Founder Fridays No. 65
Has the shake up at OpenAI made you question how solid your relationship is with your board?
Happy Black Friday.
I hope you had a great Thanksgiving. How much of your turkey day conversation was about OpenAI?
Last weekend was nuts! I was glued to Twitter. OpenAI's convoluted corporate structure seemingly led to conflicting motivations. As someone who designs governance for dual non-profit/for-profit entities, it's a reminder to balance mission and commercial incentives. Well-intentioned people often overcorrect to lock out business interests in the name of mission protection. But that groupthink can ironically undermine the mission in the long run - as we may have seen at OpenAI. The key is striking the right balance.
My favorite 2 memes from the whole fiasco are at the bottom of the newsletter.
You’re Fired
Has the shake up at OpenAI made you question how solid your relationship is with your board? The truth is: your board of directors may fire you. Boards firing the CEO happens quite often, especially as a company gets larger and more valuable. Data shows that three years after taking investments, 50% of CEOs are fired by the board. Some firms, like Sequoia Capital, even trumpet their propensity to fire CEOs. The fact that early-stage founders continue to take their money has to be some sort of delusional grandiosity, in my humble opinion. “Well yes, they fire half the CEOs they back, but surely not me.” This article has tips about how founders can work with the board to increase their shot of survival. Reaction Wheel (7 minutes)
Scatter
Scatter is the silent killer at work. Scatter is doing the same thing at the same time in multiple places. Scatter is looking but not paying attention. Scatter is intracompany fiefdoms defending themselves. Scatter is attempted multitasking. Scatter is being busy without making progress. Scatter is far-off promises you made because it was easier than saying “no.” Scatter has its place as long as it's not the steady state. Jason Fried (2 minutes)
Startup Sales Sadness
Almost all startup founders experience a deep, prolonged sadness after selling their company, even when the sale is an outrageous success. In a high-quality study from Columbia Business School, out of 22 entrepreneurs who sold their companies, every one of them experienced this effect. Why? Some re-focused the energy into the Next Thing (almost always new ventures), but most took years to find that thing that could replace not only the excitement but identity. Many still haven’t found that Next Thing at all. Others wished they could have their companies back; a few did buy them back. A startup is an obsession. You do it because you can't stop yourself. When you were doing anything else, you were thinking about it. That is the mark of “who you are.” Interviewers ask me, “Why did you decide to do a second and eventually a fourth startup?” And the answer is, “For the same reason that I started the first one — because it’s in my DNA, and I have to do it.” For better or for worse (and I think this is not a good thing), many startup founders lack a distinction between personal identity and work identity. This is the key to the “sale-blues” phenomenon and other behavior. A startup is the founder’s personal identity. Startups are not something you do to make ends meet or a “necessary evil” en route to what you “really” want to do. Selling their companies forced them to answer a difficult question: If you could do anything, what would you do? What’s really important to you, as opposed to a job? What do you really want to be when you really grow up? A Smart Bear (9 minutes)
Founder FAQ: What are the essential agreements for launching a Delaware C-Corp?
There are several essential agreements that need to be established in order to launch a Delaware C-Corp. These agreements include the certificate of incorporation, action of incorporator, initial board consent, bylaws, Restricted Stock Purchase Agreement, notice of stock issuance, 83(b) election and Confidential Information and Invention Assignment Agreement. These documents help establish the corporation’s existence, outline its purpose and internal procedures, and provide legal protection for shareholders and officers. While there may be additional agreements required for certain circumstances, the aforementioned documents are the standard set of Silicon Valley docs for startups. Westaway (7 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term by term and give you negotiation tips so that you can speak to investors with confidence.
Convertible Note: Guide / Video
Certainty in an Uncertain World
The startup journey is filled with uncertainty. A fractional General Counsel (GC) provides the certainty of on-call legal expertise. Having an experienced GC gives founders invaluable peace of mind. With a seasoned startup legal expert on demand, founders have a steady guide through uncertain legal terrain. The GC acts as trusted strategic advisor while also handling day-to-day legal tasks. This lifts a huge burden off startup leaders, allowing them to focus on growth with legal confidence. Rather than getting bogged down in legal details, founders feel empowered delegating to an expert and focusing on their vision. Founders sleep better knowing their GC can swiftly handle any legal issue that arises. If you’re curious how a fractional GC can give you peace of mind, let’s talk.