3 Reasons Co-founders Have Been Calling It Quits These exits are often driven by a confluence of personal, professional, and strategic factors, say experts
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This year, we have been seeing many CEOs and cofounders quitting their companies. For instance, Upgrad's CEO Arjun Mohan joined Byju's recently. Last week, Jaynti Kanani, co-founder of Polygon quit to focus on the two new ventures that he founded in 2023. Freshworks cofounder and CTO Shanmugam Krishnasamy resigned in March. Dunzo's cofounders Dalvir Suri and Mukund Jha exited the company recently. And, Zomato's Gunjan Patidar and Anshuman Kumar left the company early this year. Before this year too, we have seen many founders, both from India and internationally, quitting, including OnePlus co-founder Carl Pei, Ola Electric's co-founder Ankit Jain, Housing's three cofounders and many others.
Co-founders or CEOs quitting can come as a major blow to the growth of the company. And, that is the reason, investors often look into co-founder relationships before infusing capital into the startup.
"Co-founder chemistry is crucial. It is important that the founders have known each other for a number of years and have worked or studied with each other. This whole fad of finding a co-founder that we have seen in the last six months or a year and then raising capital is a disaster. I know some cases where it has worked. But nine times out of 10 it's heading straightforward disaster," said Anupam Mittal, founder and CEO of People Group, during Entrepreneur India's annual event, Entrepreneur 2023.
It almost always comes as a shock and makes headlines when a co-founder of a growth or late-stage startup leaves the company. But, why do they leave? What are the common reasons behind the departures of founders?
We asked some experts.
"The departure of CEOs and cofounders from prominent companies in the current business landscape reflects a dynamic and evolving industry. The reasons behind these exits are diverse, often driven by a confluence of personal, professional, and strategic factors. In an era of rapid technological advancements and market disruptions, founders may choose to step down to explore new opportunities, contribute to different sectors, or seek fresh challenges. The increased mobility of top executives is a testament to the fluid nature of leadership roles, where individuals continually reassess their career trajectories," said Vikram Ramasubramanian, partner, Inflection Point Ventures.
Furthermore, the maturation of startups into established enterprises can also prompt founders to reassess their roles. "As companies grow, operational demands change, and the skill sets required for effective leadership may evolve beyond the entrepreneurial expertise that characterized the startup phase. Founders might opt to hand over the reins to leaders with proven experience in scaling operations or navigating complexities associated with larger organizations," he added.
Globally too, this year, we saw many top CEOs and co-founders exiting the company making headlines. For instance, in January this year, Netflix co-founder Reed Hastings stepped down from his role as the CEO. "Starting today, Greg Peters will step up from COO to become Ted's co-CEO. Going forward, I'll be serving as Executive Chairman, a role that founders often take (Jeff Bezos, Bill Gates, etc.) after they pass the CEO baton to others. Ted, Greg and I have been working closely together in different capacities for 15 years. As is common in long, effective relationships, we've all learned how to bring out the best in each other. I look forward to working with them in this role for many years to come," Hastings said in the blog post.
Founders come together with a common vision to start an entrepreneurial journey. The vision at the start of the journey and what actually transpires during the course of the journey is totally different, say experts.
"This causes friction, heartburn, and change in aspirations of founding members," said Ashwani Singh, Managing Partner, 35North Ventures, while listing out the three key reasons.
- Founders find that the size of the opportunity as per their vision is much smaller than what they thought or envisaged, and hence, it can not accommodate or feed all the initial founders. Some of the founders, hence, step out to different firms as their learning is still valuable to others.
- Difference in vision of founding team on course correction or scaling up or scaling down – this difference leads to some of the founders who have lost out internally leaving amicably or on a bitter note to start something new or to join someone else.
- Lack of interest in the next stages of the company journey – As the company matures along its journey, the skills required in the founding team or leadership team are different. New leaders emerge or are brought in, and some of the initial or later stage founders / leadership teams then move on.
Sometimes many in leadership positions quit, despite having it all, to pursue their passion for entrepreneurship. A case in point is Falguni Nayar, CEO of Nykaa. At the age of 50, Nayar decided to leave her corporate job to start her beauty and lifestyle retail company Nykaa. Ambareesh Murty, the co-founder and CEO of Pepperfry, who died in Leh after a sudden cardiac arrest in August 2023 was also someone who quit as the Country Head of the global e-commerce portal, eBay, in India, to start his own venture.
"In essence, these departures signify a natural progression in the professional journeys of these individuals, showcasing the adaptability and resilience required in today's fast-paced business environment," summed up Ramasubramanian.