What Can You Add To A Term Sheet To Keep From Being Fired?

You’re looking for protection to keep your investors from replacing you. A term sheet is not going to do it.

The cold, hard reality is you lose control of your company the second you take funding from outside investors.

This doesn’t mean that your investors are going to replace you. Why would they if you’re doing a good job?

It does mean that your investors will replace if you’re screwing up.

It doesn’t matter what protections you think you have. Your investors have the money you need to keep your company going. Look no further than ex-Uber CEO Travis Kalanick.

Kalanick had control of Uber;s voting rights. Kalanick literally couldn’t be replaced.

None of that mattered because Uber was losing money and the investors wanted to replace Kalanick. So they fired him.

Look at the value Kalanick created. The most valuable startup ever and he still got fired. Why? Because Kalanick was screwing up.

You protect yourself by executing and acting with integrity.

Stop worrying about crazy provisions you want in term sheets. You likely don’t have the leverage to get them anyway.

Instead, do these three things and you likely will stay as CEO for as long as you want:

A. Execute.

Meet your plan and build a truly valuable business. Your investors will love you because you are creating wealth and value. Then…

B. Get to cash-flow positive.

You are free (and you have more leverage) when you get to cash-flow positive. You’re free because you don’t need any more money from investors.

Kalanick, despite the incredible value that was built at Uber, was running a company that needed huge amounts of cash inflows. Eventually, every company needs to make money.

Finally…

C. Act with integrity.

You, the CEO, set the tone for your company. Are you going to turn a blind eye if there is sexual harassment?

Are you going to allow brilliant jerks to run over other employees?

Culture matters. And you set the culture for your company.

You will likely never have to about protective clauses that your investors will never agree to if you if you build a great company. Great companies operate with integrity, have great cultures, execute to build great value, and are cash generating machines.

For more, read: When Should You Be Fired If You're The CEO?

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