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Ben Horowitz: Running Without a Board After Raising Money Is the Most Dangerous Idea in the World

By Ben Horowitz · Investing · 2 min read

Some VCs sell 'no board seat' as a feature. Horowitz says once you've given equity to anyone, running without a board can land you in jail.

Key Points

The idea that you're going to run without a board after giving equity to employees or investors is the most dangerous idea in the world
The only protection you have as CEO from going to jail or getting personally sued is that you run material ideas through the board
Once you don't own 100% of the company, you need a board — that's just how it goes

The only protection you have as CEO from going to jail or getting personally sued is that you run material ideas through the board.

The Question

The interviewer laid out both sides. Some VCs say their selling point is they don't take a board seat. They'll leave you alone. Others talk about a spiritual connection between board member and founder.

Horowitz: I probably don't believe in the spiritual connection.

The Most Dangerous Idea

Horowitz: Boards are important for founders. The idea that you're going to run without a board after you've given equity to employees and sold equity to people who are not you is the most dangerous idea in the world.

Because if you know anything about securities laws, the only protection you have as CEO from going to jail or getting personally sued is that you run material ideas through the board. That's a massive protection.

The only protection you have as CEO from going to jail or getting personally sued is that you run material ideas through the board.

The 2% Grant Example

Horowitz: If I want to give a 2% grant to someone in the company, you have to realize your fiduciary duty to the rest of the company that you're diluting is in question right there.

If you run that by the board, it's all good. You're completely protected. No problem. If you just make that call on your own, somebody wants to sue you, they're going to win. You really have very little defense at that point.

If you run that by the board, you're completely protected. If you make that call on your own, somebody wants to sue you, they're going to win.

The Line

Horowitz: Once you start not owning the company 100%, you've got to have a board. That's just how it goes.

Once you start not owning the company 100%, you've got to have a board. That's just how it goes.