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When VCs Remove Founders: The Cognism Case Puts Investor Power Under the Microscope

  • Writer: Shawn Jhanji
    Shawn Jhanji
  • 2 days ago
  • 4 min read
The legal case unfolding in a London court between the founder of Cognism and five of its investors, including Balderton Capital and AVP Capital, would be notable at any time. A court hearing this week appears to have dealt an early blow to the investor defendants, according to reporting from Sifted yesterday. Whatever the outcome of the full proceedings, the case is already doing something useful: it is making visible, in public, the power dynamics that most founders never see until they are directly in their path.

The legal case unfolding in a London court between the founder of Cognism and five of its investors, including Balderton Capital and AVP Capital, would be notable at any time. A court hearing this week appears to have dealt an early blow to the investor defendants, according to reporting from Sifted yesterday. Whatever the outcome of the full proceedings, the case is already doing something useful: it is making visible, in public, the power dynamics that most founders never see until they are directly in their path.


James Isilay founded Cognism, the B2B sales intelligence platform, and served as its CEO for nine years before leaving in February 2025. His unfair prejudice petition, filed against the company and five investors including Balderton and AVP Capital, alleges that the investors orchestrated a coordinated effort to remove him from the business in which he held a significant stake. Court hearings in early 2026 heard allegations of a covert plot to oust him, including claims that investors engaged in what the court was told amounted to a concerted campaign conducted outside the normal mechanisms of shareholder governance.


The investors have denied the allegations. The case continues.


The structural dynamic behind the headline

Set aside the specific details for a moment, which are contested and before a court. The structural pattern the case illustrates is one that many founders will recognise without ever having experienced it directly.


Venture capital investment is a relationship that is deeply asymmetric, and that asymmetry is rarely more visible than at the moment a founder and their investors disagree about leadership. The legal and governance architecture of most VC-backed companies tilts significantly towards investors. Preferred share structures, board composition rights, protective provisions, and the sheer financial weight of institutional capital all create leverage that founders, however strong their equity stake, often cannot match.


This does not mean that investors are wrong to exercise control when they have it.


Founders do sometimes need to be replaced, and boards have legitimate governance responsibilities. The question the Cognism case raises is not whether investors can act, but how they act, and whether the processes used to make decisions about a founder's future are transparent, proportionate and conducted with the procedural fairness that the law of unfair prejudice is designed to protect.


What the law of unfair prejudice covers

Unfair prejudice petitions under section 994 of the Companies Act 2006 are specifically designed for situations where the conduct of a company's affairs is unfairly prejudicial to the interests of some or all of its members. They are a significant legal remedy, and bringing a petition is not a step that founders take lightly or without cost.


The fact that Isilay pursued this route, against investors of the scale and legal resource that Balderton and AVP command, says something about the seriousness of his allegations. Courts hearing these cases look at the substance of behaviour, not merely at whether formal governance procedures were technically followed. The question is whether, taken as a whole, the way the company's affairs were conducted was unfair in a meaningful sense.


The outcome of the Cognism case will have implications beyond the parties involved. A finding in favour of the petitioner would strengthen the legal position of founders in similar disputes. It would also send a signal to the investment community that courts are willing to scrutinise how governance power is exercised in practice, not just on paper.


What is changing, and who is building it

The Cognism case is exceptional in that it has reached public litigation. The more common version of this story ends privately, with a founder accepting a negotiated exit rather than spending years and significant personal resources in court. That invisible majority of founder departures is what makes public cases so significant as data points.


There are funds that are actively working to change the dynamics the Cognism case illustrates. Impact X Capital, Cornerstone VC and Ada Ventures all operate explicit investment theses built around backing founders who might otherwise be overlooked or pushed out by the pattern-matching tendencies of conventional venture. Some funds are experimenting with structural changes, including clearer board conduct standards, independent chairs at early rounds, and founder agreements that create procedural protections before disputes arise.


Tokenisation, as it matures as a capital formation mechanism, adds another dimension. If founders can raise capital from a broader pool of qualifying investors without requiring institutional VC intermediation, the leverage structure of early-stage funding changes. Not every founder needs or wants that route. But the infrastructure to support it matters as a structural alternative, precisely because it reduces dependence on relationships that can become sources of pressure as well as support.


The Cognism case is a reminder of how much still depends on trust, goodwill and informal norms in a system that has relatively few formal protections for the people who build the companies. That is changing. Slowly, imperfectly, but measurably.


Key Takeaways

  • James Isilay, founder and former CEO of Cognism, has an ongoing unfair prejudice petition against five investors including Balderton Capital and AVP Capital, alleging a covert campaign to remove him from leadership.

  • A court hearing this week reportedly dealt an early blow to the investor defendants, according to Sifted's newsletter published today.

  • Unfair prejudice petitions under the Companies Act 2006 allow courts to scrutinise the substance of investor behaviour, not merely whether formal governance steps were followed.

  • The case makes visible the structural power asymmetry that shapes most VC-backed companies and rarely reaches public litigation.

  • Funds including Impact X Capital, Cornerstone VC and Ada Ventures are building investment models designed to alter these dynamics at the structural level, and tokenisation infrastructure provides an additional long-term route to reducing dependence on conventional VC gatekeeping.


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