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by imagnitude
4730 days ago
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You are completely right in this case. Sometimes, when the company is not doing well and the founder CEO is not hitting the performance targets agreed on earlier, the VCs will fire the founder and install one of their MBA buddies to try to turn the company around. This is usually a condition of further funding when the company is in a weak negotiating position and on the verge of shutting down, and it's incredibly unpleasant for everyone involved. However, the executive implants only come in when the company is circling the drain. It's basically failed at that point, and the founders get nothing. Sure, the executives may get a big chunk of equity to lure them into a company that's going to zero, but barring an incredibly rare miraculous turnaround, that equity is completely worthless by the time the VCs get their liquidation preferences. All of the things you describe are aspects of bad startups. Things are very, very different in good startups that are doing well, even the VC funded ones. |
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These executives get paid the big bucks because a) they are scarce and b) their job has way more leverage than the job of an engineer.
The nature of hierarchies is that there are fewer people at the top. Thus the number of people with a proven track record as executive is always much lower than the number of engineers. Thus there is a small pool of executives for a company to hire from.
It is worth it for a company to pay top dollar for proven executive talent, because an executive has 10-100X more leverage than that of an average engineer. The old line is that engineers can differ in productivity by orders of magnitude. Well, the executives determine which engineers you end up with. So the difference in executive talent is that order of magnitude times the number of engineers. The executive determines how well they the team works together and how much distraction and interference the team gets from the forces of entropy and chaos that surround the department. We have hired outstanding executives that have brought their divisions to new levels. We have hired bad directors and VPs who were disastrous and were fired. In some cases, a person who grew up with the company did not scale, and had to replaced. In other cases a person has risen with the company and taken on enormous responsibilities.
I'm guessing that the outside executives brought in at a startup that is struggling are on average much, much worse than the outside executives we have brought in. After all, the good executives will opt for a position at the company that is growing fast. Who wants to try and save a sinking ship?