Dear SaaStr: What Are The Chances of a Startup CEO Getting Fired?

Fairly low. But once you raise venture capital especially, it’s something to at least understand better.

First, let’s step back. Who can actually fire the CEO?

  • Generally, only the Board of Directors.
  • So, if you don’t raise money and bring on any outside Directors, there is usually no one who can fire the CEO, unless the other cofounders get together, vote themselves the majority of the board, and then fire the CEO. So the other cofounders can sometimes fire you, but that’s about it.
  • Even once you raise venture capital, you generally only sell so much, and give up so many board seats, in 1 or 2 rounds. After just 1 seed round, rarely do VCs have much more than 1 board seat and no control.
  • But after several rounds of venture capital, your VCs often control the board. That’s when they can fire you.

So it’s hard to fire the CEO. Personally, I’ve made about 30 VC investments (see, 6 of them unicorns, and 0 CEOs have been fired.

However, perhaps more importantly, are the 2 CEOs I’ve invested in that have decided to bring on an outside CEO, in both cases with the encouragement of the board. That’s different, and more common. Sometimes, the founder CEO comes to this conclusion 100% on their own. Sometimes, they are pushed a bit there, to move to a CTO or other role, when the company gets big and complicated.

A related post here:

How Can I Make Sure My Board Doesn’t Fire Me?

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