6 Signs it’s Time to Step Down as Startup CEO

There are many benefits and arguments in favor of being the startup founder and CEO. On the other hand, as the startup grows and scales through the early stages and beyond, it can be challenging for a founder CEO to keep up with the fast-changing startup environment.


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Why Step Down as CEO from Your Startup Voluntarily?

As a startup grows, a founder’s leadership skill set may no longer meet the business’ full range of growing needs. Even if the founder CEO meets the new demands of their startup success with skill acquisition to lead and grow the company, a lack of skills or qualities can become a crucial deficit.

When this point is reached, stepping aside for a more qualified CEO to take over is the smartest business decision the founder CEO could make. In many cases, the window of opportunity for a smooth transition in and out of the role of startup CEO is small – waiting too long can mean stifling growth, making wrong hiring or leadership decisions.

New stage attributes, internal startup factors and global impacts can present challenges too great to face alone, or at all. Lack of experience and skill across the many areas of leading a fast-growth company require an honest look at whether the founder CEO still benefits the company as they did in the beginning, while also allowing the startup to continue growing at full speed.
Another scenario is the perfectly-timed and -planned transition from founder CEOs to an appointed successor or the recruitment of an external CEO who brings the experience and skill set needed to take an already successful company to the next level.

When Should the Startup Founder CEO Step Down?

Ideas are a commodity. Execution of them is not.

Michael Dell

From idea to startup stage, the founder’s knowledge, personality and charisma is important as they attract their first employees, pitch the idea to receive funding, and reach out to a network of like-minded entrepreneurs.

As the startup grows, more formal processes and structures across the entire company are needed. Driving collaboration between teams, hiring a leadership team and embedding a strong company culture are aspects an early-stage founder CEO did not need the skills for. Now, this lack of skills is hindering the startup to grow at its potential.

Analyzing your startup for warning signs and red flags may help to determine that it’s time to bring in a new CEO.

Signs and red flags: it's time for a new CEO

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There are not many companies that get to this level.
And there are not many founders that choose their company
over their own ego.
I know we will prove this was the right move.

Twitter co-founder Jack Dorsey announcing his resignation as CEO to the company

1. Your startup's growth has become is stagnant

“If a growing company suddenly plateaus, it may be the result of a CEO who is more interested in building a great product for existing customers than in scaling the brand and acquiring new customers.”

If “the strategic stuff” isn’t for you, it can be the right time to bring a CEO in who is able to create and implement a business strategy for your startup.

2. Building a leadership team

“Possibly the most important task for a CEO is building the right team to grow with the business. That’s fun when you’re a small group and you’re hiring techies who can help you hone your own ideas.”

As the startup grows, a full range of leaders and managers are needed. Having an executive recruitment firm find the perfect candidate can save time to focus on other areas of the business.

It’s vital that the CEO is still part of the hiring process. If interviewing and building the teams your startup needs is not for you, it might be time to bring in a new CEO and focus on the parts of the business you love.

3. Meeting with employees, investors, or customers

A day full of meetings is not unusual for a founder CEO. From employees to the leadership team, to meeting with investors or potential clients, it’s a big part of the day.

If that’s not what brings you satisfaction and results in positive outcomes for the startup,  it’s a sign you’re ready to find a CEO for your company.

4. Missing the early startup days

“An entrepreneur is someone who has a vision for something and a want to create.”
David Karp, Founder of Tumblr

As the leader of a rapid-growth startup, stating that the CEO has a full time job is an understatement. Their involvement in every aspect of the business from vision to strategy, hiring and shaping more efficient processes, the entrepreneur of the early startup days has to allocate time differently now, acquiring new skills as the company scales. 

Some entrepreneurs enjoy this part of being the founder CEO. However, some enjoy what the startup was all about at the beginning – the bright idea, building the prototype, working on it with a small team.  

5. Your Company is Going in a Different Direction from Your Vision

“When you think about where a company is heading, having the right leader to take it there is really critical.”

Jane Stevenson, Vice Chair at Korn Ferry

A fast-growth startup changes more frequently than an established company. Therefore, a frequent challenge for the founder CEO of a startup  is to meet those needs.

Scaling, strategizing and transforming the business means keeping up with changing demands, challenges, trends, and global impacts. If this is stressful, exhausting or frequently requires skills that are not a strong point, it might be time to step down as CEO.

6. It's time to Re-Focus

“People are more mindful of the things they want to do, and if it’s a successful founder, there may be other priorities that they want to address sooner than later. I’ve seen CEOs and board members who have said, ‘You know what, life is really short, and this is too much. I’m out.‘ ”

 Jane Stevenson, Vice Chair at Korn Ferry

This holds true for many leaders. From founders and CEOs to senior managers and board members, shifting the focus to a new priority. Especially since the pandemic, shifting the focus to what you truly want has become a more frequent reason to hand over the reins.

Want to know more?

Read more on choosing the right Startup CEO on the Blog

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