Founder Control

I have not written a lot about this issue.

As I said in this post, I am generally a “one share one vote proponent”, but I have supported founder control provisions in a few companies where I was or am on the board. These provisions make me uncomfortable but there are solid arguments for them, particularly when you are taking a company public and want to be able to keep it independent.

But the truth about founder control, as I stated in this post from back in 2012, is:

If you want to maintain control of your company, focus on running it well or find a team to run it well, and make sure you have plenty of cash to operate your business and that you never find yourself in a position where you are running out of cash and have nowhere to go but your exisiting investors. Do those two things well and you will be in control for as long as you want to be in control.

We saw that play out with WeWork this week. The founder had a 10:1 supervoting provision and controlled a majority of the board seats.

Until he didn’t.

I don’t know anything about how that all went down.

But I can only imagine that WeWork was running out of cash and needed funds from its existing investors and the founder had to cede all of that to keep the company afloat. Or some version of that story.

So all the agreements and such are only as solid as the performance of the business. They can all get torn up in a nanosecond if things don’t go well.