I completely feel where this guy is coming from. My first startup had a small seed round of funding, in which the investors took less than 10%. They claimed to be investing in us (the founders), because they trusted us to do what it took to succeed.
However, the "you're just founders" attitude kicked in shortly thereafter. When we wanted to launch our MVP, they wouldn't let us, for example. They wanted to run things "their way", despite the fact that we had the majority of shares (and they threatened us when we brought this up). It turns out that these people didn't actually trust us at all, and actually looked down on us for being young adults trying to build an idea. (If you haven't guessed already, the project failed).
If they had only given us the respect we should have earned from the start from our previous hard work, we just might have succeeded doing things our way.
Is there some reason a proper contract couldn't have prevented this in the beginning?
If you sold off 10% to investors, then it's your fault, is it not, that you did not get the financial control you required out of the deal, allowing the VC to disproportionately influence the company in your eyes?
While I too would be interested in more details, there are certain types of people who if you let them get a toe hold in your company can effectively preclude future success.
E.g.:
They may be investing in tranches and you need future ones to launch.
If you have a bad/impossible relationship with them, future or alternative investors will steer clear.
They may be sufficiently nasty and wealthy that if you're successful, they'll sue you, or are at least making a credible threat to do so. It doesn't matter if you'd win if you don't have enough money to fight it.
The contract may have specified certain milestones, which they then prevent you from hitting.
Anyway, by and large contracts won't really protect you in a situation that gets ugly, their major purpose is to memorialize an agreement so that "but you said..." friction doesn't arise after an agreement has been made. Imagine how you might try to word a clause that starts with "In case of bad faith...", starting with the definition of that.
Comments
I completely feel where this guy is coming from. My first startup had a small seed round of funding, in which the investors took less than 10%. They claimed to be investing in us (the founders), because they trusted us to do what it took to succeed.
However, the "you're just founders" attitude kicked in shortly thereafter. When we wanted to launch our MVP, they wouldn't let us, for example. They wanted to run things "their way", despite the fact that we had the majority of shares (and they threatened us when we brought this up). It turns out that these people didn't actually trust us at all, and actually looked down on us for being young adults trying to build an idea. (If you haven't guessed already, the project failed).
If they had only given us the respect we should have earned from the start from our previous hard work, we just might have succeeded doing things our way.
Is there some reason a proper contract couldn't have prevented this in the beginning?
If you sold off 10% to investors, then it's your fault, is it not, that you did not get the financial control you required out of the deal, allowing the VC to disproportionately influence the company in your eyes?
While I too would be interested in more details, there are certain types of people who if you let them get a toe hold in your company can effectively preclude future success.
E.g.:
They may be investing in tranches and you need future ones to launch.
If you have a bad/impossible relationship with them, future or alternative investors will steer clear.
They may be sufficiently nasty and wealthy that if you're successful, they'll sue you, or are at least making a credible threat to do so. It doesn't matter if you'd win if you don't have enough money to fight it.
The contract may have specified certain milestones, which they then prevent you from hitting.
Anyway, by and large contracts won't really protect you in a situation that gets ugly, their major purpose is to memorialize an agreement so that "but you said..." friction doesn't arise after an agreement has been made. Imagine how you might try to word a clause that starts with "In case of bad faith...", starting with the definition of that.