Founders with different work orientations experience exits differently, writes Elizabeth (Bess) Rous

Rouse, Elizabeth (Bess)

LSE Research Online

11/16/2016How founders psychologically disengage from their start-ups when it’s time to exitblogs.lse.ac.uk /businessreview/2016/11/16/how-founders-psychologically-disengage-from-their-start-ups-when-its-time-to-exit/Box.net’s co-founder/CEO (Jan 13, 2011), by Robert Scoble, under a CC-BY-2.0 licenceGiven the amount of time, energy, and resources it takes to start and develop a successful venture, it is notsurprising that founders often describe their organizations as their babies or children. Much like the relationshipbetween parents and their children, these organizations can become self-defining. At the same time, a successfulexit or acquisition is often one of the key goals of the entrepreneurial process. How, then, do founderspsychologically let go and disengage from their organizations during the exiting process, given a strong identityconnection? How do founders manage their identity during this period of transition so that they are ready to startanother company?I explored these questions in a recent study of  founders of technology-based companies. Over the course of twoyears, I conducted 60 interviews with 34 founders. While many startups fail, my data contained stories of voluntary,successful exits from 30 organizations and 5 experiences of founders currently working for the acquirer. Through myanalysis of these successful exits, I developed two key insights.First, I discovered that founders oriented to their work as entrepreneurs in primarily two ways. With a self-fortifyingfounder work orientation, founders focused on themselves and their ideas, were motivated to achieve personalbenefits such as money, learning, and ego gratification, and viewed the organization primarily as a vehicle to gettheir ideas into the world. In contrast, with a stewarding founder work orientation, founders were more sociallyfocused, were motivated by working in a team and having a positive impact on the world, and viewed theorganization as an important entity worth sustaining.Second, I found that these different orientations shaped how founders psychologically disengaged. Founders with aself-fortifying orientation continually engaged in idea development, which often led to their involvement with multipleorganizations simultaneously. A founder’s identity was already bound up with the next organization(s) prior to exit. In1/3fact, some of these founders were already so psychological disengaged that they did not care what happened to theorganization when an exit occurred. As a result, these founders experienced leaving as exciting and they easilytransitioned from one organization to the next. They viewed themselves primarily as an “entrepreneurs” rather thanas founders of a particular organization, so their identity was reinforced rather than destabilized during thetransition.In contrast, founders with a stewarding orientation believed it was important to fully invest in their companies inorder to ensure the company’s future success. They described removing themselves from central decision-makingroles in order to empower others and enable the organizations to grow beyond them. Only at the point of exit didthese founders consider their future alternatives. As a consequence, many of these founders needed to take a breakbefore founding their next organization. Since they viewed themselves primarily as a founder of the particularorganization rather than as an entrepreneur, the transition was emotionally challenging. They experienced a senseof sadness, loss, and pain as they separated themselves from their organizations. With time, many of thesefounders did start other organizations and found a renewed sense of excitement about future opportunities.Overall, given seemingly similar starting points, founders with different work orientations experienced exitsdifferently—for founders with a self-fortifying orientation the process of becoming was salient, whereas for founderswith a stewarding orientation the process of unbecoming was salient. Importantly, these different disengagementpaths impacted how and when founders began again.This study has implications for founders. Particularly for first time founders, exit was a top priority, but they did notprepare themselves emotionally for this experience. I was surprised, in general, how little founders considered whatthe experience of exit would be like for them. This lack of attention might make these transitions even more difficult.This study also reveals that loss does not just occur with failures. Even founders with successful exits canexperience a loss. As one told me, “you are not surprised that the world is changing because you were acquired—you are not surprised, but still, it’s a loss.” Founders might benefit from considering, as well as preparing for, thepotential psychological and emotional challenges of navigating an acquisition.This study also has implications for venture capitalists, investors, and the people in the organization being left. Thetwo work founder orientations suggest that founders differ in how they balance their individual needs and the needsof the organization. A potential problem with approaching founding with a self-fortifying orientation is that the foundermight prematurely abandon their organization, negatively impacting organizational growth. A potential problem withapproaching founding with a stewarding orientation is that the founder might attempt to hold on too long and notallow the organization to grow beyond them. Understanding a founder’s work orientation, then, might providevaluable information in making investments to meet one’s objectives.♣♣♣Notes:This blog post is based on the author’s paper Beginning’s End: How Founders Psychologically DisengageFrom Their Organizations, in Academy of Management Journal, October 1, 2016 vol. 59 no. 5 1605-1629The post gives the views of the author, not the position of LSE Business Review or the London School ofEconomics.Before commenting, please read our Comment Policy.2/3Elizabeth (Bess) Rouse (rouse@bu.edu) is an assistant professor of organizational behavior atthe Questrom School of Business at Boston University. She received her Ph.D. from BostonCollege. Her research focuses on creativity at work to understand the role of social interactions inthe creative process and how creative workers psychologically attach to and detach from theproducts they make. Copyright © 2015 London School of Economics3/3

How founders psychologically disengage from their start-ups when it’s time to exit

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