How to Fire Yourself as CEO and Hand Over the Reins
Entrepreneurs start companies to solve problems. A founder identifies a pain point, develops an innovative solution, raises money, hires an engineering team, and pushes the product to market. Yet the drive and skills that can propel a founder to early success aren’t necessarily the same ones required to scale a business or run a large public company as CEO. Sometimes, the founder has to step aside to make way for another leader with a skill set better suited to continue to grow a company.
The shift requires a CEO to be self-aware and for both parties to take steps to make the transition seamless. But making the hard choice to move on can be key to keeping the company on the right path and maximizing value for everyone involved. How does the new chief executive maintain momentum while asserting leadership and building the necessary rapport with existing executives and employees alike?
Successful startups are on a journey, and each stage requires somewhat different skills. I spoke with several tech CEOs about the competencies leaders need in each lifecycle, and how they led to change that made their companies stronger.
1. Ensure everyone is on the same page.
Sometimes, a leadership transition in the early days of a company may be the best thing for the business.
In 2013, Nick Mehta became CEO of Gainsight, a customer success platform. At that point, the company, then known as JBara, was less than two years old. It had a handful of “beta” customers and very little revenue. Mehta says that aligning around a shared vision and values was key to an effective transition. That included a long sit-down with the founders, Jim Eberlin and Sreedhar Peddineni. It also involved an all-hands meeting to connect with the team, and a process of goal-setting and formalizing corporate values.
“I believe that was important to build the type of values-driven culture we have today,” Mehta says.
2. Respect and celebrate the work that has already been accomplished.
Evan Kaplan took over as CEO of InfluxData, creator of time-series database InfluxDB, when the company was only three years old. It had two dozen employees and less than $70,000 in annual recurring revenue, but a large following in the open-source community. Kaplan emphasizes that a CEO taking the helm at this stage should display empathy, humility and a willingness to collaborate with the founder.
"I think the onus is on the incoming CEO to come to the opportunity with a deep appreciation of the road traveled already, a humble awareness of what they bring to the table, and most importantly, a deep commitment to a long-term partnership,” he says.
Related: What Are the Duties of a CEO?
3. Respectfully assert control.
While collaboration with the founder is key, a leader taking over during the growth phase needs to make a mark, says Linda Crawford, CEO of Helpshift. “When joining as a new CEO, it’s critical to establish yourself as such right away. There can’t be any confusion,” she says.
Crawford joined Helpshift as CEO when the customer-service platform startup was five years old. She believes a transition at this stage can be successful in one of two situations: either the founder steps away entirely, or he is completely on board with the change and remains in a full-time role he’s passionate about.
“Any executive joining a company needs to listen and observe, but as CEO it is expected that you make some big decisions quickly,” she says. “Your employees will be judging you from the moment you arrive.”
In Crawford’s case, Helpshift’s founder Abinash Tripathy supported bringing her in to scale the business and stayed on as a board member and Chief Strategy Officer. In the year and a half since she joined, the company has more than doubled its revenues.
4. Know your strengths, and when it’s time to hand over the reins.
When companies reach $50-$100 million in revenue, they start laying the groundwork for a potential public offering. This stage requires an executive with an even higher level of management ability, as well as an understanding of the financial metrics required to be a healthy public company.
Tom Gonser, the founder of DocuSign, recruited Matt Schiltz to replace him as CEO in 2007. Three years after founding the company, Gonser wanted to focus on product vision while partnering with someone who could grow the company. Schiltz, who had worked with three previous founders to scale software companies, built out a senior management team, achieved a compounded annualized growth rate of more than 150 percent and closed three rounds of funding.
Despite his success, by 2011 Schiltz knew it was time to leave. One of the reasons was to make room for a CEO with experience taking companies public, which was the next step on the organization’s journey. DocuSign went on to go public in 2018 and now has a market capitalization of nearly $9 billion.
“[DocuSign] took over 15 years from startup to IPO… Along that path, very different skill sets are required, and to the company’s credit, they did a good job of getting the right CEO at the right time, based on my experience at the time, to keep the momentum going,” says Schiltz, who is now CEO of Conga.
Related: How Chess Prepared Me to Be a CEO
Time to move on?
Boards are often the ones who convince the founding CEO that it’s time for a leadership change. As Kaplan put it, “It’s important that they [the board] create the space for the entrepreneur to run the process and make the decision, and sell the opportunity to the CEO themselves. This way it becomes just another chapter in building the company. This requires emotional maturity and discernment by the VC, too, and in our case, we were fortunate to have that.”
Every great leader has skills that led to success. For some, it’s the entrepreneurial spirit required to kickstart a new business. For others, it’s the vision to manage growth and scale the company. The best leaders are self-aware enough to recognize those skills and whether they’re the right fit for a given company at a given time. Sometimes that means walking into a new company. And sometimes, that means walking away.