Parting Ways With A Founding Team Member

One of the hardest things for an entrepreneur is to part ways with a co-founder or founding team member. Those early days putting together the plan, building the product, and building the team are formative and powerful. The loyalties that develop during that time are strong and hard to break.

Running a business is not an easy job. You have to do what is right for the business and that often conflicts with what is right for you.

I have seen this so many times now. One of the founders or early team members performs heroic work, most often in building the product. But as the company grows and engineering turns into a team effort, that person or persons can't work well in the team environment. And then the entrepreneur is faced with a painful decision. How can you fire someone who was so impactful and gave so much of themselves in getting the company off the ground? What message does that send to the rest of the team? How can I fire my friend?

But you have to do it. What works when you are five or ten people often does not work when you are fifty or more. Rock stars are rarely good team players. And the best developers are rarely the best managers. The person who made your first sale is rarely the right person to manage a team of a dozen salespeople.

When you realize you have to do this, you should act. Don't let your unease with the decision let you procrastinate on it. And be generous. I am in favor of vesting more stock than is contractually obligated to be vested. And severance so the person can take some time and decompress is another way to be generous. Most of all, be generous with the way you talk about the person's contributions. Call them a founder if they are a founder. Recognize their contributions both internally and externally and continue to do so. And help them find another situation where they can work their magic again.

I believe that how you handle a person's departure has more impact on morale than the departure itself, particularly if the remaining team understands why the departure is necessary. So being generous financially and in your communications and taking the time to clearly explain the departure to the team are both critical in building and maintaining morale and making your company a great place to work.

If I look back at our most successful investments over the almost 25 years that I have been in the venture capital business, almost every single one of them has seen a founder or critical founding team member shown the door as the company scaled. It's almost inevitable. So if you are starting a company, understand that you will face this moment at some point. It will not be pleasant. But if is something you have to deal with. So talk to your mentors, coaches, and board members. Get their advice. And take the action, do it well, and do it right.

#VC & Technology

Comments (Archived):

  1. Harry DeMott

    So true. The real key is not only to be generous financially and in word, but to genuinely mean it. I’ve seen situations where companies followed your advice to a tee – but as soon as the person was gone – the real feelings came out. If that’s the case, no amount of financial generosity or complimentary e-mails are going to undo the harm to morale. People, especially in small company settings, are socially smart – so mean it, and don’t disparage later.

    1. fredwilson

      that is great advice harry.

      1. Harry DeMott

        now if I could only get twitter and facebook to default to share on disqus I would have it all!

        1. paramendra

          What do you mean? You want your Twitter and Facebook updates to show up automatically at Fred’s blog? How is that a good idea?

          1. Harry DeMott

            Of course not. Disqus has an option to share your comments on twitter or on facebook when you post to a blog that has the disqus system running (also yahoo, open id, tumblr, moveable type and typepad) when you want to share something with your facebook newsfeed or your twitter account you have to check off some buttons on the bottom of the comment. I was just wondering if you could have share be the default setting – as opposed to having to check them off.

          2. paramendra

            Oh okay.

        2. ShanaC

          Go to your settings on your disqus page, there is also at the bottom of the box in which your write your comments a tab that says ‘Share on _ (mine has a twitter logo” click on that and check off what you like to share on.Hope I could help!

    2. paramendra

      In some cultures they worship the goat before they sacrifice it at the altar. 🙂

  2. kidmercury

    i don’t know, i wonder if all the internet stuff about managing the edge is going to change how companies grow and scale. i think it will. namely i think there are two things to consider:1. more and more product development will be done by forces external to the firm itself — i.e. developer community. is managing the edge different than managing the core? i think so, and i think this will impact the growth/management issues you are referring to2. related to point #1, i think technology companies like google/msft/yahoo etc with thousands or tens of thousands of employees are not really indicative of the future. rather than one company with 10,000 employees, i think we will see a network of businesses — perhaps 1,000 companies with an average of 10 employees each, all working off agreed upon standards.

    1. BillSeitz

      In your #2 scenario (“NetworkEconomy”),a. those small firms probably don’t have VC investment and plans for big growth, so maybe “scalability” of the people isn’t the same issueb. but the same issue comes up at the “firm” level – 1 small company is crucial during the formative stage of a cooperative ecosystem, but then doesn’t perform as-relatively-well over time, so gets marginalized. No vesting there.

  3. Mordy Kaplinsky

    I couldn’t have stated it any better. I think the decision to part ways in a healthy scenario is psychologically difficult on all parties and not just on the deportee.

  4. Matt A. Myers

    I like your stance on this, it feels like its only fair to treat people this way. Karma’s a bitch too. I’ve always taken the stance to treat everyone kindly and with respect, and kudos to you for applying the same here.Off back home I go! I absolutely loved NYC. So much going on. Such good yoga instructors. So many random things to go do every day. So many really nice people here – I was pleasantly shocked; There are those who are a little more aggressive and extreme, but that’ll happen in any larger community. Once again was nice meeting everyone I did at the AVC Meetup. 🙂

    1. Mark Essel

      Sorry I missed meeting you Matt, next time then. Flying home to Long Island (I live an hour and change east of NYC) Saturday afternoon. I miss my dogs and my bed, and my development computer.

  5. DGentry

    A perceptive manager I worked for stated this as: “No one is so irreplaceable that they can be allowed to destroy the team.”

  6. chris dixon

    wow, Fred, I’ve never disagreed with one of your posts as much as I do this one. unless a cofounder is deliberately underperforming or engaging in terrible behavior etc you should never fire him/her. put them in a different role or something if they can’t manage/scale.

    1. fredwilson

      it’s not that simple chris. i am not going to get into specifics here but i’d be happy to walk you through literally dozens of situations where it was the right thing for the company and the founding team member but the person was not “deliberately underperforming or engaging in terrible behavior”

      1. chris dixon

        Then you talk to the person and make it a mutual decision. Cofounding a company is a moral compact, and you need to be prepared to accept that at times you need to put loyalty over economics. I’ve seen many of these situations too and when investors/founders do what you describe I lose a lot of respect for them.

        1. fredwilson

          of course that’s how you handle it chrisbut it is rarely really a mutual decision

          1. chris dixon

            I would never fire my cofounders and they would never fire me. Which is one reason I I have great cofounders. You put up with people’s ups and downs and stay loyal and it pays off in the long run.

          2. Adrian Bye

            its interesting to see you guys debate this. chris, you should write a counterpoint blogpost

          3. chris dixon

            I certainly will.

          4. paramendra

            Yes, I think this is worthy of a debate like that Fred had with Ben. Only I suspect in this debate Chris might end up with the upper hand.

          5. kidmercury

            i hope we can create a poll and bet on the outcome. i wanted to do this with wilson vs horowitz at TC disrupt but everybody else is all about spoiling the fun. pfft. anyway, i am likely to be long wilson in this beef, though based on the support chris has gotten in this thread, i’m not nearly as confident as i was in fred winning wilson vs horowitz.

          6. paramendra

            It’s Ben Vs Fred all over again. This round I see going to Ben.

          7. fredwilson

            i don’t think we are debating the same thing unfortunatelychris is talking about screwing people over and i am not

          8. calabs

            Actually, it sounds like you are talking about screwing people over, Fred. The reason is that you’re too vague about what counts as a firing offense, and you don’t speak at all about steps you can take prior to kicking a founder to the curb. This raises our hackles.I applaud you trying to make this difficult point, but I think you will do better to be more specific about firable behavior and what one can and should do to retain a founder.

          9. fredwilson

            good pointto do that well would require getting really specific about actual situations that involve people i respect and still count as friends after they had to leave the company they were on the founding team ofi don’t want to do that

          10. kidmercury

            lol you def got misinterpreted big time on this one boss

          11. fredwilson

            i believe it is because henry blodget wrote the first tweet on this post and it said this:”Fred Wilson: Here’s how to throw your co-founder under a bus.”…my suspicion is that many read that tweet and came to the post already thinking this was about screwing people over

          12. Tereza

            Probably. It felt like people were talking about different posts.

          13. paramendra

            To your credit you have said the firing has to be the CEO’s initiative, and if he/she decides to go for it, I think you have laid out as to what would be a good way to do it.Where I disagree with you is how often you think it needs to happen. You seem to think it has to happen with nearly every startup. I think that is too often. I blogged about it.

          14. fredwilson

            i didn’t say it has to happen in every startupi said based on my experience it does happen in almost every startup

          15. paramendra

            True. But if that is the case, maybe the idea of two or more Cofounders is a myth that finally catches up. The founding of a company is a big bang, and that is one person. Bill Gates and Paul Allen were not Cofounders, Gates was the founder, as was Steve Jobs and Larry Ellison. There is the founder, and there is team member number two, the difference between the Big Bang, and the first second in time.

          16. paramendra

            Fred, I guess I see your point to an extent, I can see some instances where I cofounder might need to go. But I’d see your side better if you were to also talk of instances where a founder’s departure was a really bad idea. Famous example: Steve Jobs and Apple. A recent example and close to your home: Etsy.Sometimes a charismatic cofounder might be “did in” just because he/she was not adept at the smoke room politics of a big team.

          17. fredwilson

            i don’t want to talk specifics here. these situations are painful and still are for the people involved. i want to respect their desire to keep these situations private

          18. Matt Mireles

            yeah dude, life doesn’t always work out so peachy. I recently had to do this, and let me tell you, it was painful. But sometimes if you want to build a successful company, you have to make hard decisions that fucking hurt. Personally, i think Fred’s advice is awesome: be generous. That’s a great approach, and what i tried to do.After a period of serious unpleasantness and hurt feelings, i think both my original co-founder and I are now much happier and better off. But i had to take that step and do the hard thing first. It was either that, or give up on my dream for the company––and there was no way in hell that was gonna happen.

          19. chris dixon

            Firing a cofounder for incompetence or lack of effort is fine. Firing them because they don’t “scale” isn’t.

          20. Matt Mireles

            sure. i guess i’ve never been in the latter situation, and it seems ill defined to me.

          21. chris dixon

            It’s basically “thanks for doing the hard stuff-now that we’re successful you don’t get the equity we originally agreed to.”

          22. Matt Mireles

            right. yeah, that would be bad––and is definitely not what i was referring to..

          23. Tereza

            Chris my hope would be, in the (undesired) scenario that the co-founder is, wittingly or unwittingly, destabilizing the organization, and there is not a non-executive role that can be negotiated on the inside, and that you as the remaining founder can stick to your original equity agreement with him/her. And keep the whole thing generous.Is this totally naive?I’m hearing you say that the exit presumes a massive cram-down for the exiting co-founder.It sounds like there are two separate issues: (1) the exit in and of itself, and (2) the cram-down.Could you share examples of % of cram-downs that you’ve seen happening to exiting co-founders?In your VC and entrepreneur experience is a co-founder exit without cram-down in the realm of possibility?

          24. PhilipSugar

            I have seen several 100% cram downs.Here is the scenario…..We aren’t growing as fast as we could because we need better management….we have a fiduciary responsibility (read my screw you euphemisms)So we bring in management that is making $250-$300k instead of the founders salary of less than $100k.With all of this extra load sales better come quick…..guess what??? They come slower. The new management is using to processing inputs not getting out there and hustling.The market wasn’t what everybody wanted but it is what it is. The company is out of money and its hard to raise money because you are losing traction not gaining it.Now comes the prison yard style cram-down politely called a bridge round. A down round which triggers anti-dilution clauses, with full warrant coverage if its not paid back in three months, which is never going to happen.The new management is working for that $25k a month salary nothing more nothing less, founder left with nada.

          25. Tereza

            Ugggh.Thanks for the play-by-play, Phil.

          26. fredwilson

            i hope you realize that is not at all what i am talking about here

          27. PhilipSugar

            Absolutely Fred. Please see my other posts. I think you can’t even imagine this so it didn’t even occur to you but I also know you realize it happens. That is why you see some opposing posts. This inspired me to write about my divorce at justanentrepreneur

          28. aarondelcohen

            That’s definitely not how I interpreted Fred’s example. I agree that firing a co-founder to reclaim their hard-earned equity is just totally unacceptable and should be handled with strong contractual agreements that were put in place at the outset

          29. fredwilson

            i totally agree Aaronscrewing people over is bad and it happens way too often

          30. kulsingh

            Totally agreed Chris. If the founder has worked hard and made important contributions, the CEO needs to try and find a role they can continue to contribute versus kicking them out. Unless as stated above, they refuse, cannot scale, are incompetent, or are disruptive. For some reason, its being positioned here that the strong and right thing to do is fire that person because they are no longer needed.

          31. fredwilson

            you could vest all of the equity chrisi’ve seen that done when appropriateagain, this is usually not about economics and mostly about creating ahealthy and functioning organization

          32. fredwilson

            i think you may be misinterpreting my post christhis is not about “scaling”i just went back and re-read the posti did not use the term “scaling” in the postthis is not about them scalingit’s about them not working well in the context of the organization as it growsthere is a big difference

          33. chris dixon

            So you start a company with someone. Your cofounder believes in you when no one else does and you make a commitment to split equity a certain way. Your cofounder contributes a lot at first but then as the organization grows “not working well in the context of the organization as it grows” so you toss out years of loyalty and a moral contract and deny him/her the equity and joy of work you agreed to. I am just at a loss that this is coming from a guy as ethical as you (as were all my entrepreneur friends scratching their head at this post today).

          34. fredwilson

            chris, that’s not what i am sayingvest the stock if you think that’s the right thing to doi said that in my postwhat i said in my post is you don’t screw thembut you might have to part ways with themdid you read the post before you starting reacting negatively to it?

          35. chris dixon

            giving them anything less than their full vesting is screwing them. theright thing to do, if you must, is let them sit in the corner and code orwhatever it is they do. you don’t fire your cofounder unless they areincompetent or lazy. period. probably the most sacred rule ofentrepreneurship.

          36. fredwilson

            let’s revisit this issue chris when you’ve spent another 15 years in thebusinessi will say it once more so at least you’ve heard it five times from mei am not advocating screwing anyonebut some day you will experience what i am talking aboutand a light bulb will go off in your headand you will remember this exchange

          37. chris dixon

            i’m an investor in companies with precisely this issue. we’ve just decided to suffer dilution and some organizational issues to do the right thing. maybe someday i’ll change my mind but I hope not.

          38. fredwilson

            i don’t have a problem with dilution. i take it all the time and happily when its the right thing to do for the companyi do have a problem with organization issues.dilution can’t kill a companyorganizational disfunction can

          39. JLM

            True wisdom.One of the best exercises a company and its Board can ever conduct is to shut their notebooks, turn off their cell phones, put away their laptops and brainstorm — how many different ways can this company be destroyed?Boards exist to dramatically reduce the number of fatal failure traps through wise policy decisions, by investing talent and by navigating around as many as possible through experience, wisdom, temperment, patience and expertise.

          40. ShanaC

            Actually the combo together is potent….ugggg

          41. David Semeria

            Discuss comment nesting champion breaks his own record.

          42. Tyler Beerman

            Although Fred doesn’t seem to portray these tactics in a way that makes it sound malicious on the founders’ part, I think I tend to agree with Chris here…How can you form a relationship/bond with someone to start a company, then completely turn-off your moral compass because you THINK you’re in the right?This would be like running for president, winning, then replacing your Vice President if things aren’t going so well….I’m having to deal with this “storming” in a startup right now and… It’s abusrd Fred think about it… It’s a team effort, and the commander-in-chief has to lead by example and remember he didn’t get himself there alon…

          43. JLM

            So you don’t think that Mr Obama has not thought a time or a million times about replacing that guy from MBNA?Sorry, couldn’t resist! LOL

          44. Bill

            +1 Chris. That’s why you are a true entrepreneur. This debate is really entrepreneur (Chris) vs. VC (Fred). Anyone who has started a company knows that what Chris is saying is true.

          45. Bill

            I don’t think Chris is “in the business” (of Venture Capital). Founder Collective is way different than any traditional early stage VC.

          46. William Carleton

            “giving them anything less than their full vesting is screwing them” – Chris, this can’t be right, can it? Or do you really mean that reverse vesting is only to cover the situation where a founder voluntarily walks away?

          47. Caterina Fake

            “Scaling” is in the last paragraph: “almost every single one of them has seen a founder or critical founding team member shown the door as the company scaled”

          48. fredwilson

            hi caterinawhat i was saying to chris is that i never once used the notion of an employee scaling in the postthis is not about thatit’s about a company outgrowing a person as it scales

          49. Guest

            i’m sorry, but this is total semantic malarkeyif the if the company is outgrowing the employee, the employee isn’t scaling!

          50. fredwilson

            that is not trueemployees don’t have to scale if they aren’t managing peoplethey can just keep doing their job

          51. Tereza

            Not semantic at all I can think of many examples.Some people are specialists, some are generalists. As the co scales the generalist jobs get much more broad and complex. And the specialist jobs get deeper and narrower.

          52. kulsingh

            100% agree that IF you have to do it be generous…and that’s great advice that Fred gives. But question is if a person is not working well in a team environment, can you find something where he can shine and help the company innovate as 1 person team that reports to the CEO. Firing a founder because he doesn’t scale without first trying other roles that he / she can flourish and can be beneficial to the company is a cop out…and seems like the easier way out.

          53. CJ

            Everyone is replaceable but some people’s actions are more detrimental than others. Do you just sit by and watch idly as one of your fellow cofounders destroys the company due to one of his/her downs? I’ve been in a mid-sized company where that happened, it took years for that particular group to recover due to this person’s mismanagement and other proclivities. In the end, despite the immense loyalty the partners felt to this person, they were ‘asked’ to leave. The group could have been saved had that decision been made a year earlier, even 6 months earlier.

          54. chris dixon

            Change his/her role then.

          55. CJ

            That was tried, the role was diminished, transformed until eventually it was largely only titular in the end. It didn’t matter, this person wasn’t performing the job anymore anyway, regardless of the nature of it. But he/she still exerted a huge amount of power in the company because of strength of personality, eventually there was no other way.

          56. ShanaC

            How can you be so sure about your and Dr. Fake’s growth trajectories? If someone asked you 2-3 years ago if you would start a seed fund, would you have said “Yeah I am going to do that!”How can you be so sure things will continue plugging along away the way you are growing right now as people?I don’t see this nearly as much as firing at the scaled we’re talking about as much as “recognition that people grow and change- a truly bittersweet thing if handled correctly”

          57. ewiesen

            I think the lack of mutuality is a critical element here, and deserves more attention. I think that when you observe that a co-founder or early employee “doesn’t scale” that can mean more than just capabilities – it can mean organizational disruption. I read into Chris’ comments here the implication that it is merely capabilities that don’t scale, and thus the co-founder can be put into a lesser role where his/her talents are still valuable.There are certainly plenty of examples where this is true (the most famous being Steve Wozniak’s continuing desire to simply be an engineer) but Fred’s post is about the many instances where this is not true, where a non-scaling co-founder is still trying to exert substantial control over the business in a way that’s disruptive and value-destructive. If I read Fred’s post correctly, it is in these instances where I think Fred’s advice is spot on, and where it probably isn’t realistic to assume that a mutually-agreeable separation will be easily achievable.

          58. Tereza

            So true Eric. And not just lack of mutuality but clearly an asymmetry between the co-founders.And when in the maturity of the company does an asymmetry emerge. If the co-founders are seasoned, came on board at the same time and are both highly scalable (which from outside observation seems the case for Hunch), then that’s fabulous and where we all want to be.In bringing in my co-founder I was seeking that kind of symmetry too. And like a marriage we are absolutely entering it for the long haul. Prior I had a business relationship that didn’t work well and it was painful. I learned so much and it informed much around this new relationship.In business, as in marriage, things happen you could never anticipate. You just never know. And if the home erodes into an unhealthy environment for your kids, you might have to make one of those decisions that no one wants to make.Until then you work the relationship as hard as you can and hope for a little luck, too.

          59. Chad Bradley

            It’s easy to say when you have co-founders that have proven themselves in the past. But what do you do when you’re new in the game and you start growing and your best bud/co-founder turns out to be a dead beat dad? Do you pull the trigger early ion or just continue chugging away until the business eventually ruins the relationship anyway?

          60. ErikSchwartz

            You blow them away fast and hope you put vesting in place.

          61. BillSeitz

            I think one of the problems there, is that the vesting schedule is too slow, so that pushed-out founder doesn’t get enough upside. Because the vesting clock doesn’t start until that B-round happens, and is typically the same for all the employees at that stage, even though the dev founder is much more likely to be shown the door more quickly.(That’s one reason to have a chunk of founders stock that an outright grant, or else structured so that it vests entirely if founder is pushed out (as long as not for-cause, etc.).)

        2. fredwilson

          and these departures are rarely about economicsthey are about creating a functional organization and a place people want to work

          1. kulsingh

            If the issue is that the co-founder does not work well in a team environment and is more of a maverick (and if economics are not an issue), why not create a special role such as Chief Scientist or Internal CTO (for technology founders) to use their “magic” in exploring new innovations or a business development role to explore new markets (for non-tech founders). I have done this in the past and it worked well. It seems like a good intermediary step that shows loyalty while also fostering a positive and innovative environment for the company. I think most founders with a vision to build something special value loyalty since it’s hard to find…so this step is often a good way to respect that loyalty. With that said, if the person is still not scalable or is disrupting team flow, at some point your post makes sense.

          2. paramendra

            “….why not create a special role ….”Great idea.

          3. CJ

            “they are about creating a functional organization and a place people want to work”This is the single biggest reason to fire a co-founder/rockstar team member. That one person can affect the entire emotional state of the company because he/she commands so much respect and loyalty from the people they influence. That power, if not used wisely, can lead to a decrease in morale and the formation of cliques which will lead to the eventual death of the company or severely hamstring it until you excise the tumor. You might as well skip the not so fun parts and make the hard decision upfront, it’s better for everyone.

          4. Tereza

            In fact I believe it is the only reason. Outside of that you stick to your commitment with the co-founder.

          5. Alex Murphy

            It is amazing how much easier it is to part with co founders if you discuss the “break up” in the beginning. You don’t need to go so far as a prenuptial agreement, but a frank discussion about what situations may come up is advisable. Talk about performance, family changes, financial strain, growth, scale, skill set. Write down that you are both focused on building a successful business and “crown the company” as Keith MacFarland puts it. Ideally, when you go into business with someone, you are agreeing to “birth” this new business. Sometimes in order to get the business to grow up you just need to let it go and be free. So many parallels between a start up and dealing with children.

          6. iamronen

            How about peeling a few more layers?What do you mean when you say “right for the business” or a “functional organization”? If you are referring to it as a social construct then you are probably wrong (and maybe a little dishonest). A single individual, especially a founder is of a higher moral order then a social construct you call a business (…. I believe you yourself mention this as an investor when you talk about backing people – you fund not only good ideas but good people.So what has changed now that you want to fire the same person you chose to back? (… I have a feeling that what you are worried about are the financial aspects of the business. It’s not so much about “a place where people want to work” as it is about “a place where people can work so that it becomes profitable for it’s investors” – which, after all, is your job.Now this is great – because we are talking honestly. It is a moral conflict between two individuals – a founder and an investor. It is a moral conflict between their values. The “Rock Star” has some crazy ideas and you the investor want to create a stable & predictable business that will lead to great returns. It is wrong for you to mask your motivations and ideas behind some adhoc social-justice-theory. Take off the gloves and have a proper fist-fight.If you happen to “win” this battle – consider what you’ve “lost”. Fast forward this movie and somewhere down the line you’ll be writing about how to hire fresh talent and to breath creative life into your team. Well, guess what, you dumped the most passionate and creative person early in the movie … you stole his purpose … and you are still driving around in it … wondering why you can’t get it to run smoothly.I am sure that sometimes it is beter for a founder to walk away. I am sure that sometimes he needs help to do it. I just think you need to be more careful and not to present your personal preferences and motivations as a truth. The truth deserves better.

          7. fredwilson

            first of all, i am not talking about the VC doing the firing. you say “you want to fire” and that is not even in the realm of this postthis is about one founder and anotherthis happens in companies backed by VC and companies not backed by VCstake the VC out of this and then re-read the post please

          8. iamronen

            I did.As I said before, I agree with you – but only if you believe that the business is more important then the founder. What I am suggesting, to counter your point, is that the business is expendable – the founder isn’t.If it is an issue between two founders – then it is just that – the “social-moral-considerations” of keeping the business healthy are secondary. If they can find a way to continue together then it can work out, if they can’t then they are going to battle it out. But it is a matter of one persons passion vs. anothers. It isn’t about the company.I also think that your opinion and advice are very much shaped by your position and personal experience. So yes I am responding with that underlying assumption in mind. Are you not coming at this from a position in which a financially successful business is the end game?In my mind a business is primarily a vehicle to carry forward a founders’ ideas. Providing jobs, servicing customers, generating profits for it’s investors are all secondary to that. When a break occurs it’s been the passions of the two founders. That’s a worthy battle. It isn’t about the business. If necessary – It’s OK for the business to go down.Thank you.

          9. fredwilson

            i suspect if you took a poll of founders you would find that the vastmajority of them would say that a financially successful business is the endgameotherwise, it would be an art project or a non-profit

          10. iamronen

            I don’t have stats – but I have a concrete recent example – USV’s recent investment in StackOverflow:(from:…”Nobody is participating in Stack Overflow to make money. We’re participating in Stack Overflow because … – We love programming – We want to leave breadcrumb trails for other programmers to follow so they can avoid making the same dumb mistakes we did – Teaching peers is one of the best ways to develop mastery – We can follow our own interests wherever they lead – We want to collectively build something great for the community with our tiny slices of effort”Is your suspicion a portrayal of reality or a creation of one? Is a financially successful business an inherent end-game for founders – or does it inevitably become when when venture capital enters the picture?I look forward to a day when business and non-profit integrate:

          11. fredwilson

            i am fairly certain that Jeff and Joel want Stack Overflow to be afinancially successful business

          12. iamronen

            I am fairly certain that they will also be happy if it only breaks even (non-profit?!). Will you?

          13. fredwilson

            if hundreds of millions of people all around the world are learning andimproving their lives with stack powered knowledge exchanges, i will bethrilled

          14. iamronen


          15. fredwilson


          16. Matt A. Myers

            I think in the discussions it’s really hard to know what someone’s truths are. Every situation with founders (and throw investors into the mix too if you want) will be different. The founder(s) skills and scope of idea(s) will vary – their other qualities too.In the end, is an action more based on ‘evil’ against a founder because it will make the investor or make the other founder(s) more money (whether directly with the project or indirectly because of their other investments) – and therefore not really based on performance or ideas?Because making a business financially successful (profitable) is the end game, it does, and will put influence and bias on a founder and/or investor’s decisions – regardless if they are aware of it and regardless if they think they are weighing fairly for it. And they may try to compensate and feel better about their decision by overcompensating the founder’s release package.It all comes down to the individual, and you can’t really know how they’ll react in any specific situation. It’ll have to come down to every individual involved and what each person’s value of fair means.I say this too – karma’s a bitch – but sadly I think a lot of karmic effect gets passed on throughout society, not specifically to the individual doing the wrong.You just have to know your cards / your value and hope others know that value too, and hope they are fair and balanced if there’s a situation involved with you, and hope they’re just not using the process for more evil reasons than because of functional reasons.Hopefully you have enough support to get you through the situation too.

        3. aarondelcohen

          Fred and Chris:On this one I have a lot of painful experiences and because I chose to fire two very close friends who were co-founders, I lost two incredibly important collegiate relationships. We are still working on repairing the damage and it will never be the same.Chris, I’ve never felt that the continuum of underperforming to superstar was particularly long in startups. People either add really significant value or they don’t. When co-founding managers start to struggle it exacerbates what could be a relatively small problem. Co-founders who occupy a “mgmt” salary are hard to place in a role that creates value in the “R and D” department or as the company evangelist.So for me Fred is right, Where I have made mistakes is in not being overly generous on severance. I think this is sage advice and I also think it’s important to announce a “departure” and throw a thank you party and find a way to end gracefully. Frankly, I think graceful conclusions are a big part of a CEO’s responsibility.Aaron

          1. JLM

            You can’t be the “C” EO unless you are going to be THE CEO. It comes with the job.I remember as one of the most marking experiences of my life being a 22-year old combat engineer 2LT and relieving a SFC who was my Plt Sgt because I smelled alcohol on his breath.We were taking out mines from an uncharted minefield and simultaneously blowing up unexploded artillery shells we found along the way. It was very, very, very dangerous work and a platoon next to mine had managed to kill several soldiers. I loved working explosives but the combination of manual probing and no maps and sympathetic detonation made for a very tight margin of error and some damn steady hands.When I smelled the whiskey, I knew I had to relieve the Plt Sgt but the question was did he sit on the bench for a couple of days or did I can him completely. To put this into context, this particular SFC had been a friend of my Dad’s since WWII and had held me in his hands the day I was born at Camp Kilmer, NJ.I sent him down to the Bn Sgt Mjr with instructions to “find another job” which is how senior noncoms are dealt with in the military if you are smart. My Dad was a Sgt Mjr, so I at least had that advantage.My story would be a whole lot better if I could get you to believe I had the steely eyed determination to know I had done the right thing but that would be a lie. In addition to just having the trepidation of the explosives job, I was not really sure I had handled the problem correctly. I was ready to shit in my pants when the Sgt Mjr showed up and asked me — “You sure about this, LT?”The only thing we can all do in these situations is to follow our instincts. And do what we think is right.

    2. Joseph Flaherty

      Chris, I’m not a founder, but I agree with your take. The number of people I have met who have the technical chops to build a product that people love and the risk tolerance for a startup is very small. Unless they are demoralizing the team it seems they could be effectively used somewhere.Is it implicit in Fred’s argument that the person who “doesn’t scale” has refused a different position or having someone placed above them? Or is it a financial requirement because their stock needs to be reallocated for a new CTO/VP of engineering?I’ve always had trouble with this idea when reading about taking VC funding. It would be great to get clarity.

    3. paramendra

      “…put them in a different role or something if they can’t manage/scale….”I find the idea appealing.Severely diluting the angel investors and firing the founders is not venture capitalism, it is vulture capitalism.The Pepsi guy firing Steve Jobs was a huge mistake.The Daily Beast: John Sculley On Why He Fired Steve Jobs: “I haven’t spoken to Steve in 20-odd years,” Sculley tells The Daily Beast. “Even though he still doesn’t speak to me, and I expect he never will ….”…”….I am in favor of vesting more stock than is contractually obligated to be vested. …”This is positive, though.I think we need a much simpler formula for the investment game that respects the early investors and team members more.

      1. Geoffie

        I don’t necessarily believe the Pepsi guy firing Steve Jobs was a huge mistake. That’s an imponderable. It raises all kinds of questions for which there are no answer.What would have been the course of events had Jobs never been forced out of Apple? Would we all have had iPads years earlier? Or would his staying have kept the iPad from ever having been conceived?It’s possible that the best thing was to fire Jobs at that time. Because it was only through those course of events that we have our current state…. just sayin’

        1. JLM

          “Horses for courses.”Jobs fueled his fires with the angst of getting canned and came roaring back. In the end, it was all the equivalent of coaching.

          1. Fred T

            True. All things considered. Things may not have turned out the way Jobs envisioned to this very day if this fateful decision did not fuel Jobs’s fire to perform the ultimate ultimate comeback in Silicon Valley history. A parallel universe could explain, perhaps?

        2. kidmercury

          in a weird sort of way jobs never really stopped working on apple even after he got canned. he started NeXT after getting canned, which ended up struggling financially and getting acquired by apple. at NeXT though they developed an operating system — after the acquisition this became apple’s operating system, which in turn was the foundation for the iphone and ipad. even though NeXT was struggling and got acquired, it sort of took over apple instead of apple taking over NeXT. add to the story that many key NeXT employees followed jobs after he got canned, and it’s almost like he never left.

      2. David Binetti

        “[Sculley] firing Jobs was a huge mistake.”Disagree. So does Steve Jobs.

        1. Alex Murphy

          Huge mistake, or foundational for the passion that Jobs came back to the company with. I am not sure which.

      3. sbmiller5

        For everybody pointing to Jobs to support their case against Fred, realize that he is an anomaly…ever Horowitz who prefers Founding CEOs points that out:

        1. Mark Essel

          Most founders would fall into the category of anomalies, Steve is a extrememlh popular and successful one. As mentioned by KidMercury Steve’s firing is a good example of it being right for a company at a certain time (although Apple’s growth was stunted while he was gone, there are many reasons for it).

          1. sbmiller5

            He’s an anomaly for a founder…sorry i wasn’t more clear

        2. JLM

          Fair play!

      4. kidmercury

        the decision to can jobs was not sculley’s sole decision. many people were in favor of it, including angel investors in apple that liked jobs and had a soft spot for him. i’m sure it was a tough decision with plenty of feelings of guilt to go around for everyone. i imagine jobs’ flamboyant attitude did not help the situation.if anything i think jobs getting canned supports much of fred’s argument here.

        1. JLM

          I think you have a bit of revisionist history woven into your tapestry.Jobs was the head of the Macintosh division which was simply not performing.The company had grown and embraced a more “mature” out of the garage sense of things by hiring Sculley and through the Board’s stiffening resolve to make a billion dollar business run like a billion dollar business.The grownups revolted against the creative children who thought they could continue to operate like a bunch of 20 somethings having a wonderful time.Jobs picked the fight that ultimately was his own undoing. He had not lost such a fight in his even then storied career. But he was outplayed by Sculley who was a masterful corporate politician.Take a look at who was on their Board at that time — Venrock blue suit types — and you can see from whence the impatience came.It was also good for Jobs who promptly went out and founded NeXT and bought Pixar and got his own creative juices flowing again. If Jobs had never been involved with Apple, NeXT and Pixar would have been stories in their own right but they were dwarfed by the Apple narrative.Pixar had been part of Lucasfilms and Jobs worked that deal for 20 years and ultimately sold it to Disney.NeXT was founded by Jobs and worked for about the same period of time starting from about 6 people. He sold it to Apple for abut $500MM.Biggest secret about Jobs — Ross Perot was the first outside investor in NeXT and is really credited with calming down Jobs over the ensuing years. Perot taught Jobs how to deal w/ grownups and how to behave. True story!It is a small world out there.

          1. kidmercury

            mike markkula is the angel investor i was referring to who sided with sculley to oust jobs. based on what i’ve read i get the impression the decision was not easy for him but he felt it was the right thing to do to grow the company in a sane manner, instead of a place where people are unpredictably fired and random engineering meetings are called at midnight, as was customary under the first jobs regime. what i’ve read about the situation sounded much like the way fred is describing the issues surrounding ousting a founder.i dont think NeXT would have done well without getting acquired by apple. their financial history was shaky at best and they were in the midst of changing much of their strategy when apple acquired them. NeXT had great technology (that would eventually become the mac operating system OS X) but they lacked the marketing reach to make it happen. when they got acquired by apple much of the marketing work sculley had spearheaded (he helped raise apple’s sales from 800 million to 8 billion) helped NeXT technology get the marketing reach it needed.ross perot seems like a very smart businessperson, it makes sense that he helped jobs grow up. perot also has a little kook in him, as he accused the US military of abandoning POWs and engaging in drug smuggling to finance secret wars. i agree with him on NAFTA sucking and the national debt being a major problem, IMHO it’s too bad no one listened to him on those issues.

          2. JLM

            Perot — trade school grad, squid. Very interesting cat. I had some extensive business dealings w/ him in the real estate business. The stories I could tell. At his heart, a real patriot. Keeps all of his real wealth in treasuries.I suspect he was right about the POWs and the dope.Funny story — Perot liked to hire trade school grads w/ lots of medals — bit of a jock sniffer his having never been in combat.He would interview lots of guys getting out of the service and his secretary used to send them a memo telling them what to wear (solid blue suit, no pinstripes, no cuffs, no pocket squares, matching not contrasting tie, tie leather shoes).I arrived in a blue pinstripe suit, pocket square, cuffs on my pants, blue shirt w/ white collar and french cuffs, red tie and tassel loafers.He squirmed a bit and asked me if I had gotten any info from his secretary about our meeting and I say “Uhuh!” I looked him right in the eye, held my gaze and he never said another word.I really went to the interview because he was reputed to have the market cornered on original Remington sculptures and I wanted to see them — museum trip. He did.Never heard from the guy again until about 15 years later he needed to get some regulatory approvals on a huge land deal from a difficult municipality with which I had a great working relationship. I get a call from his guy and he says that Perot wants me to handle this for him and to send him a bill. He says that Perot says I am a guy who could never work FOR him but a guy he wanted to work WITH.I get the approvals for him, send him a truly obscene bill and get a check back a couple of days later with a nice note. I bump into him several years later in the Texas Capitol where we were both doing some lobbying. He thanks me for getting the approvals and looks at my shoes — the exact same damn tassel loafers, Churchs — and he smiles and says — “well, not much has changed.”

          3. kidmercury

            lol that is a great story! interesting that he contacted you 15 years later, he must have a long memory.

          4. JLM

            I have it on pretty good authority that every person who has ever entered his office is photographed, every conversation is recorded (TX is a one party consent state as it relates to wire tapping) and that he catalogs every contact into a database.I also suspect that he follows people (not physically) and routinely has them “backgrounded” before he meets with anyone.Remember EDS was at its roots just a huge relational database company. And Perot traveled in some pretty spooky circles.

          5. ShanaC

            Someone always needs to. It’s hard to let go of childlike dreams. Coupled with ambition, it could be brilliant or it could be toxic.

    4. Dan T

      What if you come in as new CEO to a company with two founders, who you slowly realize have lost respect for each other, don’t trust each other and are distracting you from leading the business because of all the noise? Both are fundamentally good people, doing their best, but they have some deep rooted problems with each other that the CEO nor the investors detected during 3 months of diligence and 3 months from term sheet to closing? If one of them does not go, then everything is going no where. I was the CEO, I picked one to let go. It was hard and ugly, but I did not see another choice. Both are saying and doing what they believe is in the best interest of the business, not doing anything deliberately destructive . . it just is destructive. No one wants to do this, but sometimes it just works out that way. Fred claims to have 25 situations where this needed to happen. I believe him.Maybe you have been lucky or very good so far and have not participated in it.I co-founded a business as well. The three of us had worked together for 10+ years and agreed from the beginning that any two could vote out a third > recognizing that people and siutations change. We accepted Fred’s premise from the start. Turns out we never had to use it, but we accepted it as a reasonable possibility.

    5. markslater

      this is correct – we have this exact situation and we have moved a good friend and co-founder in to a role we believe he can now execute effectively – he was killing us in his other role and we did not react quick enough – but showing the door should in my mind be a last resort – after all other options are exhausted.

    6. Caterina Fake

      I agree with Chris here (might be because we’re cofounders? ;-)The case you’re making is that the founders:”can’t work well in the team environment””Rock stars are rarely good team players””the best developers are rarely the best managers”Which is probably true, but it seems as if the better solution is to keep them productively contributing as an individual rather than team player, in an R&D capacity or another similar role.

    7. David Fishman

      Could not agree more. First step is re-assignment. Beyond this second opportunity I would say 3 strikes your out!

  7. Aviah Laor

    I tend to disagree. If Mozart is playing in your orchestra it’s sure not easy, but you better keep him as long as possible. When these guys leave, there is a relief, the meetings are more calm, coordination is better and easier – and soon the road to mediocrity is open. The sparks are gone.I don’t have the exact quote, but Drucker said that good places make use of strength, while keeping weakness irrelevant. If there is a genius with the vision and know-how to take the company forward, the team should adjust to him, as long as possible.Although people that can take a start-up into an empire are rare, it’s not a coincident all the juggernauts in the industry: Google, Apple, Microsoft, Oracle etc are exactly the opposite of this post theme. It shows what is lost when these founders leave.

    1. fredwilson

      i agree that something is lost when a “mozart” leavesbut something is gained as well

      1. paramendra

        At this point you lose me completely. Mozart was a creative genius, not an agent of brute force. His early death was due to dumb people around him having too much power. I can see instances, some instances, where an early team member might have to go, and I think you have done a good job of pointing out as to what might be the best way to do it. But this argument is only valid – to some extent – if extra, extra, extra care is taken to make sure Mozart has his space to keep playing. He should not have to also run mud politics just to be able to breathe. Because if he has to, already the wrong signals are in place, and the company will not achieve greatness. All the big tech companies – that are big today – have kept their founders intact. Why?

    2. paramendra

      “When these guys leave, there is a relief, the meetings are more calm, coordination is better and easier – and soon the road to mediocrity is open. The sparks are gone.”This is my number one fear about firing founders.

    3. ShanaC

      It’s a huge balancing act with these characters. To strike very far, you really know how to master your own strangeness as well as others. And then using the genius that comes out of the strangeness to make music happen. Many people can’t.

    4. Fred T

      As the saying goes, “There’s a method to my madness.”How about Google? What if they didn’t let Schmidt take over as CEO? Do you think Google wouldn’t be the same if the founders took that path of running the company themselves?

  8. awaldstein

    Firing good people who are a bad fit is never easy but absolutely essential.A combo of honest talk, generous severance and clear communications to the team is the only way to get through it. The results are not always perfect but this is the only approach that is right for all involved.Funny…I just had this talk with a client that I mentor yesterday. Still not easy.

  9. Dan Cornish

    The danger here is for less experienced and less wise investors, this becomes a default position. The history of business is littered with founding team members let go and it turned out to be a very bad idea. Entrepreneurs need to be very mindful that when they take on venture capital, they are taking on a partner who can fire them. It is a one way street because once you have investors it is very difficult to fire them.

    1. fredwilson

      i am not talking about the VCs doing any firing here Dani am talking about one founder, the CEO, dealing with a difficult management issue in their company

      1. Darren Erik Vengroff

        This is a tremendously interesting topic and I think you nailed how to approach it. However, it is also among the most straightforward of all possible founding team breakup scenarios.Perhaps you could follow up with one or more posts on some of the stickier scenarios. For example, consider when the CEO is the founder who needs to go, but retaining one or more non-CEO co-founders is critical to future success. Or consider the case when none of the founders are underperforming but a deep strategic rift has grown between them and it does not appear to be resolvable. These are the kind of scenarios that can really sink a company if not handled promptly and properly.

    2. Mark the Webalyst

      Steve Jobs comes to mind, and a story about a farmer who’s prize stallion escapes.You never know if its good or bad in the long run. You just do your best and learn as much as you can from each experience, and not least that as soon as something becomes a rule it has become both a support/shortcut and a barrier/crutch.

    3. paramendra

      I think there has to a way to fire investors. You should be able to buy them out in future rounds if they are not worthy of being on the Board no more.

      1. PhilipSugar

        I have fired investors. My lawyer says in the thousands of deals he’s done it was the first time he’s seen it done. I will write about it this weekend.

        1. Tereza

          Please do!!!!

          1. PhilipSugar

            Done.I really need to get somebody to help me format better but it works for now.

        2. paramendra

          Please do. I mean, it has to be both ways. Some VCs have obvious personality flaws. Just like entrepreneurs.

          1. PhilipSugar

            It is posted I don’t like/care to plug my blog, and really I only did one because of Ellie’s eloquent post about being just an entrepreneur pushing the ball up the hill.

          2. paramendra

            You don’t have to feel bad about linking to a blog post of yours if it is relevant to what you are saying. People have the option to click over or not. Most don’t.

          3. paramendra

            http://justanentrepreneur.c… A great blog post. “It’s been said taking money from a VC is like getting married but there is no divorce. I actually got a divorce. I think a real divorce might have been easier.”

      2. JLM

        Great piece of advice I have followed during my career —“Never ever get mad at the money!”

        1. paramendra

          Great advice.

  10. ActualTechUser

    The case of a founder may be a special case, because of all the history and emotion involved, as you correctly point out. But another valuable aspect of being able to do this, is its value as management discipline for the future decisions to come with true scale. A CEO who can’t pull the trigger when all the conditions are met with a single individual (co-founder or not) is going to find it just as difficult or even moreso when and if larger-scale layoffs become necessary to reorganize or handle change. So you’re right, this is just part of building a successful growing company.

    1. paramendra

      Bob Miner was never fired by Larry Ellison. Bob Miner left on his own! 🙂

  11. Jevon

    I have never understood why so many people take such a contentious view of this process. If the founder is someone you have worked with to build a company, then you should be equally as willing to work with them to find an out or new role that unwinds their involvement.Hanging someone out to dry can damage their career and personal life, and it can damage the startup that is doing the “cutting” — Never an easy process and in my experience not as simple as you make it sound.It is pretty typical that one early member has to go– some will fight back and make it messy, but then it is just time to take the high road and do your best to make sure they move on to something better for them.

  12. William Mougayar

    Agreed. I would never put the interests of one person over the company’s interests. In the words of Gurbaksh Chahal, one of his advice to founders is “no one is indispensable…the company’s interests are above all.”

    1. JLM

      “The cemeteries of the world are full of indispensable men.” Charles de Gaulle, famous French venture capitalist

      1. Aviah Laor

        Just couldn’t forgive the most indispensable man in human history for helping him.

  13. Dave Voyles

    The way I look at it – If they were good enough to help found an organization that grew to be large and successful, then they have something that stands out, whether it is a skill or a talent, somewhere. It’s just a matter of someone else having replaced their position as the founder moved up. But I don’t know much about the situation, so I can’t really comment on it.

  14. rajjr_tx

    I had an old boss who would say ‘make a June decision in June.’ In other words, prolonging the decision rarely makes it better. Unfortunately, I’ve found that in the vast majority of instances, efforts to change behavior fail b/c you’re asking the person to change the fundamental personality traits that made them successful in the beginning. Tough for anyone to do.

  15. paramendra

    “…..over the almost 25 years that I have been in the venture capital business, almost every single one of them has seen a founder or critical founding team member shown the door as the company scaled….”I find this a little troubling. How do you explain the fact that the Etsy founder had to be brought back in?

    1. fredwilson

      there was more than one etsy founder

      1. paramendra

        I respect the Etsy team’s privacy. We will have to make to with other examples. For now let’s stick to the West Coast! 🙂

    2. Zombo

      I don’t think he ‘had’ to be brought back in. My impression is that he was intent on being involved (this is speculation). Honestly, I don’t think the CEO/Founder’s erratic style benefits the company at all at this point. Etsy needs mature management. They still don’t have it.

      1. paramendra

        I don’t have the details, so I can’t comment. All I know is Etsy is a great company that needs to scale and scale and scale.

  16. karen_e

    A good one! Preacher Fred starting Friday off just right.

  17. RichardF

    It’s a sad fact of start up life. But you’ve hit the nail on the head it’s how you deal with it and being fair (generous) is an absolute must. Apart from respecting the individual who has given so much at the beginning, it goes back to what JLM said yesterday about always treating people as well as you can because you don’t know who you are going to need when you are on the way down.The co-founder situation is far harder to deal with than early stage employees, I’ve seen the situation where co-founders were kept on but sidelined and really they just become a bit of a laughing stock to the rest of the company.

  18. Mark D. Burdette

    I have personally gone through this with co-founders before and it is never easy no matter how good or bad the situation is. In my experience when it got to that point it was obvious what needed to be done by both parties and you do the right thing for all involved and most importantly pull the trigger.At the time we had a VC involved in our deal and they were extremely supportive during this process when it presented itself. They knew when to get hands on and when to back off. It was a great learning experience for everyone involved.The key I believe in the beginning is getting the right people on the bus when building the team and putting them in the right seat. But with all the stops along the way and how the business evolves it is inevitable that something like this will happen. Good talent will learn to adapt and will find another seat more suitable for them to sit on the bus as the business advances through its business stages. But if there is no seat left for you on the bus you become a distraction to the rest of the passengers and you know it is time to get off at the next stop. If you are a good CEO then you will recognize it and plan for it and ultimately be able to pull the trigger in the company’s best interest and handle it professionally and with respect.Communication is extremely important during this process. If you do the right thing then I believe things will work out for the best for both parties after the dust settles. Like you said Fred running a business is not an easy job.

    1. fredwilson

      it’s a hard and lonely job

    2. Mark Essel

      Appreciate the startup bus analogy, wrote up the startup school bus a few weeks back 🙂

  19. Paul Goldfarb

    Fred, Absolutely right. I work with very small startup companies, often single founder entrepreneurs and have run into this exact problem. How to fire a founder, or more often for us, help them realize that they would be better suited in another, ie “Chief Scientific/Technical Officer” role is incredibly difficult when they’ve poured their heart & soul into the company. And when they are at the angel or pre-seed stage and there is no board then it becomes a Darwinian issue of will the founder realize that in order for the company (basically their idea/technology) to survive s/he must step aside. All to often that doesn’t happen.Paul

  20. David Binetti

    It’s not the number of employees, it’s where the company is in its development. If the company is still in startup mode (meaning it’s searching for a business model), the energy and creativity of the rock-star, entrepreneurial co-founder is likely still needed. If the company is in execution mode (found a model and is levering it up – which is why you are hiring) then the chaos an entrepreneurial co-founder might be more disruptive than additive. (Same is true of the CEO him/herself.)Steve Blank writes about this extensively and his arguments are very persuasive.

  21. David Pearce

    I think this is a tough situation no matter which way you look at it. And obviously something that the best outcome is going to be different in each and every situation. If a founding member got the CTO position and the company has scaled considerably to the point where that person’s weaknesses are making him a bad fit for the position, then yes something needs to be done to fix the situation. I think what exactly needs to be done will vary in every situation. Whether the employee is let go, or a mutual agreement is made, or they’re given a lesser position, whatever it is I do agree that it’s critically important for the company that as the CEO you don’t let emotions hinder the best outcome.

  22. FlavioGomes

    Might sound weak, but this very scenario was the only time I’ve ever shed a tear in business

    1. FlavioGomes

      And i should add, the right thing to do and ended up still being great friends and happy with the outcome.

    2. Tereza

      A tear, extremely selectively applied, can be a be a very powerful ingredient in business.Use sparingly but never be ashamed.It means you care.

      1. FlavioGomes

        No one witnessed and not within my DNA to lever it. But i hear what you are saying.It was a solitary moment, in my office, reflecting back.Business is easy…people make it hard 🙂

    3. fredwilson

      that does not sound weak to me flavioweak is “pseudo tough” as ben horowitz calls it…it takes a strong person to be honest about their emotions publicly

      1. FlavioGomes

        Thanks Fred.Some great lessons experienced then. Chief among them is having some sort of succession plan for *everyone* in your business. Be upfront and try to coach them on how the role *may* change as things get bigger, faster. Perhaps if I had done this earlier it would’ve lead towards a different outcome.Easier said than done but keep driving the big picture and it makes sense and most do see it. I’ve had to hire new leaders for certain teams and it went smoothly as a result and everyone remained intact.

      2. JLM

        Toughness is in the “doing”. In the moment when something needs to be done. It is used in thimble fulls.Toughness is irrelevant after the fact. It does not exist.I have been forced to do some “tough” things in life and there are some who think I might be good at it but I must confess that afterwards I often find myself thinking — did I really just do that?I once got into a deal w/ a certain unscrupulous bank CEO (look up Maxxam and redwoods and you can figure out the rest). I had delivered the approvals on a very, very difficult big commercial land transaction which was very important to this institution. When I went to their HQ to discuss how we might now go forward, the CEO said to me “the loan committee turned down your deal”. It was a very complicated transaction in which they were obligated to put up all the money and I was only obligated to get the approvals. But what it really meant was I not going to get paid a considerable sum of money I had invested on the come.At a meeting at one of the plushest boardrooms in America with his senior staff arrayed around ;the table, I looked this unscrupulous SOB right in the eye and said with the most conviction I could summon — “who the f**k are you kidding? You are the f**king loan committee!”He smiled — the kind of smile I imagine a great white smiles just before he devours you — and laughed and then worked out the details of the deal. I got paid.Karma is a bitch because a few years later the institution failed and I was summoned to testify in a Comptroller of the Currency — Office of Thrift Supervision investigation of how the thrift had been controlled and whether this individual had exercised “supervisory control”. A huge issue w/ substantial financial implications.The OTS had a rendition on file of this very conversation and had a witness to the conversation — it was not me. The Judge was a retired Marine MG and he asked me if in fact that conversation had actually happened as reported. He smiled and laughed and said that apparently that was the only time in this particular CEOs history that anyone had ever spoken to him in that manner.Karma is a bitch.

        1. FlavioGomes

          Good story. Toughness is not about being an asshole, or pretending to be fearless or even ruthlessness. Its about decisiveness and doing the right things. Those principles defend against intimidation every time.

    4. ShanaC

      I hope you do.

  23. Vijaya Sagar V

    > Rock stars are rarely good team players. And the best developers are rarely the best managers. The person who made your first sale is rarely the right person to manage a team of a dozen salespeople.Fred, unless there is overwhelming data to support those 3 assertions, I’d say those are the usual stereotypical feelings that come up in the “top management” meetings. Am surprised you wrote that paragraph.Why would any sane company fire rock stars and best developers just because they are not good team-players/managers ? Having fired them, how can it hope to scale? Applying that logic recursively, the company will be left with duds.Incompetency, malice, moral turpitude beg for unceremonious firing of course.

    1. kidmercury

      i’ll always support the decision to fire a person who is not a team player. the team is greater than any individual, individuals who don’t understand this are cancers to an organization, regardless of how talented they think they are. if they think they are bigger than the team, they can go elsewhere and conquer the world by themselves. let’s see how far they get.non-team players hinder scalability because they are morale destroyers.

      1. Spero Lucem

        Great analogy. I wondered when someone would raise the metaphor of tumors and cancers. There’s a point when one has to take the data and make a hard call whether to let the body try to take the natural course of defending itself or realize a prompt excision is needed to ensure the whole organism is not threatened.On a diff note, I have read a bunch of posts by @cdixon and my recurring issue w/ him is his incredible rush to judgement (usually in the absence of thorough critical analysis (and facts/scholarship)). There’s some truth to the saying that one can only experience experience. @fredwilson is gently making the point and Chris is not listening. And yes, it’s pretty transparent that @cdixon is marketing himself as the ‘defender of the [lowly oppressed] entrepreneur’ but frankly, it’s tiresome, fake and disingenuous. The bottom line is Fred has a ton more experience than most of us and has seen a bunch of examples across a range of scenarios. He is acknowledging the elephant in the room and offering some guidelines on how best to manage through. Doing what’s right for the greater good usually works out for the best. And doing it based on underpinnings of 2way fairness & integrity works even better. And making pit stops to evaluate diff options (new position, recast role, etc) is absolutely required…Let’s stop making excuses for bad acts and bad actors. Life’s short.

    2. fredwilson

      i could have and maybe should have written a longer postthe early team has so much power in an organization and they earned itbut when you need to move to teams led by managers and some of the early founders are getting in the way of that, then you have big organizational problems

      1. PhilipSugar

        In reading all of your replies I can see that you are saying this isn’t coming from the board its coming from the team.I would point out one last thing and that is that the highest performing member of a team in my company always gets paid more than the manager. Always.This eliminates much of the “ego” driven desire to manage whether you are good at it or not.

      2. Fred T

        In simple analogy: teamwork is what gets the team going.

      3. calabs

        Yes indeed, you needed to write a long post. Vajaya hit the nail on the head when he noted your assertions sounds exactly like the stereotypical top management meeting, which is probably why they’re raising hackles.The distance between investor and founder can give the investor valuable perspective, but it can also make him disconnected, callous and cruel. The post I’d like to read, Fred, is how you avoid the latter and maintain the former.

        1. fredwilson

          when you start with the assertion that I am unable to run a business, which is how i approach every investment, it really makes the entrepreneur/VC relationship work a lot better

    3. Mark Essel

      Agree with statement on false assumption of leadership roles, founders and early hires can and will grow into new positions.But in regards to certain rockstar but disruptive team members, I have to disagree. At one point we’ve all seen a team with nothing but superstars underperform, and an “underdog” team of no name players cohesively work and dismantle the superstars. Businesses are similar in this regard, super effective but socially disruptive members can’t be tolerated in people management roles. They cause too much ill will and an overall loss in productivity. In the catastrophic case they can kill a company. They can certainly rot it’s culture so that no one wants to work there.

  24. mattb2518

    It’s hard. It’s important when it’s necessary. Here’s a suggestion for making it even easier: at the point of founding, the CEO has to lead a conversation that’s a prelude to this. “Someday, one or more of us may need to go. Let’s all recognize that now and talk about how it will or won’t go down.”

    1. fredwilson

      that’s fantastic advice matt

    2. JLM

      Great conversation that should occur annually or more often. Folks who talk about difficult things are better equipped to deal with them when they happen.

  25. svk

    Fred, I see the necessity to make such a call, and it’s terrible for the person being fired.I would like to point to the other side of it as well – it’s a terrible position to have the “firing” founder in. It’s better for the business, sure, but we are human beings, not automated machines. And the memories of the early days when the co-founder put in the ridiculous hours with you, burned the midnight oil, was a comrade when the rest of the world didn’t believe in you – how do you forget that and sleep well at night?And let’s be honest – usually there is some nudging or pressure from the Board/investors to take this action. Maybe there are some uber professional CEO/founders out there that make the call completely on their own, but I doubt there are many.

    1. fredwilson

      i’ve seen this happen a lot and i don’t recall ever that the board pressured the CEO to do thisit’s usually the CEO knows they need to do it and the board helps them get over the hump

      1. PhilipSugar

        I mean this with all respect….if that is the case you live in rarified air.We can discuss off-line but I’ll give you two of the top VCs that blog and two founders one who is a Rhodes Scholar and one who extended Einstein’s Fifth Theorem to speak with.Fortunately I know in my circle of friends where I stand on the intelligence quotient……dead last.I am easy to find. Last name is a dead giveaway.

  26. sbmiller5

    That’s an issue I’ve been contemplating lately, as my current Co-founder is a great technical developer and I definitely need him (without a doubt I need him more than he needs me) but he’s not someone who I see scaling with the growth of a Company and becoming a manager of others in anyway (I also don’t see him working well “under” anyone else.Do you have any recommendations on how we can set-up our organization from the beginning to help avoid this conflict?What about keeping the founder in a creative role where he doesn’t supervise others and is working just focused on product development and design?

    1. fredwilson

      i agree with Chris Dixon’s advice to try to “find a role for them”often times the CTO role where they don’t manage but are strong individual contributors can workyou might try that

    2. paramendra

      “What about keeping the founder in a creative role where he doesn’t supervise others and is working just focused on product development and design?”Great idea.

    3. ShanaC

      let him grow a little first.- there is a great story here about someone learning to program at age 40. See what he does when doing paired programming, for example, if he can take a leadership role there. Then slowly scale that position. Make it a ramped learning experience.

  27. Nancy Raulston

    Some people are just a better fit for early stage companies — they like the chaos and fluidity and aren’t good when the company gets bigger and more process and discipline is required. And in their heart they know that.I would add “be honest” to your advice to confront it soon. What I see all too often is people who are afraid to have the honest conversation so they end up avoiding the founder, leaving him or her out of meetings and decisions, encouraging others to leave them out of the loop. This is cruel and unnecessary.There are lots of options for keeping the person involved in the capacity in which they are still excelling — product visionery, evangelist, technical sales, industry spokesperson. Just move them out of the role that requires routine and discipline and work that they find unfulfilling.

  28. Matt Mireles

    Fred, having had to do this very thing myself recently and dealt with all the pain and trauma that it entails, this is some of the best advice I’ve seen on this topic in a while. Kudos.

  29. Mark Essel

    Agree on the way it’s done being very important to morale and culture, but Chris made a better suggestion below, re-allocate the super resource unless they are actively disrupting the company. I think about why I’d fire myself on any given day (poor product design, not a clear user feedback model, not enough code written, no hard business plan). It’s the days where I wouldn’t fire myself that matter.You’ve stirred some curiousity, is it possible to fire investors? By generously giving them their shares but removing their say/control of the business.Writing a quick post for my travel day tomorrow,”Pay off a founder, or investor their current ownership of the business and bid them farewell. If you can’t afford to do this, you can’t afford to fire them”

  30. PhilipSugar

    I have been on both sides of this. I would say given that the decision is the right one your advice is sound. The skills needed to run a company change as it grows.However, I would say that many times the decision is not the right one. If its being pushed by the investors then it probably is not the right one. In my experience many times investors want to replace a strong willed founder with somebody they are more comfortable with. I.e. somebody that they’ve worked with before, somebody that they can control, somebody that has less of an ownership stake.If the departure is followed by hiring several people that get paid multiples of what the founder was making you know you’ve gotten hosed, because a cram-down round is on the way. So I would say if the person is a true founder and the investors are pushing really the only way it should happen is if the investors are confident enough to offer to buy out the founders stock.

    1. paramendra

      “…….many times investors want to replace a strong willed founder with somebody they are more comfortable with. I.e. somebody that they’ve worked with before, somebody that they can control, somebody that has less of an ownership stake……”This is the huge missing part of Fred’s blog post.

      1. PhilipSugar

        Fred clearly says that he is not at all part of the decision and I believe and respect that.I think he hadn’t even considered that it happens, because he doesn’t do it.I assure you however it happens all of the time. Ben Horrowitz of course does a great job of discussing it:

        1. paramendra

          I note that. Fred has put a major qualifier in the blog post. He says IF the CEO wants to do it ………. that is to Fred’s credit. …. He also said a few weeks back about a founder wanting to sell off a company. He said his instinct might be hold on, but if the founder wants to sell off, it is their prerogative.

      2. Fred T

        I’ve seen this happen a lot. It’s sad to those currently in the company and outside this “in-house” hiring circle, but management needs people whom they either worked with or they can trust.

        1. paramendra

          The trouble is sometimes they do it for all the wrong reasons.

          1. PhilipSugar

            Yes, for unethical investors I think the key phrase would be “divide and conquer”

  31. paramendra

    Chris Dixon, you took too long, so I went ahead and did it.Firing Founders: Mostly A Bad Idea

  32. David Binetti

    We’re focusing on the company, but it could also be in the co-founder’s best interest as well. You have to leave the nest eventually. It is counter-intutive that a startup’s success should precipitate an co-founder’s exit before a liquidity event, but if you’re an entrepreneur in an execution model then you’re not likely to be happy.

    1. Tereza

      circle of life.

    2. JLM

      When your kids grow up and leave the nest thinking they are able to bite the ass off a bear in a fair contest, you will be both proud and weepy eyed. You will no longer instinctively protect them, you will secretly root for the bears to test them mightily. And when they bring home a new bearskin, you will know you did well.Companies are no different.When a company can survive without all or part of its founding talent, the founders should be both proud and weepy eyed.These two emotions have to be celebrated and relished at the same time. And that is hard to do sometimes.A really good business partner and I sat one night drinking and trying to remember every bright young stud or princess who had worked for us through the years and who was now running their own business or owned their own business. It was a great feeling.Life beats the hell out of all other alternatives but it is messy at times.

  33. David

    This seems like a terrible idea.It is probably a lack of imagination on the part of management that a better solution hasn’t presented itself.Getting rid of the scarcest of scarce resources is not a recipe for long term success. It might be the best thing for getting from 5-50 or even 50-500, but losing a visionary rockstar should be avoided.I work at a very large company and managing rockstars is still a major problem. The company doesn’t know how to leverage them properly and inevitably chases them away. As a result, basically nothing really revolutionary happens at the company. I still think it is a failure in management not a necessary tactic.

    1. paramendra

      “I work at a very large company and managing rockstars is still a major problem. The company doesn’t know how to leverage them properly and inevitably chases them away. As a result, basically nothing really revolutionary happens at the company. I still think it is a failure in management not a necessary tactic.”Great point. The mediocrity of the majority.

  34. aminTorres

    I actually get 100% what Fred is talking about.When I engaged in my first efforts to help a friend get his startup up and running, we had exactly the same issue you describe here. Looking back one of my regrets is that I did not encourage my friend to fire the toxic founding member sooner in the process.As we got closer and closer to launching the site, we discover how increasingly difficult and increasingly clear it was that this person was going to be a pain in the a** to work with.And yes, this person was a rock star developer, but as we reached out for others to come help us finalize our product, everyone kept pointing out how difficult things were even on basic communication via email and lack of flexibilities etc.The other thing that you don’t necessarily mention here but I guess is somewhat implied, is having to picture your self entering in a long term commitment with this type of person. One of the most concerning things was also when we contemplated approaching VCs, we understood that keeping a person like this around wasn’t necessarily a desirable thing to a potential investor. One’s individual work ethics, dedication, communication skills etc., evenly will surface to everyone including investors sooner or later.This was going to inevitably server to an scenario where me and my friend would have had to spend a lot of time trying to “damage control, or simply keeping the toxic member from spilling onto others around when we could easily dedicate that time to simply run the company.To factor in Chris’s valid point, this was in fact engagement of bad behavior and underperforming to the extend that it was just a pain to get anything done.I think Fred’s advice factor this assumption in.But again the handling of the firing and the exit of the founding member is were my second biggest regret about this took place. It is a lesson that has stuck with me since. It is really difficult to tell someone you are screwing us and keeping them evangelists of our experience and our company at the same time.

  35. ShanaC

    Largely- I think this is advice about recognizing that we all grow and change as people. Confronting that issue heads on first makes any process with any team a lot less painful. it is totally possible it could cause a firing. It is also totally possible that by making sure things are clearly stated initially and continue to be so, one builds a much more successful company because of the strength it takes to reveal emotions and to grow from them.Lastly, one could also hope because of that same internal strength of the reveal (hopefully regular ones) that if someone has to leave, it will be less painful since there will be clear warning signs and clear indications of why as well as all the options laid on the table as to why and what to do about next steps.

  36. martin

    Wow, what a post. It’s quite reasonable yet cold and condescending, confirming the worst fear of real entrepreneurs to be at the whim of people they don’t really know upon taking venture capital. It sounds like founders are reduced to some kind of nuisance necessary at the beginning that needs to be dealt with rather sooner than later.VCs do have some sense of who from the founding team will survive and who won’t. Putting them on a vesting schedule especially after significant contributions and when there is a functioning business model must be quite controversial.

    1. fredwilson

      martinplease re-read the postthis is not about the VCs doing anything to anyonethis is about one founder to anotheri didn’t mention VCs at all in the post

      1. martin

        My bad. I have been reading all the responses and lost track of the original post.

  37. Mark D. Burdette

    Fred, I have enjoyed all of the comments your post generated today. So much so, that my partner and I did a podcast response this afternoon to your blog post that we wanted to share with you and all of those who commented today. It was a pleasure being apart of the conversation. There are two ways to listen to the podcast. First, you can go to my personal blog at and it’s the latest post. Second, you can go to our podcast website at Great topic and great comments.

  38. JLM

    A very interesting topic and a wonderfully broad and heart felt commentary. I am struck by how fundamental the issue really and truly is — plain old fashioned communication.Founders who ultimately become corporate officers have got to keep the dialogue and mo jo alive that created the initial chemistry and talent leverage in the first place. IF THEY CAN AND IF THEY WANT TO.Every close association in business will ultimately be challenged by the normal influences of the evolution of the enterprise —1. closely held and loosely collaborative begets 2. organizational structure to attract capital and new people begets3. organized and professional management begets4. the differentiation between leadership and management begets5. the need to make the money happy begets6. the need to monetize the investment.All of these evolutionary forces test the relationship between and among the founders.Some founders can hit curve balls until you get to AA ball and some can play at every possible level.There will come a time when there is truly a need for a CEO. And you cannot have more than one. Most of the time, the individual founders know who both has the talent and wants the role.I suggest founders stay in constant contact through the years and speak constantly while the evolutionary process is underway. I think that you will find that it is perfectly natural and normal to have a single person emerge to run the show. What is unnatural is to allow this to happen by accident or to not see it coming.As to the money end of things, founders have to be equal at the instant of the changed direction. No more, no less. It is not an exercise in “generosity”, it is fundamental fairness. Remember nobody is going to treat you better than you treat your own co-founders. I promise that.Keep good communication. Deal w/ the realities of the business. Celebrate for all times the successes, forget about the failures. Do what is natural and do it in the light of day.I think you will find that many co-founders who are beginning to drift outside their own comfort zones will feel the discomfort and if given a graceful opportunity to disengage or to retreat to their comfort zone, they will do it.If you are concerned about the emotional implications, then you have to have emotional capital in the game. Don’t be afraid to invest a bit of emotion. I never started anything because I wanted to be the #4 guy at anything. Dare to do it.Communication, honesty and honor will see you through. At the darkest moment, close your eyes and pretend you are the other guy and you will know exactly what is the right thing to do. Remember sometimes doing the right thing is a bit painful. That pain is your mind telling you you are doing the right thing.

  39. LIAD

    When we all get together at the inaugural annual AVC retreat in Hawaii paid for by USV’s limited partners, under the stars and over a bottle of single malt whisky I’ll tell you all a story about parting ways with a cofounder which will make your hair stand on end and your ears burst into flames.Until then, let George Bernard Shaw guide us.”I learnt long ago, never to wrestle with a pig. You get dirty, and besides the pig likes it.”Make of it what you will.

    1. Tereza

      Looking forward to it!

  40. ShanaC

    You know, after reading through all of this again- what might be interesting to read about is how the non-zero sum game works because it would explain the backstory as to why situations like the theoretical one above happen.

  41. Guest

    long time reader – first time poster.As an entrepreneur, you’ve got no choice. It may be cliche – but if you want a business build a business and be aware that you must be emotionally willing to “go to the mattresses.” There’s no “role in the corner” for a team of 15 people with $1 – 3M of VC money. Everyone must be the right person for the role they’re in. You can not afford to manufacture a role for anyone. There’s so much risk in an early stage business, there’s no reason to add to it. Any co-founder that is clearly a ‘fish out of water’ should realize their equity is more valuable given their absence than their sub-optimal participation.

  42. Gregg

    While many, many successful companies require leadership changes at points in their development I believe it’s always worth noting in discussions about the scalability of founders that Bill Gates, Larry Ellison, Steve Jobs, Sam Walton, Jeff Bezos, Michael Dell and Gordon Moore were entrepreneurs.

  43. JustAsking

    is this what just happened @twitter ?

    1. fredwilson

      i don’t believe anything “just” happened at twitterwhat are you referring to?

        1. JustAsking

          Regrets for my error on the timing, i now see he left back in 10/08, Square has been in the news the past month…. but i guess the question is the same?

        2. fredwilson

          jack left almost two years ago and founded and launched since then

  44. Michael Lewkowitz

    Wow. Late to this, but wow.Founder baggage is, I believe, one of the biggest things that kills startups. We founders have a hard time not becoming attached to the idea we got the whole thing rolling with, and that idea may no longer be the right thing the company needs to grow. And almost always, a founder’s skills are not what you need to move through subsequent phases. We need to get over ourselves and move on to doing what we are uniquely able to and should be supported in doing so.On the flip side, one of the things that founders to bring is an instinct and value set/culture that are critical ingredients of the early successes of an organization. At the very least they are part of the founding fabric. Losing that too early in the game can be the beginning of becoming meaningless in a sea of increasing competition (if what’s been created was any good in the first place). This is the hard part for the investors and professional managers. Rationalizing an ‘ejection’ is easy, valuing and justifying culture and instinct isn’t.I’ve lived through both scenarios, and been on both sides and never seen is play out as smoothly as it could. This is emotional stuff. Working rationally and respectfully with it is hard, particularly when the value of a founder after the founding phase is largely in the emotional/intangibles.The best case is you have a board that has experienced it too, can get passed the ‘rightness’ of their experience and have a real conversation about what’s going on, what the organization really needs, and what’s the unique value the founder can continue to bring the org. Of course this needs to happen with the founder (not some end run). Then, and only then, can you possibly create a transition that makes the most of it, for the founder and the organization.We need more founders, founding great organizations. This is one of the most important pieces in enabling that.

  45. David Semeria

    A bit late, but here are my 2 cents: it’s a tough one, but I’m marginally with Fred on this one.Whilst totally respecting Chris’ ethical stance (which Fred doesn’t dispute) it’s important to get a bit real and smell the aroma from the coffee machine.Sure, you fell in love – but 10 years later who says you both should always feel the same?Just like marriage is (alas) not permanent, neither is life in a startup.In both situations the most important thing is to keep in mind the feelings (and contributions) at the beginning when it comes to sorting out the details at the end.

    1. Tereza

      And as anyone who’s been married for 10 years can tell you, you never, ever know what went on behind closed doors. It’s never as black/white as you think.

  46. GraemeThickins

    excellent advice, Fred… reality for startupshope to chat with you again at Defrag in November!cheers,Graeme

  47. sigmaalgebra

    Fred,I can believe that in your 25 ventures there were some good reasons some founders had to go, but I have to conclude that the reasons you gave in your post are nearly all bad. Maybe the issue is not reality but just some hurried writing about reality.You wrote:”Rock stars are rarely good team players.””And the best developers are rarely the best managers.””The person who made your first sale is rarely the right person to manage a team of a dozen salespeople.”There’s a pattern visible here. We can start with just:”And the best developers are rarely the best managers.”It’s also true that from nearly any collection of people of significant size, they”are rarely the best managers.”So your statement denigrates “the best developers” for no good reason.Similarly for your:”Rock stars are rarely good team players.”Sure, and it’s true in general that people, except maybe for girls in the fourth grade sitting at a round table on a joint project cutting out decorations from construction paper,”are rarely good team players.”So your statement denigrates “rock stars” for no good reason.I know; I know; a father with daughters knows much more than I do about teamwork among girls, and the movie ‘Mean Girls’ had a view, but I remember some of the fourth grade: The girls worked together GREAT, and the boys were lost, disorganized, sitting alone using the construction paper to cut out guns, airplanes, slingshots, etc., and maybe fighting!And there is your:”The person who made your first sale is rarely the right person to manage a team of a dozen salespeople.”Right, and also true for most people omitting “The person who made your first sale”.So your statement denigrates the person who made the first sale for no good reason.Here’s the pattern:You are straining to find reasons to denigrate founding, non-managerial, especially technical, workers.Your writing here is back to the common denigration device that because someone has competence in one area they are then likely actually LESS talented or competent than just an average person, actually particularly INcompetent, in some other area, as if writing 2000 If-Then-Else statements somehow ruined their brain for anything else. A common use of this device is to say, “Yes, Joe founded the company and wrote the software and it’s great, but now we need a CEO.”. So, hire the stuffed suit in the Geico ads, whose main qualification is that he absolutely, positively knows NOTHING about software, and fire the founding engineer! Yup, as the nonsense goes, since the stuffed suit knows nothing about software, he is then able to be a much better CEO!Yup, once during an academic site visit to a college where as a prof I had been playing a leadership role in practical computing for the college, I was told by the visitors that my background in practical computing ruined my ability in computer science research. Total BS, as my record of peer-reviewed original research has shown.If are trying to help a startup company and are to denigrate someone, then it’s IMPORTANT to have a VERY good reason. Else the denigration can be very destructive.So, so far, at most you’ve found some things that some founders aren’t the best at yet. Okay. But your next step is to fire them: They have a wife and a child and a dog and a cat and a house and a car, they have proven ability from solid accomplishments in the company, and you want to kick them out of the company and put them on the street with no salary and some illiquid stock. If going to do that to someone, then it’s IMPORTANT to have a VERY good reason, and you never got within light years of one.Uh, your message is, in that company, do NOT do excellent work, especially excellent technical work, because it will be assumed that, then, you will not be able to ‘grow’ with the company and, then, will be fired. So, do mediocre work, get a promotion to middle management, keep out of sight, and ‘game’ the system with ‘goal subordination’. And that’s what people tend to do. They protect themselves with ‘processes’, sabotage people down the hall, make sure no one under them looks promotable, and forget about the market, the customers, and the company itself.Suppose we have found something a founding, good performer can’t do. Okay, then, there are some things they can do, so maybe let them continue to do those things. And for some things they are not the best at, maybe give them some ‘management’, ‘training’, ‘charm school’, etc.If their old technical job is gone, then find something else for them to do; in fact, humans are very flexible creatures as we can see from the fact that all of us on this blog are doing things nothing like anything any of our ancestors did.A little different is your:”But as the company grows and engineering turns into a team effort, that person or persons can’t work well in the team environment.”Nonsense. Strained, made up, concocted, junk-think, destructive nonsense. ‘Engineering’ should NEVER totally turn “into a team effort”. NEVER totally. The best work ALWAYS springs from the mind of one person, never two or more. Unless the company is hopeless and on the way out of business, there is ALWAYS more good ‘engineering’ work to do, usually first by a single person. Indeed, common advice in venture funded startups is to go to market quickly, BEFORE all the solid engineering has been done for high performance and reliability. So, with market success, there’s MORE good engineering to do.It is totally clear that a startup should be thrilled to continue to have a proven, excellent engineer founder. So it is just as clear that you are straining to find an excuse to denigrate importance of founders doing ‘engineering’ work. That’s DANGEROUS for a technical company.There’s another denigrating implicit assumption here: You have been assuming that easily enough the company can pull together a team to do the engineering that is now a team effort, but somehow, from some strange reason, the founding person who did so well at the first versions of that same engineering is not able to work on the team. Again, as in the common denigration device, good technical work is used as an excuse to claim that they will be less competent at ‘teamwork’; in your scenario good team players were easy enough to find, but the founding, proven, really good engineer is likely particularly UNqualified. Again, you are straining to denigrate founding, proven, good engineering talent.Uh, as I noticed in one startup, and you MUST have noticed somewhere in 25, there is a good, GREAT, reason founders make good team players — STOCK: They are not trying to claw their way to a corner office, which, compared with the founder’s stock, doesn’t mean much; instead, they are trying to make the STOCK valuable.But, if have a good engineer, and if most of the engineering is now done by teams, and if this good engineer really can’t work well in such teams (even after HR sends them to ‘charm school’ and the engineering team leader has tried his best at management), then let the good engineer work largely alone on some suitable, perhaps quite challenging, engineering projects. Heck, as CEO, I will take him on my staff! As questions needing answers cross my desk, some I will toss to him, have him investigate and write me a memo or paper. Later, from my staff, identify a good, longer term project for him to do. Fire him? HECK no.Your”What works when you are five or ten people often does not work when you are fifty or more.”Fifty isn’t very big, and even for 400,000 “often” is far too strong: With growth to 50, 100, 500, nearly everything that did “work” continues to “work” but a few things don’t: BELIEVE ME, Visual Basic .NET will continue to work JUST as well as it did; so will priority queues based on the heap data structure, including with the addressing changed for locality of reference in virtual memory, Cartesian trees, extensible hashing, data base transaction logic and log files, GbE, the central limit theorem, the strong law of large numbers, dynamic programming decomposition and the certainty equivalence in the case of a linear system, quadratic objective, and Gaussian random variables, for random variables, X, Y, E[Y|X] is the function of X closest to Y in L^2, an arrival process with stationary, independent increments is a Poisson process, the Neyman-Pearson lemma from the Hahn decomposition, the martingale convergence theorem, the completeness of the L^2 random variables, Ulam’s ‘tightness’, and von Neumann’s proof of the Radon-Nikodym theorem — TRUST me on this one. Sure, maybe having the petty cash fund in a shoe box where employees take the money and deposit receipts won’t work. Gee, maybe we should put the Stanford business school on this problem right away!Your statement is too eager to claim that old stuff that has worked will fail; this is destructive and indicates that you are straining to find fault as an excuse to make changes, in particular, to fire people. DESTRUCTIVE for the company and the investment.Sure the growth brings some differences, but to the extent your statement is true, it is nearly irrelevant to firing a founder, especially an engineer. Mostly your statement is not true: A big company is still lots of people; the people aren’t bigger; instead they are the same size. Still the work, the actual, core, challenging work, is done mostly by individuals, the “worker bees”. Don’t want too many chiefs and not enough indians.Net, you are looking for an excuse to fire a good founder. BUMMER.Sure, if this founder gets torqued that he didn’t get the CTO or CIO slot, doesn’t want to accept anything else, and for that reason wants to leave, then leaving is THEIR decision. Sad, but it’s THEIR decision.In my company, wanting a management slot and not getting it is no reason to leave: there is a chance that the person who did get the slot now soon enough will be ‘returned to technical work’ and the slot will be open again. In my company, except for my slot at CEO, being a ‘manager’ is no great job honor. Instead, the honors go to the people who do the hard work. When good work is done, the person who presents it to the company is the person who did it and NOT their manager; for the manager to present the work would be theft and plagiarism. The assembly line of Ford is about 100 years old, and feudalism is about 1000 years old, and it is time for both to die. Now typically a good engineer knows MORE than their manager which means that the manager is likely LESS respected and LESS well paid than the engineer. What is needed is good work, and that’s from creativity, knowledge, and effort, and these are from the engineer and NOT their manager. Michelangelo was able to paint the ceiling; no manager with a team could hope to do so otherwise.Perhaps you are following an unstated assumption that every founder should rise in the organization as a manager or be fired. Nonsense. Junk-think, dysfunctional, feudalistic nonsense.A suspicion is that you are following a hidden agenda here to get rid of the proven good founding performers and leave just more ‘malleable’, ‘fungible’ people more easily controlled by management and the Board. More ‘controllable’? Yes. Still capable? No.A larger pattern is that generalist managers feel threatened by highly capable, founding engineers. A still larger pattern is that Board members feel threatened by such engineers. NOT GOOD.In my company, the managers are not threatened by their excellent subordinates: All things considered, the subordinates actually have the better jobs!Semi-, pseudo-, quasi great idea: Let’s have a basketball team where the coach is a better player than anyone on the team, the general manager is still better, and the owner, five feet two, 230 pounds, 75 years old, having a little trouble seeing the basket, is the best of all.Or maybe in a few weeks the Lakers will say, “This is a whole new season. Time to get rid of Kobe.”. We will see what Phil Jackson and Mitch Kupchak do!Yes,”Running a business is not an easy job.”especially when using nonsense excuses to fire highly accomplished, founding, technical workers.Uh, as I recall, there’s a new movie version of Alice in Wonderland where the queen keeps saying, “Off with their heads”. Did you take your family to see it? Just a guess.

    1. fredwilson

      not hurried writing, short writingi don’t have the patience for long writingto be honest, i can’t even make it through your comment without my mindwanderingi am sorry about both, but i am being honest

      1. sigmaalgebra

        Sorry about the length; too short gets misread and too long gets unread. I spent too long on the post as it was, away from server farm performance and floor space planning arithmetic.For the ‘executive summary’ version, what you are describing:(1) uses a common, unjustified technique to strain to denigrate founders, especially technical founders, and then fires them but does not mention good reasons for either denigrating or firing.(2) firing such people is destructive.(3) the team engineering description is wrong because much important engineering will still be done by individuals; that a founding engineer is not on the team should not be a big issue.(4) that put together an engineering team without struggle and, then, that the founding engineer can’t work on it is strange and looks like a strain to denigrate the founder.(5) there is an implicit assumption that as the company grows the founders have to manage people and larger and larger groups of people or leave the company, and this is something out of Ford’s assembly line or feudalism and in our fields now is badly wrong.For the idea of the threat to the ‘organization’ mentioned in some responses, for the size in question, 50 or more employees, it’s no longer just ‘one tightly knit’ organization. Instead there are groups under the CTO, CIO, CFO, CMO, VP HR, etc. with on-demand, loose groupings and communications among these managers. maybe monitored by the COO or CEO. Given such groups, should be able to find a place for one founder where they can contribute well but not disrupt the whole organization.A lesson: While there is still routine work in our fields, the crucial work now needs all the creativity, knowledge, talent, and effort we can get, and here the subordinate does this crucial work and no longer is there just to add routine effort to the ideas of his manager, and his manager, sorry, no longer knows or does more than the subordinate. Such a subordinate is commonly more important to the company than his manager. A founding engineer who has done good work is one of the most promising employees for the rest of the crucial work to be done, whether he is a manager or not, and, thus, should not be fired without very good reason.For doubts and questions, there is still the longer version.

        1. fredwilson

          the part you are leaving out of your analysis is the effectiveness of theteam

          1. sigmaalgebra

            I thought I covered that:Sure, on the “engineering team”, maybe work of the team is such that the founding chief engineer should be on it. If he can’t be, sure, then not so good.But, then, fire the guy? No. That doesn’t directly make the team better. Instead of firing, find something else for him to do that is good and helps the company. Again, a lot of good engineering will still be needed, and the best engineering still springs from one mind, NOT a team. If he’s a good engineer and we can’t think of anything else, then I’ll have him on my staff for a while getting answers to questions on my desk. Soon enough a longer term engineering project should need doing he could do. Commonly a stint on the CEO’s staff makes a person more valuable and maybe a better performer in whatever questionable respects.Team engineering is really for the more routine stuff anyway.Will he be ‘disrupting’ in the company? In a company of 50+ people? Should be able to find a place for him where he can contribute and not be disruptive. I’m not assuming that he will be in a C-level slot or in all the CEO’s staff meetings.If he’s really disruptive, and insists on it, and I have seen cases, and his manager can’t help, HR can’t help or find people who can help, then maybe, sadly, have to give up and proceed in the relatively ethical and humane ways you outlined.I conceded that at times some founders have to go; I just didn’t think that the reasons in your post were good enough. In total in the comments, better reasons have been mentioned. Really disruptive and can’t fix it would be a good reason.

      2. Jackg

        Let’s hope you don’t manage your investments like that. “My mind’s wandering… time to fire the founder…”

  48. Chart

    I gotta agree with Chris Dixon.As Fred says “How can you fire someone who was so impactful and gave so much of themselves in getting the company off the ground? What message does that send to the rest of the team? How can I fire my friend?”You don’t, unless you are a schmuck. It demonstrates to the rest of the team that you, the CEO, can never be trusted because you will sacrifice anyone regardless of how you weasel the justification.Might as well fire the pregnant women too because they obviously have other commitments. How about the old people? Not as sharp as they used to be…fire ’em. How about someone seriously or terminally ill? Yeah…we don’t give a shit that you are going through chemo, bye…sorry you don’t scale with our plans for world domination.

  49. Donna Brewington White

    Catching up on your posts — you’ve hit some balls out of the park in the past few days — this being an example.What you are suggesting is just another aspect of running a business based on truth (i.e., reality). In a sense, the person being let go is being “set free” even though it may not seem that way at the time.

    1. Tereza

      +1 Donna

  50. Venugopal Sathya

    Wonderful article. So apt for all the start-ups.Cheers,Venugopal.

  51. pammarrone

    VCs just assume the Founder will need to go and hence that colors their view of their performance and also their commitment to mentoring and coaching the Founder. Hired guns don’t have to vision and passion that Founders do. How many companies do worse or are slowed down after the Founders leave? A lot of them. The best B-school research has shown that companies with Founders still involved outperform those where Founders are not involved. That said, it is not good to overgeneralize. Some Founders are horrible at running a business and others are great. More entrepreneurs are experienced and older in age so it is not good to assume all Founders can’t scale a business.

  52. Thyaga V (@thyaga)

    Agreed: Rock stars are rarely good team players. And the best developers are rarely the best managers.Don’t agree: If I look back at our most successful investments over the almost 25 years that I have been in the venture capital business, almost every single one of them has seen a founder or critical founding team member shown the door as the company scaled. It’s almost inevitable

  53. Dave Broadwin

    I find myself surprised at the controversy this post seems to have generated. Founders (and others) come to a parting of the ways all the time for all sorts of reasons. Fred is right, how you handle it is almost as important as that you handle it.The worst of all possible worlds for business owners is to live for a long time with a fundamental unaddressed and unresolved (and possibly not resolvable) business problem (whether it is in the nature of a disagreement as to vision or an inability to work with a large team or something else). One of the good things about businesses (as opposed to some partnerships) is that they are (generally) hierarchical which means that in the end issues are addressed and decided (mostly).One pretty bad scenario, in my experience, is the family business in which, for reasons extraneous to the business, the “owners” can’t agree upon a parting of the ways and can’t agree on a way forward. The family business case presents the most clear argument for handling the parting and handling it diplomatically. BTW, some family business work brilliantly — but a lot don’t.

  54. usb flash drive

    It is quite reasonable yet cold and condescending, real entrepreneurs to confirm the worst fears on the will of the people they really do not know to seek venture capital. It’s founders have dealt with rather quickly later.VCs the beginning of understanding the need for some kind of violence necessary to reduce are the team’s founder will survive and who will not. After them a particularly important contribution lies in time bring work and when there is a business model should be quite controversial.

  55. Arj Cho

    Paraphrasing Sun Tzu, the problem is easiest to solve when it is small. I agree with folks that founders should have conversations early and often about the role they should play as the company scales, and they should always strive to attract the best talent out there. And, if that means bringing in their bosses, so be it. It is a mark of success to be able to attract a world class management team you can work with.Per the discussions, my thoughts are (FWTAW) the VCs and their appointed CEOs are betting that they have the ability to do a better job at running the company. The CEOs are usually guys who have their own style, and the founders often disagree with this vision/style, often times being over-protective of their baby.But, let’s get real. Most VCs think that they know what needs to be done, based on their ‘astute’ ‘pattern recognition skills’. The myth of the ‘value-added VC’ is exactly that – a myth. The best deals that VCs are engaged in is where their money is treated as green, and they make an intro or two (critical, for sure). They come, sit at the board meetings and leave. The CEO has everything under control. VCs are most successful then. They hope they get to a position where ‘participating in a deal’ is seen as a sign of ‘success’ for a startup, and gets the buzz and hype cycle going. They want to get ‘their guy’ in, who they can trust, and the time spent on finding the absolute right fit, split up across all their other investments, is nothing. “They usually just go to the first available one they can get, who is probably decent. The CEO typically wants to make sure he/she can justify his/her position, and raise the next round of funding, and continue to justify his/her 5-10% stake, by continuing to get topped up, at the expense of the dilution of the founders. The founders balk, but often get whacked, per Fred’s sentiment, with a “chin up” on the way out.I have to agree with CDixon on this. As a founder, and as someone who has seen venture and vulture guys come in, there are several ways to justify “letting the founder go”. More often than not, it comes from the VC side of the table, which, divided amongst all their investments, in the limited bandwidth they have, feel that their decision is wiser.There is a reason that several of the really really successful tech firms have their founders stay on and rock the show. MSFT, AMZN, ORCL, Salesforce, Facebook, Google, etc.Bottomline – the VC market has to fundamentally change. If founders didn’t have to get money from them, and could go straight to LPs in a mutually efficient manner, the non-value-adders would get marginal returns. This disintermediation has to happen, and will happen soon… Smaller, better aligned investors who encourage capital efficiency and lower pay will thrive, as they align everyone’s interests, and encourage founders to continue to burn that same midnight oil that got the venture to where it was…

  56. Mark the Webalyst

    So long as we don’t let Apple get hold of it.

  57. paramendra


  58. JLM

    Here, here! Now that is the voice of hard earned experience. A real world anecdote — or three if you read carefully — like that told w/ just the right amount of dispassionate passion is worth 50 hours of speculation and conjecture.You can speak and listen abstractly about what a sunburn feels like but when you have the blisters to go w/ the story a wise man listens just a bit harder.I love the “make ’em eat shit” squirming. I know you had a bit of fun with that and let them off the hook like a gentleman. Not from the perspective of meanness but from the perspective of controlling your own fate.I will lift a cerveza to you tonight. Perhaps more than one. Bravo!

  59. paramendra

    Speaking of which, you better get cracking.

  60. chris dixon

    I absolutely do.

  61. chris dixon

    My investors know when they invested that I have strong ethical views including remembering who was there from the beginning.Not everyone believes in Milton Friedman crap that maximizing shareholder value is the sole purpose of a company.

  62. Vijaya Sagar V

    🙂 This maximising shareholder value thing has long since become a joke.Take care of your employees and they’ll take good care of the customers. One of the side effects of such bonhomie is awesome increase in shareholder value. But if one approaches it from the wrong end, rocks stars and great developers might get fired, and such a splendid hole it’d make in the shareholders value.

  63. markslater

    Comes down to what you want from life – my co-founding CEO in front of the whole team yesterday openly pointed to my other founder (while we were going over a company behaviour / ethics / communications exercise) and said “we have to find a way to talk more”. This sais to me that my friend and the CEO will exhaust all options with our other friend and acknowledged this in front of all of us. (25 people). Classy approach to the issue.

  64. JLM

    I don’t think anyone with a brain these days thinks that “maximizing shareholder value” is the sole purpose of a company; and, further I think that the ethical characteristics of the folks w/ whom we work are more important than any other characteristic bar none.Clearly nobody has a clue how to do it. Maximize shareholder value that is.Today, survival may be more important than anything else.But we all know how to do the “right thing” and we know what will work and what will not work. If you get confused, close your eyes and pretend you are the other guy and plumb for how he is feeling. That little exercise will make you see a bit more clearly.Funny thing about guys who inventory money, particularly somebody else’s money, all they really invest in is the people who transform that money into, hopefully, more money.

  65. A Friend

    Hi Chris, Fred, and others:Three thoughts:1. Fred:, first of all, Kudos for a great article. You took some hits, but raised some good thoughts.2. Since deal flow matters, developing a rep for “screwing people” isn’t long term in your best interets. That’s entirely consistent with Fred’s advice on being generous, and noting their contributions. Ideally they leave singing your praises; if you get lucky, their next idea is better than the last one.3. Sadly, many people cite Milton Friedman w/o reading his original work. In his NYT’s article (‘”The social responsibility of a business is to increase its profits’”1971) His concern about CSR centers on CEOs who misuse corporate money to pursue their own interests, not those of the company. Friedman give several examples of how CSR may benefit a company, and supports that. I raise this because, as a business angel (part of a larger network), I see this concern arise frequently. This spring five students brought us some software that will “change the world”. I liked that they gave a copy to the University, and to four other universities, for beta testing. So far so good. But the more we talked, the more they wanted to pursue CSR, without giving any thought to how it might help the company. Other than the few beta sites, none of their CSR ideas would build a brand image, enhance marketing, or do anything to build value. It would take time away from their actually building the company. It led us to ask more questions about the marketing, and we realized they didn’t have a marketing strategy. Ultimately, we decided “cool-technology, but no business”, and we passed. Nice kids, but not ready.Please understand that CSR and ethics are independent concepts that co-vary: Saying that I am concerned when founders talk CSR up-front doesn’t mean I don’t want founders with integrity.sorry this ran long.

  66. Mark Essel

    There’s no much of a decision then, it’s the best thing you can do for your current company.Afterburn time, show us new guys & gals how it’s done

  67. Ted Carroll

    Charlie you’re on to something here. There is an effect like gravity or inertia which all internal managerial solar systems turn in and are governed by.One legitimate role of an outside growth capital investor – if he’s skillful and prudent in his actions – is to judiciously correct imbalances which appear in those critical internal systems and forces. And sometimes you get it wrong – no question everyone makes mistakes.But if you care about long term team success and have actual experience and success in fostering organizational growth, you do what’s right for the collective enterprise and cushion the blow for the individual.Very good post Fred – it’s well worth even old guys checking in here from time to time.

  68. Fred T

    Charlie, I agree with you here. As everyone thoroughly explains different yet compelling scenarios below, I am quite sure firing a founder (or any key member) does leave a mark on the company. We’re all sentimental human beings. As the company matures, we cannot avoid key people who will eventually stand against the company’s vision. We all sincerely try to work things out, no matter how many screw-ups happen to undeserving people. While employees have to come and go, the most human way to go through this is to fully acknowledge the founder’s pivotal contribution to the company… or allow them to perform advisory duties if possible.Like one good point below, founders can initially come to an agreement that they should be open to the fact that one of them might leave the company down the road. This openness and “peripheral vision” are just as healthy as being in a social relationship.

  69. ShanaC

    The problem is that we want certain elements of that destabilizing force, not too much. That destabilizing force is where innovative growth happens.

  70. FlavioGomes

    Its been a few years now and we’ve remained good friends.

  71. Aviah Laor