When should founders step down as CEOs of their startups?

October 24, 2019
3 min read

Starting a business to solve local and global problems is an underrated skill.

Once a business takes off and begins to grow, the entrepreneur becomes a manager who handles accounting, hiring, fundraising, etc. These activities are necessary and need to be done consistently for the company to survive its first few years.

However, there is a narrative in the ecosystem that glorifies someone who creates something out of nothing, runs it as chief executive officer (CEO), and goes on to build a business empire.

The reality though is that as a company grows, the founding CEO’s skill set might not suffice to meet the evolving needs of the company.

Little or no managerial experience

As an example, Google Inc. -- one of the most powerful Internet companies in the world -- was founded by Larry Page and Sergey Brin in 1998, with Page remaining chief executive officer until 2001. As Google looked to raise $50 million and transition from a startup to a company, Page was pressured by his investors into stepping down as CEO for Eric Schmidt, who had more managerial experience.

For a decade Page was president of products, while Eric was Google's CEO. During this time, Google went public and had a market capitalisation of over $150 billion.

Page, after becoming CEO-ready, resumed the role in 2011.

UPDATE [December 3, 2019]: Larry Page and Sergey Brin have completely stepped down from day-to-day operations of Google and parent company, Alphabet. 

Driving home this point, here's a tweet from Mark Essien, CEO of Hotels.ng, encouraging founders to let a more experienced person take control of a part of their cherished companies.

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"When it is glaring that he or she does not possess the ideas, skills and competences required to help the business innovate beyond a certain threshold, I think a founding CEO should step down." Tobi Eyinade, co-founder of RovingHeights explains.

In the same vein, Adewale Yusuf, founder and CEO of Techpoint.africa, believes it is not necessary for founders to run startups but if it happens, they should not call it quits too early.

"Even though I don't think founders should leave before series A because their passion drives the startup, at some point, they might have to because the company cannot rely on passion alone. It will also need structure.”

Moving to the board as part of a long-term plan

There are instances when a CEO steps down to become chairman or board member, concentrating on long-term strategies for the coming years.

A typical example is Sim Shagaya, founder of eCommerce giant, Konga, who resigned as CEO of the company and was appointed chairman of the board.

Sim moved from performing day-to-day activities to focusing on the company’s long-term goals; he explained in a post that stepping down and becoming chairman would allow him to identify new opportunities and prepare Konga for the future.

Likewise, founder of Ventures Platform Hub, Kola Aina, recently stepped down from his executive roles in the company and its entities (Ventures Platform Foundation and co-working space, Ventures Park) and moved to the board. According to Kola, succession planning is an important part of long-term sustainability for firms.

“In our case, as our subsidiary spin-offs grew, they required more dedicated and experienced leadership. It was also an opportunity to allow other leaders emerge from within the organisation," Kola told Techpoint in a recent interview.

Shifting focus and fallouts

There are cases where some founders have the skills to run the company properly as CEO, but choose to focus on something else within or outside the company. We remember the words of the former CEO of Flutterwave, Iyinoluwa Aboyeji, following his departure from the 3-year-old startup.

"Today will be my last day at Flutterwave. After much thought and prayer, I decided to step down from my role as CEO and focus on giving back to the startup community I owe so much of my success to."

Iyin, who left Flutterwave, citing family and community service reasons, has gone on to start future.africa, a community where people engage in deep conversations on Africa's future.

While Iyin's departure appeared smooth, a prominent exit made headlines earlier this year.

Deji Oduntan, co-founder of Lagos-based on-demand motorcycle startup, Gokada, stepped down as CEO. A rumour, which Gokada refuted, had it that there was a fallout between Deji and the management.

Stepping down is a tough decision but at some point, founders will need to let go of their responsibilities and name a new CEO.

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Endlessly amused by technology. @ulonnaya
Endlessly amused by technology. @ulonnaya
Endlessly amused by technology. @ulonnaya

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