Why Founders Get Fired?
Despite the remarkable tales we read about founders who dropped out of college and started their ventures in the garages to emerge years later as the CEO of a billion-dollar public company, the ranks of these founders who shepherd their ventures through this gauntlet are very slim. We don’t hear much about are the other thousands of founders who were removed from their ventures much earlier along the path.
It turns out that the skills required to starta company are often diametrically opposed to those required to runa company at scale. Most founders are not very good at both.
The best founders are control freaks.
They make most decisions. Founders interact directly with their early clients – often giving out their mobile numbers if the client has a problem. Their companies become their personal playgrounds, sometimes with a merged singular personality. This type of behavior for the successful entrepreneur generates a ton of positive reinforcement, making it very hard for them to change. And when the scale of the company exceeds their wingspan, this behavior backfires.
Raising capital tips the balance of power.
When the founder holds majority control, she can usually do whatever she desires. But raising capital necessitates dilution of that control. Once it tips in favor of outsiders, Founders no longer get to call all their own plays.
Despite the folklore surrounding venture capitalists capriciously firing their funded founders, most go to great extents to keep the founder around. There is a lot to be said for the intimate market, product knowledge and the leadership charisma of founders. It’s hard to find a hired gun who is even close to being an adequate substitute. But when either the bad behavior of the founder, often brought on by hubris, or the expanse of the venture is too much for the founder to personally control, there may be no alternative.
What got you here will not get your there.
Running a small company is different than managing a larger one. With a small team you can connect with each team member personally, you can be involved in every sale. You can make most of the decisions. You are omni-present when your innovative and superior skills are required.
Early adopter customers love to have the founder on speed dial when the run into trouble and most founders have no issue with that. But as your customer base grows, it is no longer possible to handle all of these customers on your own. And too often, without a process or system, calls soon get left unreturned.
Founder behavior just doesn’t scale. There needs to be processes to ensure that customer get call-backs. Employees need to grow their decision-making muscles, no longer waiting for the founder to make every call. And communication is no longer one-to-one, it now requires much clearer messages that can be filtered through multiple layers of communication to reach every employee.
How does a founder avoid being fired?
The simplest and easiest answer is avoid being fired is don’t bring in outside investors. This enables most founders to remain bullet -roof to decisions to unseat him.
But if raising capital is required, as the venture grows the founder needs to accept and adopt new skills and behaviors that are quite different from the ones that initially made the company successful.