Leadership · Startups

Should a founder be CEO till the end?

Joey Nima Investment Banker at Wells Fargo

June 27th, 2015

Founders are great at seeing an idea through, which is why they founded a company. The CEO is the person that can take a company to the next level. The question is: is this going to be the same person throughout the lifespan of a company? At what point should a founder think about the fact that they might not have what it takes to take their own company to the next level?

Axel Schultze Founder Society3 Accelerator & Fundraising market place

June 27th, 2015

A 100% YES + a YES and another YES
It is extremely rare that startups who fire their CEO  typically based on a VC decision are making it big. And to the contrary those who made it big made it with their founding CEO.

A few exception if successful big companies are Google and Apple but in both the founding CEOs stepped back into the driver seat later on.

There is no substitute for the spirit, the obsession and the vision only a founder can develop. I know that there are quite some people - primarily investors  - who think otherwise. But being an investor now myself I would a) never invest in a startup that has a CEO who I believe cannot grow within the typical 7 years from start to CEO to remain in the driver seat b) therefor never even want to think about replacing a CEO with what is known as a "Bankable CEO" . 

With all that said  it maybe different a few years after an IPO when that company seems to stable and can be managed by a CEO who is not radical, tiered of constant growth and at the same time has investors who look for the quarterly gains versus a long term vision. But even then  you may not want your big dream just crumble  - as you can see with Marc Zuckerberg or you saw with Steve Jobs..  

FWIW

John Seiffer Business Advisor to growing companies

June 27th, 2015

The short answer is those founders who can make the transition to successful CEO of a huge company are rare - but they are prominent in the media so people don't realize how rare they are. People like Gates, Zuckerberg, Dell, Elison, Page, and of course Jobs 

The lessons to be gained by mere mortals is more than I can answer here but some insight can be gained at
http://www.entrepreneurship.org/en/Founders-School/Transcripts/Startups/Transcript-Building-Your-Startup.aspx

More by reading "Founder's Dilemmas" by Noam Wasserman

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

June 30th, 2015

Lets close this discussion down...   everyone is just repeating the key points .. at times using personal vignettes..

- not common for the founder and long term ceo to be the same person for various reasons

-skill set required change,  interest of company or founder changes,  vision changes,  making money, effiiceinetly running a companyand keeping a vision do not necessarily align.


Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

June 27th, 2015

Not answerable....  few do but some do ( McNealy, Ellison,  Gates )...  Most do not...consider google more typical.   The things that make a good CEO are typically just not the same as those that make a good founder and visionary  The skill set that gets a company from 0 to 5M  are different than those that get it from 5 to 25 and different for 25 to 75 and so on.    Situations change,,, family,  personal wealth and ones view of it and importance of it...   

In fact when I instruct my mentees in preparing their investment pitches I tell them never say to the investor hi..  I am the founder and CEO of xyz company...  it almost sounds arrogaunt...  better off with hi..  I am the founder and temporary CEO of xyz company...  doesn't mean you might not be the long term CEO but shows maturity as to the realization that founders typically do not make good long term ceos.   I also coach mentees how to be on the look out for good CEOs...  they can pick em or the investors can pick em for them..

pk

Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

June 27th, 2015

The problems you have to solve in a startup - finding a product - market fit, with sufficient customers and sales and marketing economics to breakeven, and even grow using reinvested earnings. You at pioneering markets which by definition is uncertain and small

Once your company is self sustaining the problems are different: you know who your customers are, so you can go ask them what other products they might want to buy.  Or you know your products you are already making and now you can look for prospects similar to your existing customers that you might sell to as well to grow your market.  Only in this way do small markets become large

These skill sets are very different,  so much so that many successful entrepreneurs will leave their successful startup and become serial entrepreneurs and few large firms are run by founders for their whole existence.

An entrepreneur can generally notice that the scale of the company limits their personal impact and the kinds of problems have shifted and they need to shift from visionary to empowering leader who manages people who are experienced in growing market share.

When that happens you have to decide what yo love more, the tasks you became good at or the company that resulted. If you are more of a serial entrepreneur at heart this is the moment where you feel like a parent struggling with whether your baby has grown wise enough to make it on its own. Every parent of adult children knows how those questions never have obvious answers in the short run, but you make guesses and see how things turn out.  Entrepreneurs experience the same thing.


Axel Schultze Founder Society3 Accelerator & Fundraising market place

June 29th, 2015

Great find John - yet I have to say by 1920 standards Durant grew it huge not Sloan. Sloan took over a massive company by any standards back then, despite the fact being nearly bankrupt. Durant made it only bigger - much bigger of course.

Thomas Sutrina Inventor at Retired Pursue Personal interrests and family

June 28th, 2015

Peter, I started when the the integration of a company when in force.  Dow presented a decade history that it only hired at people at the very low levels.  I was a college graduate and was one of those levels.  So the requirement was applied for new hires.  The rest of the management and procedures to advance were unchanged.  Dow actually almost went bankrupt.  His started the process of extracting all the chemicals our of the brine pumped from the ground.  He expanded the product sold by leveraging the chemistry.  He was lucky that the Midland MI sat in the middle of a brine source that ran 50 miles in two directions.  Since the chemical industry was on the east coast at the time the chemist he hired were in the boonies in Midland.  Midland is still the largest northern city going up the center of the state.  You would have been moving to timber country when Dow was doing the hiring.  So his policy of promoting from within and offering the opportunity to mine the rich minerals in the brine was the reason for being able to hire good people.  His second lucky was the rails needed to transport the timber to the eastern market. 
 
Obviously Crazy Dow was one of those managers that did well in managing a big company (The locals his book says thought he was crazy).   He set in place what Dow is today.  Very few founders have done this and the result is well known.  So I bring back the question replacing the founder with a CEO may extend the life of a company but at what cost.?  I am not saying that founders are the best people to continue a company but the results of their replacements is just as poor when one looks at a company a few decades later.   Sundstrand Aerospace when from a company that was expanding by innovation from the end of WWII to the 70's became a company that expanded only by acquisitions so the now acquisition board had no problem letting it be acquired.  Its creation of wealth significantly decreased by following the acquisition path.  So please tell me why you would not prepare for the retirement or death of the founder or innovators as a board?  Boards are typically made up of CEOs.   They chose to meritocracy because it was safer.

Frank Barbato CEO Third Wave, Continuously Delivering Business Value through our agile custom software team - See How in Summary Below

June 30th, 2015

It all depends on the founders skills, desires and abilities. I have often seen a founder hit the wall when the company gets to a certain size. At that point the best skill a founder can have is being honest and open to the fact they need to pass the reigns and keep playing to their strengths. Do what your good at!

Phil MBA Strategic Global Group

June 30th, 2015

Having worked a few contracts with entrepreneurs, founders of firms, and discussed many other, there are few who can take a company to the next stage with the required skill set. One president (who was insistent on being titled this) built a great company that has stagnated at a certain revenue level after two decade with a fragile, albeit impressive, limited customer base. Kudos to him for maintaining such a customer base. Yet the loss of one of these accounts would certainly cripple the company. 
What are the reasons? They could be many and various, my experience is there reluctance, be it realized or not, on keeping control of the firm, still nurturing their conception. Taking a living organization to the next stage of development requires a different skill set, and that is epitomized in the above contributions to this discussion. Sure there are successes and if we look carefully at them some of these mega companies had their growing pains also. When asked to go in and assess a firm/organization you can generally tell if this smart entrepreneur can take this organization to the next level, or not. And these companies are mostly not going to be Apples in any event. How do you advise a founder that they should bring in the required skill set? Very carefully.

Josh Carter Co-Founder/CEO - Brightwork

June 27th, 2015

I've had this discussion with many different leaders and consensus seems to be that this really depends on the company. However, a successful business is one that knows how to adjust quickly when things are not working. Many Founders believe they need to maintain control to keep a company growing. They believe that, without them at the helm, the company has no shot for success.

80% of all companies fail because of their Founders. This could be because of disorganization, disfunction, the inability to plan properly, or simple stubbornness.

It's also good to keep in mind that there are different CEOs. There's the idea CEO, the growth CEO, the CEO that simply keeps things the way they are, and CEOs that can take a company to IPO or acquisition. 

Good leaders know what kind of CEO they are.