I’ll start with some background bullets points:
– Bootstrapped a company, profitable (couple of millions I’ve mostly taken home)
– Ran said company (almost) into the ground
– I’m creative but bad with money and management (probably related to the fact that I’m bi-polar).
As part of a re-organization I realized I need “grownups” running the company, but most importantly I realized I need LESS control.
I’m a very charismatic type, and past management personnel found it hard to oppose me and allowed me to harm the company (extreme example: taking an irresponsible dividend).
While I’m not comparing myself to WeWork’s Adam Neumann, I can see how I can become a problem for myself and the company if/when we get really big.
On the other hand seeing how people like Elon Musk and Zuckerberg retained control of their companies is inspiring, and emotionally, this is my “baby” I’ve built from zero.
At the moment I’m in the process of adding people to balance me out
1. A new, stronger CEO who is very experienced with bigger companies and will be getting most his compensation in equity (vesting over 4 years), and eventually maybe a seat on the board)
2. A strong, experienced businessman I trust, as a partner who will get about 20% in equity (probably w/ vesting), and will be on the board with me (just the two of us for now).
I’m retaining 80% for now.
We’ll both also have titles, he’ll probably be a CFO for a year, and I’ll be CMO.
We’re also considering a strategic investor who is interested in buying 10%.
Here’s the issue:
The current contract I’m working on with said partner gives him the right to veto decisions in some areas (most importantly: financial decisions, up to $100k, over this amount both signatures are required).
I get to veto in other areas that are my expertise.
We each get one seat on the board, I.e. equal voting rights.
The thing is that while he gets 20%, in terms of the day to day operations, his control over the company is just as mine, as if he had 50%.
Now, I can probably change it so I have more voting rights or something like that’s kind of missing the point.
I’m trying to think of a mechanism where I can retain control of my company, but also be restrained so I can’t fuck it up.
At the time being I don’t mind that he has more control, I worked with him closely and on some joint ventures, he’s just much better than me at it and he takes a huge load off my shoulders.
I don’t even see it as a problem in the long term.
What I’m worried about is missing something that – is there a scenario I can’t think of where this would come back to bite me in the ass?
I feel like the decision to give up the control is a big one.
Would love to hear any thoughts and advice.