Twitter investors talk about how entrepreneurs build boards at different stages

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Twitter has submitted a listing document and the final IPO is expected to start at the end of this year or early next year. Twitter was founded six years ago, and there was no shortage of tossing. The tiger sniffed the company's history of tossing and brushing last year. An interesting phenomenon is that this is a company that, when it comes on the market, has three founders who have left and is wholly controlled by investors and managers--typically a startup that has a pretty high probability of failure, but Twitter is about to succeed in becoming a public company.

Dick Costolo, the incumbent CEO, initially Dick Costello 25,000 dollars to Twitter, an initial investment that now looks worth more than $10 million trillion. He is the typical CEO of an angel investor. Several other "loyal" VC will also be very lucrative. According to the New York Times's analysis of financial documents and interviews with people familiar with the matter, venture capitalist Chris Saka Chris Sacca, and at least two other VCs ' Union Square Investments (Union Square Capital) and Spark Capital, The value of each shareholding will eventually exceed 1 billion dollars.

Fred Wilson, the Union Square Capital partner, is a Twitter investor and has been a director. Last year, in an article devoted to Twitter, he talked about how startups should build boards at different stages. It may be that there has always been an appropriate board to ensure that Twitter is narrowly removed from the succession of several founders and the change of CEO.

The tiger sniffed last year translated this article to the general idea, and now read it again:

Any company, of course, needs a board of directors, and at first the board may have only one founder, but it won't last long.

If a company was in the early days, I was a supporter of the three-person board. I usually suggest that the founders should be with two other directors he trusts and respects. When investors come in, the situation will change. If the founders remain in control, the situation will not change too much and the founders can still nominate and select Directors. In some cases, of course, investors will negotiate with the founder about the board's seat. This situation, in the angel investors there is less, and in the venture capital that is more.

Adding an investor director does not mean the founder will lose control, it can still maintain the three-person board structure, two founding directors, and an investor director. Alternatively, the Board could be enlarged to five, with investors holding one to two seats and the founder controlling the rest.

When a company moves from founder control to investor control, independent directors appear. An independent director is a person who does not represent neither the founder nor the investor. I am an absolute supporter of independent directors and very much like to see them appearing on my board. A board filled with investment directors is not a good board, and usually the more independent the board is, the better it will be.

The founder may lose control of the company (usually after he has sold most of his stake), but that does not mean that investors should control the board. In fact, I would say that an investor-controlled board is the worst case scenario. Investors usually have the narrowest of interests and only care about how much money they can make or lose. Few investors look at problems from a broader perspective and from a holistic standpoint. So while investor directors play a necessary evil role in many companies, they should not dominate or control the board. If the founder controls the company, it should control the board, or the independent Director should control the board when the founder does not control the company.

When a company goes public, a nominating committee chooses the directors nominated by the shareholders at the general meeting. It is also possible that shareholders will nominate another list of boards. In reality, such situations generally occur in public companies. This situation is seen by most companies as a hostile offense, and the company and its shareholders will fight. The directors elected by shareholders rarely really control the company, but it is true that it is the way to elect a new director to the board.

Boards need to evolve. The board needs to appoint new members on a regular basis, and members should have a term of appointment. I think four years is better. Of course I spent a long time on some boards, stayed in one for 13 years, and the other was the 11th year.

A better example is Twitter. I was its first outside director. The Twitter board now consists of two founders, one CEO, three independent directors and one investor director. I think this combination is more right for me. My friend Bijan (who took the second round) withdrew from the board.

Twitter's board of directors wins in its evolution. The first year, just me and two founders. The following year, I, Bijan, two founders and a founding member. In the third year, it was three investors, two founders and two senior management. The year four was three investors, two founders, CEOs and three independent directors. In different financial periods, the changes to the Twitter board have happened accordingly. This is a typical venture capital control company.

In summary, it is the shareholder who chooses the director, in every company's basic situation. But how they choose directors is very different. Public companies may be about the same, but unlisted companies, "You get what you negotiate." So the negotiations (founder and capital) are very important.

(The 2009-year board photo of Twitter)