My co-founder is our Chief Technology Officer, but as we prepare for an exit, our investment bankers say we need a CTO who can handle complex enterprise architecture and secure data compliance. He clearly does not GWC this scaled-up seat, but he is a major shareholder. How do we handle this delicate seat adjustment?

Question

Tyler Smith · Accepted Answer

This is one of the hardest situations an owner can face, but separating ownership from operational capability is essential for a successful exit. Your co-founder will always be an owner and a shareholder, but their seat on the Accountability Chart must be earned based on GWC™: getting the seat, wanting the seat, and having the capacity to do the job today and in the future. If they do not pass the GWC™ filter for the scaled-up CTO seat, keeping them there will severely damage your valuation and likely derail your due diligence process. You must have an honest, objective conversation. Sit down and review the future requirements of the technology seat together. Frame the discussion around protecting the value of their equity. Explain that bringing in an experienced enterprise CTO will maximize the value of their shares at exit. Then, look for a different seat where they do GWC™ the roles, perhaps in a research, development, or advisory capacity. If there is no fitting seat on the leadership team, they must step out of the daily operations entirely while retaining their ownership. It is a tough conversation, but protecting the business value serves all shareholders.