The VC cares about their portfolio, so if removing the CEO gives gains elsewhere in their portfolio, then their financial incentive can be against the startup. Edit: also the financial incentives of the most influential board member might not be aligned with the company valuation.
Or the “nobody gets fired for buying IBM” theory where it is better to put in a known respected CEO (John Sculley), because fault can be blamed on the founder and LPs will believe the future VC spin.
Usually the startup is one of the failing investments to consider changing CEOs, and I suspect that there are a lot of other human motivations that come into it.
That is true, but I don't see how firing the CEO typically would give gains somewhere else in the portfolio. For example VC's very rarely invest in competing companies.
However what affects the situation is that VC's want a lot of risk, and the risk preferences of the CEO could be considerably lower - eg. the CEO would be fine with moderately profitable company, while the VC wants all or nothing.
I don't think it is common to change CEO's for truly successful companies which actually show good numbers. No one wants to change the CEO, they do it because they think that it clearly increases their possible returns so they basically have to do it because otherwise they would look incompetent as board members.
VCs invest in competing companies all the time. There’s even a saying about it “no conflict, no interest” (as a counter-play to “conflict of interest”). They might not invest in a direct competitor, but startups rarely have direct competitors that are each both looking for VC funding and are fundable. Conflicts happen all the time, though, and VCs don’t worry about them as such. They may worry about a fund company that is doing well, because no intelligent VC is going to potentially hurt a successful investment to fund something that has a 90% chance of failure. But when all else is equal (and especially if it isn’t and they can help their successful investments) they will never worry about conflicts of interest.
The more interesting point here is: word gets around. You can see it in another part of this conversation (top comment right now). VCs are worried about their portfolio, it’s true, but they’re MORE worried about their next fund. The success of this portfolio is simply a good way to advertise to LPs that they should participate in the next fund. They are also worried about deal flow — they can’t get into the hot deals if they have a reputation for turning on founders. If the situation is noisily public (Uber was a good example of this) VCs will think very carefully about what to do. If you’re a small company that is struggling to stay afloat, they will ask themselves one question: is the founder the reason the company isn’t successful? If their answer is yes, then good luck. If not, they will simply chalk it up to it being one of the many investments they make that didn’t work out like they hoped.
Or the “nobody gets fired for buying IBM” theory where it is better to put in a known respected CEO (John Sculley), because fault can be blamed on the founder and LPs will believe the future VC spin.
Usually the startup is one of the failing investments to consider changing CEOs, and I suspect that there are a lot of other human motivations that come into it.