STARTUP CEO FIRED: Plan on it, just a matter of time

Picture your name in the following news item.
(From Silicon Valley's San Jose Mercury News of December 9, 2007):

"BAD WEEK >> Martin Eberhard"
"In classic Silicon Valley style, Eberhard had an idea: Build a $100,000 electric-powered roadster that would appeal to wealthy techies. In classic Silicon Valley style, the company he founded, Tesla Motors , concluded Eberhard was the wrong guy to lead it. Eberhard was replace as CEO in August [2007], and last week he was no longer an employee at all."

Founder. Great idea.  Got funded. . News splashes reach headlines. Now Eberhard is gone.

• It happens.

How often for startups?

• Very often.

• My research shows the typical startup founder CEO is replaced within 24 months, 99% are gone within 3.5 years max.

Replaced by whom?

• By an experienced business person familiar with how startups launch their first product.
• After that person replaces the founder, he lasts about 24 more months.
• Next, when the tornado finally  starts and the company is taking orders by the planeload instead of selling hard, then the final fresh set of management arrives and prepares the company to go IPO. The "decorate the prospectus."

So are you crying?
Before you do, ask "How long do CEOs last in public corporations?"

Here are the latest statistics from executive recruiter Spencer Stuart as reported by Business Week of December 10, 2007:
"Average number of months at a position"
"CEO - 44
"CFO - 39
"CIO - 36
"CMO - 26"

Now do you still feel sorry for yourself?
It's a very slippery leadership rock out there when you step onto it.
You have been warned!

So what should you do?
Here are some tips I give the startup core teams that I coach:

1. Expect to be fired. Or at least told "Now it the time to help us help you replace yourself." Its going to happen.
2. It is not your company. Not even if it is your idea and you are the founder and have sacrificed your life to get the company this far. Let it go. It has a life of its own.
3. Meanwhile, do your best to do the job you were hired to do. In the first, Chaos Stage? Then build the core team and prototype with greatness. In the Launch Stage? Then prepare and launch the first product with so much "Wow!" that the world takes notice and moves the company quickly to the Prepare to Go IPO Stage.
4. Be a part of the solution instead of the problem. Think about the headline in the news you want written about your personal transition. Act accordingly.
5. Plan your transition. Hey, you plan -- or at least think a great deal about -- big events in your life (marriage, family, retirement, death).
6. Choose your post-CEO role. Jerry Yang became "Chief Yahoo". Kept the spirit of Yahoo alive. Remained, cheering for two CEOs who followed him. And he was there to step in when CEO number two bowed out and Yahoo needed a shot of hope and inspiration.
7. Pick a great successor. Don't compromise. Demand the finest.
8. Be brave. Its a sign of how confident you are in you. Fearful people exhibit the worst during this transition phase. Stand out, the best way.
9. Accept negative criticism. Lots of it. It will happen every day from every person including those you trust the most. Grow your character (and results on the job) as you are calmly listening to negative criticism about the great you.
10. Support the transition, the person. Yes, it takes guts. But just do it. Replace yourself with gusto! People on the board of directors are not out to axe you, they are out to build a world-class enterprise from your cool idea. With you or without you.
11. Put it all into perspective. My best friend reminds me "John, let go, let God." That puts giant me into touch with reality and I am once again humbled. Somehow we get to believing we are so critical to the success of our company. Yet it life does not work that way. So make your startup an adventure for yourself and have fun along the trail!

BOTTOM LINE: There are no safe jobs out there. Not in giant corporations. Nor in startups. Plan on being replaced in your startup and enjoy the transition. That's better than being shocked and getting depressed. You have a matter of months to get ready. Plan on it. When you can do that, you'll be welcomed and respected by reporters, employees, boards of directors and investors and those you love the best and who still love you. It is one of the distinguishing marks of the serial entrepreneur. It adds a very powerful element to your unfair advantage.

Comments

[Chris Blanchard]

I personally am a founder and CEO that WANTS to be fired! Getting fired isn't the end, it's the beginning of something better, you hope. I would be very grateful to see talented managers come in and execute on the plan we have set up, but as I understand it there are those who resist. I am not sure why that is. Let's see, I retain a good portion of ownership, and someone that knows more about business than I do monetizes and grows my investment? Sounds exactly like what we should all hope for.

[John Nesheim]

The numbers are real data, Gabor. The businesses are now expected to grow so large so fast that it is not possible to expect founders to be able to learn and grow as fast as needed to keep up with the explosive expansion of the startup. The rare instances of founders going IPO are of course noted by the media in examples like Google but even there the Google founders and investors hired an experience outsider to be CEO. The number of founders that make it to IPO as CEO are so few that the percentage that make it is statistically insignificant.

[Gabor]

"My research shows the typical startup founder CEO is replaced within 24 months, 99% are gone within 3.5 years max."

Is this actual data or just rough estimates?

Also, the 99% after 3.5 years number might have to do with vesting, which is typically done over 4 years in Silicon Valley.