Life after startup: 4 ways I navigated the founder’s dilemma

June 1, 2023

A founder’s identity is tightly intertwined with their company from the moment we take the ‘leap of faith’ in starting up. The chaotic reality of a founder’s life is highly focused on building something out of nothing – constantly problem-solving, getting customers, figuring out funding and basically dealing with a myriad of urgent priorities within the highly uncertain and highly intense environment that is a startup.

The expression of wearing many hats is that a founder’s role within the startup isn’t static one, but evolves over time. During the ‘early days’, a founder is motivated entirely by trying to solve a problem and find product/market fit. After, let’s say a few years in, the founder’s role and responsibilities are going to be fundamentally different. So, the inevitable day will arrive where there is tension between wealth and control – whether a founder wants to retain control of the business or is willing to share it for the sake of growth and value creation.

You might know this as the ‘Founder’s Dilemma‘, a concept coined by Noam Wasserman, a professor at Harvard Business School. It primarily focuses on the challenges faced by entrepreneurs while launching and scaling their start-ups.

In the spring of 2020, in the midst of the global pandemic, I found myself grappling with my own founder’s dilemma within my startup, Sunu. The company had reached the point where what it needed and what I was able to provide where diverging. It was time to shed some of my ‘hats’ as a founder. So, here’s what learned as I navigated my dilemma.

The evolving role of a founder

One of the biggest misconceptions about startup founders is that they will all remain with the company from day-1 to whatever point: IPO, multi-billion revenue, acquisition. In most cases, rarely will you find that the entire founding team (teams with 2+ founders) remained with the organization as its progressing through its stages of growth; of course for a few exceptions. So, this bring us to two key points that Wasserman refers:

  1. Role Evolutions: As a company grows, the roles of the founders often need to change. A founder who excels at leading a start-up might not be the best person to manage a large, mature company. Founders need to be prepared for this and consider what is best for the company.
  2. Succession: At some point, a founder might need to step aside and allow someone else to take the CEO role. This can be a difficult decision, especially for founders who are deeply attached to their businesses. However, it might be necessary to ensure the company’s future growth.

People and companies scale at different rates. Startup is supposed to be temporary stage in the company’s growth. The risk-taking qualities that are needed to drive innovation becomes less utilized, while the professional, careful qualities of a manager become more important. So, it depends on you as the founder which role/responsibilities you want to develop into.

In reality, people who become and remain founding CEO’s are rare, and there are plenty success stories of founders who knew when to ‘pass the rains’ at the right time. Don’t feel like you have to push yourself into a template of success.

The ‘hat juggler’ as startup founder

I found that my responsibilities at Sunu were completely different than when I started six years ago. I learned that there are ways to help make up the difference when discrepancies occurs between the work of a founder and their newly evolved responsibilities. Career coaching and advisers will help you discover and develop yourself as the inevitable changes in the company happen. However, important to periodically honestly assess yourself as the company moves through its various inflection points. Now thinking back to Wasserman:

  1. Hiring Decisions: Founders may have to decide between hiring less experienced (and cheaper) friends or investing in highly qualified professionals who might be better for the company in the long run but cost more and potentially disrupt the existing culture.
  2. Wealth vs. Control: Founders often face a tough choice between wanting to become rich (wealth) and wanting to be king (control). They may have to compromise on one to achieve the other. Maintaining control often limits the size and potential profitability of the company, while a focus on wealth can mean giving up some control to other stakeholders.
  3. Exit Strategy: Founders need to think about their end goal. This might involve selling the business, taking it public, or passing it on to the next generation. Each of these options has different implications for the founder’s wealth and control.

Every-time you attract new talent, the leadership team is evolving. Managing talent with more years of experience than you as a founder will certainly change the dynamics. It will require entirely different skills than what you started with while wearing the many different ‘hats’ you were used to before delegating and trusting in new people. As a founder, I always built the team with people who were better, more experienced, more expert than me, knowing well that one day…I would pass on that last ‘hat’.

The higher stakes game for a founder

As a founder, you’ll need to periodically check in with how you are feeling as you move from freely taking risks to now carefully managing, governance and delegating responsibilities because now the company is at a stage where the stakes are higher and there is something to loose. Two key points from Wasserman to remember are:

  1. Equity Distribution: Deciding who gets what share of the business is a crucial decision. This involves thinking about co-founders, early employees, investors, etc. Equity distribution can cause conflicts, especially if the business scales significantly.
  2. Investor Relations: Founders need to manage their relationships with investors, who often have different priorities. While founders might be focused on long-term growth and innovation, investors might want quicker returns.

Responding and adapting to change is one of the best skills a founder can have, and it will certainly reflect itself as the make-up of the team evolves and the company scales.

I took every opportunity to build/develop my managerial and executive skills. Building a stronger business acumen was certainly reflected in the way we did business with our partners, customers and investors.

A startup is a human endeavor

Any kind of transition makes people uneasy, especially when the company is primarily founder-led. Employees and investors will no-doubtably wonder if there is more to it. It’s reasonable for stakeholders to wonder about things like founder dynamics or any other bad signs behind the curtain and question the future of the company. When leading founder transitions, my experience has taught me the following:

  1. Intentionality: Transitions are hard on people and the best way to ensure lasting success is have intentionality and manage every aspect of the change. This require planning in advance to ensure a smooth transition. It’ll increase the likelihood of finding the best replacement and changing any responsibilities within the team.
  2. Communication is king: Be communicative and consistent throughout the entire process. Take control of the narrative from the start and make sure that co-founders and leadership are aligned. Have the conversation first with your co-founders and any senior leaders of your team. Give yourself enough time to plan in advance in order to strike the right tone while providing enough context.
  3. Have empathy for people on your team: People react differently to change. Some may ‘act out’ while others may turn inwards. Be kind and compassionate by allowing people the space to process and ask questions. Be mindful of the timing of any announcement. I made my announcement with enough time during the workweek to have Q&A’s, individual check-ins and follow up meetings.
  4. Remember that we’re all human: It’ cliche, but saying goodbye is hard. It’s OK to allow for a moment when tears may fall and maybe finding the right words to say. Just be authentic and people will know. It’s courageous and authentic to allow for feelings, and be vulnerable. And it’s also important to signal your intentions of support, future involvement and that you care about the people and therefore, the success of the company.

Final Thoughts

The truth is that leaving something that you’ve worked hard to create and build for many years is hard and scary. After all, a founder’s identity is intertwined with their startup. There will be moments of self-doubt and grieving, and times when you’ll need self-care and the support of your loved ones or inner circle. The important thing is to not go at it alone or isolate yourself. Remember that in order to take care of a company, you need to take care of yourself first.

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