Surprises me this is not the top voted answer. After years in this industry, I have zero empathy for startups and VCs, and all the empathy of the world for employees. Keep him.
Most of us do not go to work to warm the seat in exchange for paycheck and poor performers are devastating for morale. It's difficult enough to manage how people perceive themselves with relation to others and their compensation and you do absolutely no favors to anyone with making this even more complicated by having a visibly incompetent employee being over-compensated.