When Twitter co-founder Jack Dorsey announced his resignation as CEO today, he did not do it quietly. He stated, “There’s a lot of discussion about how important it is for a firm to be ‘founder-led.'” “In the end, I think it’s highly restrictive and a single point of failure.” I’ve put in a lot of effort to guarantee that this firm can break free from its founders.” “It’s vital that a firm can stand on its own, devoid of its founder’s influence or direction,” Dorsey noted.
We thought this was a little strange, because Dorsey, who is also the CEO and co-founder of fintech behemoth Square, was Twitter’s first CEO before stepping down and returning following Dick Costolo’s five-year tenure. That is hardly a case of founder control being lacking.
Nonetheless, his remarks constitute a bit of a counter-narrative. In today’s founder-friendly atmosphere, venture capitalists frequently gamble on early teams based only on their current product advancement, and founders are more likely than ever to continue at the helm even after their firms have gone public. “There aren’t many founders that put their firm ahead of their own ego,” wrote Dorsey.
After a lively discussion regarding Jack Dorsey’s Equity decision, we debated the merits of founders who stay in leadership roles long after their firms have matured: What is amazing about Dorsey’s view is that it was completely uncontroversial 15 years ago. Sure, things have changed a lot since then, but that is simply a sign of how much has changed.
Investors compelled the Google founders to hire a businessperson as their company’s CEO. Eric Schmidt is a name you have probably heard of. It was typical practice in previous venture eras for founders to relinquish control of their firm once it reached size, with the belief that there were people more suited to scaling a digital company than founders.
So, what happened to that point of view? There are two points to consider. First, significant profits from a few select founder-led enterprises. Under a single head, Facebook has done well financially. You may add a couple more names to the mix as well, such as Coinbase and Airbnb.
However, maybe more importantly, venture investors have lost much of their previous influence. Gone are the days when venture capitalists could sit in their throne chambers in suburban office parks and order entrepreneurs to come to them.
Furthermore, the avalanche of finance available to entrepreneurs has reduced the key venture premise — having money to invest — to a commodity. Because of the lesser advantage, venture capitalists are unable to exert as much control over founders as they formerly could.
As a result, founders may keep control of their businesses for as long as they desire, frequently wrapped in a comfortable blanket of super-voting shares that ensures lifetime control.
This is not something that every VC enjoys! Not every VC prefers to crown a monarch to a CEO! Even still, you will not be able to persuade a single VC to oppose the notion of founder-friendliness since they all want a piece of the next big transaction. In addition, informing founders that their walking, talking piggy banks could have an opinion, much alone one that they should be replaced by someone with greater operational expertise, is not the way to go.
However, Dorsey is just stating that founders are not always the greatest people to lead businesses. This is correct. While extended founder tenures have resulted in significant wealth generation, there are possibly even greater examples of the inverse.
