Big News: FounderDating is joining OneVest to build the largest community for entrepreneurs. Details here
Latest Notifications
You have no recent recommendations.
Name
Title
 
MiniBio
FOLLOW
Title
 Followers
FOLLOW TOPIC

Question goes here

1,300 Followers

  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur

Do you have views on an investor majority consent of approving annual business plans and budgets?

I am presently in the process of gaining angel investment for my startup in London. Having the right to approve our annual budget and business plan is one of the investor majority consents they want. My initial reaction was that I wanted to keep freedom and not have to get the approval, but then discovered it to be quite common. So a few questions:

a) Have any founders here had experience of this causing issues, i.e. non-consensus? Any regrets on agreeing to this right and not having tried to negotiate it out?

b) Would you agree to this being an investor director approval instead? Us two co-founders are directors so it would be a board of 3.

c) How impactful/severe is this in practice? As a startup annual plans will always be deviated on through the year as the company iterates and develops.

21 Replies

Mitchell Portnoy
2
0
Mitchell Portnoy Entrepreneur
Healthcare Information Executive
If you give on this issue you essentially forfeit your ability to operate effectively. Don't do it.
Michael Brill
0
0
Michael Brill Entrepreneur
Technology startup exec focused on AI-driven products
This is a board function and if they don't trust the board they shouldn't invest. Agree 100% with Mitchell.
Jeffrey Weitzman
0
0
Jeffrey Weitzman Entrepreneur
Consultant at Space-Time Insight
Never had this in terms from angel investors. I wouldn't do it. As Michael notes, this is a board function. Investor majorities can elect board members, that's their protection.
JD Ryan
1
0
JD Ryan Entrepreneur
Downunder Toys Pty Ltd
This is not standard practise, in my experience.
I think everyone accepts that investors want to ensure the budget is managed effectively, but you can't give this control away without giving away responsibility as well.
It is important you sell this aspect when you go back to them. If you are the founder and CEO, you must have executive decision-making power and the responsibility that goes with it. If they're not happy with your management, it is up to the Board to work with you on it, or replace you.
Steve Everhard
1
0
Steve Everhard Advisor
All Things Startup
I am surprised that they have requested to override the board in this way. To do so is to undermine the governance of the business. Majority control of the stock is not the same as control of the company and they open themselves up to actions by minority investors. If your investors want to run the company they should acquire it,


Edwin Carlson
0
0
Edwin Carlson Advisor
CEO Bitsmart | Fintech | P2P Loan Marketplace| Financial Services | Entrepreneur | Blockchain
I agree with NOT giving up control of annual plans and budget; approval of this is a board responsibility. If an angel investor thinks they know more about your business than you do then why are they investing in you?
Mark Lieberman
0
0
Mark Lieberman Entrepreneur
Chief Startup Officer and Director, Advantage Accelerator at Oregon State University
I would assume that Angels and Angel groups vary in their documentation.You might want to review standard seed investment documentation that are published throughout the internet (Y-Combinator, for example).
I could understand an investor wanting control over the use of funds or a business plan (however useless that document is) if the entrepreneurhas never had an investment, demonstrated poor fiscal responsibility or unable to manage the startup project. You also do not state how much of the ownership the angel owns.
However, I would never recommend that an investor provides that much control to one individual not running the business. Bottom line is that you need investors and advisors that are in alignment with the strategic intent of the startup. One bad apple will spoil the startup.
Larry Kutcher
0
0
Larry Kutcher Entrepreneur
Entrepreneur. Business Builder. Operational Leader.
I agree with the consensus - this is not standard procedure, unless the angel investor is part of the board, and even then, this is over-reaching. I would however take this as a teachable moment and consider whether there is something about your pitch, presentations, deck, demeanor, etc. that might be eliciting this response. I would look for a different group of investors or explore how to bootstrap without.
Don Kingsborough
0
0
VP Global Retail , BD and Corporate Development
I have started 4 companies and the investors never got the right to approve the budget. The investors had a right to decide to invest or not, but not decide what the annual budget was for the company.The investors/board members ( if they were on the board) could approve the budget as a board member. I am not sure the board can let an individual investor have the right to approve the budget. i not sure a board can delegate this right to just one investor? I think this is what boards do ....not what individual investors do.
Philip S. Miller
0
0
Philip S. Miller Entrepreneur
Founder at Hempies™ Paper Inc.
What is this? An episode of the Profit?
Join FounderDating to participate in the discussion
Nothing gets posted to LinkedIn and your information will not be shared.

Just a few more details please.

DO: Start a discussion, share a resource, or ask a question related to entrepreneurship.
DON'T: Post about prohibited topics such as recruiting, cofounder wanted, check out my product
or feedback on the FD site (you can send this to us directly info@founderdating.com).
See the Community Code of Conduct for more details.

Title

Give your question or discussion topic a great title, make it catchy and succinct.

Details

Make sure what you're about to say is specific and relevant - you'll get better responses.

Topics

Tag your discussion so you get more relevant responses.

Question goes here

1,300 Followers

  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
Know someone who should answer this question? Enter their email below
Stay current and follow these discussion topics?