The new CEO is taking away your advantage of working in a startup: - when you were CTO, you were critical for the company. When the VP comes, you will eventually become commodity (and expandable) - your influence in the company is being cut into half - you will lose your flexibility (or agility) in getting things done (the process guy also now has to put his say)

Talk to the founders and the new CEO. If the VP engg. makes sense have him to report to you. If not move on like Spolsky says.