When Twitter co-founder Jack Dorsey announced today his plans to step down as CEO, he didn’t go quietly.
“There’s a lot of talk about the importance of a company being ‘founder-led,’” he wrote. “Ultimately I believe that’s severely limiting and a single point of failure. I’ve worked hard to ensure this company can break away from its founding and founders.”
Dorsey added that he believes “it’s critical that a company can stand on its own, free of its founder’s influence or direction.”
We found this slightly rich, since Dorsey, who is also the CEO and co-founder of fintech giant Square, was Twitter’s first CEO before he stepped down and returned to the role after the five-year reign of Dick Costolo. That’s hardly a lack of founder control.
Still, his comments are pretty counternarrative.
In today’s founder-friendly environment, venture investors often bet on early teams based entirely on their to-date product progress, and founders are increasingly likely to stay at the helm even after their companies have gone public. “[T]here aren’t many founders that choose their company over their own ego,” Dorsey wrote.
After a fun chat about the Dorsey decision on Equity, we hashed out our views about the value of founders who remain in leadership roles long after their companies have reached maturity:
- Alex Wilhelm: A call to return to the old normal from the new normal
- Natasha Mascarenhas: A reset would rewrite how VCs and entrepreneurs do business
- Amanda Silberling: Founders aren’t rock stars
Alex Wilhelm: A call to return to the old normal from the new normal
What’s somewhat incredible about this Dorsey take is that it’s utterly uncontroversial — 15 years ago. Today, sure, but that’s just a mark of how much things have changed.
Recall that investors made the Google founders bring on a business person to be their company’s CEO. You’ve heard of Eric Schmidt. It was commonplace in prior venture eras for founders to step aside from the top job once their company hit scale, as the thinking went that there were folks better suited for the role of scaling a tech company than founders.
What happened to that perspective? Two things. First, major returns from select founder-led businesses. Facebook has done well in financial terms under a single leader. You can throw in a few other names to the mix as well; Coinbase and Airbnb come to mind.
But more important is that venture capitalists have lost much of their prior influence. Gone are the days when VCs could sit in their suburban office parks throne rooms and force founders to come to them. Even more, the explosion in capital available to founders has rendered the core venture conceit — having money to invest — to commodity status. This means that venture folks can’t boss founders around as much as they once could thanks to lower leverage.
So founders get to stay in charge of their companies for as long as they want, often ensconced in a warm blanket of super-voting shares, ensuring lifetime control. Not every VC likes this! Not every VC wants to anoint a king instead of a CEO! And yet, you will not be able to get a single VC to push back on the idea of founder-friendliness, as they all want allocation in the next hot deal. And telling founders that their walking, talking piggy banks might have an opinion, let alone a view that they should be replaced with someone with more operational experience, would not be the move.
But Dorsey is just saying that there are times when founders are not the best folks to lead companies. This is true. While there are great examples of capital creation thanks to long founder tenures, there are perhaps even better examples of the opposite.
In August 2011, when Tim Cook took over as the CEO of Apple, it was trading at around $13.50 per share. Today it’s worth $160.27. Or more simply, under a few runs of one of its founders leading the company, it managed to become worth $360 billion. Today, under its non-founder CEO, the company is worth $2.6 trillion.
You can come up with other examples. Google’s appreciation under Schmidt and then Pichai. Microsoft under Nadella. And those are just the superlative market leaders.
Sure, Dorsey is mostly aiming his comments at Mark Zuckerberg, but there’s a larger lesson here. Namely that today’s Founders As Messiah movement is simply a historical aberration. And one that will eventually scoot back closer to its former historical balance.
Natasha Mascarenhas: A reset would rewrite how VCs and entrepreneurs do business
A great litmus test, for any manager or founder, is to go on vacation for a week and see how your team or company works.
How many emergency calls do you get? Is your Slack full of questions? Do you know about every fire that got stoked within the past seven days? Do you have a say in solutions? It sounds counterintuitive, but ideally, vacation is far more boring than the aforementioned situations. Oftentimes, success as a founder can look like hiring smart enough people so that you are no longer relevant to making the company work day in, day out.
In this vein, Dorsey’s take makes a lot of sense — even though he’s leaving Twitter for far longer than a weeklong vacation in Miami. No one will disagree with the notion that a startup needs to be successful beyond its founder — it needs to be more intrinsic (and harder to recruit away). That said, when we broaden out the idea of no longer having founder-led startups, the opinion gets thornier. Decentralizing authority is easier said than done, and it will require a fundamental rewriting of how VCs and entrepreneurs do business at the earliest stages.
Take early-stage investing today. Pre-seed and seed investors are in the business of backing a person and an idea, which looks far more human- and founder-centric than the future Dorsey is painting. Investors will often tell me that, because early-stage startups don’t have the data or revenue to prove investment return, they’ll bet on the person behind the moonshot. For due diligence, investors spend time playing with potential investments on Fortnite or even on five-hour Zooms. The cycle makes it so that the startups that do get funding in the early days are naturally built around the allure of the founder witty enough to woo investors and users.
Changing that would require a different approach from investors and founders alike. When you’re betting on the earliest stages of a company, and it has nothing to do with a founder, what are you betting on? I don’t think pre-seed investors will start to look for the same metrics as late-stage investors, but I do think we could see a line of questioning beyond how a certain founder views the future. In due diligence, entrepreneurs could be pushed on their ability to hire, change their minds and understand when it is time to walk away.
For investors who believe in a future beyond founder-led startups, they will need to have a good gut on true decentralization and surface-level promises (the latter of which we know they’re familiar with considering how many people are partners these days). Does there need to be a succession policy? How do the stakes of hiring change if founders don’t have complete control? What does it mean to empower each person at a company to feel like a decision-maker?
I know I’m describing a lot of what web3 promises to offer: transparency and ownership. But, future aside, the present demands founders get more comfortable with how they’re preparing for their eventual succession.
I think we’re far from this mindset entirely taking seed, even if the litmus test encourages the belief for the health of the business. Today, having an idea and then getting credit for that idea is an entrepreneur’s most lucrative currency. Removing the idea from the identity of a founder so that the company doesn’t feel innately tied to a founder is healthy for the longevity of the company but will require some real conversations on attribution. In other words, unless you’re Jack (and maybe even him included), it is easy to declare but hard to execute the extraction of an individual from their startup.
Amanda Silberling: Founders aren’t rock stars
Founders aren’t rock stars. Well, maybe except for Patreon CEO Jack Conte, who was a musician before founding the creator subscription platform. But the startup world treats founders like celebrities — Elon Musk’s tweets might haunt my nightmares, but I can’t name any other C-level employee at Tesla or SpaceX. However, good leadership is important across all levels of a company not just the tippy top of the pyramid and having a trail of paparazzi follow you to brunch isn’t a prerequisite for leadership.
Even people who don’t work in tech can tell you who Elon Musk, Mark Zuckerberg and Jeff Bezos are. But when we talk about a mononymously named Jack in tech, we’re talking about Jack Dorsey, who — until this week — was founder and CEO of both Twitter and Square. Dorsey is always first to poke fun at Facebook, like when the company went offline for six hours last month or when it recently rebranded to Meta. Dorsey isn’t exactly innocent when it comes to his pride, but as he parted ways with Twitter, he wrote in an email to staff, “There aren’t many founders that choose their company over their own ego. I know we’ll prove this was the right move.”
Dorsey makes a good point, though. While he did send the first tweet, he probably doesn’t know any more about the inner workings of Twitter than Parag Agrawal, who joined as an engineer in 2011, climbed to CTO and now will take Dorsey’s position as CEO. Although Dorsey has a unique founder’s perspective, Agrawal’s POV as an engineer who rose to the top could be just as valuable. As he takes the helm and gets a bird’s eye view (pun intended) of Twitter, it’s important that he understands what it’s like to be employee number five-thousand-something and not just employee number one.
Sometimes, a founder is just someone who had a good idea, along with the diligence and talent to build it. So then we end up with young, green founders like Elizabeth Holmes, currently on trial for defrauding investors, or Mark Zuckerberg, who (along with Dorsey) was a key player in choosing to deplatform the previous president. It’s amazing that first-time entrepreneurs can have such influence, but CEOs don’t always need to be public personas daring enough to troll Congress while they’re under oath. They can just be people who are good at their job and good at managing people.
So yes, Parag’s beard is not as iconic as Jack’s. But that doesn’t mean he’s not fit to lead.
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