Unlike in private equity, an early-stage venture investment is a bet on the founder. If an early advisor, IP holder, or previous investor holds significant control, it creates friction and hinders the CEO's ability to execute. QED's experience shows that these situations are untenable and should be avoided.

Club Penguin's co-founder warns that accepting VC money creates immense pressure to become a billion-dollar company. This often crushes otherwise successful businesses that could have been profitable at a smaller scale, making founders worse off in the long run.

Beyond product-market fit, there is "Founder-Capital Fit." Some founders thrive with infinite capital, while for others it creates a moral hazard, leading to a loss of focus and an inability to make hard choices. An investor's job is to discern which type of founder they're backing before deploying capital that could inadvertently ruin the company.

When a company like Synthesia gets a $3B offer, founder and VC incentives decouple. For a founder with 10% equity, the lifestyle difference between a $300M exit and a potential $1B future exit is minimal. For a VC, that same 3.3x growth can mean the difference between a decent and a great fund return, making them far more willing to gamble.

The rise of founder-optimized fundraising—raising smaller, more frequent rounds to minimize dilution—is systematically eroding traditional VC ownership models. What is a savvy capital strategy for a founder directly translates into a VC failing to meet their ownership targets, creating a fundamental conflict in the ecosystem.

A universal ownership target is flawed. The strategy should adapt to a company's traction. For rare, breakout companies with undeniable product-market fit ('absolutely working'), a VC should take any stake they can get. For promising but unproven ideas ('could work'), they must secure high ownership to compensate for the greater risk.

A frequent conflict arises between cautious VCs who advise raising excess capital and optimistic founders who underestimate their needs. This misalignment often leads to companies running out of money, a preventable failure mode that veteran VCs have seen repeat for decades, especially when capital is tight.

An investor's power over a portfolio company is fundamentally limited and primarily negative. While a VC can block a founder's actions, such as through board approval or withholding capital, they cannot force a founder to take a specific path, even if it seems obviously correct. The role is to advise and assist, not to command or execute.

Granting a full co-founder 50% equity is a massive, often regrettable, early decision. A better model is to bring on a 'partner' with a smaller, vested equity stake (e.g., 10%). This provides accountability and complementary skills without sacrificing majority ownership and control.