Does having a controlling interest in a startup offer investors additional protection?


It reduces the risk for the entrepreneur but I also came across the complementary view that it might offer the angel/VC an added level of protection. How does that work?

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asked Apr 19 '13 at 01:10
186 points
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2 Answers


This is a common concern for entrepreneurs. However, virtually nothing in a start-up company is handled by majority vote. If you are at a point where you have to disagree with 49% if your stakeholders you're company is probably in some serious trouble.

The investors can force an unpleasant liquidation of the company if they have a majority share. This is extremely rare. In all my years as an entrepreneur, investing and teaching I have never once seen a scenario where disagreements were settled by a vote or someone exercised their majority power- not once.

answered Apr 24 '13 at 01:34
Mike Moyer
284 points


Remember that a board (aka investors) is supposed to provide support, advice, and perspective to the company. They want to make money which only happens if the team is successful.

When there are "significant" changes to the direction of the company, it should be brought to the board, discussed, and agreed upon but that doesn't always happen.

But at the end of the day, the real "controlling interest " of a company is whoever runs the day to day operations. They can hire, fire, commit to projects, kill projects, and sign agreements. If there's not some level of mutual trust, the rest doesn't matter.

answered Apr 24 '13 at 02:28
Casey Software
1,638 points

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