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RedEnvelope Dissidents get the Heisman

August 31, 2004

A follow-up to the RedEnvelope boardroom smackdown story we mentioned in early August… The gist: RedEnvelope’s founder Scott Galloway created a dissident shareholder group in an effort to wrest control of the company from the current Board, which is led by Michael Moritz of Sequoia Capital.
Not surprisingly, Moritz and his cohorts managed to Heisman Galloway and maintain control of the company at the August 27 shareholder meeting. The dissidents did, however, manage to ask some prickly questions. For example, RedEnvelope bought a $2 million software program from MultiMedia Live, a company backed by Moritz’s VC firm. Is this a conflict of interest – a clear sign of Moritz pumping the Sequoia portfolio?
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You scratch my back…
We’d say yes and no. Creating synergy (buzzword alert!) between portfolio companies is what VCs do. If done properly (and ethically), this sort of keiretsu (buzzword alert #2!) approach can be beneficial to all parties with a vested interest. But it’s for this same reason that a VC should think twice before becoming the Chairman of a publicly traded company. Mortitz should follow his own example: take a plain old Board seat at a quiet company like Google and avoid the innuendo.
Read: RedEnvelope fends off dissident challenge – [SiliconValley.com]
Read: Blood Red Envelope – [alarm:clock]

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