I spend most of my time being an entrepreneur (GenieBelt) or supporting entrepreneurs (e.g. Treatwell, StarOfService, ChurchDesk). As part of that, there are some troublesome themes I encounter again and again, one of them is how the leadership team changes as the company starts scaling. It’s a complicated process to get right, and also a very sensitive process both at an institutional level as well as on a personal level. One of the topics I think many company builders tend to get wrong is the entitlement of co-founders. I will not get popular in some quarters writing this, but yes; I think in too many cases people with the co-founder badge feels entitled to decision making rights they should not have. Let me explain.
What is a co-founder? It’s a person that founded a company, quit their job (if they had any) and bet most or all their working time plus their reputation on a project being successful.
Everybody that took the decision to risk time and reputation on an idea should get credit for that. Without those brave people, new projects would never get off the ground. However, the profile of those that start something, is often not a good fit for the profiles needed to scale projects through the various phases – and especially not in a leading capacity. Few people have what it takes to be just right for both inception, getting to product-market-fit, initial traction, growth, internationalisation, scaling, building the corporation, etc. It’s almost the same as demanding from a football player, that he had to be able to play equally well on all positions of the field (Alexis Sanchez?). I have previously written on the entreprofessional profile that can scale from zero to big, but they are rare creatures.
One way of mitigating the experience and skill gap many co-founders have, so they can continue in a leading role, is to let people evolve into different roles as the company grows, and to build up the various teams in the company so they combined have what it takes. But even with role changes and support from new people with more relevant experience, then it is in many cases not the right thing for the company to let all co-founders maintain their position at the top of the company. The role change sometimes has to involve seeing a co-founder being lifted out of the exec team.
That process often leads to stigmatization, fights in-between founders that destroys friendships, tense relationships between investors and founders that hurts progress, etc. It’s really one of the top risks when growing successful companies, and unfortunately the origins of many broken friendships. And it is usually unnecessary.
Here’s my advice:
1: Agree as a founding team from the beginning, that you will do, what is the long term right thing for the company
2: Have open and frank discussions without too much ego on an on-going basis, about how each of you evolve in the company
3: Introduce the “Partnership” concept
Ad 1: You can also decide that maintaining your positions is more important than maximizing succes of the company, but then at least be explicit about that!
Ad 2: It is much better to have small arguments along the way, than sitting on a volcano that suddenly erupts Tambora style. When everybody has climbed high up in the trees, is so difficult to get down again. The on-going alignment talks can be informal “wine & cheese” chats every quarter or in some other format – the key is to find your own personal way of setting up the process, so it facilitates an open, direct and transparent conversation full of respect without the participants being too stuck in their ego.
Ad 3: This one is very important, but it needs a bit more explanation.
My first full time job was with McKinsey. I joined McK back in the mid-90’s since I believed “company building” was about getting into a corporation, become head of a business unit and then do a management buy-out. Suddenly Mosaic and Netscape launched and Yahoo had their eye opening growth and stock listing, so I realized the digital world opened the opportunity to build significant companies from scratch, and have much more influence over your own destiny – and the tech solutions being build could have massive impact. So I left, and have now spend 20 years in the tech sector, but from McKinsey I learned a few thing that I have taken with me on my journey, and one of them is the partnership concept. I am not sure, that the way I interprets a partnerships is how McKinsey does it, but the basic introduction in a business context I had at the Firm.
For me, running companies as a partnership is the only right thing. I am sure you can do it successfully in other ways, but my personal experience professionally, personally and socially is that the partnership model works really well in a startup and scale-up situation.
A partner is a leading person in the company, who view the company as his or her own, no matter whether the person is a founder or not. The partner acts and thinks as if it is his or her company. The first priority of the partner is to the company, the second priority is to the other partners, and there is a high level of trust & transparency within the partnership. Since the partner is sitting at the high table, then a partner will always have input opportunity on major strategic decisions. The CEO is of course the ultimate decision maker, but in a partnership the CEO will try to create broad support for all key decisions in the partnership, and this happen through the partners being close on decisions, values, vision and ambition.
To sum up, the key elements for a partner are:
- you are a leading figure in the company
- you have a say in all major decisions
- you feel and take ownership of the companys health and prosperity
- you have a meaningful stake in the company
- there is deep trust and respect between you and the other partners
A partner lead company is where the executives act as partners, and work in a very tight, high-trust environment towards a shared goal of making a great company. High on good banter, low on bad politics.
I want to run companies with partners, and I am not worried about whether those people are founders or not. Yes, founders should be respected for their initial decision and risk willingness (and they typically have significant ownership stakes), but that does not mean they should monopolize decision making and the top positions of the company for ever. If you from the beginning agree, that you are leading a partnership and not a co-founder team, then you are much more open to supplementing your team later on with new talent. Very talented and experienced people have many opportunities, and they would often shy away from working in a company that defines it self as being “founder lead”, because you then risk being squeezed between founders that feels entitled to take the final decisions, even though they might not have the best skill set or experience to take decisions.
A “partner lead” company will not keep founders sacred just because they are founders. There will always be some level of veneration for founders, and when moving people around there will probably also often be more flexibility, but optimally a company focused on getting things right in the long run will prioritize having the right people in the right places. Not necessarily easy to evaluate who should rightfully sit where, but too often co-founders are obviously sitting in positions that are not helpful for them, the company or anyone else. Many founders also don’t want to be stuck in an exec position, but would rather be in different roles that suit their temper and personality better.
In my ConTech startup GenieBelt we are partner lead. We have a couple of co-founders that are in key positions in the company, they thrive and do important stuff in their roles, but are not executives. And of the five executives & partners, we are three that were also co-founders and two partners who joined six and 12 months after our formal company creation. But we very rarely talk about who are co-founders, we present our selve as partners, and we talk internally mainly about our partnership – not who were where April 2013. It is not relevant for execution today. The two partners joining post-founding, the product shark Bob and our dear leader Ulrik, would not have joined our Band of Brothers, if they had felt they would be subject to “co-founder’ism”. And without Bob & Ulrik, GenieBelt would not be in the great place we are today.
For those that want neither a partner lead or a co-founder lead company, then there is also the option of having a “board lead” company. But this I can not at all recommend for startups or even scale-ups. A small, smart board that understands it’s role with mutual respect and trust is a great thing for a scale-up, but you still want the strategy and culture to be firmly in the hands of the people actually running the company.