Nov 20, 2023 · 40m · founders-journal
Avoiding an OpenAI Fiasco by Successfully Building Your Board
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In this episode of Founder's Journal, Alex Lieberman and serial founder Brett Adcock analyze the sudden firing of Sam Altman at OpenAI to deliver an actionable masterclass on startup board construction, corporate governance, and protecting founder control.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Alex holds 27.1% of the talking time here. How this is scored →
Alex as informed peer 3.3 Guest teaching 5.4 Guest disagreement 2.3 Alex pushing back 0.5
speaking balance: gold is Alex, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:30 Denouncing independent directors
Brett forcefully rejects the standard governance model of independent board members, calling their lack of skin in the game appalling and disgusting.
Hardest push from Alex ▶ 13:34 Probing seat count versus voting powerAlex politely challenges the premise that board seat count is what matters most, contrasting it with dual-class supermajority voting structures like Mark Zuckerberg's.
Biggest teaching moment ▶ 36:11 Explaining services requirement clausesBrett educates Alex and listeners on the hidden trap where losing employment automatically strips a founder of their common stock governance and board appointment rights.
Alex holds their own ▶ 2:18 Dissecting OpenAI's unique governance setupAlex displays command of the complex legal and structural mechanics behind OpenAI's hybrid non-profit/capped-profit LLC structure and board composition.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Alex as informed peer | Guest teaching | Guest disagreement | Alex pushing back | Why |
|---|---|---|---|---|---|---|
| Deconstructing OpenAI's Corporate Structure and Altman's Ouster | 6 | 1 | 1 | 0 | Alex opens with an extensive and detailed factual breakdown of OpenAI's corporate structure, cap table dynamics, and recent boardroom events. Brett listens and agrees without any friction. | |
| The Inherent Conflict Between Founders and Risk-Averse Boards | 1 | 6 | 3 | 0 | Brett delivers a long masterclass on why boards are inherently risk-averse and how founders consistently get ousted across tech history. Alex listens silently, acknowledging occasionally. | |
| Mastering Board Seat Allocation and Executive Hiring Authority | 3 | 6 | 2 | 1 | Brett breaks down executive hiring and firing powers, common seat negotiations, and board expansion dynamics across venture rounds. Alex asks an inquiring clarifying question regarding seat counts versus voting power. | |
| The Hazards of Independent Board Members and Large Boards | 3 | 7 | 4 | 1 | Brett aggressively criticizes independent board members as risk-averse actors with no skin in the game who damage companies. Alex acts as an attentive sounding board, framing questions to allow Brett to elaborate. | |
| Leveraging Supermajority Voting and Dual-Class Stock Structures | 3 | 6 | 2 | 1 | Brett details dual-class share structures and 10:1 supermajority voting rights, explaining why both board seats and voting leverage are necessary. Alex asks whether early-stage founders should realistically try to negotiate for this. | |
| Vetting Board Members and Building Unshakeable Alignment | 2 | 6 | 3 | 0 | Brett explains the strict vetting required for board members, citing Elon Musk putting his brother on his board and calling out unhelpful investor archetypes like Vinod Khosla. Alex validates the perspective fully. | |
| Navigating Preferred Rights, Protective Provisions, and Investor Leverage | 4 | 6 | 2 | 1 | Brett details preferred rights, NVCA standard terms, and protective provisions that can override founder authority during down rounds. Alex synthesizes and prompts Brett on how early founders can maintain leverage in negotiations. | |
| Closing Hidden Loopholes: The Services Requirement Trap | 4 | 5 | 1 | 0 | Brett introduces the services requirement trap where ouster strips governance rights, and turns the question back to Alex regarding Morning Brew's origins. Alex candidly shares his own early-stage naivety. |
Statements from this episode (15)
Lieberman: Microsoft Learned of Altman's Ouster One Minute Before Announcement
“To cause the board to make this move, a move that Microsoft, OpenAI's biggest investor, found out about one minute before the press release and ended up losing fifty billion dollars in market cap from as their stock continued to trade.”
Adcock: Risk-Averse Boards Directly Conflict With Early-Stage Startup Needs
“Generally the board is a very They're frightened of risk. They're frightened of getting sued. They're frightened of told the wrong thing. Like, a lot of times doing nothing is easier than doing something that might be very aggressive, that'd be hard, and a lot…”
Adcock: Figure's Initial Board Gave Him Control of Three Seats
“When I set up the business, like here at figure, like I set up basically three seats. For myself. So two for common shareholders, which I'm a majority of the common. So the common get to vote on two seats. I'm the majority of that being the, you know, the foun…”
Adcock: Independent Board Members Make Terrible Decisions Because They Lack Equity
“So you have like all these folks that have like no stock and no skin in the game coming in, trying to be impartial that are making the worst decisions I've ever seen. Like, it's just a fundamental issue with public companies. I fundamentally believe independen…”
Adcock: Retooling Archer's Board for NYSE Independence Rules Was a Mistake
“I took my company public on the New York Stock Exchange. You have to have the majority of all your board seats be independent. So I had to basically retool my whole entire board at Archer when I went public. And it was a, you know, I made like a, basically loo…”
Adcock: Figure and Archer Used 10-to-1 Supermajority Founder Voting Stock
“What I've done at Figures here is I have a special class of stock, and I had this work at Archer that is super majority. So my stock is has a 10 for one vote versus the common and preferred. And that's sitting in the special share class of common stock.”
Adcock: Founder-Led Companies Require Both Board Control and Supermajority Stock
“You really need the board control in terms of, like, number of unique votes, and then you need the majority of votes, and then you really need the supermajority to be a true founder-led business.”
Adcock: Roughly 50 Dual-Class Companies Went Public in Two Decades
“Roughly 50 companies went public last like two decades that had this.”
Adcock: Everyone Moving Fast at OpenAI Is Going or Gone
“Everybody that's moved fast at OpenAI is gonna go, or is gone. Like, and they'll be left with folks that move slow, want to think about safety and all this stuff”
Adcock: Truly Vetting Board Behavior Requires a Ten-Plus Year Relationship
“I think if you haven't had a relationship with somebody for like 10 plus years, you're never really going to truly understand how they're going to behave in certain instances on a board like this, to be really frank.”
Adcock: A Board Coup Will Never Happen to Altman or Me Again
“Like this will never happen to Sam ever again. This problem that we're talking about here will never happen to me going forward again.”
Adcock: OpenAI Will Suffer Unrecoverable Speed and Brand Damage
“And now open AI is going to have a
Massive issue with speed and brand and everything else, and it's going to be unrecoverable.
They're never going to be a recover from what happened.”
Adcock: Hidden Contract Clauses Can Strip Fired Founders of Voting Rights
“Basically like, you know, like layman's terms, if you get fired, you lose, you can basically lose your common votes for governance purposes. These are kind of hidden in your transaction agreements. So the investor rights agreements, right at first refusal, co-…”