When CEOs and VC's Part Ways: A Survival Guide for Rank-and-File Employees

For the second time in recent months, we've heard about a CEO and a venture capitalist parting ways -- triggering high-profile leadership changes at fast-growth technology startups. So what's behind the changes? And what can rank-and-file employees learn from the course changes?

First, the facts: Work Market changed CEOs -- shifting from co-founder Jeff Leventhal to HP veteran Stephen DeWitt -- in January while raising $20 million in Series C funding. And just today, the grapevine told us that Boundary -- a fast-growth cloud monitoring company -- has parted ways with CEO Gary Read.

One Word Changes Everything

So what's behind the changes? The simple answer involves a single word: Alignment. When VCs and startup CEOs are aligned, they execute on a core plan for growth. When leaders lack alignment, core business priorities can suffer from endless debate.

At Work Market, for instance, sources say the company received a takeover bid in Q3 or Q4 2014 that co-founder and visionary Jeff Leventhal wanted to accept. However, Work Market's venture capitalists rejected the deal, sources say -- instead raising more money to fuel additional growth at the on-demand workforce company. Sources say Leventhal and Work Market's financial backers worked out a smooth CEO transition plan -- to DeWitt -- as part of that funding milestone.

Less is known about the situation at Boundary, where the company and CEO Gary Read allegedly parted ways in recent days (we're reaching out to Boundary for details). It's a safe bet the CEO change has everything to do with alignment, or a shift in philosophy by either Boundary's financial backers or Read.

Culture Shock

Often, surprise CEO changes at early stage tech companies can rock employee morale. But it's also a prime opportunity to remind yourself of a few things:

  • More Than Egos: A company must always be more than any one employee or leader. Even Apple has largely proven that in recent years, amid the CEO transition from the late Steve Jobs to Tim Cook.
  • Sustainable Culture: A CEO may provide vision, but his or her vision must be transformed into actual business process and a sustainable culture that becomes part of the company DNA. The best of that DNA survives after a CEO change.
  • Life Happens: Even CEOs have lives outside of the office. Most have tireless work ethics. But work-life balance can't be ignored forever. You can part ways with your company and go find a new job. But you can't part ways with your family and go find a new family. 
  • Align With the Business: As an employee, you could be viewed as "loyal" to the exiting CEO -- putting your career at risk as new management arrives. Instead, align yourself with the company's core business priorities -- and execute to fulfill those priorities.

Business Values?

How can you determine whether executive leadership and venture capitalists are aligned? While there are no guarantees, a good starting point is to ask the CEO about her or his business philosophy. An example: AppDirect Co-CEOs Daniel Saks and Nicolas Desmarais share five core business values that they inject into the cloud company. It's a safe bet Saks and Desmarais held firm to those business values when they recently raised $50 million in Series D funding.

Still, winning solves everything. And losing -- as in one bad financial quarter -- can expose previously hidden cracks across the leadership and VC teams.

In other words: Everybody appears to be in alignment until a high-stress financial event  (poor quarterly results; an unsolicited takeover bid; etc.) shows up at your doorstep. At those high-stress moments, some CEOs and VCs essentially agree to disagree -- and the CEO exits.

It's a timely reminder that everyone is replaceable.

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