Is the CEO Always the Founder?

Popular belief often suggests that the CEO of a company is always its founder. However, this is not always the case. While many startups are started by their CEOs, larger organizations frequently have a different CEO who is appointed to lead the company after it is established. In such instances, the founder may hold a different role such as chairman or may even have left the company altogether. The core role of the CEO remains the same: to manage the overall strategy and direction of the company, regardless of their original involvement in its founding.

Early vs Late Stage Leadership

Typically, in a startup, the CEO is a founder. However, as the company grows, it is common for the founder to be replaced by an experienced business executive. Most companies start out as small organizations where the founders often serve in multiple roles, leveraging their strengths. However, successful founders often recognize the importance of hiring a CEO with specialized skills to manage the company's growth. Many founders are either not trained or do not want to manage a large company, given that the skills required to birth a company and help it grow to significant sizes are not necessarily the same as those needed to maintain and scale it.

Research on Founder CEOs

Research by Noam Wasserman, a professor at the USC Marshall School of Business, looked into 212 US startups launched in the late 1990s and early 2000s. The findings revealed that while 50% of the founders still controlled their companies three years after founding, this number dropped to 40% by the four-year mark, and by the time of the companies' IPO, only 25% of founders remained in charge. This research underscores that while founders play significant roles, they may not always retain the CEO position.

Founder’s Role Beyond CEO

It is important to note that founders are not necessarily out of the picture after ceasing to be the CEO. Often, they continue to play crucial roles in the company. For instance, a founder may serve as the Chief Marketing Officer (CMO), Chief Operating Officer (COO), or hold a product leadership role. Such roles can continue to leverage their expertise and vision to drive the company forward.

Success vs Ego

Some founders can transition successfully into CEO roles, as demonstrated in my experience where we brought in a CEO with a wealth of experience. However, many founders fall into the trap of thinking they must remain the CEO. In reality, it can often become necessary to transition to someone with strong sales and marketing (GTM) skills at a later stage.

Transcending one's ego and understanding the necessity of bringing in the right talent can be difficult but is crucial for the long-term success of a startup. Founders who are willing to recognize and hire the right leadership can significantly enhance their company's chances of achieving sustained growth and success.