“You can’t tell the new investors that ‘Tommy’ quit!” “Raul”, one of my investors, said to me when I told him our new VP Sales, had resigned that morning.
“Your job now is to get him (Tommy) to change his mind,” Raul said.
I called Gill, our other investor, to let him know about Tommy. Gill said something similar that I couldn’t let the new investors know.
They were worried that our funding might not close without a VP Sales. And, at some level, I bought in. However, I had additional concerns regarding Tommy.
I had hired Tommy three months ago based on Gill’s recommendation. However, Tommy had been an unmitigated disaster since he joined us.
Tommy was a unique VP of Sales. He didn’t seem to care about meeting his numbers, and he didn’t want to travel. Plus, I had just found out that Tommy had lied about his background to me during the hiring process. Quite honestly, I felt like I had made a mistake hiring Tommy, so his leaving didn’t exactly make me sad.
You have an obligation to tell potential investors that an executive is leaving the company.
I really respected Raul and Gill, so I felt like I trapped. On the one hand, Tommy wasn’t working out, so I would have probably fired him. On the other hand, I was genuinely worried about our funding falling apart.
We had made a big deal about Tommy’s joining us to our new investors. What would they do when I told them he quit?
I met with my friend and mentor, Dave. Dave had been a VC and he’d been a CEO, so he was the perfect person to talk to.
“I know you’re worried you’ll lose the funding, but you should tell them Tommy’s leaving,” Dave said. “Think of it this way, how would you feel if you’re the new investors if you hid this from them?”
“I’d be royally pissed,” I said.
You might not lose your investment if an executive leaves during the fundraising.
“I feel obligated to try and keep him,” I told Dave. “Raul and Gill don’t want him to leave.”
“Brett, you’re the CEO,” Dave said. “It’s on you. Based on everything you’ve told me about Tommy, especially that he lied to you, I’d let him leave. It’s a gift.”
Dave was right. Yet, despite Dave’s advice, I actually tried to keep Tommy on board. Gill met with Tommy as did Raul to try and get him to change his mind. Tommy still left the company.
Even after Tommy left the company, Raul and Gill didn’t want me to tell our new investors. I felt like I was being left out to dry. I’d lose all my credibility with the new investors if I didn’t tell them.
Your credibility is always on the line when you’re dealing with investors.
I called Robbie first. “Tommy is leaving the company,” I said.
“That’s fine with us,” Robbie said. “Our diligence on him told us he might be a problem.”
I called Tucker next and let him know Tommy was leaving. Tucker’s words were almost identical to Robbie’s.
I started laughing and shaking my head after I got off the phone with Tucker. I’d dodged a bullet in many different ways.
Tommy’s reputation was known to investors, so he wasn’t viewed as critical. More importantly, I was reminded of what the great Steve Blank said that investors are not your friends.
I respected Raul and Gill, but they were giving me bad advice that would have really hurt me if I continued following it. Remember, you’re the CEO. You own the results of any decisions you make regardless of whose advice you follow.