How much "management control" can you give an investor who wants to invest in your startup? What limits can co-founders put in place to prevent interferences?

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JASON LEMKIN

Here’s my zen learning and answer:

All that you can really control, and that matters, are board seats.  And not “selling” the majority of them.

Yes, there are legal “protective provisions” that sort of matter and a great corporate attorney can help you here.  But much of these protections are already in California or Delaware law and don’t amount to much in the real world.

What I suggest and push for is a board proportionate to ownership.

And many VCs push way too far here.

If your VCs own 20% of the company, they should have 1 seat.  You should have 4.

Not 2+2+”1 outsider” that they basically appoint.  A so-called “balanced” board.

Keep control as long as you can.  If you are super hot, that’s forever.  At least, try to keep it until you’ve sold > 50% of the company 🙂

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Published on November 1, 2015
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