Beyond potential meddling, if the founding CEO’s performance does not live up to the expectations of a VC firm with a controlling stake, he or she could be dismissed. Venture capitalists generally take a board seat and require a board of directors to be formed. You may decide that this overkill for the company or that it is too early to decide who you want to be on the board. The Board has the right to make decisions about new employee hiring and also about you.
A Wall Street Journal article by Barnaby Federer on Sept. 30, 2002 included the following quote: “If you ask a VC what value they add, and you get them after a few drinks, they’ll say, ‘We replace the CEO,’” he said. And that, he indicated, does not vary with the economic climate.”