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 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

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.


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.  

Richard McLean Co-Founder Webscale Pty Ltd - KeyPay Cloud Payroll

June 27th, 2015

Yep agreed with Peter - not answerable.

So many factors - the person, their skills, the business, the investors, the direction and the list goes on and on..  Startup to profitable business is hard and from profitable to acquirable is even harder.. 

One thing that did make me laugh was the actual question - can you defines "the end".....

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.


Peter Weiss President at American Outlook, Inc.

June 27th, 2015

I explain to new entrepreneurs that founding CEOs who make it all the way to the BIG time (nine figure exit or IPO with a valuation noticeably higher than that) are rarer than guys who land eight figure multi-year contracts in the NBA.  

The wise people who have already commented have noted the high profile founding CEOs we think of are extremely rare.  When mentioning their names I always point out that Jobs got fired (and immediately sold all of his Apple stock).  

There are lots of reasons to believe that founders and angels do best with companies where the plan is to exit in the $15 to $50 million range - one of the most important reasons this may be true is that the business will go through fewer changes in management as it grows and evolves and it is more likely the founding CEO (and other managers) will be capable of steering the ship that far.  

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

June 27th, 2015

I have seen the effect a "hanging on" CEO has twice now, upfront and close, and in both cases the company he founded cratered. In one case the CEO had the skill set but was paranoid about not making every decision so eventually the control issue strangled the company. In the second case the founder had no experience but had a vision. Unfortunately his vision, as tested by users, was completely rejected, ie., the tests twice showed the concept would not sell. The CEO could not separate his self worth from his vision and decided to continue down the same path. The BoD, who also had not applicable experience as individuals, could not accept the fact the founder could be wrong so they continued to back him. End result was a product that was not even launched it was so bad.

I think founder's face a really gut wrenching decision of what matters more - you in the CEO role  or the company's survival, growth and successful exit? In both cases above what mattered more was their own self identity, which turned out to be short lived. In the latter case the reasoning the founder used to remain CEO was the same list of exceptions quoted above. My rebuttal was "so you are willing to risk the investor's money based on the exception and not on what maximizes the ability of the company to succeed". Sad situation.

Re VCs, the standing joke is that the most valuable function of the VC is to replace the CEO. Ouch.

 

Glen-Erik MBA Business Intelligence Manager

June 28th, 2015

The founder should know how to delegate in a way that the company survives with or without him/her still there. There should be no predicted end to the company. If the founder does not own the company in its entirety, he will eventually loose his decision-making capabilities and the board will replace him. This is a good reson to bootstrap and avoid venture capital. There are small business loans in many states, interest is cheaper than equity.