TLDR:
Key Points:
- Sequoia asked VC partner Mike Moritz to step off the board of Klarna, leading to a board-level investor change.
- When asking a VC to leave the board, check documents, consider proportionality, understand egos, and assess who they represent in the investor base.
So a little ways back a bit of a Board of Directors soap opera broke out. The Information broke the story, with Sequoia asking its ex-active partner and leader Mike Moritz to step off the board of key portfolio company Klarna in favor of an active partner, Matthew Miller. What exactly happened we may never know, but clearly it didn’t sit well with the CEO of Klarna or Moritz. Within a few days, Miller was off the board himself, and Moritz stayed put.
Now I haven’t been through this exact scenario myself, but I’ve been through and observed board-level investor changes multiple times over the years. The most common scenario is when you raise growth rounds, and in essence, to make room for a board seat for growth investors, seed investors are asked to give up their seat(s). Another scenario is like the Sequoia example above when a VC partner moves on from an active role or from the fund.
A few learnings, and then some action items:
- Check the documents to see if you have the right to remove a VC from the board and who has the right to replace them.
- Consider proportionality and assess the importance of board seats to VCs based on egos and investor representation.
When it comes to gracefully asking a VC to leave your board, the article suggests taking action slowly, starting the conversation early and respectfully, not forcing the decision if possible, tying it to the next round of funding, and asking when they would be comfortable stepping back as an “Emeritus” member of the board.
