Founder-Led Businesses; Fighting Fit or Failing?

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29 days ago by Sophie Stones

Founder-Led Businesses; Fighting Fit or Failing?

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Founder-led businesses are often the source of news stories in the modern media. More willing to make risky business decisions and to invest in new technologies and ways of working, the world has a fascination with start-ups whose founders stick around.

A large difference between companies where the founder takes on a CEO role and those who don’t is that their personality often becomes intrinsically linked to the brand. This has been highly beneficial for those who have successfully promoted the ‘family feel’ personal brand that has become so popular with millennials. For some however it has also been their downfall.  

“Founders and Entrepreneurs are big characters, when you have big characters involved, of course anything can happen; it’s going to be a lot more volatile.” – Ben Little, Co-Founder of Innovation Consultancy, Fearlessly Frank

31st State Founder, Stephanie Capuano says that in order to be effective as a present Founder you need to carefully toe the line, writing, “it’s very important for the Founders persona to be part of the marketing for the company but I think it has to be done so delicately because people can become exhausted by it and it can become toxic.”

For some high-profile companies her predictions of toxicity have unfortunately come to fruition, with Papa Johns removing their Founder, John Schnatter’s, face from their marketing material, after stripping him of the CEO title, in an attempt to distance themselves after he was exposed as using racial slurs, earlier this year. He follows Travis Kalanick, Uber Founder, who resigned in June 2017 after gender discrimination and sexual harassment were found to be rife within the lift share company. In both of these cases the founder’s presence was seen as the root of a wider problem, with the hope that their removal would allow significant change.

For Tesla it wasn’t just their reputation that was put on the line when their Founder, Elon Musk, notorious for making ‘exaggerated claims about his business’, tweeted that he’d left a meeting with ‘no questions’ that he had the funding secured to take Tesla private. Sending stocks soaring and adding to the list of false claims regulators had to look into, so far, he’s racked up a £15m fine for his over exaggerations.

These high-profile cases may have put Founder-led businesses in a bad light, however, in general they are usually lucrative. 7% of globally listed companies with market capitalisations above $500 million are ran by their founders, whilst companies that maintain the founder’s mentality as they age are 4-5x more likely to be top quartile performers. In those that do well, there appears to be a common theme; collaboration. No person is an island and a company’s environment should be a testament to that.