Tech VCs Promise to Never Disagree with Founders(go.bloomberg.com)
go.bloomberg.com
Tech VCs Promise to Never Disagree with Founders
http://go.bloomberg.com/tech-deals/2014-08-05-tech-vcs-promise-never-question-founders-give-free-cash/
13 comments
The headline of this article doesn't really match the contents. Certainly partners from Felicis Ventures will disagree with founders from time to time, they just apparently won't vote against them in board votes. In many circumstances this promise won't have much practical impact.
The article doesn't clearly say board votes. It actually says "vote the shares", which, I'm not all that clear how often or with what significance shareholder votes happen in a pre-ipo company.
I'm not gonna save never because I'm sure there have been bizarre exceptions but....basically there are never shareholder votes. Only board votes.
When the composition of board itself is changed, I think that has to be agreed by shareholders. There can be differences between legislations though.
Entrepreneur-friendly is big focus for many investors these days. Witness Techstars equity back guarantee as just one example.
Felicis, based on its exits, is a top-tier micro VC (if you define it as <$100M funds) so this may force the hand of others.
Of course, there are those that feel that "voting along is a unrealistic commercial move that negates the investor's added value to his/her LPs". [1]
[1] From comments here - https://www.cbinsights.com/blog/founder-vs-venture-capitalis...
Felicis, based on its exits, is a top-tier micro VC (if you define it as <$100M funds) so this may force the hand of others.
Of course, there are those that feel that "voting along is a unrealistic commercial move that negates the investor's added value to his/her LPs". [1]
[1] From comments here - https://www.cbinsights.com/blog/founder-vs-venture-capitalis...
Personally, as a CEO, I would like to have an investor questioning my moves so that I am forced to consider my choices from different perspectives.
If I'm constantly being told I'm the golden boy then I'm doomed.
If I'm constantly being told I'm the golden boy then I'm doomed.
So...what happens when the next Gurbaksh Chahal[1] gets funded by Felicis Ventures?
[1] http://www.newyorker.com/tech/elements/gurbaksh-chahals-ugly...
[1] http://www.newyorker.com/tech/elements/gurbaksh-chahals-ugly...
While I like that investors are now forced to give entrepreneurs a better deal, this sounds like a move too far.
This is like a blank check for entrepreneurs with no strings attached, and no consequence for failure. In fact, the share given to founders in the diversified fund means that financial returns may be had even for a failing business.
That doesn't sound like an entrepreneurial risk/reward type system anymore. That sounds like a guaranteed reward for a bunch of "special" people who are part of some special club.
In fact, it sounds like East Coast investment banking.
This is like a blank check for entrepreneurs with no strings attached, and no consequence for failure. In fact, the share given to founders in the diversified fund means that financial returns may be had even for a failing business.
That doesn't sound like an entrepreneurial risk/reward type system anymore. That sounds like a guaranteed reward for a bunch of "special" people who are part of some special club.
In fact, it sounds like East Coast investment banking.
It's exactly like the stock market, on with larger percentages.
Most people own their stocks totally passive, active shareholders are rare and usually have a big stake in the company.
If everybody who is a shareholder of Google would show up at the shareholder meeting there would be a bit of a space problem.
So passive investors are not rare at all, what is strange about this announcement is that most VCs tout their active role as a plus. This company seems to be taking the opposite tack.
IMO that's wrong, investors can be a useful sounding board and if they automatically agree with every C level decision then you lose a very valuable source of criticism.
Most people own their stocks totally passive, active shareholders are rare and usually have a big stake in the company.
If everybody who is a shareholder of Google would show up at the shareholder meeting there would be a bit of a space problem.
So passive investors are not rare at all, what is strange about this announcement is that most VCs tout their active role as a plus. This company seems to be taking the opposite tack.
IMO that's wrong, investors can be a useful sounding board and if they automatically agree with every C level decision then you lose a very valuable source of criticism.
The consequences for failing as an entrepreneur have always been and will always be opportunity cost.
At first I thought this title was a poorly timed April Fools Joke.
I would imagine there are only a few decisions the founders make that ever come down to votes based on shares. Off the top of my head: Selling the company, firing the CEO, electing a new board, diluting existing shareholders, dividends.
The impact of this decision is probably heavily based on how often Felicis has a big enough stake to be a factor in shareholder voting.
I would imagine there are only a few decisions the founders make that ever come down to votes based on shares. Off the top of my head: Selling the company, firing the CEO, electing a new board, diluting existing shareholders, dividends.
The impact of this decision is probably heavily based on how often Felicis has a big enough stake to be a factor in shareholder voting.
Certainly times have changed. If the bubble does burst anytime soon, people might look at this in hindsight as being another warning sign we missed.
"“We’ll be voting unconditionally with the CEO,” Senkut said in an interview. “It’s time for bold moves.”///"
spoken like a true believer
spoken like a true believer
Great move.
If you just want to invest, and take your hands off, this is great. It means you have less work managing, so you can make smaller 'bets'... err, I mean investments.
Also means the team can get on with it, and have to spend less time managing investors. Yes, some start ups do spend a lot of time doing stuff just to present nicely to investors. From taking days off working on product preparing the office so it looks more professional, to preparing speeches, and developing further pitches.
If you just want to invest, and take your hands off, this is great. It means you have less work managing, so you can make smaller 'bets'... err, I mean investments.
Also means the team can get on with it, and have to spend less time managing investors. Yes, some start ups do spend a lot of time doing stuff just to present nicely to investors. From taking days off working on product preparing the office so it looks more professional, to preparing speeches, and developing further pitches.
Theoretically, if there is trust between the founders and the VC's shouldn't both of them have one seat?
Suddenly the President/CEO title differences matter for co-founders.
Ycombinator has forever changed the landscape for entrepreneurs for the better =D