Dear SaaStr: How Do You Keep Yourself From Getting Fired as a Founder CEO?

First, note it isn’t easy to get fired as a founder CEO.  Especially if you haven’t raised all that much money.  I’ll leave the legal and contractual answers to others. But it’s tough to be fired if you control the majority of the board, voting shares, etc.

More importantly though, the answer to me is transparency + don’t run out of money.

The last thing 98% of boards want to do is fire a CEO. It’s way too much work, and way too risky, to try to find someone new to come in. That won’t know the business, the customers, the codebase, etc.

And everyone knows startups are tough, and have ups-and-down.

  • Where boards get so nervous as to want a fire a CEO is when the bad news is a big and potentially fatal surprise. Missing a quarter is tough. It happens all the time, though. But when a CEO tells you everything is Daisies and Unicorns, going great, and then you get an email later saying the quarter was missed hard … that creates some panic.
  • Similarly, many founders hide from bad news. They stop sending out investor updates for a while. They hunker down. That’s natural. And a terrible idea. Investors are prepared for bad news. Share it as soon as you have it. Actually, share it as soon as you sense it.
  • Finally, the worst bad news to hide is that you are running out of money. Don’t hide the burn rate. Share your “Zero Cash Date” every month. More on that here: Knowing — and Sharing — Your Zero Cash Date – SaaStr Don’t run out of cash a lot faster than you’ve led your investors to believe. That freaks everyone out. Then, they feel like they have to make a change. Even if that’s a bad choice — there’s no better choice.

So my quick tips:

  • Send out a monthly investor update, every monthly, ideally the first week of each month. It’s OK to send a “Flash” update that is draft, and then follow with the final numbers later. Better to send a 95% complete update on Jan 1 on the the last year, than a 100% accurate update on March 31 …
  • Share your top 2-3 concerns in each board meeting, along with the top 3 highlights. Just put them out there, so everyone’s tracking them.
  • Share bad news quickly, and really, before it happens. As a founder, you know. You know when you’re over your skis. You know when the burn is too high. You know when that fancy VP of Sales you hired isn’t going to work out. You know. So share it early, before anyone else can even see it. That builds more trust than you can imagine.

As Olivier Pomel, founder CEO of Datadog put it — run toward bad news.

That’s your best insurance.

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