The rise—and fall?—of the founder‑CEO

And why leadership transition is a gendered issue

by Hannah Miet

Table of contents

I’ve seen it before in a TV miniseries. You’ve seen it before in a TV miniseries. A male, venture-backed tech founder in a branded hoodie, scowling at a boardroom full of people that want to oust him as CEO.

Adam Neuman’s petulant clinging to WeWork as it was bleeding money is a real-world example, obsessively depicted by Jared Leto in Apple TV’s “WeCrashed.” There are similar cases in every corner of the venture-backed startup world. It’s hard to find someone who doesn’t have a story about a tech founder-CEO who won’t let go despite obvious shortcomings.

“A lot of founders are visionary but disorganized, and people need a framework,” Julio Bruno, who holds board chairman and director seats at several startups, told me as we discussed the dissonance between the role of founder and CEO in later stages of a company’s growth. “You can’t just be out there drinking and saying Kumbaya.”

“A lot of founders are visionary but disorganized, and people need a framework. You can’t just be out there drinking and saying Kumbaya.”

In the past two years, founder-CEOs have uncoupled from the latter half of their titles en masse, leaving many wondering if it’s the end of an era. In Jack Dorsey’s resignation letter from Twitter, he criticized the founder-led concept altogether, calling it “a single point of failure.”1

I think it’s worth questioning whether Dorsey’s claim is true in all circumstances, or only when an ego bloated by venture capital (VC) is unwilling to give up control. If, instead, a VC-backed founder humbly admits the areas in which they can no longer serve, hires accordingly, and then carefully considers the guidance of a diverse team of senior advisors, can’t they go further than one who digs their heels in?

“A core CEO skill is identifying your own skill gaps and recruiting others who fill them,” Allison Byers, the founder of Scroobious, told me. “Founders who have a strong vision along with the ability to recognize shifting company needs and how to recruit complementary leadership skills can be very successful long-term, including post-IPO.”

An example of one such founder is Whitney Wolfe Herd, who founded Bumble in 2014, took it through its initial public offering (IPO), and still runs it in line with her vision.

“As we’ve grown, [I’ve] learned to be honest with myself about my strengths and weaknesses,” Herd said in an interview with Forbes. “I’m a marketer. I understand branding. What I’m not is a design guru or a whiz at operations. As you build your business, look to create a diverse team of subject area experts—while being forthright about your skills and limitations.”

The core issue, therefore, may not be the founder-CEO role itself, but rather the founder’s willingness to adapt and evolve in response to the changing demands of their growing company. There’s compelling evidence that women are more likely to lead in this fashion, which I’ll get to later. First: some founder-CEO history.

The rise of the VC-backed tech founder-CEO

Founders retaining the CEO role is a relatively new phenomenon. Until roughly fifteen years ago, founders of venture-backed startups rarely remained CEO at the time of IPO, which did not occur until the company had a profitable product. Investor-majority boards swapped them out with executives-for-hire, bred in prestigious business schools, or pressured them into acquisitions.2

That changed, as Ernest Hemingway said, “gradually, then suddenly,” with many catalysts along the way. In 1995, Netscape, despite being unprofitable, had a blockbuster IPO, which shattered the prerequisite of five profitable quarters3. The Great Recession of 2008 ushered in further shifts, as companies remained private longer to avoid a tumbleweed IPO market. These shifts contributed to the rise of secondary markets that give still-private companies liquidity.

In some ways, it also created an environment where bad behavior could flourish. Would sexual harassment at Uber4, for example, have remained unchecked if Uber had a faster IPO, after which companies typically install more formal HR oversight? Very possibly. But it’s worth noting the safeguards that weren’t in place while founder and former CEO Travis Kalanick strutted down a long pre-IPO runway.

Then came the rise of founder-friendly VCs5, which contributed to the rise of unicorns. Move-fast-and-break-things founders became icons who increasingly negotiated deals that gave them more control, including retaining their CEO titles.

Now, some worry the founder-friendly VC era is over.

The pullback

Economic turmoil always leads to conservatism. The first quarter of 2023 saw a drastic drop in VC volume to $76 billion, a 53% decrease year over year, despite sizable funding for OpenAI and Stripe6.

This year, many boards have ordered founders at established companies to cut costs, shed the latter part of their titles, or oversee massive layoffs. In January,

Only 2%

of VC funding went to women in 2022, according to Pitchbook.

Reed Hastings stepped down as co-CEO of Netflix, marking the latest wave of the founder-CEO exodus. Amazon, Microsoft, Apple, Twitt—ahem, X—and Google’s parent company Alphabet now all operate under the leadership of non-founders7.

There are, of course, exceptions, like Mark Zuckerberg at Meta. But largely, the startup experts I spoke to told me the tides are turning, at least while VC belts are tightening. A CEO’s experience with previous downturns seems to matter more to some VCs today than who can infuse the most creative energy into a product and culture, eliminating many young founders from the running.

This wave of conservatism amongst VCs could reduce the already dismal diversity at the board level. Underrepresented groups are less likely to have access to the Ivy League educations, high-level connections, and blue-chip resumes boards typically look for when determining whether a CEO replacement candidate is “proven.”

Operational vs. inspirational

Few disagree that companies need founders as leaders to infuse their vision into the early stages of building a product or service. It gets murkier when you question whether they are best equipped to scale it long after the IPO. Some research seems to indicate they aren’t.

A study in the Harvard Business Review found that founder-CEO leadership leads to a 10% higher company valuation at IPO, but from there, the value of the founder running the company diminishes.

Many of my sources echoed this finding. The word “operational” came up a lot while talking to more than a dozen insiders about the role of a CEO. Conversely, “inspirational,” “innovation,” and “culture” came up repeatedly while talking about the role of a founder.

“Usually, the attributes that make a CEO great at building a successful company from scratch — talking to users, building products they love, curating team and culture — don’t translate into the demands of the job at the later stages,” Judd Schoenholtz, the co-founder and CEO of Balance, told me.

Desmond Pieri, a professional interim CEO, told me that, out of the 36 companies where he was either hired to replace a founder ousted by a board or to help a founder last longer as CEO, zero founders retained the CEO role at the IPO stage.

Sometimes, ego takes the wheel and prevents a founder from considering whether they should transition to a title that better fits their talents and passions—say, Chief Inspiration Officer or Chief Creative Officer, the latter of which Brad Hargreaves, the founder and former CEO of Common, transitioned to last year.8

“The board’s only objective is to represent the shareholder. But a founder has multiple reasons why they are doing this. They want to make money. They want to change the world. They want to become famous and prove to Dad that they are better than him.”

When founders cling to their CEO roles, “they are scared of losing the meaning of their lives and have failed to find out who they really are because they define themselves as the company,” Naeem Zafar, who sold his AgTech startup TeleSense to UPL, told me, adding that when founders set their egos aside, they often realize the role of CEO no longer aligns with running the company.

“By the time of an IPO, it’s about spreadsheets, compliance, and operational reviews — it’s no longer about why you started it,” Zafar said. “The board’s only objective is to represent the shareholder. But a founder has multiple reasons why they are doing this. They want to make money. They want to change the world. They want to become famous and prove to Dad that they are better than him.”

Hiring for skill gaps: Are women the answer?

What the HBR study doesn’t consider is whether the founder-CEOs in their data were willing to give up some level of control and hire for their skill gaps, like Wolfe said she did.

It also doesn’t consider gender. How could it? Only 2% of VC funding went to women in 2022, according to Pitchbook, and the numbers weren’t better when HBR published its study. Women who get that sliver of the pie are often forced out of their companies after a Board of Directors forms, Byers told me. And because female founders own just $0.47 in equity for every dollar a male founder owns9, they often can’t protect themselves.

The disparity in funding is perhaps responsible for the founder-CEO role falling out of favor. Research shows that women are better primed to acknowledge where they have skill gaps and then hire for them, allowing them to potentially retain the CEO role longer with positive results. Korn Ferry Hay Group10 found that women outperform men in emotional intelligence competencies such as empathy, listening, and interpersonal effectiveness—traits that often translate to adaptability during transitions. Female CEOs also scored significantly higher than Korn Ferry’s benchmark group on humility11.

“Indicative of a consistent lack of self-promotion, an expressed appreciation for others, and a tendency to share the credit—the women CEOs were more likely to leverage others to achieve desired results,” the Korn Ferry researchers said.

In a separate study, Korn Ferry found that female leaders care more about the community and less about status and power when compared to a predominantly male CEO benchmark group. They are more likely to leverage the power of those around them12.

With boards that support them, women, more likely to hire for skill gaps, could stay on as CEO for longer. This consistency could strengthen many startups, which are fragile until they aren’t; leadership transitions are not always in the company’s best interest.

“One frequent board misstep is not conducting employee and key customer interviews to understand the potential impact and risks of the transition,” Byers said. “Another common pitfall is rushing through the process and underestimating the emotional response from the founder-CEO, which often comes out in the press and can be damning for all involved, including the transitioning leadership.”

VCs should consider setting aside their grievances with the founder-CEO role when a woman is at the helm and let her stay there longer. Not just to level the scales or to repent for the extreme gender disparity in their funding—though, that too—but because, as the research shows, women are better at leading companies and communities for the long haul without ego blinding us.

How founders (of all genders) can stay on

Many founders with the skills to lead for the long haul look to structures that allow them to retain control, even if it means taking on less investment.

Joe Meyer, founder and CEO of ExecThread, who was himself a replacement CEO at HopStop, told me he raised money for ExecThread “early on and a little along the way.” Now that the company is “cash-flow positive,” he may not want to raise more, choosing instead to maintain control.

“The press sees the barometer as how much money you raise and how many employees you have, but I’m not looking to win any vanity awards, ” he said. “I’d rather raise as little money as possible with as few employees as possible.”

Chris LaFerla, founder & CEO of Tatem, has raised only $2.5 million in venture capital, leaving him in control of more than 50% of the company. This percentage of ownership typically allows a founder to make adjustments to the board. LaFerla has yet to give up a board seat.

Because he intends to stay on as CEO for the long term—seeking organic, sustainable growth instead of large cash infusions—he carefully considers what investment he will take.

“I hope to achieve profitability in the next couple of years, which reduces our reliance on outside capital,” he said.

A considerable portion of those bootstrapping are women, who start 42% of all U.S. businesses.13 The problem with this approach is that VC dollars provide scale. If VCs continue to put 98% of their funding toward men, women will continue to be excluded from these positions, resulting in the downfall of the founder-CEO.

This inequality will prevent us from seeing a female Steve Jobs in our lifetime. And I don’t know about you, but I think we desperately need a female Steve Jobs, yesterday.

  1. Tom Jones, “Jack Dorsey resigns as CEO of Twitter,” Poynter, November 29, 2021, Link. ↩︎
  2. Steve Blank, “When Founders Go Too Far,” Harvard Business Review, November 13, 2017, Link. ↩︎
  3. Vivek Wadhwa, AnnaLee Saxenian, Richard Freeman, and Alex Salkever, “Entrepreneurial Beacons: The Yale Survey on Entrepreneurship,” Harvard Business School Research, September 22, 2017, Link. ↩︎
  4. Susan J. Fowler, “Reflecting On One Very Strange Year At Uber,” Susan Fowler’s Blog, February 19, 2017, Link. ↩︎
  5. Charles Duhigg, “How Venture Capitalists Are Deforming Capitalism,” The New Yorker, November 23, 2020, Link. ↩︎
  6. Gené Teare, “Global VC Funding Falls In Q1 2023,” Crunchbase News, April 5, 2023, Link. ↩︎
  7. Elaine Moore, “Tech’s obsession with founder-CEOs is not over yet,” Financial Times, April 24, 2023, Link. ↩︎
  8. Erin Griffith, “The Boy Bosses of Silicon Valley Are on Their Way Out,” The New York Times, August 10, 2022, Link. ↩︎
  9. Carta, “Analyzing the gender equity gap,” Carta, September 17, 2018, Link. ↩︎
  10. Korn Ferry, “New Research Shows Women Are Better at Using Soft Skills Crucial for Effective Leadership and Superior Business Performance,” March 7, 2016, Link. ↩︎
  11. Korn Ferry, “Women CEOs: Insights for Leadership.” Korn Ferry, Link. ↩︎
  12. Jane Edison Stevenson and Evelyn Orr, “We Interviewed 57 Female CEOs to Find Out How More Women Can Get to the Top,” Harvard Business Review, November 8, 2017, Link. ↩︎
  13. National Women’s Business Council, “Annual Report 2020,” National Women’s Business Council, Link. ↩︎