How Steve Jobs Lost Control of Apple—and What Founders Can Learn

In 1985, Steve Jobs, the visionary co-founder of Apple, was ousted from the very company he built. The story of his firing has become a cautionary tale for startup founders, especially those navigating venture-backed companies. Losing control of your company is not uncommon, and in some cases, it’s a direct consequence of decisions made early in the company’s journey.

This post dives into what happened to Jobs from a legal and governance perspective and offers actionable lessons to help founders avoid a similar fate.

What Happened to Steve Jobs?

Corporate Governance and the Role of the Board

Jobs’ ousting came down to the authority of Apple’s board of directors, which oversees a company’s management and has the power to hire or fire executives. Despite being a co-founder and chairman, Jobs was subject to the board’s decisions.

The Turning Point

Jobs recruited John Sculley as Apple’s CEO in 1983, believing Sculley’s business expertise could help Apple scale. However, tensions arose when the Macintosh, Jobs’ passion project, struggled commercially. The board sided with Sculley, believing Jobs’ leadership style was harming Apple’s growth.

In a critical board meeting, Jobs was stripped of his operational role. While he remained chairman for a time, he ultimately resigned, leaving Apple behind.

Why Did Jobs Lose Control?

The key reason Jobs was ousted was his lack of a controlling stake in Apple. Over multiple funding rounds, Jobs diluted his ownership to raise capital for Apple’s growth. At the time of Apple's IPO in 1980, Jobs owned approximately 14% of the company, which was diluted to around 12% shortly thereafter. By 1985, venture capitalists and institutional investors held significant influence over the board.

This is a common scenario for founders of venture-backed startups. As you raise capital, you dilute your ownership—and potentially your control.

Lessons for Early-Stage Founders

1. Plan Your Dilution
   
   • To maintain control, plan your fundraising strategy carefully. Aim to limit dilution to 10–20% per round and preserve majority ownership from Pre-Seed to Series A.
   • By Series B, losing majority ownership is normal, but you can still protect your influence through smart planning.
   • There are only two ways to minimize dilution: raise less money or at a higher valuation. No magic here, unfortunately.
2. Pick a Term Sheet with Founder-Friendly Terms
   
   • The first priced round you take will set the precedent for all future rounds. For example, if you accept a seed term sheet with two investor directors, you might lose control of the board as early as Seed!
   • Future investors will typically demand the same (or better) rights than earlier investors. Setting founder-friendly terms at the seed stage is crucial.
   • If you have a choice, do not accept a term sheet that causes you to lose control early on. Instead, consider raising via SAFEs (while monitoring dilution carefully) until you receive a term sheet with terms that protect your position as the founder.

The Takeaway

Being ousted like Steve Jobs is rare, but it’s not impossible. Founders often lose control due to early decisions around governance, term sheets, and equity. By planning your dilution, negotiating founder-friendly terms, and understanding the long-term impact of your fundraising decisions, you can protect your role and your vision for the company.

Call to Action

If you’re preparing to raise outside capital, check out our packages that will help you prepare: 

• Startup Due Diligence Package
• SAFE Financing Package
• For a fixed priced Seed round or Series A round, apply to work with us here.

These tools are designed to help you prepare for fundraising, protect your vision, and avoid costly mistakes.

Disclaimer: This post is for informational purposes only and does not constitute legal or tax advice. Consult professionals for tailored guidance.

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