The founder versus VC balance of power in startups

Fred Wilson Credit: flick/Joi

Founders stay in control when things go well, but investors take over when things go south.

Fred Wilson's blog post says it clearly: "Entrepreneurs Have Control When Things Work, VCs Have Control When They Don't." This came from an interview with the Buffalo News during the launch of the Z80 incubator. Main point? The actual ownership percentage doesn't determine who drives the startup as much as the founder's ability to manage.

Other viewpoints include Micah Baldwin's "Advisors – Stop Screwing Startups," (entrepreneur and CEO) and "Replacing CEOs" from Altos Ventures (a venture capital company). Baldwin's point includes unpaid and paid advisors as well as VCs, suggesting the founder only reward real value with real equity. Altos prefers not to replace CEOs, but will if necessary.

Critical decisions

The single most important decision you will make in business is with whom you go into business --- co-founders, partners, team members, VCs. Nothing else comes close in importance.

JLM on avc.com

The next post should be "Incubators Stop Screwing Startups.

Otachi8 on askthevc.com

A change of vision is likely a better reason for a change of CEO.

Nick M on altosventures.com

Partnerships

Bottom line, when things occasionally go sideways, and you have a good partner....you get a couple more grace misses.

FlavioGomes on avc.com

I've been involved with a couple mentors that were not looking out for my best interest, but had their own agenda.

Kim Oakland on askthevc.com

I always look for candidates who can develop 'founder-like passion' -- but they're hard to find!

Paul Gomory on altosventures.com

There must be a quote from The Godfather or Tony Soprano about choosing your friends and VC partners well that fits this discussion.

Arnold Waldstein on avc.com

Money

Realistic milestones and their ratio to funding tranches is vital.

Carl Rahn Griffith on avc.com

The probability of a CEO change increases dramatically with each round of financing...

Kevin Morris on altosventures.com

Have you been in a company where investors pulled the plug on management too early? Or did investors hesitate too long, and the company fold?

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