If you’re reading this you already know that the probability of your company achieving some kind of liquidity event is under 10 percent. Unfortunately, the likelihood that you will still have your job when your company goes public, or gets acquired, may be even lower. The reality of professionally funded start-ups is that most founders are eventually replaced with an outside CEO by their board of directors.
Take it from me, a “professional” CEO, this isn’t all bad news. Often it happens contemporaneously with a critical growth spurt of the company, or prior to a liquidity event. So, if you’re a startup founder and your board is considering bringing me in, don’t fret: it is, in part, because you’ve already shown that your company can be successful.
Now if you own more than 50 percent of your company, it is cash flow positive, and you still want to be CEO, stop reading. You have the leverage to keep your job.
If you don’t own 50 percent of your startup, it is not yet cash flow positive, and especially if your board has even hinted that it might be a good idea to “eventually” hire an outside CEO, by all means, keep reading! I know from experience that they are going to bring in someone like me, whether you like it or not.
As the founder of your company, it’s only natural that you would resist being replaced with an outsider. But resisting won’t prevent the inevitable: You’ll either be replaced, or you’ll be fired. It’s rough justice for sure (and a good reason to keep 50 percent of your equity), but it is as it is.
But this transition doesn’t need to be as painful as you think.
For starters, the so-called Pro-CEO is not your competition. I don’t invent, I don’t create, and I certainly won’t or can’t do what you’ve done founding your company. I might not understand your space, I probably won’t understand the technology and I’ll have no familiarity with your team—so the last thing I want is to assume your mantle without being on the same page with you.
But I am a good people and process manager. I’m used to managing up (board/investors), and down (employees). I’m used to firing people when they don’t perform, or otherwise cleaning up ugly messes. Most important, I’ve probably been brought in to help you and your employees get to that liquidity event. Think of me as the guy who wants to be standing next to you when you clang the bell at the Nasdaq!
So if you see signs of being replaced by a pro-CEO, don’t make the choice of being frustrated that you picked the wrong investors, or try to convince them that you can continue to do the job. Your job now, for the sake of your company, is to accept that this is the path you’re on and optimize the process.
How do you optimize the process of being replaced!? It can actually be really easy: actively work with the board to manage my selection. Take it from someone who has been on the other side, they need your help to find the right person. You know more than anyone what the culture of your company, and what your people need to be successful. You’re also likely to be as connected to interesting candidates as your directors are (maybe more so). So don’t resist being replaced.
Be proactive about it to ensure your company gets the _right_ new CEO.
Here are some tips.
*a) Suggest that the board form a hiring committee.* Negotiating with a few board members is easier that negotiating with the entire board
*b) Prioritize the skill set* that is most relevant to your company’s business: sales; operational processes; customer service skills, etc.
*c) Pour through your own network for candidates.* Push your directors/investors to do the same. If possible, avoid recruiters who will take over the process from the outside.
*d) Propose that you and _one_ other director/ investor do the initial screening* of candidates, before they go to the hiring committee. This will ensure that you stay involved and help you proactively manage the process from the beginning.
Again, you have a choice in how to deal with being replaced as CEO. You can be proactive, as you have been with every element of your company so far; or you can let the board dictate to you who your company’s next chief is. It’s up to you. You have more power in this process than you think. Engage me, even _recruit me_, and you’ll increase the chances that your company gets the right person. At the end of the day, we both want the same thing, to create value and money—and who knows; maybe we’ll start another company together!