Startup CEO Succession
Why I wrote a founder's guide to leadership transition in venture-scale startups.
Last week, I sat down with, my editor, to hear her feedback on the book draft I sent her earlier.
“Look, it’s not bad”, said Adele, which I decided to take as a compliment, “but we need to work a bit on the core message. What do you want to say by writing it?”.
I realised that I had never spelt it out in the book. I wrote over 50,000 words without saying directly why I wrote it.
I wrote the book to tell every founder CEO who’s considering stepping down that it is ok to leave your startup and explain how to make it happen in the best possible way. This is the book I needed when I was considering leaving my role as a CEO of Makers years ago.
There are countless books on how to start a business and many books on how to sell a business, but there are hardly any books on what to do when you start thinking about stepping down as the CEO of your startup.
This topic is still taboo in the entrepreneurial community. Founders look up to CEOs like Jeff Bezos (Amazon) and Mark Zuckerberg (Meta / Facebook), who took the business from an idea to a global conglomerate, remaining a founder CEO for decades. Yet, their stories are an exception, not the norm.
What’s far more common is founders who built successful businesses but are nonetheless considering stepping down. Some realise that the business is growing beyond their skillset. Being a CEO of a 20-strong company is not the same as being a CEO of a 70-strong business. Leading a team of 200 is a wholly different game altogether.
Getting the business to a point where it makes sense to bring a leader with a different skill set to keep growing is a sign of success, not failure.
Others find themselves exhausted after years of running a business, often reassessing their priorities as they grow older and start families.
Yet other founders are asked to leave by their boards or choose to leave themselves, knowing that they’ll be pushed out otherwise.
How to leave the startup you founded
While every founder considering stepping down is different, there are lessons that can be drawn from the experience of those who walked this path before.
Understand deeply why you want to leave
First, you’ll need to understand why you feel like stepping down. It’s an irreversible step that shouldn’t be taken lightly. The more clarity you have on why you started the business, what you feel you’re meant to be doing and what you might be looking to avoid, the easier it will be to make the right decision.
Work through your fears around the succession
You will also need to understand and work through all your fears. We all have different ones, but a few are common among founders considering leaving their roles. What will I do after I step down? Will my successor do a good job? What if I won’t be able to get a job or raise money again?
Exploring each fear will help us realise that none is as scary as it seems, and some are completely unfounded. For example, while entrepreneurs often worry about being unable to raise again, the investors I interviewed for the book have no issue investing in founders who stepped down as CEOs previously. What matters is how it was done.
Don’t sit on the fence
Then, you’ll need to consider your options and your specific situation to make a confident decision. Stepping down isn’t as binary as it seems. For example, we can step down as a CEO and remain in an executive role or as a NED. In some situations, it may make sense to return money to investors and shut down the business. Maybe there’s a better way forward than stepping down, e.g. revising your job specification.
However, what’s important is making a decision. Looking at the door for years without leaving doesn’t serve anyone either. As I say in the book, if you’re in, you’re in. If you’re not, you don’t have to be. But don’t sit on the fence.
Decide who to trust the business to
If you do decide to step down, the biggest decision you’ll have to make (or influence) is who will be your successor. The chances are that much or most of your wealth is locked into the business. Plus, you’ll likely be working with this person in your capacity as a board director or even just a shareholder. Even if you don’t have any ties to the business, their actions will reflect on you as many people will continue to associate the business with you, the founder, for years.
It’s particularly important to align all stakeholders (investors, co-founders, etc) and agree on a process that works for everyone. If the new CEO's expectations are unclear, they’ll be set up to fail.
Prepare for a smooth transition
Once you have a great candidate, working with them is important to ensure a smooth transition. The biggest thing you can do as the outgoing CEO is to get out of the way. Staying in the business as a founder and an ex-CEO with an unclear role will confuse the team and likely undermine the new CEO.
You’ll need to navigate several practical challenges as part of the transition. One of them is whether the outgoing CEO should take some money from the business as they leave.
In the book, I argue that it’s pragmatic for the boards to offer the outgoing founder financial stability so that they can focus on running the business until the last day instead of raising money for a different venture or interviewing for a job. Additionally, it allows the business to time the transition in a way that suits the business rather than the outgoing CEO.
Reflect slowly on what’s next for you
Finally, the founder will need to decide what’s next for them. Every founder I interviewed for the book stressed the importance of not rushing through this process. If you can at all afford to take time off to slow down and reflect, take it. It can be tempting to start another business or accept a job offer immediately, but it’s important to reflect on the direction you want to take your career in.
Leaving the business you founded is a rare moment. You have the skills, the network, and the experience to do a range of things: starting another business, joining someone else’s startup or getting a corporate job, building a freelance career, staying in your business as a chairperson or an executive, or becoming an investor.
When can I buy the book?
Within the next few months. If you’re impatient, drop me a line, and I’ll give you access to the draft as I work on it.
The big task for next week is rewriting and updating the draft before I show it toagain.