Tuesday, October 4, 2011

Would you start a startup knowing you'll be fired in 18 months?

“45% of new businesses change CEOs within 18 months.... Firing Founders happens quite often and is not much fun.” -- Don Valentine, Co-Founder of Draper & Johnson Investment

I attended the 1st Annual Palo Alto International Film Festival this past weekend and “Something Ventured” was my favorite movie.  It examines the birth of the Venture Capital industry, and the rise of its dominant players (Sequoia Capital, Draper & Johnson, etc.).  Check it out if you get the chance, it’s making the Film Festival rounds this year and will be released in 2012.

One of the movie quotes that stood out most was Don Valentine’s assessment (above) on firing founders.  45% is a staggering number; I had no idea the CEO replacement rate was so high in startups.  I bet most founders have never heard this statistic either.

So for all you would-be entrepreneurs out there -- given that there’s a great chance you’d get canned and replaced by your Board of Directors (or Investors) within the first 18-months operation, are you now less likely to start the venture in the first place?

If your answer is “yes”, then Tenacity Worx probably isn’t the best accelerator for your business.  Starting a business is not for the faint of heart; we are looking for Founders who never give up, never stop pushing for their dreams to come true.  It’s the attitude we rally around, and everyone on the team (Tenacity + Portfolio Company) has to be tenacious or results won’t come as quickly.  

If your answer is “no”, then take a look at our Winter 2012 application because we want to hear from you.  A 45% replacement rate can be daunting, but we like how you didn’t flinch one bit.  Tenacity Worx is looking for businesses that are not afraid to go against conventional wisdom; these are the startups that dare to change the world, and we want to help them do just that.

Lastly, we’re not interested in firing the Founders of our portfolio companies.  In fact, our term sheets specify that Tenacity Worx does NOT have a board seat with voting rights; we only require board observer rights, so the closest we’d ever get to a Founder ousting is watching it unfold from afar -- like a reality show.

The article was written by Tenacity Worx' managing member Renelito Delos Santos.  You can follow Renelito on Twitter @frgds3.

Image from glassdoor.com.

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