
Board Members - BIackSwan
http://blog.samaltman.com/board-members
======
nodesocket
I feel a bit foolish for asking, but what exactly do board members do?

Does each board member have one vote? I assume events (key hires,
acquisitions, investments) are brought to the board for a vote, and need to
pass with a majority. Is there ever a case where a single-founder could have
multiple board seats? Do board members vote on product/marketing decisions?

~~~
titanomachy
Follow-on question: do the shareholders usually have the power to redraw the
board? Say you own 60% of the company but only 1 of 3 board seats -- could you
overrule the board members or fire them if you felt it necessary? Does the
board ultimately answer to the shareholders?

I imagine that this equity and board seat distribution could easily happen
with a solo founder.

~~~
cfield
Yes, the board is elected by the stockholders.

Absent an alternative structure, default corporate laws provide for the
directors of a company with only one class of common stock to be elected by
majority vote of the stockholders.

However, there are all sorts of alternative structures that can alter this
default. For example, it is common in a VC-backed company that preferred
stockholders are given the right to designate a specified number of board
members. The right is usually laid out in the company's certificate of
incorporation or a voting agreement among the stockholders.

Source: I am a startup attorney.

~~~
wodzu
Do they get paid by shares or salary? I mean is it a viable alternative to
having a "job"? I see many people around sitting on multiple boards of
companies.

~~~
dudurocha
If you are a investor in the company you usally don't get paid, just your trip
expenses.

If you are an external member, somebody strategic to the company, you get paid
either by meeting or some shares. Usually all board members in public
companies are paid with cash.

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kirinan
This is solid advice. I had one of my mentors put it a really elegent way :
"Your board should consist of people who fix your weaknesses". Don't have a
lot of business contacts? Get a board member who has a huge network. Lack
marketing knowledge? Get a board member for that. In a lot of ways its like
getting venture capital; wherein you should gather venture capital from
experts in the domain you are trying to enter/execute in. Although Im not
currently building a board my current venture, this is always one thing that I
struggled to find information on: building a board. Maybe I should get a board
member who knows how to make a great board...

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solve
Strange article. Is this meant primarily for YC companies, or generally?
Sounds like advice that's only applicable if you're dealing with very
reputable top-tear investors.

My experience: Giving investors substantial control doesn't just give them an
ability, it gives them a liability to their LPs. If something goes wrong in
the startup, and everyone knows that the board members could have potentially
taken drastic steps such as firing the founders to possibly prevent the bad
situation, even if the possibility is very small, then that responsibility
weighs heavily on the VCs. Giving them substantial control, gives them a big
responsibility to fix problems and only a loaded gun with which to fix them.

Just a guess, Sam's advice seems like a classic type of VC advice - do riskier
things, because although it will likely end up bad for you individually, we're
well diversified and it increases expected value for our VC portfolio as a
whole. Suppose that's a big part of the reason why he's the spokesman for YC
now.

> Finally, board members stick with the company when things really go wrong,
> in a way that advisors usually don’t.

Nice choice of wording, they stick with the "company".

> As a side note, bad board members are disastrous. You should check
> references thoroughly on someone before you let them join your board.

That sounds like more than just a little side note!

Here's the other side of the debate:

[http://www.paulgraham.com/control.html](http://www.paulgraham.com/control.html)

[http://blogs.wsj.com/accelerators/2013/06/17/steve-blank-
don...](http://blogs.wsj.com/accelerators/2013/06/17/steve-blank-dont-give-
away-your-board-seats/)

[http://venturehacks.com/articles/one-way-
control](http://venturehacks.com/articles/one-way-control)

[http://venturehacks.com/articles/board-
structure](http://venturehacks.com/articles/board-structure)

------
nadam
I tend to think about this topic as an 'independence spectrum' where
YCombinator seems to suggest your independence should be somewhere in the
middle.

The spectrum is this:

Being an employee -> being a founder with no majority in the board of your own
company -> being bootstrapped, full control

I remember when pg wrote the piece 'you weren't meant to have a boss' which
was extremely heavily against 'being an employee', while this piece by Sam
Altman seems to be against full control as an 'extreme case'. (For me it is
not extreme at all, on the contrary, it is the most natural thing on earth, as
natural as the examples in pg's piece about "you weren't meant to have a
boss")

I symphathise with having full control, although I can see that you have to
make compromises in life; (that's the reason I am an employee now, but at
least I have full control in my side project :) )

~~~
hawkice
I can't help but think that, even if YCombinator is the same it has always
been, I honestly do not understand the culture they are trying to foster. Is
it that you weren't meant to have a boss, or that smart investors make good
bosses (have a whole group of them, even if it costs your company money). I
have noticed the average programming chops of a YC founder has gone down a
lot, and I thought that was a group core value, and remarkably close to
mandatory.

I hope YC is both a financial success and changes the lives of the founders in
the program for the better. But it isn't something I would apply for anymore.
I feel like, as someone who wasn't popular in school, but loved lisp, I am no
longer part of the in-group, because I don't have experience with Finance or
Sales.

------
pen2l
> It’s a good idea to keep enough control so that investors can’t fire you
> (there are a lot of different ways to do this)

Such as?

~~~
randall
Different classes of stock is the Google and FB way, IIRC.

[http://blogs.wsj.com/deals/2012/02/01/at-facebook-
governance...](http://blogs.wsj.com/deals/2012/02/01/at-facebook-governance-
zuckerberg/)

~~~
pen2l
As I understand, Sam would rather that you not do what Zuckerberg has done.
Zuckerberg can't just not be fired because of the things he's done in terms of
how he has set up the governance structure, he can also acquire whatever
company he wants, block sale of any part of Facebook, etc. with or without the
support of the board. Sam, I think, does not want you to have this power. So
the question still remains.

~~~
jfoutz
It's religious zeal verses rational waffling. If big Z is perfect forever,
there's no issue at all. He will, by default, do whatever is best for his
company in any circumstances. That approach can be amazing or howard hughes
like.

On the other hand, you dilute power between an array of smart talented people.
Any action requires consensus. In the best case, you get congress when passing
a "think of the children" resolution. In the worst case, you get congress with
pretty much any other piece of legislation.

~~~
danieltillett
For all of Howard Hughes unusual personality traits he was until the end a
very good business man. It will be interesting to see if the big z gets close
to Howard.

------
bozoUser
I like what Sam says here, but how would the founders know the new board
member is the right fit for a particular startup..would you interview(if so
how?) or ...? would love hear what Sam has to say about that.

~~~
solve
Apparently YC has an internal "bad investor list", as well as a huge network
of easily accessible founders who've dealt with the majority of the investors
in the area before.

Presumably, us normal outsiders would have a tough time approaching this level
of background checking. I wish something like this bad investor list could be
done publicly too.

As for interviewing VCs as the primary method, that must be a joke. They're
professional salesmen and always act like your best friend when you're
signing. VCs mostly get to where they are for 2 reasons - great deal flow or
great personal sales technique, mostly the later.

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mpdehaan2
The best alternative to a board is bootstrapping your company.

You likely do know better and can seek advice anytime you like, but giving up
votes and your destiny is another story.

I'm sure some can be fantastic, of course, if you get the right mentor
situation and they are well connected and sharp (and correct, believing in
you, caring about you, not motivated by investment, etc...).

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ryanx435
the second someone tells me that there has been an incredible shift of power
and they are no longer in control, my bullshit meter shoots up off the charts.
especially coming from someone who is the one holding the purse strings.

can someone who is on the opposite side of the table from Sam Altman provide a
counter example to this power shift? I'm interested in hearing both sides.

~~~
adventured
It's certainly true in most respects that founders have acquired increased
leverage.

Mostly due to 1) a million dollars isn't what it was in 1995 2) since 2000 the
Fed has been almost constantly pumping liquidity into the US economy, this has
made capital far more readily available 3) it has become very cheap to develop
and launch products; the cost to manage a million users has plunged over the
last ten years 4) knowledge is far more widespread about the industry,
practices, etc. among entrepreneurs 5) funding options, systems, networks,
have become far more widespread

Today there are dozens of angel networks that are easy to access for tech
startups, in basically every major city in the US. In 1995 that simply wasn't
the case.

The further along you can develop your business, the greater leverage you have
with venture capitalists. Today you need them more to accelerate growth than
anything else.

The negative example, that I've been seeing a lot of lately, are very
aggressive liquity preferences by VCs. Perhaps I'm just noticing it more,
rather than the terms getting worse.

------
JacobAldridge
I often get asked "How many Board members is the right number?"

My standard response is that "an odd number is required, and 3 is too many."

That's the kickoff point for explaining that the right question isn't "How
many?", it's "Who?" Who is right for your Board?

I agree with sama that an even number isn't usually an issue if it's the right
people.

------
rcyn
whenever anyone mentions pg i think of paul gauguin

------
rattray
I found it a bit odd that an article on great board members (advisors with
teeth) was only reviewed by one person. While there was nothing groundbreaking
or surprising in this helpful post, it would have been nice to see it reviewed
by one or two other founders and board members, preferably from outside the
direct YC family, since this talks in generalizations about what does and does
not work.

EDIT: Of course, I do feel a bit spoiled asking for this, as so many of PG's
and sama's essays do have a long list of reviewers at the end. And this is of
course much less than an essay (which I like). I welcome counter-opinions :-)

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sdrothrock
This post's title is a bit ambiguous. I originally thought it was a biography
about Sam Altman as a YC board member or something and only stopped to
actually read it after it got some more upvotes.

How about something like "Choosing Board Members for Startups"?

