Dear SaaStr: What Are Some Ways to Keep Investors From Firing You?
Founders tend to worry a bit too much about getting fired — and not enough about transparency.
Yes, it does happen. And sometimes, it’s very dramatic, see e.g., Travis Kalanik at Uber.
But most investors absolutely do not want to fire founders. Because:
- It usually increases risk. It’s very hard to find anyone that knows the business as well as the founders
- The vast majority of SaaS companies that IPO still have their founders as CEO. More on that here.
- Most investors don’t have a better replacement at hand. If you are going to fire a founder, you sure better be able to source a better CEO. And ideally, have them on hand right now.
So generally, VCs only fire founders — assuming they have the legal / contractual rights to — when they are sort of forced to:
- Deep toxicity
- Sexism and other related issues
- Burning up all the cash with no ability to fundraise further
- Lying on important things
How do you avoid the above? A few thoughts:
- Have the board approve your salary and all key expenses. No surprises.
- Send out monthly investor updates with full metrics. No surprises.
- Share the Zero Cash Date and burn rate every month. No surprises.
- Don’t run out of money. No surprises.
Mostly it boils down to … No surprises.
VCs are wired to take bad news, and even lose money from time to time. It’s repeated surprises that spook folks.
going distance image from here