Why Trying To Limit Your Investors Ownership Doesn't Matter
By Brett Fox
One of the greatest lines in movie history was said in the classic, All The President’s Men. The line is, “Follow the money.”
The idea was that if you traced the trail of money, you would find out who was behind the Watergate break-in.
Well, “Follow the money” also holds true if you are starting a company. Here’s how:
Whoever invests in your company, regardless of how much they own of the company, now controls the company.
Guy Kawasaki is right. The second you take on outside funding, your investors control your company. Your percentage ownership or whatever crazy voting rights you dream up will not save you from being fired if you do a bad job.
Your investors make the rules as long as you need more money. Period.
If you don’t believe me, ask Travis Kalanick. Travis had control of Uber. He couldn’t be voted out as CEO.
Yet here he is now, the ex-CEO of Uber.
Uber needed more money to keep the company growing, but the investors grew tired of Kalanick. It was inevitable that Kalanick would lose this showdown because Uber needed money to keep the company alive.
The price of the money was that Kalanick no longer be the CEO of Uber.
The only way to stay CEO is to do a great job as CEO.
I’m not saying you shouldn’t try and keep as much of the company as you can. I am saying that you should focus on what matters, and what matters is how you and your team execute.
If you do a great job, then you’ve got nothing to worry about. Your investors will be thrilled that you are the one company in their portfolio they don’t have to worry about.
That’s what you should aim for. Worrying about owning 51% of the company will just get you in trouble.
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