Why Founders Leave Successful Companies: 4 Archetypes

In my line of work, it’s a common occurrence to run into founders who are no longer involved in the successful companies they built.  At first glance, a departed founder from a successful company seems like an anathema.  After all, venture capital firms these days are each falling over each other to position themselves as “founder friendly.”   Given that most founders will only create one company, one might surmise that such founders are loath to depart from their greatest moment in the sun.   Nonetheless, I probably find myself chatting with a departed founder of a successful company each week.

The conversation with the departed founder experience is often bittersweet.  These departed founders are proud of what they built, but you can often detect a distinct hint of sadness in their voice.

After listening to many of these stories, I have concluded that there are fundamentally four archetypes for the departed founder.

1.  The Co-Founder (in name only):  When a company starts, there are commonly two or three “founders” but one person may have more control and ownership than the others.  The line separating the founding team from the first employee is often unclear.   Often there is a main founder, and he or she uses the founder title to acquire free work from friends during a project’s embryonic stage.  After all, founders don’t get paid.  These “junior” founders rarely seem to last through Series B or C.   As a company succeeds, the company attracts investors and talent.   The senior founder finds that he can upgrade talent.  Then, the junior founders are either shown the door or frustrated with their diminished role.

2.  The Wrong Investor:  Each “how to” list published by a VC or an entrepreneur contains an exhortation for entrepreneurs to conduct back channel references.   Yet, so often, all it takes is a good brand name and the entrepreneur forgets this crucial step in the process.   If a company is successful, the wrong kind of early investor can see that they can get more credit if they push the founder out.   This rare situation can occur especially when the founder is young and the investor can demand “adult supervision.”   This doesn’t happen often, but it happens.

3. The Portfolio Founder:  A portfolio founder is one who, from the beginning, is at peace with their exit and knows they will bring in a manager/partner sooner rather than later to play the front man.   They see that most of the value is created in the first few years and after that, after product/market fit, the issue is usually execution.   Their goal is to get the huge early slug of equity and then let others carry the ball once the idea has found market validation.   After a decade or so, these founders have amassed a portfolio of equity positions using other people’s money.   As an investor, one has to have some respect for the kind of founder that can pull this off.

4.  The Chief Strategy Officer:  Its not uncommon for a founder to bring in a CEO to scale revenue towards a significant exit.    When this occurs, some founders are kings without a kingdom and are given the title Chief Strategy Officer.  Let’s be honest here: there is no such thing as a Chief Strategy Officer.  That job is the entrepreneurial equivalent of being the Vice President.    The title and role exists to keep the founder tightly by the CEOs side to take on whatever idiosyncratic projects arise.  If the founder is a great utility infielder, and checks his ego at the door, the role can work.  Often, however, “CSO/Founders” resign eventually and, since the job is not a real job, they are not replaced.

About Ben Black

Benjamin Black is the Co-founder and Managing Director of Akkadian Ventures, LLC. An eleven-year veteran of the private equity space, Ben co-founded Akkadian with Peter Smith, to specialize in offering early liquidity to entrepreneurs, early employees, and investors in successful private companies.

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