How does a startup replace an executive?
This is one of the trickiest situations, and for a tech-based startup where the Founder/CEO is not him- or herself a tech person, it may well be THE trickiest situation.
In large part it comes down to the integrity and personality of the CTO, and the quality of the relationship with the CEO. If both are straight-shooting professionals, then a full, private, direct discussion/negotiation is probably in order.
What the CTO brings to the table (usually) are the keys to the kingdom: the only person with a comprehensive understanding of the company’s technology, as well as all of the source code and access controls for the system.
On the other hand, the CEO has it within his or her power to craft a face-saving professional exit for the CTO, instead of an ignominious firing.
As a result, two professionals would agree to some type of transition. Perhaps one month, two months, or whatever is needed. During this time the CEO would search for a replacement tech manager, the CTO would search for a job, and an appropriate story could be crafted that positions everyone as a winner.
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This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.