Mark Suster at Venture Capital firm GRP Partners wrote an article titled “Lead, Follow or Get the Fuck Out of the Way”, in which he laments in a self-described Dave McClure way how founding CEOs should know when it is time to stay or go. It is a topic that has been covered in much detail before.
As an early-stage investor, you pick the right team in addition to the right technology (that has tangible socio-economic upside), and when you, as an investor, have made a mistake in that assessment, the equity and voting power can be used to induce a change of leadership. Yawn…
The problem with the scenario described in the article is that the merit of the investor making the judgment of a change of leadership is often unquestioned. Hence we respond:
Sounds good to me. I wish however the 99.4% of VCs that don’t make any money for LPs would do the same and get the f*k out too. If we all worked on the basis of a meritocracy our world would be a much better and healthier place.
For when we have more investors with transparent and verifiable merit, the likelihood of funding companies without the proper composition will make Mark’s blog moot. Entrepreneurs are held to high standards (as they should), yet investors are not. That is the real reason why Venture Capital, as the arbitrage of innovation, performs so poorly.