How to Avoid Getting Fired by Investors

Strategies for securing a founder's role in venture fund backed companies

Q.  I am launching an online company and recently spoke to a venture capitalist about my new business. This conversation opened my eyes to the ways our company can accelerate growth with the help of more working capital. Yet, my fear is that VCs will one day fire the founders. If I take in venture capital, what can I do to protect my job as CEO of my company?

A.  One of the reasons why I like hanging out with entrepreneurs is for their optimism and energy. Entrepreneurs are not talkers, but doers. They like to create. They like to build. And, they are always out to win.

You can find this same goal-intense attitude in sports. Most athletes would say they have dreamed of scoring game winning touchdowns or pitching a perfect game in the World Series. To them, success is not just about winning; it's about contributing to the win in a meaningful way.

It is completely understandable that you want to be the player who leads your company to victory. But just as there are times in sports when the beloved quarterback is pulled from the game in favor of fresher talent, sometimes the demands of a fast-growing company outpace a startup entrepreneur's capabilities.

So your decision to accept VC funding can, in part, be based on your ability to be a good sport. Can you sacrifice personal glory for team glory? Can you willingly step aside for the good of the company?

If it is more important to you to always be the quarterback of your team, then I'd say find other ways to fund your company's growth. If success means owning shares in a venture-game winning company that you founded, then I'd say you and your investors' goals are aligned. The name of the game is all about making money.

As all entrepreneurs are fighters, here are four ways to keep the top spot in a venture funded company:

1. Do the CEO's Job Well.
   VCs don't bench top performing CEO's who "make their numbers." I've found that many rookie entrepreneurs get into trouble by doing what they like to do, not what they need to do as CEO. If you love writing code more than building a growing organization, you might be happier in a CTO role after site launch.
2. Surround Yourself with Strength.
   No quarterback can ever make it to the Super Bowl without a superb team. Actually, a great team can protect the quarterback from getting sacked and make it easier to execute game strategy. This means hiring people who are smarter than you, have more experience than you, or excel in areas where you are weak. This is best way to stay in the game.
3. Pick Your Board.
   As the CEO of a venture funded company you will report to a board of directors that will include one or more representatives of the venture fund. I encourage entrepreneurs to select at least two well-respected non-family directors before approaching venture funds. Why? Hopefully these members will be more loyal to the company's interests rather than the venture fund's interests.
4. Get an employment contract.
   Employment contracts that are negotiated prior to venture funding tend to be more lenient to founding executives. However, if the contract is "abusive" in terms of compensation or performance measures, VCs will either renegotiate as a condition of financing or simply walk away.

My recommendation to all founding CEO's is to focus on getting the company to its next operating milestone. At that point consider what skills will be needed to reach another set of goals. If you can't carry the ball to this goal line, hand it off to someone who can. Everyone wins with this game plan.

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