50% of VC backed startups fire the CEO/Founders within 1st year | Hacker News Reader

50% of VC backed startups fire the CEO/Founders within 1st year

chinastartupblog.com

29 pointsnreece11 comments

An interesting article, but I'm not sure what insight it offers over the original article it quotes so heavily from.

http://smartstartup.typepad.com/my_weblog/2008/01/the-dreade...

If you give a majority share to a VC, or they have more board seats... you should expect to move down from CEO to another position, if you don't perform.

Why is that a bad thing? If you don't like it - don't take the money. If you take the money - expect to step down if you can't hack it.

I believe the point the author was making is that it is standard practice to replace the CEO and founding management team regardless of performance. They just prefer to have their buddies at thee helm. In other words it has more to do with cronyism than business results.

I don't buy it. Why would a VC want to replace a founder that is kicking ass? If you don't make your numbers, expect to be canned. You work for the board at that point. Better yet, if you don't make your numbers - step down.

Actually, the board members have a fiduciary duty to the shareholders to maximize corporate performance.

If the CEO isn't cutting it, it doesn't matter who he is, he should be fired.

This article paints it like the purge is whimsical.

VC's are in it for the money. Mediocre CEO's aren't good for business. A good CEO way outweighs nepotism.

"Control is a one way street" -- http://venturehacks.com/articles/one-way-control

can't you negotiate that as long as you are expanding the board, that you want another spot for one of your board members for balance

What's your negotiating position at that time? Before you accept money you have alternatives, you can get by with no money, you can look for money elsewhere, etc. Once you've committed, gotten the money, hired the team, spent the money on advertising or building out or customer aquisition... your negotiating position is much weaker.

If you're going down that path, be prepared to look objectively at your own performance, and be as ruthless about the changes that need to be made as your backers will be. It's my observation that a breakdown of communications between the board and the management team is the root cause of the management being replaced.

But yes, once you accept funding it's no longer your company; you are answerable to your shareholders.

that seems backwards.

At this point you still control the majority of the company + the board. If the VC's money is gone, so is their negotiation position, since the only way for them to get their money back is for you to succeed.

As long as you control 51% of the company, you aren't required to play along in planning your down fall

Have you ever worked in a funded startup?

It's not a game of chess; it's more like a game of lacrosse where you are the only one without a mask. As an officer of the company you have a fiduciary responsibility to your minority shareholders which can override the ownership share, or earn you lawsuits you will lose if you don't go along with the boards idea of how to fulfill it. And in the meantime, you need to be hustling to make the company work. You don't have time for boardroom shenanigans if you are doing it right; and if you're doing it right you'll be part of the 50% of founder/CEO's whom forcing out would be a bad idea.

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