Control - Founder vs. VC

What the greatest technology investors say about Control - Founder vs. VC

Fred Wilson: The Reality of Founder Control

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

Wilson discusses company control.  “In theory, [company control] rests with the ownership split between the founder and the investors and how the Board [] is set up. If the founder/entrepreneur owns more than 50% of the company and controls more than half of the board seats, then he or she has “control” [].  But in reality [Wilson has] found things are very different than that.  And it all comes down to two things:  1) How well the Company is performing;  2) Whether the Company needs more investment capital and where it’s coming from.

[] An entrepreneur or hired CEO can own as little as 5-10% [] but [have control]” if the company is performing well with substantial cash flow and no need for additional capital.

“An entrepreneur can control 95% [] and all [board seats] but [] easily lose control” if the company is struggling, needs more cash and only existing investors would consider putting up cash. 

“[] VCs have control when things don't work. Entrepreneurs have control when they do.”  If a founder wants to keep control, the company must perform well, have plenty of cash and not risk running out of cash.     Fred Wilson Entrepreneurs Have Control When Things Work, VCs Have Control When They Don't, July 25, 2012; http://www.avc.com/a_vc/2012/07/entrepreneurs-have-control-when-things-work-vcs-have-control-when-things-dont-work.html