Founders of venture capital worthy startups – even when their companies thrive – seldom take the company all the way home themselves. At some point in the development of the business they make room for someone else in the CEO chair. When and how this happens is, more often than not, the subject of great angst, for investors and founders. Herewith, two takes on the issue of founder redeployment.
The Angry Entrepreneur.
Ok, I may not be Bill Gates, but that doesn’t mean it’s not my vision and my sweat that’s what my company is all about. Sure, there’s going to be a time when I need to bring in more firepower, but who is the best judge of that? Some finance wizard “adding value” to a half dozen portfolio companies when he’s not wining and dining his own investors? Or me, the guy who is living and breathing my business 24/7/365? And ditto re what kind of help is needed. When I said, before taking your money, that I would make room for new talent as necessary to grow the business, I meant it. But I never said that I’d let you make the call as to when that was, or who was needed. If, as the VCs always say, they are investing in teams, not deals, they should let those teams – my team – make the big decisions. Including the decision as to when and if the team needs new leadership.
The Angry Investor.
You’re right. Of course you’re no Bill Gates, or Scott McNealy, for that matter. Few people are. Yes, we invested in you more than your deal. But that’s not to say our crystal ball wasn’t cloudy: we didn’t fool ourselves (or you) into thinking we knew how either you or your company would develop over time. Truth be told, we were not even sure we were making a good call – more often than not, hindsight would suggest we didn’t, but that’s another story. And finally, we did discuss with you, before you took our capital, that there might come a time for a change in leadership. If you want tenure, you should have been a professor, not an entrepreneur.
All of that said the bottom line is this: when you took our money your company became our company. Not just ours, but yours and ours. We negotiated a deal that gave us certain rights, and one of those rights was some authority over how the company would be managed, and who would be doing the managing. And, of course, we didn’t say we would keep putting money if we didn’t like what we were seeing. If in retrospect you don’t like the deal you negotiated, well, live and learn. As to who knows better when it’s time for new leadership, a dispassionate investor who has been intimately involved in dozens of deals like yours over the years, or an entrepreneur so immersed in his business that he probably hasn’t spent a waking hour without thinking about it since he first had the vision, well, I’ll take the dispassionate guy with the money. And that would be me.
So, who is right? Should founders be master their own fates, or should investors have the final authority? Having been both a redeployer and redeployee myself, I am looking forward to hearing from both sides of this divide. What I will say is this: most entrepreneurs and investors would be better off vetting the issue thoroughly before doing a deal – not that that will guarantee a happy ending.