“How many investors on your cap table would it take to get you fired?”

I will share 3 truths that aren’t discussed enough in the Founder Community.

Truth 1: Your #Board talks about you behind your back.

They regularly discuss:

1. Their level of confidence in you as the #startup leader

2. Your behavior and it’s effect on your #team and your #culture

3. The areas where you need coaching and guidance

4. The strategic direction of your company

5. Whether you’re the right person for the job

These talks happen after board meetings, via email, via text, via phone, over lunch… any time really.

Depending on your board structure and distribution of voting rights, these talks could be the end of your employment at the very company you founded.

Which leads me to my next truth…

Truth 2: When you take outside capital, you give up equity and voting power.

The voting power component usually gets overlooked.

Once you are no longer the majority owner of your own company, there are significant implications pertaining to the startup’s future direction, strategy, and decision-making processes. Other potential implications:

• Losing power to make significant decisions

• Needing approval of other shareholders to make significant decisions

• Other shareholders able to push for changes in leadership and strategy such as business model, investment strategy, or general management

• Losing leverage pertaining to voting rights

It might only require that 1 - 2 investors be aligned to seal your fate.

I once asked a Board Member where I needed to improve the most as a VC.

They said, “Analyzing and Understanding Board Power Dynamics… Think about it… If you were a founder, how many investors on your cap table would it take to form a coalition strong enough to get you fired?”

I think I will always remember that response.

When term sheets are countered, Founders often fail to analyze the effect that the new offer would have on board structure and voting dynamics.

Truth 3: You only get 2 quarters to underperform.

• The first quarter you significantly underperform versus forecast, your Board / Investors will coach you with some tough love.

• The second quarter you significantly underperform versus forecast, your Board / Investors will look for your replacement.

Truths 1 and 2 are called into action once you whiff for the second time.

Board Members and Investors will begin gathering evidence of your poor performance, misconduct, financial mismanagement, or incapacity to act in the best interest of the business.

They will begin to build a coalition of support, and they only need 50.00001% of the voting power to get their way.

They will put plans in place to replace you and quietly speak with industry experts for support and recommendations on your replacement.

Therefore, at all times, and especially before taking fresh funding from outside investors, an entrepreneur should know how many board members it would take to get them fired.