I’ve recently had multiple conversations with entrepreneurs about the growth of their company, raising a round of funding and their prospective role. I often reference a publication from the 90s titled “Barbarians to Bureaucrats” by Lawrence Miller. In it, Miller covers the various stages of a corporate lifecycle and the leaders needed in each stage. I will not cover the stages in this post. It’s a great read, and I highly recommend the book. The point I want to remind start-up founders is simply, as you grow, you may not be the right person to lead the next phase of the company.
This assertion is backed by data found by Noam Wasserman, a former professor at Harvard, who authored “The Founder’s Dilemmas.” In his research, he found that in VC-backed firms, most CEOs are replaced within three to four years. And only a quarter of that time is the replacement initiated by the founder, and the rest of the time it’s initiated by the board. So, in most cases, founders are being kicked out of their company. And you could see from the stats here, by the time you are three rounds or four rounds in, the majority of companies have fired their founding CEO.
Interestingly, there’s a paradox of success around founders. You’re most likely to be replaced at two points in your company, and they’re both when you’re successful. Either when you’ve raised a round of funding, and the VCs or angel investors have some control of your company. Or you’ve just shipped a product and that you’re replaced by the investors who said, “Okay, great, you’re good at developing a product, but you’re not good at scaling a growing company.”
Founders must constantly evolve and surround themselves with team members who in many areas have superior skills. More important, they must be self-aware enough to recognize when their skills and leadership style are stifling the growth of their company.