Founders And CEOs Exits – The New Cool Or The New Chaos?
Sometime around mid-October this year, most startup and entrepreneurship-focused media platforms in Nigeria and beyond just had to have a reporting slice of the Flutterwave spectacle. The name Iyinoluwa Aboyeji hit several headlines, and his strides in the fintech space, alongside his contributions to the modern payment tech and infrastructure solution platform comprised the tunes of the praises sung to honor the Founder.
Aboyeji was reported to have vacated the CEO spot in order to spend more time with his family, get some rest, and advice startups in his community. His exit from the company came at a rather interesting time, as Flutterwave had just concluded its Series A extension round of financing at the time, bringing the total amount of investment raised to USD 20 Mn.
Iyinoluwa did comment that he has a lifelong commitment to building the African future but needed to take some time off to reminisce the remarkable experiences he had had. While a carbon-copy development could be cited in his prior exit from Andela some two years back, he expressed his stir and dither about African opportunities, as well as his undying dedication to act as a stanchion to next-generation entrepreneurs that will pick up from where he left off not just in Flutterwave, but also Andela. So, Olugbenga Agboola assumed a new position as CEO and bade Iyinoluwa official farewell, taking over one of Africa’s top funded companies.
As I surfed through the internet during the wee hours last month, I came across a publication about Kenya’s Telkom appointing a new CEO Mugo Kibati. According to the piece which was published on November 12, the former CEO, Mareuse Aldo, exited Telkom after two years; having expanded the company’s network by up to 50 percent.
This Kenyan company tendered their gratitude to the outgoing CEO ‘for his three-year leadership with regards to the notable milestones in rebranding the company to Telkom and rolling out a 4G network – making the company the market’s choicest data operator’. Well, for knowledge sake, Kibati is a former Director General of Kenya Vision’s 2030 Delivery Board and the founder of Miliki Ventures, as well as the former CEO of East African Cables. According to him, he called time on his first job on the grounds of being unable to land a deserved promotion.
On November 26, the same saga wind blew in the Italian fashion industry as men’s brand Corneliani was storied to have welcomed Luigi Ferrando as the successor of Paolo Roviera who had just exited the company. Well, Roviera arrived at this company in September 2016 with a global expansion task for Corneliani, having previously served as CEO of Pal Zileri; a Qatar-based men’s designer company under the auspices of Mayhoola.
These unfolding developments have all the makings of a thought-provoking trend, and being that questions can’t help but arise, one has to dispel the myth and unearth the reasons why Founders and CEOs are taking bow-outs and even junketing between companies. Also, having seen the similar Nigerian, Kenyan and Italian developments, is exiting now the norm?
Founding a company is a process believed to be extremely personal, demanding loads of passion, commitment, and energy. In fact, many entrepreneurs will gladly tell you that starting a business isn’t just a full-time job – during the initial stages, it can take over your life completely. You will skip meals, have shorter bath times if at all, lack sleep, and perhaps always be in the lobbies of potential investors. Strewed condos, scruffy looks, and grungy gestures will be the least of your worries. That is precisely why is it woebegone, melancholic, and even tear-jerking to see a Founder/CEO maroon his or her title and take a permanent vacation from the company he or she started.
It is a core belief that there is a tricky reality attached to the skills required to start a company and its misalignment with the ones required to effectively manage its growth. This is often one of the reasons CEOs take the bow – they have enough knowledge and experience to scale through the getting-off-the-ground stage, but need to make room for another tiger to come to hold down the fort and even take it higher up.
This situation was pretty obvious in the Zynga case where the Founder and CEO Mark Pincus, by himself, relinquished the title and became an ordinary active member on the social gaming company. Deciding to yet remain in the office, he transferred the reins of leadership to Don Mattick, a former president of interactive entertainment at Microsoft and longtime gaming industry executive.
The 2007-founded company made meteoric strides previously and even recorded big-time hits such as FarmVille. But as social games began to go mobile, the company experienced several hiccups trying to adapt. Zynga’s stocks plummeted, and hundreds of staff were given the boot. Pincus thinks highly of himself as an entrepreneur, but “learned a lot of hard lessons on the CEO front,” and doesn’t give himself “very high marks as a CEO of a large-scale company.” Pincus, despite being a brilliant leader at Zynga, acknowledged that he was neither a passionate nor an effective manager, as managing more than 200 people “isn’t fun” and part of his skillset.
On the harsh side of this topic, boards are acting quicker than ever in ousting and replacing executives on many grounds – one of them being misconduct. Company boards may not report it to the media, but they are actually putting tighter boundaries around what’s acceptable and acting on it. Companies are getting bolder with making the “our-CEO-is-leaving statement.” Of the executives who have stepped down from top positions at Russell-3000-Companies this year, eight have been tied to particular references to misconduct. You must know that this issue is getting quite alarming in some circles.
Michael Adams, an Indiana University professor who delivers lectures on Language Management, said that the increased clarity with which today organizations are publicizing their executives’ departure is a ‘tectonic shift in corporate culture.’ Companies being honest about it is somewhat unexpected in the business world. Daniel Schauber, an editor at German finance newspaper Borsen-Zeitung, became frustrated with corporate-speak when it has to do with reporting CEOs stepping down.
He went on to develop a system that scores executive departures on a scale of zero to ten; with zero being the score for instances where they obviously left out of their own volition, and ten for where they were given the heave-ho. The average score on his scale has been greater than a five for eight months in a row, according to him – a snowball effect by his reckoning.
When this topic was posted for addressing on Quora, a comment from Ravdeep Chawla pointed out that sometimes company CEOs exit their companies to simply cash out. Being that it is quite a task these days to run a startup, it is almost certain that the day will come when the founder would think it’s time to pack and leave – it is all business. Most founders take their companies as children and leave them in a better place where they can be sustained, just as Pincus did. The ideal time to make these exits, as reported, is during the closure of funding rounds wherein they simply cash out and leave on the best terms possible.
Also, being that the best rule of hiring is hiring someone better than you, it would be a great feat already achieved if the people in a Founder’s team are doing quite well. At such a point, CEOs feel the need to cash out and move on. But, the exact legal process of a Founder leaving a startup can be challenging as it not exactly a cake walk. If not done properly, it could yield negative repercussions, and that’s the reason most CEOs hire an expert attorney to legally and safely facilitate the severing process. Considerations such as formation, governing documents, interest and contracts need to be attended to before a Founder exit can be seamless and successful.
Leaving a company you devoted your strength, money, time, and life to is a truly bittersweet ordeal. The very best part of building a company is getting the right people to build it with – hiring talent and growing with them. CEOs are better off surrounding themselves with great people, and because they reserve the power to knead the team, they really should love the people they work with. Having shared experiences while doing business defines the whole team, especially when you beat odds and overcome adversities.
When Founders exit having tasted success, they sometimes dare not push it by trying again – but some actually do. Because some of them know how intense the struggle can be – to create a collection of people and become a great company – they may never try again. Iyinoluwa, though, did exit Andela and founded Flutterwave, with which he also severed ties recently. From his narrative, we learn that most of these businesspeople want to do it again. They want to start another company, get it off the ground, fund it internally and externally, hire talented staff, build it, and then exit again – building profiles upon profiles in different regards.
Due to this same reason, many of the greatest Founders never think of leaving until forever, because they can’t imagine themselves doing anything else; because they love the kind of people that surround them. Do you think that three decades from now Larry Page and Mark Zuckerberg will still have their jobs? Well, I bet they would, and I have my reasons. For one, they both have the very best jobs in the world, and there may not be a better alternative to such companies they have nurtured.
Founders are more or less a unique people-set, infinitely capable and unrelenting demonstrators of critical thinking, healthy paranoia, unheeding optimism, and heroic work ethic. They have what it takes to hit the books of a market and bond together a great team. They can sell dreams and acknowledged risks. They are matchless because they can do most of it, if not all of it. But sometimes, they don’t want to do these things.
The technical founder has his mind set on building products, not to fuss over performance reviews. The sales founder has his eyes set on engaging customers, not devoting time to learning the ropes of metrics. To sustain their leadership roles, they need to love it, be good at it and the business needs to value it. Founders who have lifted their seedling businesses onto their own shoulders often find it burdensome to fit in as the business matures. The feeling will likely aggrandize if the business welcomes a new stakeholder. What usually happens next is: they leave (or more dismally), are asked to do so.
Again, many founders love ‘startups,’ and if they succeed as a ‘company,’ it may no longer feel to them as a startup. This is one reason they remain in the pursuit of more exciting ventures. But a Founder leaving his/her brainchild is not all that wistful. In many ways, the departure is often a sign of success, implying that the once-nascent company is now champing at the bit for its next growth phase.