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You retain control by coding it into your corporate bylaws. For example, you might have two board seats elected by common (the founders + employees), one board

by paul 12y ago

You retain control by coding it into your corporate bylaws. For example, you might have two board seats elected by common (the founders + employees), one board seat elected by preferred (the investors), and the ceo hired/fired by a majority vote of the board. That way two founders can always outvote investors, but investor + founder could outvote the other founder (sometimes necessary). The way you lose control is to do something like one seat to the ceo, one to preferred, and one "independent". The investor recommends his highly qualified friend as the independent member, then sometime down the road you run into trouble and the investors + independent fire you (the ceo), and then you've lost all control.

hiou 12y ago
> but investor + founder could outvote the other founder Seems like such a high risk to take on when as said above a board of advisers can accomplish similar benefits without the risk of a founder disagreement getting you pushed out of your company.
abalone 12y ago
Thanks, but doesn't that contradict Sam? You're saying "2 founders + 1 investor" maintains founder control. Of course it does. But Sam's recommendation is 2 founders + 1 or 2 investors + 1 outsider. My guess is what Sam means by "keep enough control so that investors can't fire you" is to have an outsider on the board so that the investor class is never in the majority by themselves. But if I understand you Paul you are explicitly saying that's a situation founders should worry about, and that they should instead keep themselves in the majority without relying on an "independent". Basically what sounds best to me as a founder is to have outsiders on the board, so that you get the best advice, but maintain founder control through a voting agreement. But then again that also sounds not that different from an advisory board.

by paul 12y ago

hiou 12y ago

> but investor + founder could outvote the other founder Seems like such a high risk to take on when as said above a board of advisers can accomplish similar benefits without the risk of a founder disagreement getting you pushed out of your company.

abalone 12y ago

Thanks, but doesn't that contradict Sam? You're saying "2 founders + 1 investor" maintains founder control. Of course it does. But Sam's recommendation is 2 founders + 1 or 2 investors + 1 outsider. My guess is what Sam means by "keep enough control so that investors can't fire you" is to have an outsider on the board so that the investor class is never in the majority by themselves. But if I understand you Paul you are explicitly saying that's a situation founders should worry about, and that they should instead keep themselves in the majority without relying on an "independent". Basically what sounds best to me as a founder is to have outsiders on the board, so that you get the best advice, but maintain founder control through a voting agreement. But then again that also sounds not that different from an advisory board.