Question from someone uneducated on this topic: is it impossible to get VC levels of investment without giving away board seats?
Is a board even required for private companies?
Is a board even required for private companies?
Not impossible, but extremely difficult. You need to already be successful to a degree that investors are fighting each other to give you money, to the point where they will still give you that money without asking for any amount of control of or oversight over the company. Google[0] and Facebook founders managed to do this (though not through board composition, but through stock classification and voting rights), but 99.9% of other founders will not have that kind of clout.
> Is a board even required for private companies?
I believe some state laws around incorporation require them, but otherwise it's just a standard way of doing things that a company will lay out in its charter/by-laws. You're going to have a really hard time convincing a VC to give you money if you tell them that you're not going to have a board of directors. Even if you present an alternative structure that gives the VC some form of oversight, they will be (rightly) skeptical, since this is unproven ground and they will be (rightly) afraid that their lack of understanding of your unique structure will come back to bite them later.
[9] I do think Page and Brin retaining control of Google was especially impressive, considering that their early funding rounds happened during, and in the aftermath of, the original dot-com bust, when investors were probably pretty leery of funding tech companies.
Microsoft, interestingly, was after the opposite. They took a rather nominal $1M VC funding to get someone knowledgeable on their board. Probably helped when it came time to IPO. They definitely didn't need the funding. VCs would love for the world to believe that their funding is necessary. But often that sort of rocket fuel is detrimental to the growth of a company. It puts immense sudden pressure on a company, relationships are strained, and really weird things start to happen as your headcount shoots past 20-30 people.
Microsoft is like Marylin Monroe, or Michael Jackson or that person who lived to 123 years old.
You'll never see a company like that ever again in your lifetime.
They did what Standard Oil did, in perhaps an even cleaner and uncontroversial manner.
Tons of talent and luck aligned in the exact right way for it to be the phenomenon it became.
Formal boards are not required for private companies.
Reading through this and my gutt feeling is that if I had a company doing really well I would do my absolute best to not give up any control over it - but idk how many investors would be willing to invest in that case (if we were doing really well though, I assume at least some would?)
board: many co's give 1 board seat at Seed and another at A, so lose the board around B. but more negotiable, eg, seed investor gives seat to later investor .
So it seems normal: for most, somewhere between A + B, and except for outliers, by C.
Edit: VCs generally have an ownership target, say 15% as a lead, and less as a follower. So that adds up quickly.
Some companies have grown quite large with small boards. The company will need a certain number of people to make up the board, though, so it helps to start identifying such people early.