Apparently, 50% of Founders/CEO get fired in startups within the first year!
Barnaby Federer of the WSJ, take on this is simple and clear.
1. Don't recommend someone for a board set until you are satisfied that they can make an actual contribution
2. Have the guy work as a consultant until he makes a tangible contribution
Why do VCs do this?
- They generally prefer "their" people at the helm. Nothing personal.
- Also, people who are generally "ruthless" (eg. lacking in moral fibre) generally end up being closest to VCs the longest.
Barnaby Federer of the WSJ, take on this is simple and clear.
“If you ask a VC what value they add, and you get them after a few drinks, they’ll say, ‘We replace the CEO’ “,Here's how it plays out (source):
he said. And that, he indicated, does not vary with the economic climate.
- Usually happens over a friendly lunch.
- VC mentions about a new person who can benefit the company greatly through his connections or industry experience.
- (VC) Explains this person is not available to serve on the management team, he could probably help out as a director.
- Would mean enhancing the board but this "star" guy deserves to be on it.
- Founder, who wants to please his VC - reluctantly agrees
- The new guy ends up becoming the leverage the VC needs to restructure the board
- Enter the New CEO
1. Don't recommend someone for a board set until you are satisfied that they can make an actual contribution
2. Have the guy work as a consultant until he makes a tangible contribution
Why do VCs do this?
- They generally prefer "their" people at the helm. Nothing personal.
- Also, people who are generally "ruthless" (eg. lacking in moral fibre) generally end up being closest to VCs the longest.
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4 comments:
Nice one! I have a few questions - doesnt the founder have any say in who is CEO? And why not to get money from multiple VCs to prevent this? Also, I believe it was you who pointed this one out to me.
Why don't you set this up as blog.mobiporter.com? I can walk you through that if you want!
A founder only has a say, while it maintains control of the Board (of Directors) ie.. it has a say over the mgmt of the company. In most cases, VCs primary objective is ROI - along the lines of pecuniary, and organizational development (ie. how quickly can I offload this co to someone else and maximize my return). They can't really go around saying that. Otherwise, no one would take their money. The "discreet" way to do it, is via the Leadership of the company - the CEO. As long as the CEO is not "theirs", they will always get a push-back (at the least, or be perceived to be non-aligned with the "founder's vision" with such ideas of M&A).
As the saying goes, there are "no free lunches".
Re: Multiple VCs
- my earlier point still holds. In fact, it gets reinforced, as each VC intrinsically, wants the same objective.
Re: Lower entry costs
This is true for initial setup and break-even /profitability. Its not true for scaling issues that comes with providing sales and support. That still can not be done via the tech/open-source/etc - even Google has a teams of people all across the globe that essentially are data-feeders of metadata for its various services.
Re: blog.mobiporter
This one is generally a mixup of my personal blog and stuff related to mobip - hence its crazy name. So, am a little ambivalent on whether I should make it blog.mobiporter.com. To me, it would give it a "blog representing the company"-type of feel to it. Not sure, if that is what I want. I want the liberty of putting up some crazy stuff on here once in a while and not worry about PC.
I actually have/participate-in 3 blogs. Other than this, have one for the edu stuff, a private one for our ideation (is that even a word?) and one for PIB-ing (Psuedo-Intellectual BS).
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