The non-binary question of can a founder become a company builder?

I was listening to a podcast this week where Jim Collins raised an issue that comes up time and again.  “Can a founder really transition to being a company builder?”  While we tend to associate Collins with iconic companies, many of the companies he works with remain led by their founders.  A rough estimation of his quote is, “there is this myth that founders don’t make good company builders but it’s not true.” 

Plenty of notable founders made the shift to company building, creating the systems, growth strategy, culture, getting the right people on the bus etc.  to build sustainable enterprises. Yet, much has been written about the propensity for founders to be replaced when investors arrive. Estimates are that four of five founders step down from the CEO role, and the vast majority leave the company.  Often the process is a tense one.   

I spoke with the founder of a UK technology company who was promoted to CEO, and several years later stepped aside on his own. He was part of a trio of founders from different companies, all medium size enterprises at the time. I also talked to another deeply experienced US based life sciences CEO and investor about founder shelf life. They had perspectives that are relevant to both investors and founders.

For founders, take care that you truly understand the CEO role, take time to understand what you really want and whether being a company builder fits your character. My UK colleague watched as his two companion company founders acted with wrong assumptions of what a CEO does; firmly in control, “its my vision,” handing out tasks to their team to execute upon and report back for further instruction and lamenting when their staff exerted independent leadership of their own that was wrong. He said frankly, the other founders missed fundamentally that the CEO must give up control to be successful.  His own investors and board took something of a go slow and understand approach.  My UK colleague was able to grow the company but dreadfully missed engineering and suspected that he was not growing the company as quickly as it should be.

He understood the need to build a strong technical and business team, and as important, a strong board around him that would truly challenge his authority. He said that while he suspected that the company could be growing faster, he needed a caring board member, he trusted, to nudge him with the question of what he wanted as well as what other leadership options there were. 

Founders should also be careful to not overestimate how much VC’s care about personality and presumptions.  They do not care nearly as much about your personality style as you might think.  They care about whether you are executing on your plan.  But founders, pick carefully to be sure you have investors that have a clue about your culture and know the business you are in so they can be trusted advisors to you.

Had the investors come in and simply replaced my UK friend, it would have had a debilitating impact on the product, staff, and culture, maybe even the survival of the company. He said “it would have been absolutely horrifying to have an ignorant VC come in.” Ensure that you know your partners, board, investors, and leadership, and on what matters you can trust them. It will make difficult decisions much smoother.   

Founders, you will certainly need to requalify for the role of company builder CEO but investors are likely more receptive than you might suppose.  Start thinking early about strategy, people, and systems. Get some good advice from your board, those you trust, and work on your own maturity so that you can make a wise decision about whether you qualify for the new role and whether you even want it.