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Startup Boards Aren't Holding Founders Accountable, VC Warns

By William Vogeler, Esq. on February 15, 2018 | Last updated on March 21, 2019

To hear Bill Gurley tell the story about inside the boardroom, it sounds like venture capitalists are afraid.

They tip-toe around the conference table, trying to avoid the elephant in the room. They don't want to ask the founders to, gulp, "perform financially."

"Our business has gotten super competitive," Gurley said at a technology conference. "What the venture capitalist is afraid of is losing the next big one."

Fiduciary Responsibility

Speaking to bankers at the Goldman Sachs Internet and Technology Conference, Gurley said Silicon Valley board rooms sound like applause. Everybody is clapping for the founders and avoiding the bottom line.

It's not like the old days, he said, when venture capitalists stormed into board rooms and demanded fiduciary responsibility. "If you get a reputation like that, you won't win the next deal," the Benchmark partner said.

The venture firm knows what it's like to push back against a Silicon entrepreneur. The early investor helped oust Uber founder Travis Kalanick last year amidst claims of mismanagement and sexual harassment.

The company also sued Kalanick for breach of fiduciary, breach of contract and fraud. Benchmark recently dismissed its case as part of a deal when SoftBank investors put about $9 billion in Uber, ending one of the "biggest VC-founder disputes in history."

FOMO

Following Gurley's comments at the tech conference, TechCrunch reported that FOMO -- the fear of missing out -- used to permeate the Silicon Valley.

"When on-demand was exploding and companies like Shyp and Luxe were fetching sizable valuations with large rounds of funding, there was a flurry of activity from investors that seemed to be jumping quickly to the next company with a lot of leeway for founders with ideas that made sense in theory," Matthew Lynley wrote.

Things have changed since then, of course, and some tech darlings are being held more accountable. After Kalanick testified in the Waymo v. Uber, for example, Uber agreed to pay Waymo a quarter billion dollars to settle the case.

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