Founder Mode and the Ever Shifting Power Dynamics in Silicon Valley

Boardroom Governance Newsletter #56 | September 3, 2024

I’ve frequently discussed how VC-backed startup boards often include representatives from both the founder class (who typically hold common stock, same as employees) and the investor class (who usually hold preferred stock). These groups can have diverging interests, especially in scenarios like company sales, downrounds, and recapitalizations.

Since the mid-2000s, the balance of power in Silicon Valley decisively shifted in favor of founders, although this dynamic has become less clear-cut for non-AI founders since 2021. This founder-friendly environment is partly driven by the power law, which underscores the outsized success of a select few startups. Investors fiercely compete to secure a place on these companies’ cap tables.

This founder mindset contrasts sharply with Wall Street, where capital and the investor class dominate. Nowhere is this more evident than in public markets, where institutional investors largely dictate corporate governance standards. Firms like BlackRock, State…