Startups · Entrepreneurship

At what point should I give up my CEO role to someone more experienced?

Richard Tan Internet Marketer, Social Media Manager, and Freelance Writer

September 13th, 2016

There seems to be a good amount of Venture Capital firms that past the Series B round, even if the CEO is doing a good job, they still want to bring onboard someone more experience and letting the founding CEO go. Not sure if you all have any words of wisdom here.
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Jerry Mahabub Chairman of the Board and CEO at Astound Holdings, Inc.

September 13th, 2016

If necessary, before agreeing to leave the helm, negotiate for setting up a preferred series class of stock (limited to the Founder only) which does one thing only - gives you the right to appoint one of two board members in perpetuity (making sure you always have a seat on the board or you and if possible you plus one other person, which you can appoint and de-appoint the seats whenever you want), and these shares convert to common 1:1. Also, big severance, and continue as part of the operating Sr. Management team with same or higher salary. A lot of warrants (10-year minimum) with a cashless exercise. If company owes you any money through loans, expenses, all debt owed you should be paid in full (or some settled amount). You could also ask for performance milestones, and if new CEO does not meet them, within a certain period of time, you take back the helm. Also, make sure indemnification sticks so you do not get blamed for something the new CEO did, especially when dealing with securities laws. Last, require that any new D&O policy or current policy continues to protect you in the event a shady shareholder or group of shady shareholders go running to the SEC with a bunch of nonsense and bull crap. (there needs to be an government organization that protects us Founders and CEO's from shady shareholders just same as the SEC (allegedly) protect shareholders from shady CEO's/Founders).  Last, make sure you review your employment agreement and look at what it says regarding "termination without cause", did it have severance T&C's built-in, and get a good lawyer for this process so you don't get the shaft where the sun don't shine. Otherwise, hold your position at the helm, unless the board can outvote, and then it still falls under termination without cause.

Jake Diner Founder and CEO at Elafris

September 13th, 2016

I have first hand experience in this. I can share, connect with me privately via jake.diner@gmail.com

David Johnston 16 Patent Claims Granted in Artificial Intelligence, NLP, IoT & Mobile SMS/Chat/Text Messaging

September 14th, 2016

I have done this multiple times because I am more suited for the CTO role. The problems I faced were related to "domain knowledge" of the new CEO. 

If they don't know your industry inside and out, there will be a tug of war between you and your team and the new leader. Problems especially arise if your team ends up circumventing the new CEO and going to you because they can't get their questions answered. 

This can lead to that new CEO trying to permanently get rid of you. They can win investors over by giving them ammunition against you and increasing their % by revoking your shares, etc.

Focus on board control. Being "CTO" and also "President" can be a good option as long as "product" vision and the technology is under your direction and the new CEO's job description is clear and focused on other things like "Marketing," "Raising Capital," "Investor Relations," "Strategic Partnerships," etc. etc.

If you do step aside, make sure you give the new CEO 150% support and don't contribute to or cause any problems, especially between them and other team members. Put your heart into it or don't do it in the first place.

Rod Abbamonte Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute

September 15th, 2016

When he fails to deliver results.