Written by Mikhail Taber
As I often say, building a successful company is not something that just anyone can do. It takes a lot of blood, sweat, and tears, not to mention creativity and resilience.
However, the very qualities and skills that enable a founder to build a company and drive early success can become obstacles and bottlenecks to progress as the business grows. This suggests it may be time for the founder to step back.
Perhaps the most important example is Google. Larry Page and Sergey Brin agreed, not without some persuasion from John Doerr, to bring Eric Schmidt to the company as CEO. Schmidt’s tenure has been described as part of “adult oversight,” and without him, Google wouldn’t be where it is today.
identify the root of the problem
Unfortunately, many companies are not so proactive and only start discussing this solution after being attacked. Although our default setting is often to blame external factors, the source of the problem is usually closer to home. As the saying goes, when you point a finger, three fingers point back at you.
It can be difficult for founders to acknowledge their role in the company’s affairs. After all, they started a company from scratch, so founders often identify themselves with the company like some kind of Sun King, declaring, “I am the nation.” And they become convinced that acting in their own interests is synonymous with acting in the company’s interests.
This reminds me of a scene from the Uber drama “Super Pumped.” On the show, when Eric Holder and regulators visit Uber’s offices to investigate the company, founder Travis Kalanick responds, “We’re the same.”
But they were never the same and never will be.
How to spot the winds of change
Change is a natural part of life. And in startup, you can identify when a stage ends. For example, if a founder is more focused on self-promotion than actual business development, it may indicate a lack of engagement.
In other cases, founders may feel burnt out, bored, or simply unable to fit in with what the business currently needs. Their leadership potential is diminished, and bringing in an outside CEO may improve the company’s prospects.
Another sign is when the founder’s lack of business acumen prevents them from making important decisions and the company begins to drift aimlessly. The best option at this stage is to bring in an external leader and find a new role for the founder.
The hardest part for many founders is that exiting feels like a failure.
This needs to be restructured because this is not a failure, but a strategic move towards sustainable business success. Founders who exit often find they can contribute more effectively while remaining involved in a strategic or advisory role.
Smooth transition: How can investors help?
The key to a successful transition is an amicable process.
Ideally, founders should recognize the need for change in advance and work with investors and the board to find a suitable successor. If managed correctly, businesses can emerge stronger than ever. Conversely, a poorly managed transition can lead to both internal and external disruption.
Investors can help by recognizing founder burnout and misalignment. A founder’s reluctance to step back or inability to adapt to changing circumstances can be a sign. Once that is established, you can guide founders through the process and ensure a smooth transition. After all, the ultimate goal is survival and growth, and companies need to choose the best people to lead their teams to achieve them.
Mikhail Taver is the Founder and Managing Partner of Taver Capital Partners, a Delaware-based VC fund whose portfolio includes more than 20 AI startups and five successful projects. I am. He has more than 20 years of experience as a financial group and industry executive and has closed more than 250 M&A and private equity transactions totaling $24 billion.
Illustration: Dom Guzman
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