All founders want their companies to thrive without them, but the readiness to act on that awareness continues to be one of the more uncomfortable conversations within today’s market. After all, the glorification of founders (and our constant habit of treating them like rockstars) has some validity: Visionaries are intrinsically interesting humans, wild enough to bet that people would sleep in strangers’ homes or come to a bird-friendly app to share their unfiltered thoughts every single day.
This tension — of society both positioning a founder as the figurehead of a startup’s success and realizing that succession is key to the longevity of any business — is why a few lines within Jack Dorsey’s recent Twitter resignation tweet stood out to me.
not sure anyone has heard but,
I resigned from Twitter pic.twitter.com/G5tUkSSxkl
— jack
(@jack) November 29, 2021
“There’s a lot of talk about the importance of a company being ‘founder-led,’” Dorsey wrote. “Ultimately I believe that’s severely limiting and a single point of failure. I’ve worked hard to ensure this company can break away from its founding and founders.” Dorsey added that he believes “it’s critical that a company can stand on its own, free of its founder’s influence or direction.”
Dorsey started a conversation that I’ve now been having with founders and investors all week: Removing the idea from the founder’s identity so that the company doesn’t feel innately tied to its creator is healthy for the company. But will require some real conversations on attribution.
Last month, I wrote about the importance of establishing the difference, both in ownership and incentive, between a founder, a founding team member, an adviser, an investor, an angel investor and an early employee. This week, we need to talk about why it’s important to understand how governance can change over time, and why a founder’s job title one day might just be “the VP of Nothing.”
Unlearning the weeds
“At some point, the founder becomes the VP of nothing,” Iris Choi, partner at Floodgate, said during our latest Equity podcast. “In the beginning you are the head of product, head engineer — both an individual contributor, as well as the person picking up all the loose ends or filling in the gaps.”
The identity crisis begins when a company gets to the growth stage. Then, founders look less like the scrappy engineer pulling an all-nighter and more like the visionary who is responsible for hiring talent and making sure “the trains are running on time.”
“To a certain extent, you have to let the founder be elevated and not just be in the weeds anymore,” Choi said.
Fractional co-founder Stella Han recently went through Y Combinator and raised millions in a seed round. Her business is all about making ownership more accessible to strangers and friends, which means she’s had to have conversations with her co-founder about how to practice that internally as well.
“When you’re a co-founder, you’re very active in the execution of the product, versus being an executive leader, [when] it’s about how well you can empower other people to take the reins and take things into action and have the company grow,” she said. “When you need a conductor for the orchestra, it’s about communicating that vision and that magic and then having everyone be able to be a team and carry out that whole experience together and deliver it to the audience and the consumers.”
While it’s not controversial to begin building a smart executive team around a brilliant founder as the company scales, it is contrarian to tell the person who thought of an idea that it’s time for them to step down and make room for another acting CEO. In other words, what do you do if you’re not ready to step down or at least away?
Han thinks it comes down to incentive alignment.
“Ego is a huge part of a person, and maybe that’s why they might be doing something that seems right to them but maybe it’s not for the company overall,” she said, adding that the founder (and any other incoming or existing executives) need to figure out “what is the more holistic bigger-picture incentive that everyone should be aligned on.”
Then, she said, founders need to remove themselves from “being so in the weeds in the heated moment and doing what’s overall the best.”
Getting more comfortable with decentralizing power within companies will require a broader shift in how investors write checks. Today, having an idea and then getting credit for that idea is an entrepreneur’s most lucrative currency when it comes to pitching a venture capitalist to bet on them. What can replace that incentive?
Due diligence gets a tweak
“All businesses want star founders who recruit star teams and turn those into an ecosystem that is the next PayPal Mafia,” said Blair Silverberg, the CEO and co-founder of Hum Capital. “Very few businesses ever achieve this vision. The reason is lack of clarity between what teams do, how those actions produce results for the business, and how the individuals involved can take the ownership for the wins they create with them as they start new or join new businesses.”
Silverberg is describing some of the promises of Web3, which wants to formalize processes so it’s easier to transparently see who owns, and executes, parts of businesses. But, the entrepreneur doesn’t think we have to wait until the school of thought becomes mainstream to see a shift happen.
“The concept of a hedge fund manager having a portable track record is incredible to think about in the context of an operating business,” he said. “If we can create a world where a similar track record exists, we can match society’s capital with talent at the level of people, not just businesses.” And, as we talked about last month, in an ideas economy, proof of who came up with the winning business strategy matters (both legally and financially).
Within the pitch Zoom, though. I think early-stage investors who want to bet on a successful company — versus a single person — will need to push co-founders on their ability to hire, change their minds and understand when it’s time to walk away.
Sonia Gokhale, a GP at early-stage fintech fund VentureSouq, said that even when she invests, she’s usually looking for co-founders rather than a single founder, both because it de-risks a company in case of unplanned succession, and it’s helpful to have someone to balance out the other.
“A lot of our founding team spends part of due diligence focused on if the two founders work together well. Is there chemistry between them? Are there synergies? Do we have a gut feeling?” she said. “And if we sense any tension that shows up, that’s a red flag.”
Dorsey’s argument that it is critical for a company to stand on its own may not require forcing every single founder out of their company at some point. Instead, as Sounding Board’s Christine Tao pointed out, it can just be an awareness held by “good leadership.”
“CEOs are just people too — and while a lot of our identity may get wrapped up in our companies — we’re not perfect,” she said. “Companies evolve and change, and may need different leadership at different times.”
via Tech News Digest
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