Marcos Dantus appeared to be living the entrepreneur's dream. In 2003, as a chemistry professor at Michigan State University, he founded BioPhotonic Solutions, a laser technology startup. Over the next 10 years, he gradually turned it into a $1 million company, taking little outside investment along the way.
His next move as a successful CEO? Stepping down.
"I am an academic researcher and inventor without an MBA, and I realized I needed to bring someone in who knows how to take it from $1 million to $10 million," says Dantus, now chairman and chief technology officer.
His self-demotion reflects a hard truth for entrepreneurs: No matter how much you love the company you started, you probably won't get to run it for long. Almost half of founders are out of the CEO spot within four years of starting up, and fewer than 25 percent stay there until an initial public offering, according to research by Harvard Business School professor Noam Wasserman. Sometimes that's purely your decision. But you're also at risk if you've given a significant stake to outside investors, who frequently demand changes in how their portfolio companies are run. "Founder-CEO replacements often happen later than the investor wants, but almost always sooner than the founder wants," says Wasserman, who has studied hundreds of such transitions.
So, realistically, what do you want to do next? There are a few options, depending on your industry and how involved you want to be with day-to-day operations.
Get back to basics
Many founders of tech and life-science companies take on the role of chief technology officer or chief scientific officer. (No surprise there.) If you are in the business of design, food, or other consumer goods, becoming chief product officer might make the most sense. Whatever you do in your new job, choose a title that will indicate your continuing authority, says Carter Weiss, a venture investor with consumer-brands-focused Silas Capital. "If the company's fate is being decided--merger, IPO--the first call won't be to the chief inspiration officer."
For founders who want to remain involved in operations, leading the board of directors is a common move. Think Reid Hoffman of LinkedIn, for example (see sidebar below), or Jeremy Allaire of online video company Brightcove.
Jump before you're pushed
Whatever new role you want, making the first move is important. Nearly 75 percent of the founder-CEO changes Wasserman studied were initiated by the board or other nonfounders. But when founders took the first step, they generally fared better. "Founders who take control of the process are more likely to be able to dictate the terms of the transition: They are more likely to stick around, and to have a C-level position," says Wasserman.
They are also more likely to help choose their replacements. When Dantus decided he wanted to focus on inventing rather than leading BioPhotonic, he spent a year interviewing CEO candidates. Once he settled on Kiyomi Monro, Dantus gradually handed over power while creating his new role as CTO. Two years later, "it's fantastic," he reports. "The larger a company grows, the more time it takes. My time is best spent inventing the next technology."
How to survive the worst-case scenario
Once you've taken on outside investors or gone public, your time as CEO could be running out. "A lot of founders hold onto the illusion that their role is secure," says Jeffrey Hollender, co-founder of Seventh Generation. "But if you don't control the majority of ownership, you're an employee." He stepped down as CEO of his eco-friendly consumer products company in 2009 and was asked to leave his board position months later, when outside investors owned about 70 percent of his company.
That's a worst-case scenario for some investors too. "We would never back a company if we thought at some point we had to get rid of the founder," says John Backus, a managing partner with New Atlantic Ventures. "It's more about them transitioning roles than leaving the company." If your investors want another CEO, you can buy time to plan your next move by taking on a senior advisory role, as long as you understand that it will carry little actual power. Sometimes a title like "senior adviser means we're taking the person out but trying to save their ego," says Backus.
Understandably, that can be difficult to accept. After being forced out of Seventh Generation, Hollender initially vowed he was done with startups. But eventually he became excited about his next big idea: Sustain, an environmentally friendly, female-focused condom company that he started with his daughter, Meika. "Things look very different the day you leave from the way they look a year or two later," Hollender says. "As difficult as they may be, these transitions are an opportunity to think about what you want to do next."