Founder Friendly

Long time VC watcher, writer, and analyst Dan Primack suggested on Friday that the days of VCs trying to out “founder friendly” each other are now over.

It is an interesting observation and was worthy of a reply. The VC industry is highly competitive for the best opportunities and we certainly do try to ingratiate ourselves and our firms to the entrepreneurs who will decide who gets to invest in their companies and who does not. Being “founder friendly” is an important way to do that.

But there is another important participant in the VC/entrepreneur relationship and that is the Company the entrepreneur creates and all of its stakeholders; the employees, the customers, the suppliers, and even the community around the Company.

Having worked with entrepreneurs for over thirty years now, I have developed tremendous admiration for what they do and for the Companies they create. Entrepreneurs are a very special breed of people.

But there are times when interests diverge and what is best for the Company and it’s stakeholders may not be what an entrepreneur perceives to be in their own best interest. This creates a conflict situation and VCs are often caught in the middle of it.

I’ve been there many times and my mantra in those moments is “what is best for the Company?”. It has to be that way and, many times, when it is all over and done, the founder realized it was in fact best for them too.

Of course, reasonable people will disagree about what is best for a Company. That is what Boards are for. They are the bodies made up of reasonable people who can and should debate these issues and find resolution and make the hard decisions.

I reject the notion that being led by its founder is always what is best for a Company. It is often so, but certainly not always so.

Orthodoxy in thinking and believing is quite troublesome. There is no one way to do things and no single truth. You have to figure things out all the time based on facts and circumstances, based on a combination of experience and knowledge. If you do that well, you will get a lot right but never everything right.

I have heard from quite a few founders that they read the book Hatching Twitter and came away thinking that they would not want to work with me. That sucks for me but I don’t regret anything I did or said in the events that were described in that book.

You must try to make the right decisions for what is best for the Company and if that means being labeled unfriendly to founders, so be it.

#entrepreneurship#VC & Technology

Comments (Archived):

  1. awaldstein

    Thanks Fred.I as well believe that work–and it this case–life as well needs to be driven by first principal beliefs that drive decisions cross a multiplicity of never foreseen circumstances.In politics to me it is ethics, in work the dynamics of following the vision.Each to their own. This is mine and close to yours in this case I think.

  2. William Mougayar

    What you painted is the reality and it is in context with the lifecycle of a startup. It appears that Dan’s comment was anecdotal and influenced by the Uber drama with Benchmark Capital.

  3. Jay Bregman

    I think the statement should say “Saving your company from yourself may be founder friendly…in the long run.” This is important because many company stakeholders and many (not all) VCs have (the luxury of?) a long term focus on creating value. If it takes a re-organization and five years to get there, as long as you get there, that’s a win for everyone (though sooner is of course better). In the heat of the moment, founders in crisis may be unable to think clearly about what could happen if everyone had a chance to reset and breathe for a while. The market may change. Your strategy may change. Your partners may change. If VCs religiously practice this long term view then I believe they are in many cases being founder friendly regardless of how it looks or feels today.

  4. creative group

    CONTRIBUTORS:If this entire exchange was promoted by Benchmark (Gurley) suing Uber (Travis Kalanick) from attempting to revive himself as CEO (Which isn’t the best for the company based upon previous events) requires more inside information on how much did Gurley know. He was Travis Kalanick’s friend. The strange event of other Investors (VC’s-Shervin Pishevar, Ron Burkle and Adam Leber) rebuking Benchmark move and wants them off the Board is just as head scratching.

    1. Jay Bregman

      I think this is a real outlier example of how these tensions can go public and go wrong. The general point is that the result of disagreements between VCs and founders may often lead to a better result for the company, and in doing so, the founders themselves. This especially is the case when founders are being actively disruptive toward agreed changes in management or strategy (something they do not always realize they are doing, and if they do, they don’t think through the long term consequences of their actions).

    2. sigmaalgebra

      Yup. But, go into a swamp and lie down with snakes, are likely to smell bad and get hurt.Uber? A goofy taxi cab company. Gads, what a swamp. The taxi business is almost all many local businesses; so, f’get about the overhead of being a world-wide taxi company. Uber has no advantages but does have a lot of international overhead. Uber has been losing big bucks and soaking up equity investments, that is, selling off the company, to pay for it. A taxi company? Gotta be kidding.The old CEO of Uber? Who’d trust him to run a lemonade stand at the end of a cul de sac? Would you drink his lemonade?

      1. LE

        The old CEO of Uber? Who’d trust him to run a lemonade stand at the end of a cul de sac? Would you drink his lemonade?No, it’s the opposite. Travis was like a sacrificial zinc in the new pleasure boat you just bought:…Actually that is a brilliant analogy if I may say so myself.Those VC’s knew exactly what they were getting.Other related examples: Supreme court nominees chosen knowing they will be rejected.

    3. JamesHRH

      Its a generational power play in Valley VC land.Shervin has an ego the size of Jupiter. He would like Bill’s young bucks off the board so he can be Uber’s Big Hoss and embarrassing Bill a little is just bonus points.

  5. George Gamble

    You ignore the elephant in your particular room – what is best for the VC is not always what is best for the company. I have seen countless deals where the VC contingent pushes their own interests over what is best for the company. Though there are times when the founder is definitely a problem, my feeling is the founder’s interests more often align with what’s best for the company than how the VC’s interests align. When the VC and the founders are on the same page, companies crank. When they are not on the same page, I would tend to trust the founder far more often than the VCs.A good point would be a company that I was a founder of not too long ago. A group of VCs came in and helped merge us with several other companies. The lead VC was eager to show a success as their stable of companies at the time was not doing so well (2001 tech meltdown). So they pushed and pushed to get the new company to a stage where it could IPO. The new company itself was a decent organization and would have done fine if it just hunkered down and weathered the storm. Instead the VCs insisted the company spend money to get bigger against the wishes of the majority of founders who wanted to conserve the cash. Ultimately, the runway ran out and the companies that all had been very viable and profitable prior to the VC showing up ran out of money and thousands of people had to be let go.Ultimately, the VCs primary responsibility is to their investors NOT to the company and its employees. This is a conflict that is far more problematic than the occasional founder who runs off the rails or whose interests are worse for the company than the VCs.

    1. Jay Bregman

      You’re totally right. That’s why you need to be very careful when choosing VCs. You need to have Partners and VCs that are patient and looking for long term success, not just a hit to line up their next fund. VCs that have a significant track record and support of their LPs can and do take the longview. I think a pre-condition for Fred’s comment is that the VCs are indeed looking out for the long term value of the company which is not always true. That’s what makes this such a sticky topic.

    2. Mark Annett

      @George. You wrote, “I would tend to trust the founder far more often than the VCs.” I am a founder, an angel investor and have been a board chair during a nasty board fight, so I come at this from multiple perspectives.So while in general this would be true that the founder has a better vision of where to take the company and should be trusted (which the founders were not in the situation you describe), when you are talking about “a conflict” between a VC and a founder, the founder is probably better off listening to the VC.This is because conflicts typically arise when the founder has reached their limit, can’t except their personal limitations and can no longer make an objective assessment. On the other hand, the primary motives of the money person tend to go unchanged.In the particular case you describe, it sounds like the Lead VC had founder syndrome themselves and was no longer able to make an objective assessment because of it.

      1. Pointsandfigures

        This is very true

      2. PhilipSugar

        We disagree. Where the biggest conflict comes from? Founders don’t mind selling for $20mm and getting $5mm. VC thinks putting in $3mm and getting back $6mm sucks.See my comments with Charlie.Again in no way saying replacing a founder is founder unfriendly. But saying that the VC knows best is one big lie.

        1. JamesHRH

          Exactly, and I have lived that story.

        2. sigmaalgebra

          As in the last Indiana Jones movie, what was it from Elvis? “You ain’t never bought a record and you ain’t no friend of mine”?Well, too many VCs were history majors at Williams College and Harvard MBAs (I was a prof in one of the better MBA programs and, thus, have not much respect for MBAs) who never wrote 1000 lines of serious code, never invented a serious, new algorithm, never built a big business, and regard technology as just a black box.Especially in information technology, they are nothing like the smartest guys in the room. Not good guys to have on the team or even on the bench.

        3. Yaw

          I agree, a good exit for a founder might not be a good exit for the VC.But the thing is, as a founder, when you sign up for building a venture-backed company, you are agreeing that you have one path: growth at all costs or death.That’s how VC works. If you as a founder aren’t willing to grow and sell for $100+ million, then you probably shouldn’t be taking VC money in the first place.

    3. PhilipSugar

      I have been in that situation twice. Once things happened like you said, once I refused to spend the money.Where Founders and VC’s interests can diverge is where you say get big at all costs and roll the dice. The founder doesn’t have a portfolio.Really dirty is doing it on purpose to then cram down some really nasty terms.Many times though it is the optimistic founder that spends the money.

      1. sigmaalgebra

        > Really dirty is doing it on purpose to then cram down some really nasty terms.”Dirty” you say?Got to be an inebriated half of a half wit to fail to think of that sabotage, manipulation, but tell me that no decent person, certainly no VC, would ever, ever do such a thing!!!!!I remember a remark about workouts in just commercial banking: “A commercial bank can make more money from a workout than from the loan.”For an investor, a failing company can be a path to “obscene profits”, from a remark of my especially conscientious brother who got involved in investing the family money, “those are the best kind!”.

    4. LE

      Ultimately, the VCs primary responsibility is to their investors NOT to the company and its employees.And as you also pointed out their reputation also comes into play as well.

    5. JamesHRH

      You just tell the investors, what is best for you long term is for us to be known as a firm that does the right thing for the companies we invest in.Consistency is your protector.

    6. fredwilson

      Yupp. Very true. I was not avoiding that issue. I wrote ” what is best for the company” and I mean it. And I live by it. At my financial detriment very often

      1. avifreedman

        When doing CEO (but not LP) references for one of our investors, I always point out that he will generally say “Here’s what I would like. Here’s what’s best for the company.” and will always go along with what’s best for the company. It’s critical for CEOs to do diligence on investors’ behavior when things are not great (or great and people get sharp elbows in that direction), especially anyone with even board observation rights.

    7. cavepainting

      A company is not a single homogenous entity. It has multiple stakeholders, each with a different definition of success and representing varying interests. It is a complex beast with very real human dynamics and failings.When everything is going up and to the right, all agendas are aligned, but this occurs less than 5% of the time. Mostly, things go sideways at multiple points in time, and there are differing perspectives on the future. For example, do you want to raise new money with loaded terms or sell the business, do you invest in growth or conserve cash, etc. ? Founders and different investor classes have very different incentives that typically drive them towards conflicting points of view.It is wrong to say that the founder’s view will always represent the best for the company, just as it will be wrong to say that any single investor class represents the best path forward.It really depends on the specific situation, the people involved, who has leverage, whose vision, credibility, and understanding of the market is perceived to be correct, and the dynamics among the actors.

  6. Tom Labus

    But at crucial times “reasonable people” are not always available. A lot of people can disappear when things head south.

    1. Pointsandfigures

      Ain’t that the truth.

    2. PhilipSugar

      You stole my point :-)Founder unfriendly can be MIA when really tough times happen, just letting the founder twist in the wind.When times are desperate sometimes really tough decisions get made.

      1. JamesHRH

        Guy said to me a long time ago, ‘every now and then, your job is solely to take care of yourself.’Its true in big enterprise and startups.

    3. creative group

      Tom Labus:Reading Bill Gurley from afar, he appeared to feel betrayed by a friend that agreed to step down and then is attempting a return to what he agreed to step aside. What Benchmark did was the nuclear option.There is no way we can accept Bill Gurley didn’t have any information before the public on the majority of transgressions before the public from a friend running the company he is on the board. The other VC’s feel betrayed by Benchmark’s actions that are harming the brand they all made Billions on. (Billions)

      1. CJ

        I bet Travis feels betrayed by a friend who forced him to step down when he was dealing with an extremely difficult and stressful personal situation and arguably, not in his right mind.So that kinda goes both ways.Amazing how badly you can screw the pooch here from both sides. Travis running a company as a frat house and the board refusing to govern until Travis is grieving his mother and holding vigil for his father.

        1. PhilipSugar

          I’ll take exception to the fraternity house reference. My house has more CEO’s per capita than the average number at Penn (Wharton) by a factor of 10 to 100.We “blackballed” a brother that displayed aggressive inappropriate behavior towards women.However, if the reports are true that place was bad for women, but you are right the optics look totally wrong.

          1. LE

            We “blackballed” a brother that displayed aggressive inappropriate behavior towards women.Sure but look at what is at stake in a fraternity vs. a company.In business the overwhelming number of people, pension funds, your aunt invest to make money. They are more than willing to look the other way if they get good returns. My guess is that companies were rated on social responsibility that wouldn’t move any needles in terms of where people put their dollars. Short of something truly horrendous.Look I think smoking is the scourge of the earth [1] and a huge detriment to society. I literally curse people in front of me in cars that are smoking (you know they have those stupid air freshner things on the rearview mirrors.) But would I not hire a contractor that smoked? No I would and have. One painter literally sits in the van during breaks and smokes with his son! Does a good job (or used to got sloppy), price is decent so I go with it. So much for what you believe in.[1] In the 80’s I decided that I didn’t want people smoking at the company. Unfortunately the most valuable guy in the company was the biggest smoker. He was in the machine room. Took me some time and energy to social engineer him and get him to go along with the program. Didn’t want him to quit. He could easily get another job. The others I didn’t care about if they quit (working I mean). But this guy I did. Luckily it worked out. It would have been a show stopper.

          2. PhilipSugar

            Smoking: hurting yourself, and harassing women: hurting somebody else are different.I also disagree having a bad work environment is bad for business.

          3. LE

            having a bad work environment is bad for business.Look if you put a big enough engine on a boat it will move and move fast and it doesn’t matter if you are dragging bodies in the rear or whatever.Not the way I operate obviously and I am not saying it’s right. And I don’t like it.But no question Uber is where it is today because of the attitude that went along with the abuse that they did. It took tremendous chutzpah to go up against those entrenched interests. Not something I would ever take on and I don’t think you would either. The impact on their business has been nominal. Almost a movie parody balls to the wall business.My point is sure the bad boy created a great deal of negative. But they are still standing today and it looks like they will most likely remain standing.So from an investor standpoint it’s a win.You’ve seen this pattern many times as I have. Company makes enough money to be able to clean up the mess afterwords using money and lawyers. It’s kind of a standard pattern used by many corporations. It is to business what lying is to politics.You know the example I give is of secret service agents the guys who got caught with prostitutes. Not something that would ever happen to me I am not that type of guy. But I am also not the type of guy that would take a bullet for someone and neither is my rabbi. So while the bad behavior sucks it is not totally unexpected either.

          4. JamesHRH

            You nailed this. I have just enough inside dope on Uber to believe that Brotastic Bombast is what made them what they are.

          5. LE

            One other thing notice how it’s as if sexual harassment is considered to be the defacto and king of harm out there? Or at least by the way it’s covered by the media, bloggers pundits it seems to be. Why? Sex sells and is interesting across a wide swath of the population and it’s always easy to get people rallying around it.So take what is in the Mercury News here regarding Tesla:…The company’s last stretch of manufacturing hyper-stress — the months leading up to the September 2015 delivery of the Model X — brought long hours, mandatory overtime and an 11 percent jump in worker time missed due to injury.“We had long hours. It took a toll on a lot of us,” said Michael Catura, a Tesla factory worker who started in April 2014. “I hope that we learn from the mistakes.”That type of injury is no less important. And it won’t prevent anyone from buying a Tesla because, well, it’s not a sweat shop or anything and people can’t feel the pain in this particular circumstance. There will be no boycotts and the few stories won’t have any impact on customers. Indeed the entire tone of the article downplays any actual harm. No whiny quotes of people layed up with injuries it’s like ‘take 2 Nuprin and call me in the morning’.And the ‘shovel’ and gold watch that Musk uses to make this happen:He praised his workers and joked, “I look forward to working alongside you through our journey through hell.”Wow praise. Like they are dogs waiting for a biscuit from the master.Edit: The overtime was mandatory. Mandatory or what you lose your job? You are never promoted?

          6. PhilipSugar

            Amazon has a traffic light in their warehouse. Leave when it is red, never come back.

          7. LE

            You know my ‘wawa must sell smokes or the entire model goes out the window’? Well the equivalent with Amazon (from what I read and what I have observed with their low grade delivery people) is ‘pay people a good wage and give them good working conditions and the entire model goes out the window’.One thing Bezos has going for him though is he is approaching monopoly status by way of ‘cutting off the air supply’ of competitors.As such he will be able to, at some point, jack up prices and be able to pay a better wage and have better conditions.

          8. PhilipSugar

            Or make profits.There will always be a finance person, and once you have that culture you keep it.And I still disagree with your harassment theory.You can work harder, get a side job, leave, etc. But getting harassed stays with you.

  7. David C. Baker

    Here’s what I’m taking away from this: if I were a founder (I’m not) and I’m shopping for VC money, I’m not thinking very clearly. Instead I should see myself as shopping equally for VC money and VC influence together. You don’t get the money without the influence…although at times you can get the influence without the money.So whining about the VC influence after you’ve taken their money–particularly if the VC has a decades-long record of influence to study–just means that you didn’t do your homework beforehand.

    1. JamesHRH

      Dave, you missed the part of AVC’s history where people told horror stories of young VC partners forcing acquisitions on a founder b/c they wanted to wrap a fund and publish results for fundraising purposes on the raise of a subsequent fund, etc.VCs are finance people. The ratio of total assholes in finance is slightly higher than the general population.

      1. David C. Baker

        But that’s sort of my point–wouldn’t you know that going in? How could such a move surprise you? Taking someone’s money and then complaining about a well-publicized modus operandi seems disingenuous.

        1. JamesHRH

          Fred does what is best for company, not what is best for USV.There are times when those are not the same thing.Its why USV is small, it reduces potential conflicts.And, yes, you are right: if you take money from Sequoia and they replace because they said they would if the found somebody better, it doesn’t matter if you think you are better.

          1. LE

            The way I read it (and not saying what you are saying isn’t part of it) USV is small because Fred wrote that he had a bad experience with Flatiron getting out of hand size wise with to many hands in to many pots.In any case crying over getting to the point where you have an idea and pitch and can actually take on money from any top VC firm is entitlement at the highest level. It’s like those people protesting shit at Yale University. Getting ahead isn’t all merit and fairness that is baked into the system. Having a stamp of approval and failing is decent in itself in a system where luck plays an oversized role in who gets where.

      2. PhilipSugar

        No you are wrong. It is not slightly higher it is at least an order or two of magnitude higher.

  8. sgerstenzang

    Hi Fred, I very much agree with you. I wrote my own take on being founder friendly here:

  9. CJ

    I think there is a difference between being founder-friendly and a founder’s rubber stamp. By allowing the founder to control the vote through a special class of shares you say to the founder that we’re just here to provide money and advice but won’t actually try and force any decisions. It’s your company, we’re along for the ride.However, if you force the founder to control the company through strength of will, execution, charisma, and results rather than through stock, then you show the founder that this is OUR company and not YOUR company and that’s founder-friendly to me.As soon as I take OPM then I have a higher duty. If I don’t want that duty then I shouldn’t take OPM and I definitely shouldn’t take so much that it puts me in the minority. But agreeing to do all of that means that I should choose the best partners possible, especially partners who will call me on my BS because ultimately I want to get better at this, not worse.

    1. PhilipSugar

      The more rounds you do especially rounds that you have to do and are super tough the less chance you remain CEO.That is not founder unfriendly. That is just reality.Founder unfriendly is when you go in knowing you want to replace the founder and don’t express that.It’s also when you take advantage of terms to harm the founder.

      1. CJ

        Agreed. Convincing me to take your money only so that you can depose me is pretty damn founder unfriendly. LOL

        1. PhilipSugar

          It happens. Somebody thinks that is a good idea but I really don’t think she is the gal to lead this. Let’s put in money spend it on “my friends” consultants, lawyers, agencies, and most importantly some very expensive employees that I know, run out of money and force the situation.

          1. CJ

            Yeah, that’s pretty crappy. I said to some friends earlier this week, when talking about the Board forcing Travis’s resignation after his personal tragedy, if you don’t think business is all about money then you don’t have enough money. This is just further proof.

          2. PhilipSugar

            After the personal tragedy sucks, especially if you thought that was your “weak” moment.But there was some serious “brotastic” behavior going on there. Too many points make a line. It’s not right anytime, but when your base is women and their kids that is just stupid.

    2. creative group

      CJ:”founder’s rubber stamp”That part becomes blurred depending on who is controlling the narrative. We have witnessed VC’s openly admit a CEO/Founder they are on the board of is their friend. Your Fiduciary duty as a board member is to protect the interests of the investors not be the best friend who nominated you to make $700K per year. Just gets weird when observing it. How many boards can a VC’s effectively be on at one time? 100? 200? Does it depend on how many they are invested in? Is that dynamic controlling the rubber stamp?

      1. CJ

        Well when the board doesn’t have the ability to overrule the founder, then they are essentially a rubber stamp. The rest of it is nuance if that condition is met.But to the rest, it’s all about making as much as you can, when you can for most people. I don’t hold VCs or founders to a larger persona than what they can actually demonstrate. Otherwise they are just your standard execs with power and the interest in making money and will typically do whatever is necessary to ensure that capability.

  10. PhilipSugar

    It would be really interesting to know the thoughts, negotiations and terms to that Soundcloud deal. The really nitty gritty.Of course that is completely out of the question.But there must be some similar type deal you could discuss.Founder needs to raise a really tough round and as part of the round they get replaced as CEO.

    1. JamesHRH

      Soundcloud is the world’s largest hobby.There is no business model there. Although I have an idea……;-)

      1. fredwilson


        1. David C. Baker

          It would be helpful to all of us if you could quit rambling on and on and just get to the point quicker. 🙂

          1. JamesHRH

            Blogging has sharpened Fred’s written communication, that’s for sure!

        2. JamesHRH

          I was beginning to wonder if you had stopped reading my posts ;-)When I read Alex’s blog, I honestly thought “I have no idea if what he is saying about shaping culture and global impact….etc. is totally true or a total fantasy.”I dont use it.I can’t get it to work on any social media platform I use religiously – sorry, but that is FB & Twit w some I’gram thrown in.As far as I can tell, it is a shared garage for the world’s aspiring musicians.The thing about the edges of culture is that it is totally irrelevant until something from the edge seeps and then sweeps over the mainstream.BTW, that’s the basis for my business model idea.PS – I am quite musical, as is one of my children. When I asked her – 15 yo – if she used Soundcloud, she said ‘1 podcast I like is on it, so I have to have it on my phone for that.’PSS – I don’t like music that isn’t popular. That might seem superficial, but tons of people make great art that is inaccessible, its just not that hard to do. Its like making a technically superior product that has not market. Making good bordering on great art that is accessible, that’s something. It explains so many 1 Hit bands – they can pull the trick once but don’t have the talent / discipline to do it repeatedly.Enjoy the beach.

    2. fredwilson

      This post was not about that. I will address it at some point though

      1. PhilipSugar

        Yes, as you said this week posts are not about somebody.But I love real stories and they can be about somebody if the company is exited.

  11. Mark Annett

    @Fred Wilson. So far, I only know you through your posts, so you may be a son of a gun in person. However, what you express through yours posts is a remarkable degree of authenticity, which is by far the most important thing to look for in the people that you choose to partner with.Being authentic means that you own yourself and your actions, which you are obviously doing with your statement, “That sucks for me but I don’t regret anything I did or said in the events that were described in that book.”I would take an authentic VC over a friendly one every day of the week!

    1. PhilipSugar

      I agree as much as Fred, Brad, and Mark have disclosed about the workings of the VC world it’s hard to say they are founder unfriendly.

      1. JamesHRH

        But they will railroad a founder if they think it is best for the company, as they should.

        1. fredwilson

          Railroad is not a term I would use for any action I have ever taken

          1. JamesHRH

            I doubt I would use it either. when you laid out what you did and why you did it.But I bet a founder or two who was involved in a decisive moment where you forced this issue for his company might see it that way.It’s the old 3 sides bromide: yours, theirs & actual.

    2. fredwilson

      I agree that authenticity is very important in partners. In life or business

      1. JamesHRH

        Single greatest asset in life.

  12. Pointsandfigures

    I agree. Sometimes what happens in the course of business isn’t always best for the VC either. “Founder friendly” VCs will “speak for the company” as you said.True leadership is collaborative. Sometimes you have to take pain. Sometimes true leadership is telling someone they aren’t right for something.A corollary to this might be a coach. A star player might not be the right fit for a certain situation so they become a decoy on a play or sit on the bench. The star player doesn’t like it. The fans don’t like it. But, it’s the best for the team.

  13. Twain Twain

    A core tenet of business is: KNOW YOUR CLIENT. Reciprocally, founders and VCs are each other’s clients.The Google approach to founder-friendly is different from Apple, Amazon, Twitter, FB, Uber etcetcetc.Sometimes, founders have a solid mix of operational experience before they become founders (e.g. Michael Bloomberg). Other times, they don’t have much experience at all, e.g. Mark Zuckerberg and they get surrounded by great people who can help guide them.Some VCs are motivated by the right agenda. Some VCs are NOT motivated by the right agendas, e.g. Justin Caldbeck.https://uploads.disquscdn.c

  14. John Revay

    Saw the headline of the post…was thinking I would see Sound Cloud in the body or in the comments. My sense was that Fred was very close to the founder @ SC (hunch only)…and with what appears to be a restructuring in order to save the company , the founder had to move aside.I may be totally wrong here – as I have not really followed much of this along the way

    1. Donna Brewington White

      In Friday’s post he mentioned that he would someday tell the story.

    1. sigmaalgebra

      I just read that: Naw!If have such a good company, e.g., 200 employees running well, then stick around and lead the growth to 20,000 employees. E.g., since the article talked about vesting, likely it is VC funded in which case the intention was to grow to 20,000+ employees. So, DO that.If you, the successful founder, controlling stockholder, etc., are no longer there, then the place can become a several way civil war of people fighting each other, thus killing the company, for the job you just left!A lot of people bet a lot on you: They have a spouse, mortgage, kids, are saving for college and retirement, getting braces for the kids teeth, have the kids in private schools with lots of after school, summer activities, last year put in an in-ground pool, this year made a down payment on a 40′ boat, are active in several organizations — church, school board, local hospital, Toys for Tots, etc. — and generally are assuming, betting, that you and the company will continue to be successful. So, DO that — stay and continue to make the company successful.Or, if you have been such a successful founder, then very likely you are from difficult to impossible to replace.

  15. Frank W. Miller

    How expensive is that VC money when they take the company away from you?

    1. JamesHRH

      The biggest risk is that VC’s are in the game for 30-40 years.You likely have 1 or 2 good startups in you.They are permanent, founder is temporary – in the long term run of the industry,

      1. PhilipSugar

        I am going to take the con. Don’t get good returns? Out in a decade after sweating it out for a decade before that. Am I going to hire you? Good luck.

        1. JamesHRH

          Which explains the shitty behaviour.

  16. D Waserstein

    I’ve been a founder, a replacement (interim) CEO, a board member, and an investor so I’ve seen this from multiple angles.Successful companies grow and evolve. While founders have that initial vision, they don’t generally (by definition) have the skills needed as the company hits that late-stage growth period. A serial entrepreneur with multiple successful exits under their belt may be the exception since they’ve potentially proven their ability to operate effectively across the life-cycle.I’ve always said that the primary job of the investor board members is to help guide/nurture the CEO to either grow into the requirements of a later-stage CEO or help them become self-aware of their strengths as an early-stage founder and that it may be in everyone’s best interest (including their own) to pass the baton to someone with the needed skills to take the company through its next phase. After all, a slice of something is worth more than a big piece of nothing.

  17. sigmaalgebra

    A simple solution, taken by millions of startups: Be a sole, solo founder, have a business that is dirt cheap to start, start small, fund the startup yourself, grow only organically (from retained earnings), don’t take equity funding, be maybe an LLC but don’t be a Delaware C-Corp. and don’t have a BoD. So, presto, bingo, avoid several of the biggest problems of startup founders — co-founder disputes, legal and other expenses for the BoD, BoD squabbles, BoD angry at the founder, VCs on BoD in much bigger hurry for an IPO than the founder (who may never want an IPO), VC squabbles, etc.Also it may be that the founder has some crucial, core, powerful, valuable, proprietary, trade secret, intellectual property secret sauce essentially no one else anywhere in business in the world has the background to understand, not co-founders, any candidate C-level people, Members of the BoD, VCs, etc.Also VCs essentially never will fund a 100% owner, sole, solo founder. YCombinator for their funding makes this point fully clear.Also VCs have limited ability to understand the crucial, core parts of a successful company, and essentially no ability to understand secret sauce, so evaluate first round investments based on traction, but a sole, solo founder who started the company from their own checkbook, with such traction has plenty of funds for the organic growth and no need for equity funding. So, for such a founder, the latest they will take equity funding is way before the earliest the VCs will provide it.Apparently A16Z partly agrees, e.g., in theirSam Gerstenzang, The Happy Demise of the 10X Engineer,at…with in partThis is the new normal: fewer engineers and dollars to ship code to more users than ever before. The potential impact of the lone software engineer is soaring. How long before we have a billion-dollar acquisition offer for a one-engineer startup? How long before the role of an engineer, artisanally crafting custom solutions, vanishes altogether? There’s a fundamental problem with the current norm of so many powerful cooks in the kitchen: At most one of the cooks is Andre Solter, Pierre Escoffier, etc.For the investors, they are looking at patterns in what they have seen. E.g., there is now:Jasper Kuria, With $80 Billion in Value Created, Techstars is the #1 Global Tech Accelerator, August 10, 2017athttp://blog.capitalandgrowt…on Techstars and its co-CEO David Cohen where Cohen describes the patterns he has seen in his investing and uses now.Alas, necessarily what he and his LPs are looking for are new efforts that will be exceptionally good outcomes, and those are not visible in his empirical patterns from the past. There are ways to know, e.g., high value, low risk,http://iliketowastemytime.c…but not from such empirical patterns. From the SR-71, the CIA and DoD had some really good ways to know, knew how to evaluate the project. Apparently VCs don’t know ways to know; maybe their LPs are listening only to accountants who, in 1942, to build a much bigger bomb, would have looked at bomb design for the previous 10 years.Uh, for the intended results, the exceptional is necessary but, right, not sufficient.

  18. Susan Rubinsky

    More complicated than blockchains!

    1. fredwilson

      Hehe. True. Albert tries to weave these issues in yesterday’s video.

  19. JamesHRH

    No insult taken here, I hope Fred, but… would be fair to say that the most successful VC firm ever is Sequoia. As I understand it, they tell founders that the best person they can find should be CEO. So, when the founder is not that person, someone else takes the job, because it is in the best interests of the company, and, subsequently, all the stakeholders.What no one talks about is how many not great founders start companies as part of a personal mission that includes them being CEO of a company. I have personally worked with dozens of entrepreneurs who have this mantra:’ The company goes as far as it goes with me as CEO. ‘They may say other things, but when push comes to shove, its about them being in charge of their company.

    1. David C. Baker

      That’s a great quote.

    2. Rob Larson

      That’s fine as long as sequioa is upfront with founders from the beginning that they might be replaced. What’s NOT ok (and is frankly unethical) is for a VC to pretend they will be behind the founder through thick and thin in order to close the deal, then change their tune as soon as they decide the company isn’t growing fast enough.Be honest and upfront from the begining and no one can complain.

      1. JamesHRH

        They are up front about it, if that is not clear in my post, as I understand it.

        1. Rob Larson

          Your post was perfectly clear. Mine was not, it seems. My comment wasn’t about Sequoia so much as other VCs with less brand value and less incentive to be upfront with founders.This is a big enough issue for one vc firm (msuster’s) to re-brand itself explicitly that, as a way to stand out.

    3. sigmaalgebra

      Sure, I’ve heard that Sequoia is the most successful VC firm. Then KPCB, etc. Then maybe A16Z?Uh, that doesn’t necessarily mean much for a founding CEO!Uh, Sequoia, when they replace a CEO, is really just following a huge, fundamental, debilitating mistake they made long before: They are in a fetid swamp, mud wrestling, and trying to make a buck from alligator skins, snake skins, crayfish, exotic bird feathers, cedar lumber, etc.Look, the company wasn’t at all promising as another Microsoft, Apple, Cisco, Google, QUALCOMM, or Facebook to begin with. That was known when the old CEO was there and will still be the case when the new CEO is there. No way will the new CEO, with or without Sequoia, be able to take that business and make it worth $500 billion. So, we’re not talking big bucks here and, instead, are saying that Sequoia is relatively good at, say, making some money from selling alligator skins from swamp mud wrestling. Unless they are lucky enough to have the swamp in some part of southern Louisiana with lots of crude oil and methane bubbling up, there’s fundamentally just no hope for much financial success in that swamp.Why? Sure, Sequoia is apparently the best at getting a CEO who is a leader, impatient, a crackerjack salesman, a promoter, a this, a that, at mud wrestling in a fetid swamp. A hard driver? Okay. Ignorant? Definitely.But here’s the huge failing: Sequoia and the CEOs they pick just are common, ordinary people from the street, maybe a notch or two higher in some respects; there’s no good future — certainly not the highly exceptional future the Sequoia LPs need — in such mediocrity. There is at most some somewhat better mud wrestling and snake skinning in a big, fetid, hopeless swamp.Gee, the main leader of Sequoia is a guy who was — sit down for this one — a newsie back in England!!!!!! For the future of information technology, how much more worthless and hopeless could one be? Nowhere in Sequoia or its thinking, values, or understanding is another Kelly Johnson who did so much, e.g.,https://upload.wikimedia.orhttp://iliketowastemytime.c…Gee, at KPCB, the main guy long was “Ideas are easy and plentiful. Execution is hard and rare and everything.” or some such. BS. Brain dead BS. Uninformed, misinformed, incompetent, smoking funny stuff BS. Luddite BS. In medicine, it would be leach bleeding or worse. In national security, it would be sticks and stones or at best bronze swords. No one should get anywhere near such BS, certainly should not bet anything important on such BS. The medical profession would not. US national security would not. He wasn’t qualified for an NSF grant, a tenure track slot in a STEM field at a high end research university, etc.Of course, bad ideas are worthless and plentiful. With a bad idea, execution is everything and next to hopeless. Yup, with bad ideas, find a lot of hard things in hard things; life is tough in a fetid swamp. Especially in information technology, bio-medical technology, and exploitation of the STEM fields, good ideas are rare, valuable, and nearly everything, and then execution is routine and low risk.E.g., after Kelly Johnson with his armload of blueprints gave his presentation at the CIA, no one expected that the SR-71 project would be risky. Instead, with the blueprints, the hard work was done, and the rest was routine. And it was: The SR-71 flew just as planned — 2000 miles without refueling, Mach 3+, 80,000+ feet, never shot down.Can’t expect physicians 500 years ago to understand modern medicine just on their own and without years of re-training. And can’t expect mediocre history majors, English newsies, etc. to understand good ideas — they quite literally have never seen any, never invented any, and would not understand or recognize a good idea if they saw it.Sequoia — best in a really poor league, mud wrestling with alligators, snakes, crayfish, etc. With a weak company, they can replace a CEO with another CEO — just different cases of hopeless fetid swamp mud wrestling.Sand Hill Road has yet to figure this out. Their massive failing is a well qualified STEM field entrepreneur’s opportunity! When see a grand disaster of grotesque incompetence such as Sand Hill Road, look for an opportunity on the flip side!

      1. JamesHRH

        As Don Cherry –… – says about solid goaltending in hockey, ‘ Its only a problem if you don’t have it. ‘Sure, every now and then a product is so awesome that any boob can see it is a rocket to the moon or a landmark in an area of science.But, a solid product in a startup is only a problem if you don’t have it.Sequoia has been thru multiple generations of leadership, based on a simple set of principles: solid products, sold strategy, solid leadership.If it turns out that one of the three is exceptional, yahoo! But, if you don’t have one of the three and the other two are exceptional, you will likely not make much of an impact.Its worked for 4 decades.

        1. sigmaalgebra

          It worked well only in comparison with the rest of Sand Hill Road. It was chump change instead of a gold mine. It was fabric covered biplanes instead of the SR-71. It was little Yahoo instead of several more Googles.Their dream horizon from their fetid swamp mud wrestling of ignorance is just little Yahoo. They have no vision because they are grotesquely incompetent at the real potential of the STEM fields. They are history majors, newsies, etc. They are grotesquely uninformed, misinformed, and incompetent.

          1. JamesHRH

            That’s easy to say, harder to prove.

          2. sigmaalgebra

            The proof is easy, dirt simple, and I’ve given it here often for years: Here it is again, yet again, once again, over again, one more time:(1) For a startup in information technology (IT) or bio-medical technology, surprise, the technology is just crucial; it’s the main advantage for the first or much better solution to big problems in big markets, for more companies worth $500 billion.(2) Thankfully for our national security, medical care, and general progress in knowledge, the US is awash in people who understand the relevant knowledge, technology, and research for more. These people are at our best research universities, NSF, NIH, DARPA, ONR, NRL, USAF Cambridge, Army Durham, our many Federally funded research centers from Draper Labs at MIT, Brookhaven on Long Island, to many labs around DC, e.g., JHU/APL, Argonne Labs, Oak Ridge, Los Alamos, Lawrence-Livermore, several companies, Lockheed, Raytheon, Boeing, and more. And in bio-medical there are the research-teaching hospitals, Eric Lander’s Broad Institute, the NIH site in Betheda, ….For the crucial core advantages necessary for lots more $500 billion startups, that’s just where the good stuff is. In technology, everything else looks like sticks and stones. In medicine, everything else looks like leach bleeding.These people create the good, new stuff, understand a lot of applications, and are able to evaluate proposals — e.g., the human genome project, the SR-71, Keyhole and Hubble, GPS, etc.The qualifications of these people are well known: The first educational qualification is education in the advanced knowledge and in doing original research — a Ph.D. from a high end research university.(3) For evaluating new projects in information technology (bio-medical technology is different), nearly none of the equity investors on Sand Hill Road have even the beginnings of the qualifications.QED. Done.For IT, Sand HIll Road is close to some medieval swamp of mud wrestling, grotesque incompetence.Any questions?

          3. JamesHRH

            Got a good read for you –… .Written by McKinsey partners – 2 of whom are CDN, so you know its legit smart.You focus mostly on scientific research, or stage 1.VCs focus on commercialization, or stage 2.Benchmark is currently trying to shift Uber to stage 3, professional line management.The best insight in the book is that many of their clients were dominant in one of the 3 stages….but then got into the other stages and managed them EXACTLY THE SAME WAY AS THEY HAS MANAGED THE STAGE IN WHICH THEY WERE DOMINANT.Doesn’t work that way.So, I get the cats you hang with are smarter than smart and the stuff the build is the baddest of the bad.But the cats Fast Freddy hangs with are richer than Richie Rich…..cause the commercialization cats get paid.

          4. sigmaalgebra

            You make the mistake that the research isn’t about money, that the person doing the research is not interested in money, neglects commercialization and business growth, and doesn’t get “paid” while the people who get “paid” concentrate on commercialization and ignore research.There’s no reason that has to be the case. I’m here to tell you, again, once again, over again, my goal is to make MONEY, just MONEY, lots of MONEY, green MONEY, legal, ethical, and safe, but on those last three I’m flexible. Did I mention MONEY? Am I being clear yet?Now, to review, in one word, my interest is (A) girls, (B) research, or (C) money. Hint: Not (A) or (B).But for commercialization and revenue, need some product/service enough people like enough to generate revenue and earnings enough to make a really successful business. For information technology, the best way to do that is RESEARCH, in the STEM fields. Sorry ’bout that; the business book at Amazon is dealing with at most, in comparison, chump change.Then after the research has been done well, launch the product, get the revenue, and grow.Sure, need a good idea for the product/service, but for suitably good results, say, the first good or much better, the key is RESEARCH. Sure, need to do the commercialization. Gee, also had to put gasoline in the P-38, gasoline in the Enola Gay, and special jet fuel in the SR-71.Without research, Fast Freddie and Sand Hill Road are limited to small things or dumb, blind, doo-dah, LUCK. So, a few startups get lucky, and we get another Microsoft, …, Facebook.But those successes are very rare.With good research and the resulting good companies, we can have LOTS of such successes.Certainly Sand Hill Road has no clue how to do that; neither does Fast Freddy. I believe as one example I do; I’m trying.Earlier today I did some back of the envelope arithmetic. My work stands to be the first good solution to a problem quite serious for every Internet user in the world. If a lot of people like my work, then there’s a good shot that 1 billion people in the more industrialized countries will like my work. If I get them to come to my Web site once a week, get ad revenue such as from Mary Meeker, then I should be able to get a market capitalization of $0.96 T. With much better ad targeting, natural for my work, multiply that by about 4. If I can get those people five times a week, multiply that by 5. So, that’s 20; the 2 gives $1.92 T and the 10 gives $19.2 T. That’s what I’m interested in and shooting for. That’s why I did the research.And we’re talking a private company with me as 100% owner and $19.2 T.Sand Hill Road is going for chump change. One reason is that in information technology they are less interested in research than some luddite 200 years ago.Right: You believe that anyone who does research has no interest in money or commercialization. That’s one reason I never wanted to be a college prof, even when for a while (to help my wife) I was one. I don’t have to follow that old slander. There’s just NOTHING to say that that old slander has to hold for me.Actually I made ALL of this just crystal clear in my last post. You, however are just fixed on the old slander that researchers don’t want to be successful in business. No law told me I couldn’t do research or can’t be in business.

          5. JamesHRH

            Two mistakes Siggy:1. I never said you weren’t into making $, you just read it into my comment.2. The old slander isn’t. that big time research isn’t interested in money, it”s that they are more interested in proving how smart they are and,the most important thing is the approval of their peers. Another good read for you – Dealers of Lightning – which specifically lays out the XEROX PARC founder’s philosophy that peer pressure was the surest path to research breakthroughs.If you are so interested in $ and Fadt Freddie is so clueless, why is he worth half a Bill and you are ……..?

          6. sigmaalgebra

            > 2. The old slander isn’t. that big time research isn’t interested in money, it”s that they are more interested in proving how smart they are and,the most important thing is the approval of their peers.Xerox PARC? Okay. Me? NO WAY!There’s no law that I have to do research with the motivations some twit at Xerox PARC dreamed up. I’ve seen LOTS of good research and done some myself; that comment from Xerox PARC is silly.> If you are so interested in $ and Fadt Freddie is so clueless, why is he worth half a Bill and you are ……..?Dad guided me to be an employee. The idea was to get a college education and then a stable job with a salary. I did that for a while and made relatively good money. Then my wife got into a long illness, and I sacrificed my career to take care or her.Eventually I tried being an entrepreneur.First I tried on-line romantic matchmaking: I was gullible and believed what IBM was saying about their multi-media software on OS/2. It was all total BS.I tried attacking the high end network design problems, e.g., BGP, etc.; the Dean of Science T. Magnanti, at MIT said it was a good problem and gave a lecture on it in a series honoring the guy who was the Chair of my Ph.D. orals committee. The Dean was naive: I did make a little progress, but the whole field was a flop. There was a VC funded startup for that in Texas. They flew me down. They looked really sick. Soon they flopped.Then I tried my current project. It looks really good. I learned some startup 101 lessons, one of which is that for anything with very many users/customers, for the users, customers, and/or investors, the product/service has to look to them really dirt simple, like any inebriated half of a half wit on the street could like it a lot, right away, and find it just dirt simple, 6 year old child like, to use and like, a lot.This view is a bit extreme: Millions of people got good with Microsoft Word, and it is a total pain in the back side to use. Still, in many ways, looking dirt simple, 6 year old child like, is good advice.So, I’m doing it. Looks fine.But it’s really not about me, whether I get worth $20 or $20 T: Instead, it’s simple, dirt simple, just as I argued: Current Sand Hill Road is playing for chump change. The really big bucks, lots of new Googles, are entirely possible, but the key is research. I argued that point in rock solid terms, but you just misread and otherwise ignored it.You are fixed on the idea that the traditional way of doing business is the only way to do business. Wrong. Very badly wrong. As I have outlined in the thread today, the opportunity for much more, in business, the money making kind, is just sitting there.

  20. creative group

    CONTRIBUTORS :The three Investors (Sherpa Capital, Yucaipa Co. and Maverick music) stated the tactics used by Benchmark to address concerns they share are “ethically dubious and value destructive”.Two terms a VC firm would not want to be labeled by other respected VC’s. Could there ever be in co-deals with the same players in the future? Highly doubt it.

  21. george

    I think this stuff is really challenging and sometimes gets very ugly. The nature of knitting Founders + Investors together is often misunderstood; the relationship is not solely driven by mutual capital interests, both sides still operate under a heavy dose of their own personal ideology, which drives decisions and actions. Under each new venture, this dependenceand independence gets tested both in best and worse of times. Hopefully in the end – all parties succeed and get to avoid therapy.

  22. Swatick Majumdar

    That’s right, Company first. If that survives everything will work out. Similarly, Country first…do what is right for the country;not party or personality.

  23. jason wright

    Perhaps we need to go back to the very beginning and remind ourselves of why the proto company first came to exist in law. was it so that accountants could earn a nice living based on the hard work of others? probably not.

  24. Geo

    @fredwilson:disqus Glad you brought up Hatching Twitter. As a founder with similar concerns, I’d appreciate if you could share your side or your perspective on what has been mentioned in the book.From my conversations with other founders, the overarching concern has been the suggested conspiratorial or coup-like behavior within the board and executives, coupled with disinterest or lack of awareness. The combination made it feel like a different level of dysfunction. That dysfunction/drama is more the turn-off than the resulting action which I’m sure you’d appreciate.I know you’ve hinted at your side in this post, but I’d appreciate if you could clear the air and share more perspectives on that.

    1. fredwilson

      It is ancient history now. Better to focus on what is happening or what will happen than what did happen

  25. David Grossblatt

    Can anyone deny that traditional VC is dying in face of ICO, crowdfunding etc. while money pours into funds? There is nothing to do with all the money. There are too many lions (VCs) drinking from an evaporating puddle, of course they are killing the gazelles (Founders) and drinking the blood. As far as the Travis thing goes, anyone who has been in the Valley for more than a minute knows what happens if you mess with a VC’s exit.

  26. Dan Cornish

    People only do what is in their self interest. Humans are hard wired for this. Even seemingly altrusistic things such as charity are in the end motivated by self interest. Nothing feels better than giving money (or equivalent) to someone who needs it and is grateful for it.A founder is much better off realizing that investors invest for their own self interest and no other reason. When someone says they care about what is best for the company, the real translation is they care about what is best for their investment in the company. Founder friendly is just marketing bullshit. An investor who is mature and experienced who will not panic at the first sign of trouble, is what founders should look for because they realize that panic is not in their own self interest. But always remember, there are a million variables and most VCs are always thinking about replacing the founder wether they say it or not.I also have to call out Fred. When he says that he always will do what is right for the company, he is avoiding taking responsibility for his actions. Own it.

  27. Lane

    With the recent success of ICO’s this seems like a recipe for disaster for the VC’s who take this approach.

  28. sigmaalgebra

    > Of course, reasonable people will disagree about what is best for a Company. That is what Boards are for.No, that’s what founders are for, especially just 1-2 founders, not what Boards are for, and why a company should avoid having a Board if at all possible.> They are the bodies made up of reasonable people …They may be “reasonable people,” but that is nowhere near good enough. Instead they each need to be really exceptionally good, e.g., 1 in 100,000, people for the standard and, for the VCs and LPs, necessary goal of a really exceptional company, e.g., another Microsoft, Apple, Cisco, Google, Facebook, that is, a 1 in 1 million company. Moreover, nearly everyone on the Board has responsibilities that have much higher priority than the company.> should debate these issues and find resolution and make the hard decisions.They can debate all they want, but no way should any of the Boards in venture funded, high end information technology make any decisions harder than when to break for lunch to go McDonald’s or Burger King — since the company is paying for the food. And, really, the CEO should toss the Board a few loaves of week old bread and a few packages of sliced cheese — the water fountain is down the hall.> I reject the notion that being led by its founder is always what is best for a Company. It is often so, but certainly not always so.Good, but the implication is that sometimes the Board knows better than a founding CEO. For Travis, sure. For some CEO hitting the sauce, okay. For some CEO giving $50 million of the company’s money to his college to get his name on a building — yup.Otherwise, I’d bet on a founder who has been successful so far, and to heck with the Board. Yup, that won’t always be right, just the overwhelming fraction of the time.If a founder accepts an equity check, term sheet, Board with a lot of VCs, a vesting schedule, to get back in maybe five years some of the stock in the company he owns 100% of now, he just gave away his whole company: The Board can fire him before his stock is vested, bring in one of their buddies as puppet CEO, have that CEO go along with some new stock deals, and, thus, have the whole company and leave the founder with $0.00 for the company he founded and once owned all of. Bummer.The main difference between being a really good employee and a successful founder is in one word — ownership. Part of the big difference is that the supervisor of an employee knows just what the employee is being paid, but a customer of a company with a lot of customers, 1 million, 1 billion, etc. has no idea what a 100% owner, founder is being paid. E.g., Wal-Mart sells 2 liter diet cola for maybe $0.58 a bottle. So, that’s a very standard bottle, a little syrup, the rest water except for a little CO2. What does that cost? 10 cents? 40 cents? What? The customers don’t know. Another one, famous, partly out of business now, was the popcorn, soda, and candy stand in a movie theater! There maybe $4 for popcorn, $3 for soda, and $1.50 for candy? The popcorn really cost, what, 15 cents, including the oil and bucket?A solo founder, 100% owner who takes an equity check and gets a BoD has mostly converted himself from an owner to an at-will employee working for a lot of people with interest at odds with the founder. And, yes, the BoD knows exactly what the founder is being paid.If at all possible, own a pizza carryout if necessary, remain 100% owner with no Delaware C-Corp., no co-founders, no equity investors, and no BoD.Ah, on Windows, when backing up a boot partition, while it is running, via NTBACKUP and the Volume Shadow copy Service (VSS) it uses, NTBACKUP can get totally upset and stop right away if there is an instance of SQL Server installed and, maybe, running on that booted partition. SQL Server doesn’t want to be backed up and/or restored via NTBACKUP, and NTBACKUP has been programmed to honor that. There is a patch, but gee. Lesson: Do NOT install SQL Server on a bootable partition.Really on Windows there are essentially three kinds of data and backup/recovery — (1) ordinary user data backed up with, say, XCOPY (can work great, I use it); (2) a bootable partition backed up with NTBACKUP, amazing when it works; and (3) SQL Server backed up with some special functionality in SQL Server. Keep these three suitably separate.Partial solution of tonight: To backup bootable partition E: with an installed instance of SQL Server, have installed on another partition, say, D:, another instance of Windows, hopefully same version of Windows, boot it, and use the installed instance of NTBACKUP on D: to backup up the partition E: with SQL Server. Then during the backup while booted from D:, hopefully nothing is running on E: and SQL Server is not running on E: Apparently then NTBACKUP will backup E: with its installed instance of SQL Server.Microsoft doesn’t write this stuff down! For me it was mud wrestling for much of the afternoon, but so far it appears that I won. Yup, I took good notes.Gee, I wonder what a really helpful BoD could have done to help me with that? Hmm ….I’m a sole, solo founder, and I win at such mud wrestling all the time. Only a tiny fraction of VCs have done such work.In my canoe crossing rough waters, for anyone else in the canoe, I want them equally good at mud wrestling and much more. E.g., to find out who deserves to be Big Dog in the company, as a start, let’s compare SAT and GRE Math scores. Hope you had your game face on when you took those tests! See, you have a chance; at the time, I didn’t know the importance of those tests and didn’t try very hard! Still, even if you went to Princeton, don’t bet your wife more than lunch at McDonald’s that you could beat me!Some advice is, one of the most important things in business is being careful about whom you work with. This advice sounds better to me day by day. From what I’ve see on Sand Hill Road, I’d have a tough time finding a VC who deserves a place in my canoe.When I was at FedEx, I saved the company from going out of business twice. I’d been promised stock. At one time the founder of FedEx told me the amount would be $500,000. He was really late, and I didn’t believe him. But with that much stock, today I’d be worth ballpark $500 million.I’ve got a better business startup than FedEx did; this time I want to keep the ownership and not lose it like last time.

  29. Abstract-Outlook

    I am glad this whole charade of investors pretending to be founder friendly is finally getting over. There isn’t / has never been such a thing as “founder friendly”. Investors pretend to be friendly so that they can convince entrepreneurs to take their money. It’s not their true nature, just something you need to do to get into the right deals. Investors are always worried about their reputation, not character – if you know the difference.I learnt this lesson after getting kicked out of my company by VCs from NY (the story is not dramatically different than what Fred did at Twitter). My VCs always pretended to be incredibly supportive, but when we found ourselves in a tough spot, I saw the really ugly side of the VCs (making baseless threats to get the founders off the board, telling porkies to other investors to sullying the founders repuation, etc etc). In my experience, the east coast VCs are the worst – they play a lot more games / most of these guys are banker types. Most of them have never built a company before and have no clue what it takes to really build a successful startup (sorry, just because you sit on a board doesn’t mean you understand the hard work, tears, daily ups and downs, personal sacrifice it takes to build a business)…. These people know how to schmooze, and then stab you in the back if they don’t get what they want….Investors have 1 goal – maximize their ROI. They are your friend as long as they think they are getting the maximum return they can get. If you are an entrepreneur and you believe anything else, you are waiting to be screwed. As an entrepreneur, it’s your job to protect yourself.If you are an entrepreneur reading this, take the following advice from someone who got f by people like Fred.1. Read Brad Feld’s book “Venture Deals” before you take money from any investors. Make sure you know every single terminology in the term sheet (this is where the wolf in the sheep’s clothing reference is really true – VCs will screw you over if you don’t understand the term sheet).2. Hire an exec coach or a successful entrepreneur who has seen the ups & downs on your advisory board – someone you trust completely (Never trust your board member to be this person – no matter what anyone says). The advisor and the exec coach are your 1st phone calls – they are fully aligned with, unlike VCs. IA good exec coach can really help if you are dealing with tough board situations. f you are part of YC, you always have that support.3. If you are a valley based company, avoid all east coast VCs if you can. They are all made from the same dirty cloth.4. Maintain board control as long as you can.5. Try to negotiate and get a final say on the independent board seat (often hard to get).6. Learn how to manage your board – this is probably the most important advice. You need to know how to play the game, so that in tough times you have enough support to keep your job. If you don’t have a board control, then try to build allies – perhaps build a strong relationship with 1-2 board members that will support you when others are trying to screw (which they will!).At the end of the day, it’s all about leverage – as soon as you are about to get your first board member, think how you build leverage. There is nothing wrong in taking money from VCs, you need them, and they need you. But if you get into the relationship knowing this is not about friendship/relationship – it’s just business, and when it comes to money, people act in all kinds of ways, you will not be under delusion. You will protect yourself from day one. Good luck!

  30. markslater

    Isn’t this all just mute at this point. VC is over long live the ICO 😉

  31. reece

    “That is what Boards are for. They are the bodies made up of reasonable people…”this statement subtly assumes that board members are “reasonable…” in my experience, i’ve been blessed with reasonable board members, but i’ve certainly heard/seen of many unreasonable people on boards throughout the startup ecosystem…

  32. Lynn Kasel

    Investors and board members tend to be less involved than founders. Some investors (or investor representatives) treat their jobs more like a hobby than a responsibility.Lack of involvement is a perfect formula for poor decision making. This is the source of a lot of problems between founders and investors.If your investors are under-involved, watch out. If your investors are not up-to-speed, watch out. If you are a founder that doesn’t come from central casting, especially WATCH OUT.OTOH, any founder that needs personal control more than business growth probably shouldn’t take outside capital.

  33. Arif Boyraz

    founder friendly is not dead

  34. PhilipSugar

    Yes, but as we both know that sometimes that doesn’t work out…..IRC one didn’t work out for you.Just as Fred said though there is not one single truth.

  35. LE

    I’ve recruited my replacements and likely will again.Yeah but I think that’s because ‘you’re just not that into her…’.You need to do something that you are addicted to. [1] Then come back to me and tell me the same thing.[1] Trivial and easy for me to avoid all sorts of evils (drugs, alcohol, gambling) that others get sucked into. Don’t even break a sweat. Sure it’s will power but it’s also the fact that I am just not that buzzed by those evils.

  36. creative group

    Charlie Crystle:Question…The unethical behavior couldn’t be curtailed by not even establishing a relationship with a person who would present those qualities?Understanding your reasoning at the end but why even let that person in the door?We are great at reading people, when a skill set doesn’t match the assignment we understand the purpose of a reassign or separation. But character issues are the Gatekeepers fault they need to accept complete responsibility.

  37. PhilipSugar

    In no way am I saying that having a founder replaced as CEO defines founder unfriendly. It can be the best for all involved. It can be necessary for the company.It can be good. It also can be bad.The one thing that always makes people suspicious is there is some bad VC behavior that goes on in replacing founders, you know that. So when it happens people can automatically think of the worst.In no way am I accusing anybody of bad behavior, and there are two sides to every story.I can think of many founders that deserved to get replaced, and I can think of some that got screwed. Again two sides to every story and unless you are there it’s tough to know the real truth.

  38. LE

    and felt there was unethical behavior.There is always unethical behavior. It just varies in degree. [1][1] Was even parodied in Scarface by the Robert Loggia character ie ‘bigger pig’ or something like that.

  39. LE

    Important for Wozniak to pick the right horse to be ‘screwed’ by.

  40. PhilipSugar

    We agree, but let’s agree we’ve all seen this:Company not growing as fast as VC wantsVC we didn’t invest to get a lifestyle business let’s hire expensive XCEO X comes in and hires expensive VP’s A, B, C, and DCompany doesn’t grow much fasterRuns out of money. Gun to founders head: raise or dieNew round get’s raised but it’s brutalVC gets anti dilution true up and warrant coverageCEO X gets an options carve outFounder gets shitThat is why people get paranoid.Edit: In the Soundcloud case it looks just the opposite. Hire tons of people Go Big or Go Home!!!! Lay half off because the new money says too many people. I am on record saying on this blog saying that is what was happening.

  41. JamesHRH

    both philosophies work, mainly because yours suits you and LE’s suits LE.Startup’s have the culture of their founder’s personality.

  42. awaldstein

    This doesn’t surprise me and good luck with this.If there ever was an industry in flux, in trouble it is the perishable food biz from retail through and including distribution.The threat of Amazon has only exacerbated this.Look at systems of a massive company like UNFI–friendly and helpful to no one including themselves.The consumer may end up in the end being better served potentially but there will be blood on the tracks of a multitude of artisanal brands.

  43. JamesHRH

    My fave nasty story:- founder closed fair sized round B- part of deal is it includes CEO X- CEO X multiplies burn by 800%- 6 months later, with end of runway in sight, VC suggests sale to Company B- Sale happens- founder’s nicely going on path to profitable mid sized win now inside total shit show- VC has all kinds of chips in favour bank and an exit he needed- founder no longer in the club- thanks for coming outHeard it twice in 6 months circa 2002.

  44. sigmaalgebra

    Look, it’s simple: VCs want to rush to liquidity. Entrepreneurs usually want to build a family business that can last over the horizon. Super big difference.To a VC and their LPs, 10 years is a very long time. To an entrepreneur, 10 years is barely enough time to get the kids into college and not enough time to have them start to run the family business.