Discuss: Keep your founder as CEO if you want your startup to succeed

Base photo credit: Bench Accounting.

Yahoo’s failure highlights the criticality of the role founders play in a business.

Let’s look at the biggest tech companies headquartered in Silicon Valley by capitalization from data I got from Bloomberg (as of June 3, 2017). They are Apple, Alphabet, Facebook, Oracle, Intel, Cisco, Nvidia, Netflix, Uber, PayPal, and Salesforce.

If you look at their histories, at least one founder played a critical role in at least the first five years of the company (except PayPal for which it was only three years). In nearly all cases, the founder(s) seems to be key to the success of the company (I do appreciate the subjectivity of the statement).

For Microsoft (which isn’t on the list) and Apple, it is fairly striking that their successful periods coincided with one of the founders being closely involved—an exception being Microsoft’s recent strong performance. For Apple, it’s always been the case—it almost died soon after Steve Jobs was kicked out and the company has also given up innovating since he died.

Google, Amazon, Facebook, Oracle, Netflix, Salesforce, Xero, Snap, and an extensive list of stellar unicorns have grown from strength to strength because they have kept the founder(s) in the business. Those founders understood the business, had their heart in it, and maintained a vision like no non-founder CEO ever could. They treated the business as their own baby.

Many businesses do continue to grow once the founder(s) exit (like Cisco), but they exit when the business is mature enough to stand on its own feet. Even then, things often don’t work out well.

Now if we look at Yahoo, both co-founders, Jerry Yang and David Filo, stopped playing a key role in Yahoo a year after it was founded. Non-founder CEO’s ran the company for more than a decade, after which Yang came back in. This was way too late. Since it was founded, Yahoo has had eight CEO changes.

(Google also had a non-founder CEO soon after it was founded, but Larry Page and Sergey Brin remained evidently deeply active and influential.)

So the biggest lesson to learn from Yahoo is that founders not only start the company, they also make the company.

This was first posted on Quora.