Source | procket.in
Getting fired from your own company could be one of the worst nightmares of a Founder. And definitely, rebound is not simple. Under this section, we will discuss couple of examples in India and outside where Founders were forced to leave their own companies. Some did made a good comeback and some did not, but the premise is to avoid such events in the first place.
Why does this happen?
It is important to understand that while investors do invest in ideas, at the same time, they invest in the person with the idea. It is more like a partnership. Like every relationship, Founder – Investor relationship equally requires trust and cooperation. When any of these elements of the relationship is broken, discomfort starts to emerge.
Many Founders, are not experts in legal and financial matters, whereas Investors do understand these aspects in detail. Understandably, at the time of fund raising, new Founders tend to sign several legal documents at the time of fund raise without understanding them in detail. As a result, Founders tend to agree to certain conditions without understanding the repercussions.
What is the cure?
The ultimate cure to this issue is to retain 100% equity with yourself such that no other person has any other rights. This, however, is not practically possible if you are in the market to raise funds.
While there is no cure, the best one can do is to be aware and take right decisions at the time of fund raising. We have quoted some of the real-life examples, where things did not turn the way Founders would have anticipated.
Some examples – Indian startups
Housing.com was founded in 2012. As per media reports1, the CEO was removed by the Board of Directors due to behavioral issues towards investors, ecosystem and the media, which the Board believed was detrimental to the company.
2. Flipkart.com – Sachin Bansal
As per media reports2, after leading Flipkart since its initial date, Sachin Bansal lost control of his company in 2015 when his planned transformation of the company failed. Both the founders were removed from operational roles by the investors and they appointed a new CEO to look after the future of Flipkart. Sachin did try to acquire more stake in Flipkart, from 5.6-6%, to have a greater say in the operations of Flipkart but the same did not go through. Sachin even tried to push for greater rights for shares held by minority shareholders but even that did not sail through. After much of turmoil with the investors, Sachin eventually stepped out of Flipkart by selling his remaining stake.