Founder or Co-Founder. These are coveted titles, ones that call to mind famous names like Gates and Allen, or Jobs and Wozniak. I’ve seen many an entrepreneur obsess over this designation, whether on a website, business card or closing document. It’s a sought-after badge of honor, one that connotes success and executive position.
But does it? Really? Consider the following observations the next time you receive a card from a Founder or a Co-Founder:
Late to the Founding
A summary definition of a founder is: “The person who creates an organization or a company.” Seems quite straightforward. One must be an initial company hire, someone there at (or near) the start. Interestingly, I have seen startups operate for years, close on a fundraising round, hire a new CEO, then designate him/her as a Co-Founder. Why? The new CEO made it a condition of employment. The title is that alluring . . . and meaningless.
On its own, the title, Founder, conveys very little information. Often, it is used in a compound fashion: Founder and CEO; or, Founder and CTO. Absent such clarifications, a Founder might occupy a corner office, a company laboratory. . . or a couch at home.
Founders, They Founder
Founder is also a verb, meaning to fail miserably. Statistically speaking, that’s what Founders do. According to the Census Bureau, over 50% of all new businesses fail within three years. Founders, typically independent individuals who develop a new product or service, are not accomplished businessmen or businesswomen. On-the-job business training, especially with investor funding, is a very hard way to learn. Failure is the not infrequent outcome.
Founders in Spirit
Investors are usually reluctant to fire an employee who was responsible for developing critical IP, especially when he/she is a company Founder. Demotions or job restructurings are the preferred alternatives. Startups can be haunted by the continued presence of such demoted individuals on their small teams.
Title for Life
Founders, like old soldiers, never die; even when fired they retain their titles.
It is the rare founder who can be as effective a CEO in a 5 person company as he/she can be in one with 2,000 employees. Consider this statement the next time you receive a card from a Founder. Elon Musk and Jeff Bezos are the exceptions to the rule.
Peter has spent the past twenty-plus years as an acting/consulting CFO for a number of small businesses in a wide range of industries. Peter’s prior experience is that of a serial entrepreneur, managing various start-up and turnaround projects. He is a co-founder of Keurig.