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Jason M. Lemkin
Jason M. Lemkin
SaaStr Europa is June 4-5 in London!! See You There!!
Published Feb 27, 2023
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Most SaaS CEOs don’t truly get fired.As you can seehere, the vast majority of public SaaS companies are in fact run by founder-CEOs. Boom!
But as companies scale, and raise multiple rounds of venture capital, sometimes VCs will suggest, or even in some ways push hard, to bring in a more experienced CEO.Especially if growth slows for an extended period of time.But it’s not the default choice or goal.
Most seed and early-stage investors, the very last thing they want to do is fire a CEO.Even in a struggling start-up, almost anything else is worse. Who are they going to find that is “better”? Even if they are “better”, they won’t know the product, how to fix its issues, the customers, etc. And if your start-up is early, struggling, with a tiny balance sheet, what great CEO #2 is going to join anyway?
Now, with later-stage investors, sometimes there’s more of a split in thinking. Multi-billion funds sometimes have a bench of potential “operators” that can come in as a CEO. But even there, if it makes sense (which I believe it rarely does), it’s only going to work at $10m-$20m in ARR, once a real engine is running. So these later-stage folks are often more nuanced on whether a founder CEO is by default the long-term CEO. A little more on that here:5 Things To Be Wary of In VC Financings | SaaStr
And importantly — note that these days, it can be pretty hard for VCs to truly fire a founder CEO. There are generally enough control provisions, and with less dilution (and thus control) common, oftentimes, the VCs have no legal or contractual rights here, anyway. See, e.g., the drama with Travis Kalanick and Uber.
In any event, almost all investorswantthe founder CEO to go the distance.
So why do they get fired, if no one really wants to do this?
Anyhow, you’ll still hear horror stories, even today. And sometimes, VCs do want to push founders out. But in general, today, that’s a lot less common. And even when one VC wants to push a CEO out, oftentimes, the others won’t agree. I never have.
So if you are worried:
Then you probably don’t need to worry.
Recommended next reads
…
Look atUiPath.They did it the hard way.It took them 10 years to get to the first $1m in ARR (!!).And they raised just one tiny seed round along the way in those early years.But then … boom!They went from $1m to $600m in 5 years!Matching capital to growth.So the founder-CEO owned 30% at IPO.And 90% of the voting stock …
Don’t miss this week’s liveWorkshop WednesdaywithICONIQ Growth!
These live, interactive workshops are hosted each and every Wednesday with a SaaS expert and speaker, and this week Doug Pepper, General Partner at ICONIQ Growth and Christine Edmonds, Partner & Head of Analytics at ICONIQ Growth will be hosting: “Building Resilience through Efficient Scaling in 2023”
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5 Comments
Netalie Nadivi
Investor | Advisor | Board Member | Partner to visionary, goal-oriented entrepreneurs with hustle | X: @NetalieNadivi
1y
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Great and informative post...unfortunately, I know several early stage investors that have no qualms about replacing founder CEOs
Carilu Dietrich
CMO, Hypergrowth Advisor, Took Atlassian Public
1y
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You mention briefly the value of keeping ownership and voting shares at the end, but this is a HUGE issue. The Atlassian founders didn't take outside capital except a small round pre IPO to offer early employees some liquidity. They kept the vast majority and voted themselves super voting shares. They didn't invite investors in that could fire them and didn't have to take the opinions and decisions of the board if they didn't want to (i.e. the board always wanted them to build more of a sales model instead of continuing the product-led-growth-only so long). It was a much slower build, less "sexy" but gave them a lot more control, flexibility and job security. It's a path less taken but one that served them very well. I've also worked for a CEO that was pushed out by their board when a short-term investor wanted short term results. He lost his role and the company lost its way. He didn't have the leverage to get his way.
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Patrick Spielmann
Founder at Uptics.io | STOP being ignored by prospects, channel CHOKING your sales, and REJECTING your own leads | Creator of the Cold to Gold Method | #girldad
1y
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glad i dont need to worry about being fired
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Nathan K.
CCO of ZFG. Because, someone else will monetize it. Allegedly Unemployable.
1y
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Your TAM: bruv. we need to talk mate. sorry cuz, but the investors happy to hear it, competitor happy to hear it, customers happy to hear it. off the island mate. Gimme the tiki, now. Well HOLD ON A gosh DaRn mINuTe
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CHESTER SWANSON SR.
Next Trend Realty LLC./ Har.com/Chester-Swanson/agent_cbswan
1y
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Thanks for Posting.
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