Is Jack Dorsey Right: Are Founder-CEOs The ‘Single Point Of Failure?’

As he exited from the helm of one of the unicorns he founded (Twitter), Jack Dorsey noted that he is leaving because he thinks that founder-CEOs can limit the growth of the venture and can become a “single point of failure.”

Is Dorsey right?

Yes and No.

Founder-CEOs can become the limiting factor behind the growth of a venture, especially if they do not grow with the venture.

A business fails for many reasons, including factors such as capital, sales, pricing, costs, employees, and so on. All these roads lead to the entrepreneur. Successful entrepreneurs are skilled at balancing the diverse needs of the venture and making the right decisions. Failing entrepreneurs are not. The fact that more than 50% of businesses fail within the first five years is evidence that most entrepreneurs (or founder-CEOs) are the limiting factor and suggests that Dorsey is right about them being the “single point of failure.”  

But there is a flip side. Dorsey is wrong when it comes to 94% of unicorn-entrepreneurs who did build their ventures from idea to real unicorns and built iconic companies. Please note that this is billion-dollars in valuation and sales, unlike a VC unicorn whose valuation can be manipulated. The companies include:

·     Walmart, where Sam Walton grew from a startup in rural Arkansas to one of the biggest companies in the world without VC

·     Microsoft, where Bill Gates built a startup into one of the biggest companies in the world

·     Apple, where Steve Jobs grew from a startup to an icon, was fired, and came back to make it one of the greatest companies in the history of the world

·     Amazon, where Jeff Bezos grew from a startup to global dominance  

·     Fastenal, where Bob Kierlin built a giant fastener company with $31,000 in equity and no VC

·     Best Buy, where Dick Schulze built a great retailer starting with $9,000 and no VC

·     UnitedHealthcare, where Richard Burke built the world’s largest healthcare company using a $40,000 loan and no VC.

And there are more like them – but not that many more. Some entrepreneurs are not the limiting factors and are not a “single point of failure.” They are unicorn builders. So how do they overcome the hurdles and build unicorns?

They recognize the changing needs for each stage of growth

A venture goes though many stages on its journey from idea to unicorn, including idea, startup, emergence, take-off, and growth. Each stage has its special needs. Those who do not adapt to the needs of each stage end up failing or being left behind. That is why entrepreneurship is a pyramid, with many at the bottom and few at the top.

They develop the skills and strategies to take off without VC and stay in control

94% of unicorn-entrepreneurs took off without VC and 76% avoided VC altogether. Except in Silicon Valley where most unicorn-entrepreneurs got VC. But even there, most delayed and stayed in control. Dorsey is a Silicon Valley entrepreneur. He got VC early and did not control Twitter.

They learn the skills to lead a giant after takeoff

Dorsey seems to excel at take-off skills. He has done it twice — with Square (newly named Block) and Twitter. Square’s success shows that he does have the skills even after takeoff. So why did he leave Twitter?

They focus on one venture

Unicorn-entrepreneurs focused – on one unicorn. Few attempted to lead 2 unicorns at the same time. Musk is one exception. And Dorsey was the other. Now Dorsey has pointed out why focus is important. It is tough enough to lead one giant corporation and succeed. Dorsey thought he could lead two. Hubris?

My take: Few can build an idea into a unicorn. Even fewer succeed with two because scaling up is difficult. You need to find the right opportunity, develop the best strategy, finance for growth, take-off against venture gravity, recruit right, motivate right, control right, and lead right to beat the giants at the top of the pyramid. To do this, you need innovation skills, strategic skills, financial skills, launch skills, control skills, organizational skills, and leadership skills. Dorsey did it twice. Wow! But few can run two giant companies at the same time and succeed at both. Dorsey is proving the value of focus.