You appear to be factually incorrect when you say that their board is mostly Series C investors. The board makeup pre-deal was (i'm pretty sure):
David Sacks (CEO)
Laks Srini (co-founder & CTO)
Lars Dalgaard (Andreessen Horowitz - Series A)
Bill McGlashan (TPG - Series C)
Peter Thiel (Founders Fund - Series C)
Antonio Gracias (Valor Equity - Independent Seat)
Good point. But Andreessen also put a lot into the series C round. I don't have all the numbers handy to do the math on whether approx. doubling their series C interest cancels the dilution of their series A and B interest. I just kind of assumed that it did. Sorry if I am wrong.
I did find it very surprising that a16z was getting their stake increased here. They were on the board for years. Whatever happened, happened on their watch. Highly unusual.
Yes they were one of the most vocal proponents-- Marc Andreessen would often point out how the company was their firm's largest single investment
I always find it a little sketchily when both CEO and C level exec's are on the board.
CEOs are almost always on the board.
So are founders. They own a huge stake of the company. Board representation is how their interests as owners are maintained.
Why would that be sketchy?
The primary value of boards is a sanity check for the top layer of management. As an investor you want a board looking after the investors interests. You can find plenty of company's that where gutted by overly permissive boards handing out ridiculous compensation packages for example.
PS: You can compare the performance of public companies with various board makeups, it's not a meaningless topic.
The purpose of a board is to look out for owner's interests. That is not exactly the same thing as investor's interests. That is why boards aren't made up of just investors.
I never said that was their purpose, just what you want as an investor.
You can have a board focusing on balancing public good with profit, if that's what the companies charter says. But, that's probably not a great investment.
I can certainly see how investors might only want investors on the board! Screw the other owners! That would be sketchy!
You can find stations that break down like this:
CEO and CXX of company A is on company B's board.
CEO and CXX of company B is on company C's board.
CEO and CXX of company C is on company A's board.
So, yea on it's own the co-founders on the board is not a big thing. But, looking into the board should be part of due diligence.
PS: You can also see issues when VC's make up the majority of the board, but that's less common with public companies. (Let's buy up little company X that my firm invested in.)
That said, there are some assumptions in here that we need to remember are assumptions. We don't know for sure what was and was not in the disclosures. And, thinking back on the news about the actual software program, I don't remember that it "facilitated and attempted to cover blatant regulatory violations." Didn't it just run down the clock on an online course but NOT go through any material or take tests? Maybe it was not as obviously material as it seems now.