Founder Transitions. Don’t be a Larry!

One of the biggest problems facing a founder is the decision to step away from the company’s day-to-day operations. In our experience, many founders manage this quite well; but others can find it to be a real challenge. Larry Ellison recently announced that he was stepping down as the CEO of Oracle. He plans to turn over the CEO role to Safra Catz and Mark Hurd and will stay on with Oracle as the CTO. Ellison is a polarizing figure in the tech world. Love him or hate him, you can’t argue that he has been successful. However, from a succession-planning standpoint, this is a failure — especially from a middle market perspective.

My partner, Jim, competed against Larry Ellison in the 1980s as a Sales Engineer at Ingres. (He won a few battles, but lost the war.) Then, in the mid 1990’s, he worked for him as a Director of Competitive Intelligence at Oracle. He can attest to the truth behind his larger-than-life persona. Ellison has always loomed large at Oracle and he’s even bigger in person. Despite his public forays into yachting and flying his jet, his opinion has always ruled at Oracle. If Larry doesn’t like it, Oracle isn’t doing it. Period.

It’s a big problem for Oracle, but it can be a bigger problem for a smaller tech company with a similarly charismatic and knowledgeable founder. As a founder, you had the idea, you started the company, and you served as the product manager, chief sales rep, marketing wizard, and part-time CFO through the early years of the company. The only employee that was likely to push back on you at all was your CTO co-founder. (This might be why Bruce Scott left Oracle all those years ago.) You carried the company on your back, kicking and screaming its way to success. It’s no wonder that the rest of your team kowtows to your opinion.

Here’s some free advice for you: If you still want to run the day-to-day operations and make most of the decisions, but you want to take a little money off the table, find a private equity group that does minority growth investments. On the other hand, if you want to take most of your chips off the table by partnering with someone like us, then you can’t handle succession planning like Ellison.

Ask yourself this question: Once you put $20+ million dollars in your pocket, are you really going approach the business with the same passion as before? I doubt it. But that’s okay. Give yourself a round of applause. You built a very successful business and you sold it to a nice group of folks who are going to carry on your legacy. But you have to let them do it. Ellison is staying on with Oracle as the CTO. Do you really think that his new role makes any difference AT ALL within the power structure at Oracle? Nope, I don’t either.

The same holds true for you as the founder of your company. We LOVE having you as a part of the business on a go-forward basis. But you are going to be better off in a non-operational position, as a board member, or even the board chairperson. You can’t be engaging with employees on a daily basis. Your employees will have a hard time seeing you as anything other than the charismatic founder that makes all the decisions. You have to give your successor a chance to manage the growth of the company in his/her own image. You carry too much weight to “hang around the rim”.

We’ve been very successful working with tech founders as they move away from a day-to-day role within their company. Many times we find that they have already selected a successor and begun a gradual transition out. Selling us a control position is just the next logical step in the process. It’s important for you as the founder to really step away — and not just in a symbolic way. We value your opinion; we want your input at the board level. But let the team that you put in place do their jobs.

Nothing has changed at Oracle. Don’t be a Larry Ellison.