ganeumann

That may be true in many companies, but venture capital funded companies almost always have something called a "Voting Agreement". I pulled a random one from my folder of docs, it is below. The upshot, if you are not used to reading these, is that all of the shareholders signed an agreement that says they will vote their shares to elect certain directors. In the absence of an agreement like this you are right, the board could fire the CEO but the majority shareholder could fire the board. But, again, every equity round from a VC that I have seen in the last 25 years (and, I assume, longer, but that's as far back as my personal knowledge goes) has a Voting Agreement in some shape or form.

Actual text from a Voting Agreement:

"NOW, THEREFORE, the parties agree as follows:

1. Voting Provisions Regarding Board of Directors.

1.1 Board Composition. Each Stockholder agrees to vote, or cause to be voted, all securities of the Company the holders of which are entitled to vote for members of the Board, including without limitation, all shares of Common Stock, Series A Preferred Stock, by whatever name called, now owned or subsequently acquired by a Stockholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise (“Shares”) owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, the following persons shall be elected to the Board:

(a) For so long as there remain outstanding not less than 200,000 shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock), one (1) individual designated by the holders of a majority of the shares of Series A Preferred Stock then outstanding, which individual shall initially be Jerry Neumann (such director being the director defined as the Series A Directors in the Restated Certificate); and

(b) Two (2) individuals designated by the Key Holders who are at such time providing services to the Company as an officer, director, employee, consultant or advisor holding a majority of the Shares then held by such Key Holders (each such director being one of the directors defined as a Common Director in the Restated Certificate);"

etc. etc.

While this is theoretically true, I think you would be hard-pressed to find an example of someone suing and winning.

That is how it works. The board has the power to fire the CEO in all companies that I know of. (I suppose you might be able to write the bylaws so this isn't true but I'm not sure; a corporate lawyer would know.) The best you can do is to have an employment contract that regulates how the firing happens (ie. do you get severance, accelerated options, longer option exercise times, COBRA, etc. if you are fired without "cause", with cause carefully defined.)

Removing you from the board itself is a different matter. But that's usually also explicitly covered: they don't put the founder in the "Common seat" they put the founder in the "CEO seat." That way, when you're fired as CEO you automatically lose your board seat.

Very few things in a VC-backed startup require a shareholder vote. Firing the CEO is not one of them (this is a board vote.) Electing directors to the board is not one of them (this is usually the subject of a voting agreement that ensures board representation by the VCs.)

Let's say the company raises money from VC1, who buys 20%, leaving you with 80%. The contracts add VC1 and an independent to the board, alongside you. Later the company raises money from VC2, who buys 20%, leaving VC1 with 16% and you with 64%. The contracts add VC2 to the board.

Now the board is VC1, VC2, an independent, and you. If the VCs can convince the independent director to vote with them, the board can fire you, even though you own 64% of the company.

Good list. Nit: Crossing to Safety is Wallace Stegner

Responding solely to the 'moat' question: think railroad price wars in the late 1800s in the US.

Industries with capital expenses relatively large compared to contribution margin tend towards local monopolies. When faced with a potential new entrant the incumbent can lower prices to where the entrant's assets can't return their cost of capital. The incumbent's capital is already sunk so they can afford to bring prices close to the marginal cost of providing the service. This threat of a price war is usually enough to deter entry.

This also leads to agglomeration in local markets both to avoid duplicative assets and to add credence to the price war threat.

I'll skip the humility. I'm smart. Always have been. My parents realized it early on and praised me for it. I pretty much slept through high school because after a couple of minutes of explanation of any math, science or computer science concept I grasped it. I never did any work, although I read a lot about the subjects I enjoyed, because I enjoyed them.

The non-STEM stuff was confusingly ill-defined and in those subjects I was average, at best. And because I wasn't good at them, I avoided them: I didn't do anything to be smart, I always had been, so what could I do to become smart at reading Shakespeare? I had no idea how I could learn to understand something I didn't understand because understanding seemed to have been something I was just born with.

I did well enough on the SATs to get into a top college and decided to major in electrical engineering. I skated through freshman year, earning a low B average.

Towards the end of the year I met with my advisor, the head of the department for the first time. Without preamble he said "We made a mistake. You're not really the person you looked like you'd be in your application." I didn't really grasp what he was saying. "You're not getting the grades your record indicates you could get. You're not working hard enough. You should think about transferring to a less demanding school. In any case, EE requires a commitment and I think you should pick a different major."

I was stunned. This was the first time in my life that anyone had ever done anything but praise my academics. I was angry. How could this adult, who claimed to be some sort of mentor, talk to me like that? In fact, writing this years and years later, I'm still a little pissed off.

But looking around, all my friends and classmates were working their asses off, getting ready for finals. The guy may have been a jerk, but he was right: I wasn't working hard and I wasn't learning very much. Much as I dislike the guy, I have to admit he did me an enormous service. He recognized that I needed a kick in the teeth to take his advice seriously. The next three years I made sure I worked harder than everyone else around me, if only to prove that he was wrong, that I hadn't been a mistake. I stayed in EE and would have graduated near the top of my class if I hadn't had to factor in my freshman year grades.

So what does that prove? That you can make a kid neurotic if you push him hard enough? Maybe. But I know that if I had tried to skate through my post-college life being smart and not working, I would have got nowhere and done nothing interesting. Being super intelligent is like having giant biceps: impressive, but rarely useful. People admire intelligence, but they reward getting things done. Getting things done requires some intelligence, but much more it requires hard work and stick-to-itiveness. I'm not faulting my parents one bit: they manifestly loved me, found me good schools and interesting activities and fed my eagerness to do useful things. But I'm careful with my kids to praise the things they control and can change--like hard work and not being deterred when things are hard--and let the being smart thing take care of itself.

It's often an issue in up-rounds as well.

Sometimes firms can't follow-on from a different fund even if they're following, up-round or down-round. That's why funds usually reserve money for follow-on investments.

Firms often have to go back to their LPs if they want to invest in the same company across funds.