Dear SaaStr: What Happens if One Founder Wants to Quit When the Startup Has Just Raised VC Funding?

This, unfortunately, is more common that you might think.

First, be completely upfront with your investors immediately. As horrible as this is, it’s not the first time. Let them know, and let them know you are working on it.

Basically, you have 2.5 options:

  • Find a replacement “founder”. While this isn’t literally possible, by that I meant someone who can operate at a very senior role and carry the founder-level emotional and leadership role. If you have a few million in the bank, your vision is interesting, and you are charismatic — you can figure this out.
  • Fake it for a while. This really is the 0.5 option and doesn’t really work for too long. But sometimes, you can fake it (have the co-founder hang around for a while, at least nominally) until you can find his/her replacement, see above point. Sometimes this is better than the founder just leaving that day. Sometimes it’s better for everyone to see a slow disengagement rather than an immediate departure.
  • Return the capital (or I guess, try to engineer an acqui-hire). If you are unable to make it without the co-founder, and unable to recruit a team to replace him or her — give back what’s left of the capital. My guess is this isn’t the right option here b/c you wouldn’t have gotten the capital in the first place if there wasn’t something there beyond just this co-founder. But if you can’t make it happen without him or her, let the investors know you want to return what’s left of their capital.

This does happen. And it’s your fault for picking the wrong co-founder. At least, it’s your fault too by definition.

Go find someone better to replace him or her. That’s your job. Or better yet, since you have a few million in the bank … go find 2 or 3 better people to replace this mistake.

A related post here:

Dear SaaStr: As a Co-Founder, When Do You Know It’s Time to Quit?

(see ya later image from here)

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