Mapping out the Control Timeline – more advice for entrepreneurs

One of the goals of being an entrepreneur is to be in charge of your own destiny. This obviously implies that you are in control of your destiny, and this means in control of your company. The instruments of control are your shareholding, your board of directors, and your position in the company.

Unfortunately the weakest of all of these is your shareholding. If you lose control of the board, you run the risk that the board can propose all kinds of resolutions that may disadvantage you. You might want to complain, fairly, that you are being mistreated. That will not count for very much, and all you will do is run up legal fees and still lose the battle.

As an executive, you can do a lot. But at the same time, you need representation and control of the board to make the role truly effective. Otherwise you are just an employee, subject to the often minimal protections available or included in your service agreement. As a word of advice, I strongly recommend not agreeing to any employment or service contract that has ANY way of having you leave without a pay out. It is disgraceful to think that you might end up being kicked out of your own firm on trumped up charges… all so that the company can avoid paying you any money. That’s plain wrong.

The key therefore is controlling the Board. Straight, pure and simple.

Now, let us consider the three phases control you are likely to experience, and think through some of the strategic and tactical implications.

Phase 1: You are in Control

Phase 2: You are losing control

Phase 3: You have lost control

Phase 1 is the easiest phase. Your ideal should be to maintain Phase 1 for as long as you personally want to be in control of your company. The ‘In Control’ phase is all about creating human, legal and financial structures for you to maintain and even extend your control. As I have mentioned in previous posts, this would mean reviewing shareholder agreements periodically, firing enemies and potential saboteurs quickly, and ensuring at your board is on your side.

Phase 2 is when everything starts to go wrong. There will be a period of change where you are likely not to be aware that you are losing control. You may think you are In Control, whereas in fact you are a month away from losing control. As discussed in previous posts, you sadly need to be suspicious of any proposed change in the structure of the business, new senior staff, or change in the investor base.

Once you are aware that you are losing control, your options start disappearing quickly. One of the first things you need to do is find out how ‘inevitable’ your removal is, and whether there is any way of recovering the situation. Often, if you have been unaware of the situation for a while, the path will be so well established that it will be impossible to dissuade people. In that case, the best option is to assess what leverage you have, and extract the best possible deal as quickly as possible. Take everything you can while the situation is still friendly. At least in that way you are slightly more in control of your destiny. Negotiate cash payments – and be aware that if you had a significant shareholding, the first thing on the board’s agenda will be to dilute your control. This is especially true if you own a large block of stock and can arrange a vote to remove the directors. Once the turkeys take control of the board, they tend to do whatever
they can to postpone or cancel Thanksgiving.

If there is a chance of rescuing the situation, you need to act fast and ruthlessly. The fact that you are in this loss situation means that things are already really bad, and so you should not worry about hurting people’s feelings, or being perceived as being a bit of a bastard. You need to identify where the cancer is, and remove it. As quickly as possible.

Make sure you seek advice from outside the firm. This is especially true of legal advice. Your company engages a law firm. The lawyers operate on behalf of the company. Even if you have been working with them for years, the lawyers will follow the money. If the board engages them on behalf of the company in a way that will disadvantage you, you are cut loose. So make sure you engage another firm – paid for by the company – to review the situation as quickly as possible.

Ultimately, most control situations end up with the innovator / entrepreneur losing their company. And in doing so, their livelihoods, their friendships, their sense of self-worth, their income and their future wealth. This does seem to be the evil side of creative destruction, as the creators lose out to the… (how best to say it without sounding embittered… which I am not… 😉 vultures (?).

Once it has happened, the best and most practical advice seems to be to give up. Honestly. Sadly.

The reality is that fighting costs you a lot of money with little to no chance of success. The organisation has a lot more mass than you have as an individual, and this mass – that you helped create – can and will be used against you if you try to disrupt its new path.

I have spoken to many tech entrepreneurs and most take months to get over the personal trauma. You rotate through emotion after emotion: bewilderment, disbelief, anger, vengeance, puzzlement, sadness, grief. Most of us come out the other end, a little damaged but wiser for our next venture. Some do not.

For myself, I have chosen to do the impossible. I have chosen to fight my Surreal Journey. I can do so because in Phase 1 I structured the company and my shareholding so that I owned massive stake in the company, 71% on IPO, and 47% at time of writing. By taking on money very late in the company’s evolution, I retained a lot more control of the capital structure and my board.

Clearly I made mistakes, the key one being managing my Board. But as I own an effective majority of stock in a public company, and would have a 99% chance of winning any vote in my favour, I can take risks with my approach that other investors could not take.

I also have a bizarrely logical take on my financial situation. I am used to having no money, having been in debt, deep debt, for most of my life. As all my assets are basically Imaginatik stock, I either have a lot to lose (if the company survives this ‘bump’), or the directors have driven the company into insolvency and there is nothing left anyway. So if I lose, I start again. And if I win, I win big. It’s not personal – it just looks like it from the outside.

Hopefully this post will help you on your journey. As always, thanks for the contributions – keep the advice and stories coming.

Mark Turrell
Founder, Imaginatik plc

US: +1(617)4702692
EU: +44 7971 023289
Twitter: @mark_turrell

Sent from my iPad


  1. The Surreal Journey – Rationale for NAME & SHAME | Mark Turrell - Changing the World... - October 13, 2011

    […] Let other entrepreneurs know that they are not alone when bad things happen – and point them in the direction of help they can get (see my Lessons for Entrepreneurs – Part 1 & Part 2) […]

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