This ad will close in

How to Not Get Fired

Being the CEO of a venture-backed company risky. Here's how to keep your job.

Here are a couple sentences you probably don't want to hear if you're the CEO of a startup sharing a meal with your lead investor: "I don't think things are working out. The board has decided that we need to replace you as CEO."

Clearly, you needed to deal with things a long time ago.

When things aren't going well in a startup, the pressure on the CEO can be intense. Great CEOs open up in this situation, involve their investors constructively in the context of the business and elicit their help. This takes a lot of work in an already difficult situation, but it is critical to prevent an all-or-nothing scenario where the CEO wakes up one day and realizes he's lost the support of his investors.

As an investor, I have a simple mantra about this: "I support the CEO until the moment I don't. At that moment, it's my responsibility to address it." Now, "address it" doesn't always mean fire the CEO; it can mean a range of things that include getting back to a happy place where I once again support the CEO. However, my approach isn't uniform. Some VCs are excellent at expressing their concerns about performance; others aren't. The worst is the passive-aggressive VC who is always agitating behind the scenes but never willing or able to confront the CEO directly.

But this isn't really about the VC--it's about the CEO. Regardless of ownership percentages, the dynamics of your company change once you take VC investment. In some situations, the entrepreneur maintains control over whether he can continue to be the CEO--but this is atypical. In most VC-backed companies, the board or a major investor can remove the CEO if they want. As a result, it's the CEO's responsibility to make sure that the communication lines are always open and clear.

When confronted with this lunch conversation, the first thing a CEO should find out is if this decision has been made, or if he is dealing with an opinion by one of the investors. If the decision hasn't been made, the CEO should take the discussion seriously, not be defensive and view it as a first step toward either leaving the position or getting back the support of his investors and board members. Like in any difficult situation, direct communication always works better. The behavior of the CEO--in the moment--will have a huge impact on the outcome.

If the decision has been made, there are two approaches: Work with the investors and the board on a smooth transition, or go down fighting. In my more than 20 years of entrepreneurial experience, I can't think of a situation where going down fighting resulted in a positive outcome for anyone. The damage done to the company when everyone thrashes around is almost always worse than sitting down and figuring out how to transition things as gracefully as possible.

Getting fired shouldn't be a surprise. CEOs of entrepreneurial companies should be assertive about getting feedback from their investors on a regular basis. Go to them; don't wait for them to come to you. In the same way that you evaluate your direct reports on an annual basis, have the board evaluate you on an annual basis. This will help prevent you from being surprised at lunch one day.

Brad Feld has been an early stage investor and entrepreneur for more than 20 years. He is a co-founder of Foundry Group , an early stage VC firm. Brad blogs at feld.com and askthevc.com , runs marathons and lives with his wife and two golden retrievers in Boulder, Colo., and Homer, Alaska.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the September 2009 print edition of Entrepreneur with the headline: How to Not Get Fired.

Loading the player ...

Shark Tank's Daymond John on Lessons From His Worst Mistakes

Ads by Google

0 Comments. Post Yours.