Replacing Founders with CEOs: A Discussion with Paul Doscher, CEO, Lucid Imagination (Part 4)

Sramana: How many times have you replaced founders as the CEO?

Paul Doscher: Three times. Each time I have been a CEO, I have replaced a founder.

Sramana: In each of those three scenarios, what was the situation you came into, and how did you both navigate the scenarios?

Paul Doscher: The first situation was a company that had gone through two rounds of funding. The founder had developed a lot of the technology himself and was a very strong personality in terms of how he ran the business. The transition was forced by the venture capitalist, which is how it happens almost every time. The founder was passive-aggressive about it.

When I came on board, the founder told me that since I had such a strong sales background, I should focus there. I told him no, my business card said CEO for a reason. I was ultimately the one to be held accountable for the success or failure of the business and the one who would do additional fundraising if necessary. I had to embrace that role and make decisions accordingly. The founder then said he understood. We tried to co-exist and he tried to find his place as the CTO, yet you could see that he would still try to influence every decision or that he would not participate in a decision until he felt like he could mold it into what he wanted to be. I accommodated that as much as I possibly could because I wanted a cohesive team.

When you are in a situation where you are trying to build a team and the dynamics don’t work between key people, there is a problem. After about six months we were in a situation where decisions would get blocked or the founder would try to develop another network of influence to act in opposition to initiatives. Eventually I had to go to the board and tell them the situation was untenable. I did that a few times, and they encouraged me to council. We did everything we possibly could do to work together until I felt that the company had stalled. The management team did not know how the dynamics of a power struggle would turn out, eventually somebody has to be the winner. I finally went to the board and told them it was him or me in order for the company to be successful. The board held some private discussions and came back and said that they were going with me. I told them that this would mean the founder had to exit, and the board said they understood and that I should try to make it as professional as we could. I tried to be as professional as I could, but the exit negotiations did not go well. That was probably the most extreme example of replacing a CEO that I have been through.

Sramana: What was the experience like the second time you replaced a founder as CEO?

Paul Doscher: It was not as much of an issue. The founder acknowledged that he had taken the company as far as he could. The founder was exhausted, and it was obvious to everybody. He was ready to take the role as CTO and visionary. That was important for the founder to make that transition because the engineering team had total admiration for the product that had been developed. It was important for the company to be successful. The founder adopted a new role in a positive way and was part of the decision-making process, but he did not have over-weighted responsibility. The founder had responsibility and budget over the engineering processes but never tried to overstep his bounds into sales, finance, and marketing. He accepted the role genuinely. The company did not have the runway, so we were acquired and it was a good exit for everybody involved. Soon after the company was bought, the founder decided to leave. It worked out well for everybody. The key component in that story is the respect that the engineering team had for the founder and the founder’s willingness to take a CTO role.

This segment is part 4 in the series : Replacing Founders with CEOs: A Discussion with Paul Doscher, CEO, Lucid Imagination
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