What Do You Tell Investors When A Co-Founder Quits?
“What’s your plan?”
That’s what “Raul”, one of our two large investors, asked me after I let him know that I was going to fire “Randy”, one of my co-founders. Yes, he also asked my why I was firing Randy. I’ll get back to that later.
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I told Raul that my plan was to have Randy’s two direct reports, Dave and Shoba, report to me and run the operations team.
“That sounds fine to me,” Raul said.
When I spoke to Gill, our other large investor, later the same day, Gill was also supportive.
Raul and Gill were very experienced investors. I wasn’t, by a long shot, the first founding CEO that had told them that a co-founder had to go. All they wanted to make sure of was that I had a plan.
It’s rare for a founding team not to lose at least one co-founder.
Six months after I fired Randy, “Ken”, one of other co-founders, quit the day before I was going to fire him. Yet again, the conversation between me and my investors was what what was my plan.
I’m not unique in having co-founders not work out. Indeed, over 50% of the startups that I work with have co-founders that didn’t work out.
In other words, it’s pretty common for you to have a co-founder not work out. The worst thing you can do is ignore a problem with your co-founder and expect the problem to improve.
It never works this way. Instead, the problem likely becomes worse. Then you run the risk, because co-founders are in very prominent roles, of the problem infecting the rest of the company, creating a cancerous environment for everyone in your startup.
You’re the CEO, so you get to make the hiring and firing decisions in the company.
The good news is you’re the CEO. You don’t have to ask permission from anyone to fire a co-founder that isn’t working out.
So, if the problem between you and your co-founder can’t be fixed, then your job is to take action quickly. Don’t worry about your board or your investors getting in the way.
Your board and investors are expecting you to take action. That’s why you’re there. You’re the CEO!
But, your investors are expecting you to have a plan about what you’ll do after your co-founder leaves the company.
The key is you need a plan of what you’re going to do after a co-founder, or any key executive, leaves your startup. Your board and investors will be supportive as long as you have a plan, and, obviously, the plan has to make sense.
Your board and investors will lose faith in you if you appear not to be in control. Control means that no matter what happens, you know what to do.
Founders leave startups. That’s not the issue. It becomes an issue if you don’t know what to do when a founder leaves your startup.
That’s why you should always have a plan of what you’ll do if a key executive leaves your startup. Even if it’s unexpected. Even if it’s your CTO who you can’t afford to lose. It’s critical that you always have a plan.