A lot has changed in the past decade. Today, the vast majority of traditional South Park / Sand Hill type VCs want the founder-CEO to go the distance, if at all possible.
Bringing in “adult supervision” a la Google isn’t part of the core Silicon Valley playbook per se anymore. Mark Zuckerberg started the change in the VC mindset, Drew Houston, Aaron Levie, and many others continued it, the Collision brothers perfected it.
Also, kicking out a founder CEO is risky. On so many levels. VCs do not want to add risk to their investments.
However, there are 3 scenarios where VCs try to still push out founders, or at least founder CEOs:
- Existential Underperformance. If the founder is burning so much cash + growing so slowly that the company cannot raise another round, the VCs may feel they are forced into a corner. If a change isn’t made, the company dies. Forcing the founder CEO out is seen as the only way to continue to fund the company. High burn rates need to deliver high growth.
- Creep Issues or other Inappropriate Behavior. Creep CEOs need to go. There is (I hope) no tolerance here today.
- Not Willing to Sign Up for Venture-Levels of Growth — but only if the investment is material. Sometimes CEOs no longer want to really “go for it” and build a decacorn. VCs do not want to fund so-called “lifestyle businesses”. If the investors have put in a relatively modest amount, they generally just check out in this scenario and focus on their other investments. But if VCs have put a lot in of money on a relative basis (e.g., 5%-10% of their fund size), they may push to bring a CEO that is willing to “go for it”.
In these scenarios, VCs will often try to bring in a new CEO.
Beyond that, there are many cases where VCs, especially larger funds, try to suggest a CEO step down and bring a more professional CEO. They may suggest it very strongly. This typically happens when a company is doing OK, and not running out of money — but clearly could do materially better with someone else running it. Still, this scenario is not the same as “firing”, and usually the CEO has to come to the same conclusion her/himself.
A little more here: 5 Things To Be Wary of In VC Financings | SaaStr
(note: an updated SaaStr Classic answer)