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Oct 26

A Difficult Decision For First Time Founders

Posted by: Mark Solon        

(Before we started this blog, I wrote a series of columns for the Idaho Statesman’s “starting up” series. I looked through my file this weekend and found a few that are probably worth sharing. Here’s the first)

Let me ask you something: If your phone rang today and you discovered that your distant aunt Sadie had passed away and left you her enormous fortune, would you open up an online trading account and start buying and selling stocks with your inheritance? I didn’t think so. Neither would I. We’d find an expert money manager we trusted to help us maintain and grow our newfound and valuable assets, right?

It is with this in mind that I find it puzzling that the vast majority of tech entrepreneurs who come up with brilliant ideas, start companies and then decide after getting them off the ground that they’re the best candidate to run and scale those businesses. Granted this is a generalization but most of the great geeks who I’ve met in my career have strikingly similar backgrounds; great engineering talent, insatiable curiosity and an incredible appetite and passion for all types of technologies.

Unfortunately, none of these characteristics are at the top of the list when it comes to building an organization, understanding a P & L, raising capital and dealing with the never-ending human resource issues associated with a rapidly growing start-up. Nevertheless, the vast majority of tech-startup founders I’ve encountered believe that they are best suited to run their businesses, well after their passion gets them through the first year or two, the first dozen or so hires and first few customers.However, It’s well documented that less than 25% of founders of tech startups are still running their businesses after two years. Why? The same reason that I never pitched for the Yankees; despite my burning desire, I didn’t have the skill sets. Why do most of them cling to running their startups? Probably the same reason that we cringe when we give the keys to the shiny new car to the 16 year-old valet, we know he’s not going to take care of it the way we would.


By no means am I saying that geeks shouldn’t start companies; on the contrary their intelligence, vision and tolerance of risk is the reason that our country continues to be the world leader in innovation. They’re willing to take huge risks to pursue dreams that only they can see and most of the time; they’re also the ideal person to lead the company for the first year or two.Why? Because only they can fulfill the most glaring needs of startups: They need to passionately articulate their vision in order to 1) woo highly talented people to join them 2) get the first customers to buy the product and 3) convince investors to give them capital. Nobody but a founder can do this.

But somewhere around the time that a company passes its employee / customer milestones described earlier, more often that not it’s time for geeks to create a role for themselves in their burgeoning companies other than CEO and find someone who A) is a great cultural fit and B) has a strong track record of scaling young companies.Most importantly, it’s imperative for the founder to stay at the company and find an appropriate senior management position that best suits their skill sets (often CTO). Leaving the company at this critical stage can be crippling. Why? Companies that lose their founders often lose their soul. When the founder leaves, passion soon follows.

Of course, finding the right person to run the business that you’ve given your blood, sweat & tears to for a few years is a daunting thought to contemplate. There are things you can do however to begin a process. One of the best ways I’ve seen to accomplish this is to create a board of advisors and over time, add one or two people that you think could be suitable candidates. By working with them over time, you can get to know their thinking, capabilities, trustworthiness and see if there’s good chemistry between you.

So if you’re a geek/nerd/genius, there’s never been a better time to take the leap and start your own company. Some of the best tech companies in the world were created in market downturns when fear and uncertainly cause paralysis among potential competitors. As for who runs the company after the first year or two, I guess there’s a chance that you may be the next Scott McNealy or Bill Gates and run your company from start-up to a billion dollar market cap. It would also be trite of me to suggest that there aren’t a whole bunch of founders who have built their companies, enjoyed tremendous growth and had exits that created fantastic value for their employees and investors. Usually though, I’ve found that many of these founders have had some good business experience as well. As for the first-time tech founder, it’s probably not a bad idea to incorporate thinking about your replacement as CEO sooner rather than later…


8 Responses to “A Difficult Decision For First Time Founders”

  1. Dennis Kaill says:

    Hi Mark-
    Great column, and I totally agree. Having said that, I am not sure which is worse-watching a founder struggle beyond the natural transition point, or watching a bad hire CEO turn the founders company into a smoking hole in the ground. Out of all of the factors you mentioned (proven ability to scale a company, bandwidth, etc) it seems the one that is most responsible for poor results in poor chemistry and/or lack of trust. And it is the softest skill, the hardest to measure. Even if someone looks great on paper and the board 'loves this guy', I would advocate as much 'try before you buy' as possible.

    • Mark Solon says:

      Thanks for weighing in and I couldn't agree with you more Dennis. That's specifically why I mentioned the idea of getting a few advisors who are potential CEOs, it's a wonderful way to see how you work together.

  2. MattCope says:

    Mark - good use of the library for this post.

    How often do founders hold the reigns too long because of psyche - e.g., "This company is my baby" ?

    And to what extent do you think carving out a 'Founder' role, separate from the CEO role, helps manage this?

  3. Mark Solon says:

    Good question Matt, hard to quantify. Some good yardstick would be when operations begin slipping, too much focus is placed on engineering and not enough on sales (very common), or when product development suffers as the Founder/CEO is overwhelmed with the business side of the business.

    I think the role of "Founder" winds up being a cancer. The Founder winds up feeling lost and folks in the organization wind up resenting the "Founder" for not contributing. There's got to be a place in the organization where the Founder makes a real contribution in a traditional role such as CTO or VP Engineering. Keeping Founders around just because they're Founders is a disaster waiting to happen…

  4. Mark - Great post.

    As a first time founder I think about this stuff a lot. One thing that has helped us is i have a co-founder that has complimentary skills.

    What have you seen as far as first time founder's success when they have a partner vs when they lead the team alone?

    • Mark Solon says:

      Like all partnerships it depends upon the relationship Jimmy. If there's mutual respect and a real understanding by each partner that it's not always going to be smooth sailing (conversely, you'll often be in 30 foot swells), and you're both willing and able to disagree with civility and respect, then there's nothing better than having a partner. However, without those dynamics, it's probably doomed from the start. I've been around alot of these and would be happy to get on the phone and talk about this in more depth if you're interested.

  5. Mark - As an executive who replaced founders four times I look at the founders transition issue from the other side. I agree completely that bad outside CEO hires can be worse than a founder who is not prepared to manage, grow and scale their own venture. My experience has shown that a mature view of how to manage the transition from both the founder and the replacement CEO is key to making these things work. Cold turkey transitions where everything changes all at once is just as bad as ploddingly slow transitions where the founder handcuffs the new CEO with his/her established norms. Getting the chemistry and perhaps more importantly the "contract" (not the written one but the actual agreement on how the founder and outside CEO will interact) and knowing what decisions will be made by the new CEO rather than the founder (and vice versa) IN ADVANCE, is the best medicine I have found for a successful transition.

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