To be Normal Or Abnormal

Is it better to be the founder and the CEO or to be a CEO of a company which was founded by someone else?

Let us dig deep and try to find a few answers.

The main difference between a founder CEO and a non-founder CEO is the founder CEO is much more passionate about the company and its employees.

This is both an advantage and disadvantage. The founder CEO is much less likely to give up on the mission and direction of the company and is less likely to cut back or layoff employees during tough times. Just the opposite is true for a non-founder CEO.

This has implications for both drive and growth and reckless actions.

Mark Zuckerberg spent 10% of Facebook’s shares to buy WhatsApp. Without even allowing much board-level discussion. $20b at the time,  far more now. And $1b to buy Instagram when it had a handful of employees.

Crazy!

These are bets a Non-Founder CEO almost never can make.

Too risky, too much from the gut and too dilutive.

The Hired/Non-Founder CEO loses her job when these don’t work out. Zuck doesn’t. And the non-founder CEO has to socialize the idea, convince everyone. It takes months or even years. Zuck can move in a day.

We all learned this from Jeff Bezos. A Hired CEO is going to be judged annually. So will a founder, but she’ll be more insulated from the risk of being fired every January. CEOs aren’t judged quarterly, but they are certainly judged annually.

You can miss a quarter, but as a non-founder CEO, your job is always at risk if you miss a year. So it’s very hard to make expensive long-term bets. It really is. And you cannot really divert your focus away from what the founder wants. We all know way too well what happens when we do that.

People want to buy from and work for someone truly authentic. Non-founder CEOs can do this, too. A non-founder CEO can care so much, and learn so much, she is just as authentic as a founder. Elon Musk didn’t really found Tesla,  he was just the first investor but there is so much more to them.

Eventually, it won’t matter but maybe even up to $100m in ARR and beyond, there will be some things only the founders understand. And because of that, only the founders will really understand how it all pieces together: the vision, the bugs, the strategy, the technical debt, the early customers. It’s hard for any mere mortal to understand how it all really works.

Let us list them down for a better understanding.

Founder CEO 

ADVANTAGES 

• Has real skin in the game
• Will do whatever it takes to make the company succeed
• He knows what type of people he needs on his management team.
• Might not want to find investors to help him because he wants absolute control of his company.  
• He has the vision of how the company will ultimately look
• He knows exactly what it will take to reach specific goals
• Knowing the end goal might make him take calculated risks to reach those goals.

DISADVANTAGES

• He has real skin in the game
• The new company is his baby, and that may blind him to the fact that he’s throwing good money after bad.
• He might be over-protective of his company to the point that he won’t listen to others’ ideas of growing the company.
• He is likely to work 100 hours a week or more to ensure success.
• He might take unnecessary risks to succeed.
• Any outside advice is ignored.
• As this is his baby, he might invest every penny he has only to go down with the ship.
• He might believe that there are no managers good enough to join his team.
• His team will be nervous, not knowing if they will get paid this week, if money is short.

Normal CEO

ADVANTAGES

• He brings outside experience to the new company
• Outside experience brings new ideas that might help the company grow.
• He likely knows many successful managers/executives that he can bring onboard to build a successful team quickly.  

DISADVANTAGES

• May not have the right experience for the company
• Being a successful CEO in one industry does not guarantee success in this new company’s industry.  
• The normal CEO is not 100% invested in the absolute success of the company, he might be only 95-99% invested.
• Not having a 100% interest in the company means that while success is the goal, some CEOs will only go so far to make the company succeed.
• Might not want to take calculated risks to succeed.  
• His lack of industry experience might cause him to hire the wrong management team.
• The normal CEO can walk away at any time if things get too tough.
• If a better opportunity comes along, he might jump ship.

So, who is a better option?

We leave that up to your rational mind.