Startup founders face an existential paradox. They are encouraged to ignore the experts, abandon best practices and disrupt the status quo. At the same time, they're told to inherit the rigid leadership structures of the boring and staid corporations they purport to disrupt.
This includes an implicit assumption that there is or will be a CEO. Usually, that is one of the founders, but not necessarily so.
It is easy to find opinions on whether or not a founder needs to be the CEO, when a founder should stop being a CEO, and how to navigate life as a founder CEO. Detailed guidance exists for what a founder CEO needs to focus on.
But if the founders’ goal should be to challenge the enemy of innovation — conventional wisdom — why is no one asking, “Should startups even have a CEO in the first place?”
Spoiler: we decided to do away with having a CEO.
Why startups feel like they need a CEO
There are a lot of reasons why startups feel they need a CEO. There’s a sense that the buck must stop with someone for both internal and external reasons. One founder might have pulled more of the startup together and wants to be recognised. Individual founders with career aspirations may want to have the title on their resumé as a sign that yes, they ran a business. A founding member who has previously had that title might feel entitled to those shiny three letters.
But the most simple reason that startups have a CEO? They think investors expect it.
As cofounders, we spent a lot of time reflecting on whether we want to go down this path. However, we all believe that when it comes to the founding team, the whole is greater than the sum of its parts. While we each have our own perspectives and areas of specialisation, we fundamentally reject codifying one view as preeminent — something that having a CEO does inherently. Success will only come from the diversity of focuses — sales, product, investment, talent, operations, etc — that the cofounders bring together.
Appointing a CEO can create interpersonal tension among cofounders and lead to the creation of alternative C-suite titles wholly inappropriate for the business. Will the non-CEO cofounders really find fulfilment in the role of CFO of an early-stage business where the financial model is simply to raise money and spend it? Does a company of 20 people really need a chief strategy officer, when the startup journey is all about iteration?
But the most simple reason that startups have a CEO? They think investors expect it
Few seem to consider the costs of appointing a CEO too early. No technology startup will be successful if it can’t secure financing to build and ship products that are then successfully marketed to customers. Unlike large corporations, where a CEO often has experience in all parts of the business, most startup teams feature individual founders who specialise in specific parts of that journey. The act of elevating the technical cofounder over the cofounder with a commercial background, for instance, will have a dramatic shift in the direction of an early business.
A Harvard Business Review study of 95 Dutch startups revealed that 60% of startups fail due to team dynamics, noting that “shared entrepreneurial passion and shared strategic vision” were even more important than previous experience at ensuring success.
There are certainly startups that can rally around the strategic vision and passion of a single leader. But we find it remarkable that so few have chosen to fully distribute responsibilities, get the best of all skillsets and exploit the full extent of cofounders motivating each other.
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How we lead without a CEO
Cofounder is more than enough of a title for us. It demonstrates that we created our company's concept and brought it into being. It points to our responsibility to our employees, our customers and our investors. It makes clear that no matter what transpires over the course of the business, each of us was present at creation and has a critical role in driving success.
We don’t manage by consensus or committee. We respect the specialities that each of us brings to the table, make sure to identify responsible persons for the important problems we need to solve and defer decision-making to the others in their core areas of responsibility.
Not having a CEO also helps us reject the cults of personality that plague tech startups
On decisions that truly affect the whole business — like which investors to take money from — we force ourselves to get to a position we can all back. This makes us more resilient. If we didn’t do that, we’d risk feeling increasingly alienated from the direction of the business, as it drifted in the preferred direction of one of us over the other. It is our strong conviction that collaborative leadership has been the key to our success to date, and will be a critical factor for the future.
Not having a CEO also helps us reject the cults of personality that plague tech startups. Myopically focusing on a single person’s vision holds companies back from bringing in diverse perspectives from employees, clients and investors.
Investors may prefer other companies to ours because they want a single throat to strangle. But we’re proud to offer them three
We don’t just hold these principles at the founder level. We expect that everyone on the team has clear areas they are responsible for owning. This gives our team a stronger sense of ownership while allowing us to benefit from the unique strengths that each of the team brings.
Investors may prefer other companies to ours because they want a single throat to strangle. But we’re proud to offer them three. As we grow into new phases we may bring in an external CEO if it is the right thing for the business. But Hence won’t have a CEO just because we need to conform to the status quo.