Startup Founders: What To Do When Your Company Fires You

There are a number of certainties in life. There’s death. And taxes. And if you’re the founder of a successful startup and you’re not named Mark Zuckerberg, there’s the day when you’re replaced as CEO. Don’t pout - your ouster is actually the ultimate validation of your company.

So says David Feinleib, author of Why Startups Fail: And How Yours Can Succeed. Feinleib has been on both sides of the process. He was a venture capitalist at Mohr Davidow Ventures and, prior to that, he founded four companies of his own, one of which was acquired by Hewlett-Packard, another by Keynote Systems.

See The Silver Lining

He’s learned to see the founder pink slip’s silver lining.

“An old colleague recently called me, upset because the guys who gave him money for his startup wanted to get rid of him,” Feinleib says. “My response to him was, ‘Congratulations, man. You’ve arrived!’”

Of course it’s not easy to give up the business you’ve built. When your board members call you in to tell you it’s time to move on, you might be mad, you might be sad, you’ll probably have to force a smile, but you should be glad.

Why Getting Replaced Is A Stamp Of Approval

Founding CEOs should consider getting the boot a stamp of approval, Feinleib says. “It means you did something right and people care enough about your company to want to replace you.”

OK. This is where you start rolling your eyes at the VC-speak. But Feinleib has a valid point and many of the best entrepreneurs know it. They launch and leave - and let other people sweat the long-term.

“But other founders are more like, ‘This is my baby and there’s no way you’re taking it away from me,’” Feinleib says. “They may even see that things are not going the right way or they don’t have the right skill set - and still they won’t relinquish.”

Don’t Take It Personally

Most founders get replaced because they have the vision to create a great company but they don’t have the tools to scale it.

A common shortcoming is interpersonal skills. Often founders with a genius for product are not so good at managing people. Maybe they don’t hire fast enough or they’re too short-tempered to attract top talent. That’s when the board decides to kick the founder to a corner office so the company can grow.

The key is not to take it personally, Feinleib says. “If you’re getting replaced as CEO, it does not mean you’re a failure or disgrace. It can mean quite the opposite. It can mean the company is outpacing you as the founder and you either have to transform yourself or get out of the way. But it’s hard for a lot of founders to see that.”

Seeing The Writing On The Wall

Something else many founders don’t see: the warning signs, even though they’re usually readily apparent. This, according to Feinleib, is why investors are often unfairly cast as the bad guys, blaming the founder for everything and giving him the quick heave-ho when it suits them.

“In one way or another, someone on your board has been indicating to you that it’s time to ramp it up well before the ultimate conversation ever takes place. For founders, there are telltale signs that they may be in trouble and need to step aside. Like if you agree to hire a new VP of engineering and six months later you still haven’t done it, you’re heading for a conversation with your board members.”

Another red flag: a board member suggests you sit down with someone because that someone might have good advice. A lot of founders reject the suggestion out of hand. Others nod and smile and never take the meeting.

Investors notice. And eventually they react.

When they do, try to look at the upside. “Getting ousted is a rite of passage,” Feinleib says. “It means you’ve arrived. You’ve done enough. You’ve raised enough money, you’ve hired enough people, you’ve built a great product.”

Sort Of Like Getting Dumped By A Girlfriend

At times, Feinleib starts to sound like a girlfriend who’s breaking up with you. “It’s really a growth moment,” he says. But he’s right. And besides, there are lots of other fish in the Valley.

“Getting replaced as a founding CEO is not the end of the world, especially in Silicon Valley. It’s not a black mark. You’ll have the opportunity to start another company. There are tons of guys who have rebounded and gone on to new and better things.”

Hmmm. Where have we heard that before?