May 15, 2012

Being Ousted As Founding CEO Is A Rite Of Passage

I’m introducing a new feature of my blog called “Dear VCDave.” I advise many entrepreneurs and each week I receive a number of practical, real-world questions. These are day to day operating issues, from “The investors are replacing me as CEO, what’s your advice?” to “My co-founder is moving to another city to be with his fiancee, what’s the best way to handle?”

While I’ve traditionally shared the answers to these questions with those asking them directly in emails and phone calls, a number of entrepreneurs have asked that I share these questions and answers in a format others can learn from — here they are.

DEAR VCDAVE: My investors are replacing me as CEO. What’s your input on that?
– Ousted CEO

DEAR OUSTED:
Congratulations! Consider it a rite of passage. If it makes you feel better, many great entrepreneurs have been ousted as CEO–Steve Jobs, for one. Getting fired sucks. It’s even more painful when it’s your baby, a company you created from nothing.

It’s natural to question yourself and wonder what the investors thought was missing, regardless of what they say. Maybe they thought you couldn’t raise money. Or that you weren’t scaling with the company’s growth. Perhaps they want to bring in someone of their own. Or they just have bad judgment.

You could, of course, fight your investors on the decision (see: Yahoo). You might win, but you’d better have some other investors lined up. More likely, you and they will destroy the company and they’ll end up keeping what’s left.

You’ll have time for soul-searching later. It’s probably a mix of many factors, some having to do with you, some having to do with the investors, others having to do with the situation. Don’t let it get to you. Stay focused. Focus on keeping the business running. Sort out your equity and near-term compensation. Figure out your go-forward relationship with the company. Be helpful with the new CEO on-boarding process.

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