How to move forward when a startup founder steps down

Today’s startups have no singular model to follow as they evolve and expand.

They can scale through acquisition or fundraising, access numerous financing options, expand rapidly, or diversify offerings. However, as recent events have shown, the number of fundraising rounds and amount raised don’t necessarily equate to long-term success.

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At some point in the startup’s journey, when it matures and scales, the founder may move aside to allow someone with the requisite experience to take over and expand the business. For instance, Google co-founders Larry Page and Sergey Brin stepped down to make way for Sundar Pichai, while Alibaba’s Jack Ma gradually made way for Daniel Zhang. Bukalapak’s Achmad Zaky also relinquished his role.

Getting the transition right promotes confidence in the new leadership and protects shareholder value. However, in founder-led organizations, the transition to a non-founder CEO can be particularly challenging, as it often signals a profound change in the direction and culture of the company.

Eighty percent of a startup’s culture will be determined by a founder’s personality, strengths, and weaknesses, according to American venture capital firm First Round Capital. As a result, the founder’s identity seeps into the startup and informs its culture and ethos.

But transitions can be successful when boards, key shareholders, and business founders understand and agree on the drivers for change, while acknowledging the journey of the founders who have brought the organization to its current stage.

But once the founder agrees that it’s time to step down and a new CEO is put in place, how do you set up the transition for success?

Focus on the future while respecting heritage

The transition from founder to non-founder works best when the organization is at the center of the process, separate from and independent of the founder. Steve Vamos, Xero’s CEO, said that startups making the transition should stay focused on their ambition and take a future-centric view.

That said, the legacy and contributions of the founder and founding staff should be respected, as it has enabled the startup to move from concept to substance.

It’s important to focus on planning for the next stage of growth and charting the future direction of the company. However, it’s also crucial to reflect on the values that have brought the startup to where it is and determine which ones will support the future development of the company.

When Buffer co-founder Leo Widrich decided to step down from his role as chief operating officer and leave the company, his co-founder and CEO, Joel Gascoigne, was transparent with the team about the reasons for the exit. In a detailed blog post, Gascoigne also laid out the singular vision and direction that Buffer would be moving toward and how the heritage that Widrich had helped to build would contribute to that.

Define the future role of the founder

Even when founders step down from their leadership positions, their ongoing involvement in the business often helps to maintain a sense of continuity, particularly for customers and shareholders who may value their continued stewardship.

At the same time, research by executive search firm Korn Ferry reveals that leaders who have transitioned out but remain involved in the company appear to experience “interest spikes” in areas of the business which dissipate abruptly. In other words, a founder’s involvement may quickly become disruptive and interfere with the company’s broader agenda.

Implement decision-making processes

Prioritize culture