Costly capital

Venture capital seems to be the most expensive sort of capital out there. True, they expect monetary return for their investment, and this can come at quite a cost. But the power they have over the startup company might be an even higher cost. The highest of these costs is probably the “CEO eject button.”

When a company seems to be doing poorly, the last desperate attempt by the capitalists will be to fire the CEO or founder of the company. It’s understandable for a venture capitalist to protect their interests, but this seems a little extreme.The problem is that, in nearly all startups, things will go wrong at some point. So among the costs of venture capital is that, at any given time, the founder may be fired. Maybe he should be fired, but then again, maybe he shouldn’t.