Founders, Don’t Lose Your Control: How to Avoid Being Undermined, or Fired by Your Board
During the early stages of a startup, most founders believe that their company’s sustainability rests on how much they trust their board and investors — and they fail to realize that, beneath the surface of their relationships, it actually all comes down to the strength of their operating agreements, share classes, and voting rights.
If you’re not extremely intentional from day one, the same board you put together could be the same board that takes you out. Good board members are supposed to drive the vision of the company and collaborate with the Founder/CEO to execute the strategy; however, self-serving board members will often rise and try to take control of the entire ship and fire the founder when given the opportunity.
Throughout history, countless founders have been forced out of their companies because they over-trusted — they put all of their eggs in the baskets of their board members and investors and had nothing left to fend for themselves. Sure, when visions are aligned and the investors’ wire transfers hit the bank, things are great and everyone’s enthusiastic to work together! But what happens the moment you want to go in one direction and the board and investors want to go in another direction? Will you have the final word? Will you be fired? What will the paperwork state on your behalf?
Let’s say things go completely left after a disagreement. Founders who didn’t take the time early on to hyperfocus on what needed to be done to avoid being taken out of the control seat will likely lose it. This is what almost happened to me years ago, when I was on the verge of losing PopCom due to a board disagreement. It started when I noticed that my investor was making decisions that were best for himself and not for what was best for the company. This led me to act — first researching how to remove my board before they could try to undermine or remove me.
Today, after $7 million raised, I can say that my solid organizational documents are the reason why I am still PopCom’s largest shareholder, with over 98% of the company voting rights. How did I get here? Well, here are three key lessons I learned the hard way so that you don’t have to: