If you’re feeling nervous, it’s probably for a good reason
Me and my cofounder have less than 35 percent of our company after a few rounds of fundraising. Now we’re a little nervous that if we can't deliver enough growth, we’re going to get pushed out by the board. Is there anything we can do to prevent it?
Let’s start by breaking down your question. You’re asking about four distinct things that are related but not necessarily dependent. There’s:
First things first: how much do you own? As a founding team, you most likely have common stock, some of which may be (re)vesting depending upon the terms of the last round of funding. You may also have received option grants in order to incentivize you to stay, although the merits of sitting around for two or three or four years to vest another point may not be particularly…energizing. And, of course, the more money you raise, the less of the company you own. At less than a third, each of a team of two owns 15 percent; a team of three, 10 percent. Ugh. These numbers are also totally dependent on how the company is doing—and the founders themselves. It might be okay if you own 10 percent and the business is worth $1 billion with a clear exit; it might not be okay with a $10 million valuation and a flailing company.
Then there’s your operating role. Are you doing a good job? Could someone be doing it better? Are you in the right job for you, not to mention the company? Pragmatically speaking, if a cofounder is also the CTO, their job is to deliver reliable product. If you’re the head of sales, then you gotta put up those revenue numbers. In charge of customer success, you keep churn low. And if you’re the CEO, the whole thing rests on your back. If you’re not delivering growth, something is going wrong somewhere. Is it you? Possibly. I go on ad nauseam about the difference between being a founder and being an operator capable of scaling in my book, so I’ll spare you here. But if you’re worried about job security, odds are you already know you’re not enough. It’s time to consider a change.
How is the business doing? A board member’s job is to be a guardian of the business; an operator’s job is to grow the business in whatever way makes most sense; a founder’s job is to safeguard your vision. These missions conflict. If you’re worried about your company not hitting growth trajectories, you’ve got to (at least temporarily) put on each of those hats and ask why. The board should be asking if the team is executing, if the market is shifting, and if the company has responded. Operators should be asking: Am I good enough? Is this the right job for me? And founders have to ask if their vision is still the right vision. Is it too early or too late? Is the market there? Is it special enough for folks to care enough? Sometimes we’re so fixated on what we want that we don’t consider if tha want is still in service of the business. I’ve worked with a founding team that had been told by its investors and advisors over the past two years that they strongly need to consider that the product isn’t enough to win and that the founding team isn’t up to the task. They finally realized it for themselves, but the revelation was bittersweet: They could have returned capital a long time ago had they only been able to see their own egos were in the way.
Finally, the issue of control. If you’ve negotiated well, you should have a majority of votes on the board. If you don’t and things aren’t growing in the way investors expect, then you signed your death warrant on that last round of funding. Sorry. ☹ But if you do have board control (see my book’s board chapter for details on what this really looks like; independent seats are not votes you can rely on) and you and your cofounder(s) are tightly aligned, you can stop worrying about job security. If you control the votes, you control getting fired. But do consider for a moment your sense of your own job performance—and the business’s performance. There’s a reason you feel the way that you do. Perhaps it’s time to make a change, and that change might just be you.
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