you make enough sales you can forget about hiring help, or quitting your dayjob and forget about a marketing budget because you simply don't have enough money for that. I see these things as opposite sites to a "perfect company" coin. If you have a "perfect company" (as a founder), it means not only is your business generating enough revenue for getting all the cool things you could get with investor dollars, you are also in control like you would be if you didn't take investor dollars. Achieving the "perfect company" is practically impossible so you have to manage which side of the coin you prefer and your business can bear. For a small software company, it's definitely possible to go the bootstrapped route and achieve the "perfect company", though hard. But when you're talking about any capital intensive business (the Tesla's, SpaceX's of the world), then not taking investor dollars means there is a 0% chance your company succeeds unless you're already extremely wealthy.
- deleted 3y ago
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kozikow 3y ago
I think many founders have some buried deep worry like this. You end up fundraising, preparing forecasts and budgets for investors for the next X years, attending conferences, working with marketing on PR, dealing with unglamorous problems that are not part of anyone's job but need to get done and someone else doing it would impact morale too much. It's lucky if you find 1-2 days a week for "deep work" given constant context switching. Even if you work 2 shifts you can't sometimes match the level of being necessary for day-to-day operations as "regular" employees. But you own orders of magnitude more equity.
demondemidi 3y ago
Just don’t be a toxic leader. Why is that so hard for messianic tech bros to comprehend?
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bartwr 3y ago
I'm always for people over financial entities and capital holders, however in this case it's pretty simple - you sell control to someone for a ton of money, so why on Earth would you expect to retain it forever? You literally got millions in exchange for having less shares and it not being "your" company. Maby startups don't even need to take on seed investor money (could be self funded, smaller team, longer time before funding etc) - but founders obviously prefer to have a nice salary and soft landing. Or sometimes literally just as a marketing strategy "we are backed by x/y/z, this proves our value". This is the price to pay. What am I missing?
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notahacker 3y ago
Altman got an immediate counter offer from his company's main commercial backer, his staff threatening to leave if he wasn't reinstated, his rivals off the board and all he had to do to return was promise to be better behaved in future. I think most founders who are at loggerheads with their board can only dream of being fired like Sam Altman
BobbyTables2 3y ago
I myself wonder what does it even mean to be a “founder” when it means starting a company with other people’s money and having the work done by other people (employees)? I have the utmost respect for people who start their own restaurant with their own money and grow it into multiple locations over decades. But the tech industry isn’t anywhere close to that. If I had ever worked for a company where the CEO visibly did positive things instead of just trying to not fail long enough to collect his golden parachute, maybe my view would be different.
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mindcrime 3y ago
There's an easy way to avoid that: don't take any outside capital (or very little of it) and maintain a majority share of the company. And no, I'm not just being glib in saying that. Not every startup needs to follow the "take a bunch of outside capital, grow really big really fast, and (hopefully) exit" model. Unless you're building something that's genuinely capital intensive (like building a factory to build cars or rockets, or doing drug trials) there's a good chance you can ship a working product, sell said valuable product to actual customers and fund growth from gasp customer revenue gasp. I know, I know... heresy, right? Sounds like an outdated way of doing things? Well, maybe. But if you're really concerned about maintaining control, it might just be worth a shot if it's viable for what you're doing.
- SOLAR_FIELDS 3y ago
  I think the main fear around that (founded or unfounded) is that someone else can see your nice sustainable business, use infinite stacks of cash to catch up to your moat quickly and make you irrelevant. Sometimes the moat is good enough that they fail to unseat you, but are you willing to risk years of your livelihood around that?
  - traceroute66 3y ago
    > use infinite stacks of cash to catch up to your moat quickly and make you irrelevant Some might say that if all it takes is cash to catch up your moat then you don't have a moat. Sadly most businesses who claim to have a moat are infact just doing the same thing a tiny bit differently and just dressing it up in marketing bullshit to make it sound like they have some amazing secret sauce. The old rolling a turd in glitter routine. A real moat is something like ASML. Throw as much cash as you want at it but its going to take you decades to catch up, if you ever do. Less extreme examples than ASML exist, of course. But you get my point.
    - Justsignedup 3y ago
      SpaceX is a great example too. Literally the world is throwing so much money at the problem, and they're still a decade behind at least. Waymo is another example, remember when Uber tried to get into self-driving? Very few heavily capitalized players can even attempt to try to catch up to these guys in a decade.
distortionfield 3y ago
This just in: C-suites fear being treated even once like they treat employees on a daily basis.
josefresco 3y ago
When you're a CEO "deal guy" and not a CEO "maker" you're always under threat of being fired. Want job security? Become an engineer.
- danjac 3y ago
  I must have hallucinated the past year when 10,000s of engineers lost their jobs while CEOs got nice share bonuses...
  - josefresco 3y ago
    Sure engineers can lose their jobs, but they actually make things. Once the "seal" on a dealmaker is broken by failure, re-employment at the same level is difficult because their respect (which is their core skillset) has been destroyed or tarnished.
sirrodgepodge 3y ago
So glad people are talking about this in public
sirrodgepodge 3y ago
So glad this is being brought into the public eye (I'm Roger Beaman, I was featured in the article)
- mr33 3y ago
  Roger, thanks for sharing your story. It's admirable you were able to bounce back from a bad experience and have success with a new company. It looks like the company you were at is still operational too. Can you give more details about what happened? What is the investors side of the story? Do you think looking back it could have gone a different way/what would you have done differently to avoid the suboptimal outcomes? Whether that be negotiating better terms like you did with the latest company or something else tactical.
  - sirrodgepodge 2y ago
    Yea - there's a few things that blew my mind and understanding of the world at the time. One of those things is - if you have hit product market fit, a company becomes hard to kill. I do think it's dying a slow death, but had they done what they did later, it might not have, look up the Cisco story. After all, in a way starting a company that no longer needs you to run it might be the definition of success for a startup (e.g. it's what leads to a successful acquisition). As for what happened - as a first-time founder I hadn't put normal founder protections in place, and this meant that at the time that I was about to close the round referenced in the article that valued Smartrr at $75mn, it was possible for investors to push me out and take pretty much all my equity which was worth tens of millions of $ and could have been worth billions were the company to go on to succeed. The incoming investors wanted to get rid of this vulnerability and increase my control ("we're betting on you here...") and there was some tension around that with existing investors. I viewed my first sales hire as a very close friend and confidant and was going to promote them to President to formally be my righthand as part of the round and give them a large chunk of equity that would otherwise have been my own. Instead that first sales hire used what I had confided to collaborate with existing investors and push me out of the company the night I was to sign that deal. Instead of closing that world-class round I woke up the next day without the company I had started. You might read that and think I was a naive moron and that's okay, I now think I was too, but I also don't think there's any moral shame in that. At that time I believed that people were good or at least wanted to be and much was built on that foundational view. This experience broke that foundation, but I now believe the scarcity of being good makes it that much more special. Regarding their story, the investors and the present CEO who did it gave no public statement apart and privately lied and said that I had somehow stolen money from the company (the WSJ wouldn't have included me if this were true). I think what you're really asking is what would their "true" story be, the one in their minds not their mouths. They'll never be honest publicly if they wouldn't even be privately, but that itself in some ways reveals the answer. They just saw an opportunity to take a lot of equity worth a lot of $$$ from an overly trusting first-time founder who hadn't protected themselves, and so... they did it. I used to believe that everyone needs to convince themselves that they are good for humanity in order to sleep at night, it's a nice to think that but try reconciling that with the existence of Ted Bundy. With regard to what I would have done differently, there are a lot of tactical things (look up "double trigger clause", that's really the most important one). In a way though, my fatal mistakes stemmed from the optimistic view of the world that says if you work hard and are honest and do right by people, good things will happen. That view led to a lot of poorly placed trust, certainly in that first sales hire who I brought into my thing and sought to elevate and is now has my former job as CEO of the company, but also in an investor that I viewed as a mentor figure. While I believe the dollars I lost are certainly eye-popping and would have been nice, I just don't have that kind of emotional attachment to money, that's not what hurt. What hurt was rebuilding from that shattered of that world view and accepting a much more nuanced one, where being good in the classical sense is often exploited as a vulnerability and in order to preserve the good you need to be able to fend that off. That's where I ended up, but it was a journey through hell to get there, one where I saw the people that were hurting me and my family so much get lauded on social media and in the press for the short-term success of my Smartrr following my departure. Anyways - if you happen to stumble on this and it helps you, shoot me a message on LinkedIn, happy to help further if I can.
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rashidae 3y ago
Could someone explain how to fortify a first time founder’s position, that’s in a VC Backed type of startup which will need N Investment Rounds and Equity for employees and Board of Advisor's…
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jauntywundrkind 3y ago
He went off trying to raise money from the Middle East to create a startup he would have controlled trying to make AI accelerator hardware. The conflict of interest vs what OpenAI was doing was absurd. Don't thieve from one startup to build your own next startup. Given AIs power and hype & control over people, maybe also don't go about trying to disrupt the industry with a bunch of anti-Democracy sovereign powers. Maybe stay a little closer to home. There's so much general banter in comments about ownership & what to do/what not to do. Little of it is specific to what happened here. Don't undermine your startup by creating a new startup thats going to overtake & subjugate your current startup. The people running the current one don't want to be devoured.
paxys 3y ago
It's fun to fantasize about being in the midst of a high stakes boardroom battle like in your favorite movie, but the boring truth is that your company is not important enough. Focus on surviving and making money first. That's exactly what your investors want as well.
cdchn 3y ago
Don't start a pretend non-profit to attract talent then just start acting like the non-profit never existed.
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78 points by sam345 3y ago

No paywall:https://archive.is/mxwly https://archive.is/mxwly

Easy solution: 1) Be a good CEO 2) Don’t take on questionable board members. 3) Don’t take on questionable equity partners. I don’t think this is easier said than done, just takes some discipline.

snapcaster 3y ago
1). Not actionable or even well defined 2). Not actionable, doesn't appreciate that questionable people won't present themselves as questionable in all cases or be easily detectable 3). Same thing
anonreeeeplor 3y ago
The human race works differently than you may expect.
danielvaughn 3y ago
It's virtually impossible to determine whether someone will be a good board member or equity partner. You can try your best, and some methods are undoubtedly better than others, but some people are just very good at lying.
- bedhead 3y ago
  And yet, many people do it every year, over and over again, like magic.
  - networkchad 3y ago
    [dead]
- yowlingcat 3y ago
  It's not virtually impossible. Whether it is possible or not is a function of that founder's relationships and information networks. If a founder is lacking in those categories, then yes, the deck is stacked against them.
nashashmi 3y ago
> just takes some discipline Step 0. Be committed to the principles even in the face of adversity and challenges when meeting goals, aka Don't cheat the rules to meet your goals. Step 0 is very very hard to do. When shit hits the fan, the shoulders drop and tummy swirls and the only thing left are the bones that make you the person you are. Your biggest challenges will be to be a "professional" for the job you took.

JCM9 3y ago

There are certainly exceptions, but in a very practical sense if the founder didn’t put the majority of capital into the business it’s unlikely and unrealistic that they’ll get some sort of special protection. The thing many founders struggle to comprehend when taking on outside capital is that there comes a point fairly early on when it’s not really your company anymore… you just work for it as a minority shareholder. The other investors have a fiduciary duty to their own stakeholders that generally comes before the founder’s desire for special treatment. Good founders that know they’re not the right ones to lead the next phase of the business know when to step aside. Founders that don’t and try to cling on when they’ve long passed the threshold of their own competence to lead aren’t doing anyone favors by trying to cling on.

herewego 3y ago
Agreed and well put. This is one reason why bootstrapping is such an attractive alternative for many who are able.
- shortrounddev2 3y ago
  I've always been inspired by the story of id software, who funded their company by simply making a product and selling it. It seems like so many people in tech want to come up with an idea and immediately execute it at scale with tens of millions of dollars in seed money. It seems like profit is secondary to investment rounds at startups. Id software was able to remain independent and in control of the partners by making world class products and selling them directly to the consumer
  - bombcar 3y ago
    They call this a “lifestyle” business apparently - and part of the issue is that those who do that kind of bootstrapping are often comfortable stopping at some small millions. Who needs more? An example from another industry is successful restaurants - if you don’t franchise you’re basically capped, and some are quite content with that. A local bar “franchised” - each of the kids of the original owner has their own variation on the bar/restaurant.

alberth 3y ago

Sam Altman is not a founder (of OpenAI). Which means he probably doesn’t have voting shares to exert company control. Sam (+ Elon) were though initial board members.

edgyquant 3y ago
In what way is he not a founder?
- alberth 3y ago
  > "[OpenAI] was founded by Ilya Sutskever, Greg Brockman, Trevor Blackwell, Vicki Cheung, Andrej Karpathy, Durk Kingma, Jessica Livingston, John Schulman, Pamela Vagata, and Wojciech Zaremba, ... with Sam Altman and Elon Musk serving as the initial board members" https://en.wikipedia.org/wiki/OpenAI#:~:text=It%20was%20founded%20by%20Ilya,as%20the%20initial%20board%20members https://en.wikipedia.org/wiki/OpenAI#:~:text=It%20was%20foun....
  - siva7 3y ago
    He is a founder. Someone should finally correct that wikipedia article with better sources and its wording as people get confused over and over that passage.
    - alberth 3y ago
      Sam has stated he doesn’t have an equity stake in OpenAI https://finance.yahoo.com/news/sam-altman-says-doesn-t-204324251.html https://finance.yahoo.com/news/sam-altman-says-doesn-t-20432...
      - alberth 3y ago
        From OpenAI: > OpenAI’s research director is Ilya Sutskever, one of the world experts in machine learning. Our CTO is Greg Brockman, formerly the CTO of Stripe. The group’s other founding members are world-class research engineers and scientists: Trevor Blackwell, Vicki Cheung, Andrej Karpathy, Durk Kingma, John Schulman, Pamela Vagata, and Wojciech Zaremba. Pieter Abbeel, Yoshua Bengio, Alan Kay, Sergey Levine, and Vishal Sikka are advisors to the group. OpenAI’s co-chairs are Sam Altman and Elon Musk. https://openai.com/blog/introducing-openai https://openai.com/blog/introducing-openai

draw_down 3y ago

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kiba 3y ago

Altman is supposed to be following OpenAI 's charter. Quoted from the company website: OpenAI is an AI research and deployment company. Our mission is to ensure that artificial general intelligence benefits all of humanity.[1] The OpenAI Research Organization said pretty much the same thing.[2] I don't see how monopolizing the technology is supposed to benefit all humanity, such as letting microsoft have large investments in it. If I wouldn't know better, OpenAI is just another company that cared about making $$$. This is different from being a founder of a for profit company as opposed to being an employee of a foundation with a specific goal and mandate. 1. https://openai.com/about https://openai.com/about 2. https://www.openairesearch.org/about-us/ https://www.openairesearch.org/about-us/

bombcar 3y ago
Charters like that aren’t worth much at all because it’s down to the leader to decide what it means. You have to have one with teeth, like all code is GPL 3 or something, that can be concretely followed.
- mminer237 3y ago
  Technically the state attorney general gets a say too, and the courts have the final say.
- lolinder 3y ago
  It's supposed to be down to the board to decide what it means [0], and the CEO is supposed to follow the board's interpretation. In the event that a CEO fails to keep the mission in mind or has a major disagreement with the board about what the mission is, we should expect the board to remove that CEO and replace them with another. The board is the teeth to the mission. What happened here wasn't that the mission was vague, it was that the board turned out to be a paper tiger. [0] https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/board-roles-and-responsibilities https://www.councilofnonprofits.org/running-nonprofit/govern...
  - peteradio 3y ago

blitzar 3y ago

"Ries has a system of hurdles founders can set up that would make it harder for a board to move against a company’s mission or management." Odd to use OpenAi as an example here ... If anything the founders of OpenAi set it up appropriately to fire Sam.

cherryteastain 3y ago

OpenAI's controlling entity is a non profit, so not a startup. It does not have investors. Investors to OpenAI's for profit subsidiary entity did not move to undermine Sam Altman anyway. Moral of the story is, if you want more control over your company, don't try to trick people into thinking your startup is actually a nonprofit.

wolframhempel 3y ago

It's probably worth stressing that Open AI has a very unusual ownership and government structure that left Sam very vulnerable to this sort of board action - not just from a legal point of view, but from a fundamental conflict of interest one. After all, being the CEO of the SaaS offering with the fastest growing revenue ever (AFAIK) is inherently in conflict with a board that still believes its running a non-profit organisation. Having said that, there are any number of examples, from Uber's Travis Kalanick to Andrew Mason (Groupon), Jerry Yang (Yahoo) to - probably most famously - Steve Jobs from Apple. For founders, there's only really two ways to absolutely ensure to stay in control: - Retain 50%+1 of the business - Decouple monetary ownership from voting rights by having multiple share classes, then ensure you own 50% of the voting rights class It might also be helpful to: - Be indispensable. This should be a given if you're the founder/CEO, but if you feel there's a potential revolt brewing, there's some Machiavellian stuff you can do, e.g. by ensuring only you personally have some key relationships or- as Adam Newman at WeWork showed - by e.g. personally owning a lot of the real estate. (Not that that helped in the long run) - Play board politics. Ensure that you control (on a social and relationship level) a fraction of the board that adds up to 50%+ But ultimately, there's a different question: Yes, it's your baby and of course you should be the first one to run it. But why does your board think you shouldn't? Removing a Founder-CEO comes with very high risk, makes the VC fund look bad (if your board is composed of VCs) and will bring a lot of chaos to the company. So - what's so problematic about you that people feel compelled to consider it? Or maybe there's nothing problematic per se, but you're a great product-market-fit finder and growth CEO, but now it's a large company and it requires another set of talents? Would it really be so bad to do the Google/Eric Schmidt playbook and let someone else run things while you do what you enjoy the most, e.g. heading product? Or become an executive chair person that spends most of their days travelling between Tuscan vineyards?

Whiteshadow12 3y ago

You are most likely not Sam Altman.

_fat_santa 3y ago

The easiest way to not get fired like Sam Altman is to not take investor dollars. But like anything there are massive tradeoffs to either taking investor cash or not taking it (something I am personally grappling with right now). When you take investor capital, you suddenly have the power to do things you would not have had the ability to do for years. You can quit your job day job, hire other engineers, your development speeds up, you may even have a budget to spend on marketing. But the tradeoff here is your entire business shifts overnight, you are no longer the sole authority (ie. the benevolent dictator) and by that you no longer have complete say over the direction of your company. You might want one thing and your investors want another thing, and your job quickly becomes managing the relationship between your investors and the company you founded. Now if you decide to not take investor capital then you stay in absolute control. You call the shots, and only you (and your co-founder(s) if you have them). If you are just a founder with no co-founders then there is zero chance a Sam Altman situation will happen, and even with co-founders that scenario is extremely unlikely because you very likely own an equal stake in the business to your counterparts. The only problem with this scenario is the money, or lack thereof. Until you make enough sales you can forget about hiring help, or quitting your dayjob and forget about a marketing budget because you simply don't have enough money for that. I see these things as opposite sites to a "perfect company" coin. If you have a "perfect company" (as a founder), it means not only is your business generating enough revenue for getting all the cool things you could get with investor dollars, you are also in control like you would be if you didn't take investor dollars. Achieving the "perfect company" is practically impossible so you have to manage which side of the coin you prefer and your business can bear. For a small software company, it's definitely possible to go the bootstrapped route and achieve the "perfect company", though hard. But when you're talking about any capital intensive business (the Tesla's, SpaceX's of the world), then not taking investor dollars means there is a 0% chance your company succeeds unless you're already extremely wealthy.

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kozikow 3y ago

I think many founders have some buried deep worry like this. You end up fundraising, preparing forecasts and budgets for investors for the next X years, attending conferences, working with marketing on PR, dealing with unglamorous problems that are not part of anyone's job but need to get done and someone else doing it would impact morale too much. It's lucky if you find 1-2 days a week for "deep work" given constant context switching. Even if you work 2 shifts you can't sometimes match the level of being necessary for day-to-day operations as "regular" employees. But you own orders of magnitude more equity.

demondemidi 3y ago

Just don’t be a toxic leader. Why is that so hard for messianic tech bros to comprehend?

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bartwr 3y ago

I'm always for people over financial entities and capital holders, however in this case it's pretty simple - you sell control to someone for a ton of money, so why on Earth would you expect to retain it forever? You literally got millions in exchange for having less shares and it not being "your" company. Maby startups don't even need to take on seed investor money (could be self funded, smaller team, longer time before funding etc) - but founders obviously prefer to have a nice salary and soft landing. Or sometimes literally just as a marketing strategy "we are backed by x/y/z, this proves our value". This is the price to pay. What am I missing?

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notahacker 3y ago

Altman got an immediate counter offer from his company's main commercial backer, his staff threatening to leave if he wasn't reinstated, his rivals off the board and all he had to do to return was promise to be better behaved in future. I think most founders who are at loggerheads with their board can only dream of being fired like Sam Altman

BobbyTables2 3y ago

I myself wonder what does it even mean to be a “founder” when it means starting a company with other people’s money and having the work done by other people (employees)? I have the utmost respect for people who start their own restaurant with their own money and grow it into multiple locations over decades. But the tech industry isn’t anywhere close to that. If I had ever worked for a company where the CEO visibly did positive things instead of just trying to not fail long enough to collect his golden parachute, maybe my view would be different.

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mindcrime 3y ago

There's an easy way to avoid that: don't take any outside capital (or very little of it) and maintain a majority share of the company. And no, I'm not just being glib in saying that. Not every startup needs to follow the "take a bunch of outside capital, grow really big really fast, and (hopefully) exit" model. Unless you're building something that's genuinely capital intensive (like building a factory to build cars or rockets, or doing drug trials) there's a good chance you can ship a working product, sell said valuable product to actual customers and fund growth from gasp customer revenue gasp. I know, I know... heresy, right? Sounds like an outdated way of doing things? Well, maybe. But if you're really concerned about maintaining control, it might just be worth a shot if it's viable for what you're doing.

SOLAR_FIELDS 3y ago
I think the main fear around that (founded or unfounded) is that someone else can see your nice sustainable business, use infinite stacks of cash to catch up to your moat quickly and make you irrelevant. Sometimes the moat is good enough that they fail to unseat you, but are you willing to risk years of your livelihood around that?
- traceroute66 3y ago
  > use infinite stacks of cash to catch up to your moat quickly and make you irrelevant Some might say that if all it takes is cash to catch up your moat then you don't have a moat. Sadly most businesses who claim to have a moat are infact just doing the same thing a tiny bit differently and just dressing it up in marketing bullshit to make it sound like they have some amazing secret sauce. The old rolling a turd in glitter routine. A real moat is something like ASML. Throw as much cash as you want at it but its going to take you decades to catch up, if you ever do. Less extreme examples than ASML exist, of course. But you get my point.
  - Justsignedup 3y ago
    SpaceX is a great example too. Literally the world is throwing so much money at the problem, and they're still a decade behind at least. Waymo is another example, remember when Uber tried to get into self-driving? Very few heavily capitalized players can even attempt to try to catch up to these guys in a decade.

distortionfield 3y ago

This just in: C-suites fear being treated even once like they treat employees on a daily basis.

josefresco 3y ago

When you're a CEO "deal guy" and not a CEO "maker" you're always under threat of being fired. Want job security? Become an engineer.

danjac 3y ago
I must have hallucinated the past year when 10,000s of engineers lost their jobs while CEOs got nice share bonuses...
- josefresco 3y ago
  Sure engineers can lose their jobs, but they actually make things. Once the "seal" on a dealmaker is broken by failure, re-employment at the same level is difficult because their respect (which is their core skillset) has been destroyed or tarnished.

sirrodgepodge 3y ago

So glad people are talking about this in public

sirrodgepodge 3y ago

So glad this is being brought into the public eye (I'm Roger Beaman, I was featured in the article)

mr33 3y ago
Roger, thanks for sharing your story. It's admirable you were able to bounce back from a bad experience and have success with a new company. It looks like the company you were at is still operational too. Can you give more details about what happened? What is the investors side of the story? Do you think looking back it could have gone a different way/what would you have done differently to avoid the suboptimal outcomes? Whether that be negotiating better terms like you did with the latest company or something else tactical.
- sirrodgepodge 2y ago
  Yea - there's a few things that blew my mind and understanding of the world at the time. One of those things is - if you have hit product market fit, a company becomes hard to kill. I do think it's dying a slow death, but had they done what they did later, it might not have, look up the Cisco story. After all, in a way starting a company that no longer needs you to run it might be the definition of success for a startup (e.g. it's what leads to a successful acquisition). As for what happened - as a first-time founder I hadn't put normal founder protections in place, and this meant that at the time that I was about to close the round referenced in the article that valued Smartrr at $75mn, it was possible for investors to push me out and take pretty much all my equity which was worth tens of millions of $ and could have been worth billions were the company to go on to succeed. The incoming investors wanted to get rid of this vulnerability and increase my control ("we're betting on you here...") and there was some tension around that with existing investors. I viewed my first sales hire as a very close friend and confidant and was going to promote them to President to formally be my righthand as part of the round and give them a large chunk of equity that would otherwise have been my own. Instead that first sales hire used what I had confided to collaborate with existing investors and push me out of the company the night I was to sign that deal. Instead of closing that world-class round I woke up the next day without the company I had started. You might read that and think I was a naive moron and that's okay, I now think I was too, but I also don't think there's any moral shame in that. At that time I believed that people were good or at least wanted to be and much was built on that foundational view. This experience broke that foundation, but I now believe the scarcity of being good makes it that much more special. Regarding their story, the investors and the present CEO who did it gave no public statement apart and privately lied and said that I had somehow stolen money from the company (the WSJ wouldn't have included me if this were true). I think what you're really asking is what would their "true" story be, the one in their minds not their mouths. They'll never be honest publicly if they wouldn't even be privately, but that itself in some ways reveals the answer. They just saw an opportunity to take a lot of equity worth a lot of $$$ from an overly trusting first-time founder who hadn't protected themselves, and so... they did it. I used to believe that everyone needs to convince themselves that they are good for humanity in order to sleep at night, it's a nice to think that but try reconciling that with the existence of Ted Bundy. With regard to what I would have done differently, there are a lot of tactical things (look up "double trigger clause", that's really the most important one). In a way though, my fatal mistakes stemmed from the optimistic view of the world that says if you work hard and are honest and do right by people, good things will happen. That view led to a lot of poorly placed trust, certainly in that first sales hire who I brought into my thing and sought to elevate and is now has my former job as CEO of the company, but also in an investor that I viewed as a mentor figure. While I believe the dollars I lost are certainly eye-popping and would have been nice, I just don't have that kind of emotional attachment to money, that's not what hurt. What hurt was rebuilding from that shattered of that world view and accepting a much more nuanced one, where being good in the classical sense is often exploited as a vulnerability and in order to preserve the good you need to be able to fend that off. That's where I ended up, but it was a journey through hell to get there, one where I saw the people that were hurting me and my family so much get lauded on social media and in the press for the short-term success of my Smartrr following my departure. Anyways - if you happen to stumble on this and it helps you, shoot me a message on LinkedIn, happy to help further if I can.

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rashidae 3y ago

Could someone explain how to fortify a first time founder’s position, that’s in a VC Backed type of startup which will need N Investment Rounds and Equity for employees and Board of Advisor's…

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jauntywundrkind 3y ago

He went off trying to raise money from the Middle East to create a startup he would have controlled trying to make AI accelerator hardware. The conflict of interest vs what OpenAI was doing was absurd. Don't thieve from one startup to build your own next startup. Given AIs power and hype & control over people, maybe also don't go about trying to disrupt the industry with a bunch of anti-Democracy sovereign powers. Maybe stay a little closer to home. There's so much general banter in comments about ownership & what to do/what not to do. Little of it is specific to what happened here. Don't undermine your startup by creating a new startup thats going to overtake & subjugate your current startup. The people running the current one don't want to be devoured.

paxys 3y ago

It's fun to fantasize about being in the midst of a high stakes boardroom battle like in your favorite movie, but the boring truth is that your company is not important enough. Focus on surviving and making money first. That's exactly what your investors want as well.

cdchn 3y ago

Don't start a pretend non-profit to attract talent then just start acting like the non-profit never existed.

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