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 99%+ of VCs and 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:
- Stealing
- 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.
- Don’t spend more than everyone agreed. And make sure everyone really agreed.
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.
More here:
going distance image from here
