The founder’s farewell: Why and when to leave your startup

Deciding when to step away from your startup can be one of the toughest decisions a founder has to make. So, how do you know if and when you should leave?

Founding and leading a startup from the ground up is an immensely rewarding yet challenging journey, and many founders have a tremendous amount of ownership over their startups.

Yet, it is possible that one day, you may find that your skillset no longer aligns with the company’s scaling needs. Knowing when to step aside and transition the leadership of the company can be one of the most difficult decisions a founder faces. Exiting a startup you created is bittersweet—it signifies the end of an era, but also potentially the beginning of an exciting new chapter, both for the company and you, the founder.

So when the time comes, the hard question to ask yourself is: Is it the end of the road, and what can I do to make a graceful exit?

Above Conflict is one of the reasons why a co-founder can leave their startup (Photo: Getty Images)

Why founders leave their startups

There are many reasons why founders decide to leave their startups. At different stages of the startup growth, the skills used to launch a startup into existence probably aren’t the same ones required to scale and sustain it. Some founders better serve as a visionary leader, rather than a day-to-day operator. But this mismatch is but one of the reasons why a founder may decide to leave their startup.

Founder feuds are another reason for a founder’s departure. Conflicts between co-founders can lead to irreconcilable differences that make it necessary for one or more founders to step aside.

Another common reason is a passion paradox. This can occur when a founder feels they have taken the business as far as their skillset and interests allow, and they begin to crave a new, more engaging challenge. Similarly, a founder may reach a point where their personal growth trajectory no longer aligns with the company’s trajectory. As the startup scales and evolves, the founder’s role and responsibilities may shift in a way that no longer provides the same fulfilment or opportunity for advancement.

Financial concerns can also prompt a founder’s exit. Not every startup achieves immediate profitability and some founders may choose to leave if the company’s financial outlook does not meet their needs or expectations. Additionally, changes in personal priorities, health considerations, or appealing new opportunities elsewhere can all be valid reasons for a founder to step down.

Above When a founder decides to leave, open and transparent communication about the decision is key to mitigating the transition (Photo: Getty Images)

What to do when a founder leaves

Startup founders are the backbone of a company’s culture and they shape up to 80 percent of it with their presence. The average founder, however, departs after only six years. This founder turnover can be due to various reasons, with 20 percent to 40 percent of founders being replaced due to investors seeking a different direction for the company.

When the time comes for a founder to move on from their startup, open and transparent communication with all stakeholders and employees is of the utmost importance. Being upfront about the decision to exit, and the reasoning behind it will help ensure a smooth transition and mitigate any uncertainty or disruption within the organisation.

The next crucial step is selecting the right successor to take the reins of the company. This individual should not only embody the core vision and values that the founder established, but also possess the necessary leadership skills and experience to guide the startup through its next phase of growth.

Jack Dorsey’s exit from Twitter (now known as X) in 2022 is a case study in founder departures. Some see it as a textbook transition, with a planned handover to a trusted CTO, but others suspect he was pressured out, and the company hasn’t been the same ever since.

Finally, prioritise a seamless handover. Plan a clear transition period to minimise disruption and allow the new leader to integrate effectively.

Above Facilitating a thoughtful handoff of responsibilities to a new leader is key to preserving the company’s momentum (Photo: Getty Images)

The road ahead

The good news is leaving your startup doesn’t have to mean the end of your entrepreneurial journey. Rather than abandoning entrepreneurship altogether, many founders often move on to roles such as venture capitalists (VCs) or business consultants, where firsthand startup experience provides a major advantage.

Knowing when to quit is an essential skill. Just as you would pivot away from an unsuccessful minimum viable product (MVP) to explore a more promising direction, you should be prepared to walk away from your startup as soon as it stops providing the motivation and fulfilment needed to sustain your commitment. After all, as the ancient Roman philosopher Seneca succinctly said, ‘Every new beginning comes from some other beginning’s end.’

This article was adapted from our weekly newsletter The Deep Dive. Read the full edition on When and how to leave your startup? Subscribe to The Deep Dive here.

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The founder’s farewell: Why and when to leave your startup

Why founders leave their startups

What to do when a founder leaves

The road ahead