As a company grows, founder usually isn't best choice to lead

Code42 Software's Matthew Dornquast has wisely chosen being rich over being king.

Dornquast had been the CEO of Code42 Software, a pillar of the emerging technology community in Minnesota. Sometime in the recent past, and it's still not clear when, he stepped down as CEO.

He didn't share the circumstances, but in an e-mail exchange last week he did share links to an academic study and related Harvard Business Review article called "The Founder's Dilemma." Give them a read, he explained, as "my personal and ­professional experience generally agrees with his findings."

The author of both, a Harvard prof named Noam Wasserman, framed the fundamental choice of a founder as picking between seeing the business succeed — getting rich — or keeping complete control of it. There isn't much realistic chance of having both.

It's a paradox. The most successful founders — that is, their businesses succeeded famously and turned their founder's stock into a lot of money — seem to be the ones who get a business going and then let professional managers build it into a big company.

Wasserman is clear that most founders don't get to that conclusion easily. Most didn't all but kill themselves starting a business just to turn over leadership when the sales started climbing and the media started paying attention. Wasserman found that four out of five of them were forced out of the CEO job.

If that's what happened here, Dornquast's not saying. And perhaps he never aspired to be CEO of a big, publicly held Code42. But he certainly looked as likely a candidate to accomplish that as anyone.

He was the optimistic and genial face of the company. He frequently spoke at conferences, talking as often about the right ­culture for doing great work as he did technology.

The Code42 story was a good one, too. It got its start in 2001, with Dornquast and co-founders Brian Bispala and Mitch Coopet selling services to pay the bills, allowing them to also work on their own product.

They eventually peeled off just a small part of a more ambitious project for their product, some software that would protect data on the computers they owned.

They called it CrashPlan and took it to the big technology event Macworld in early 2007. Dornquast once explained that their goal was to get 200 customers. Instead so many potential customers jumped on it that they overwhelmed Code42's website.

With CrashPlan a hit, and later $52.5 million of venture capital money in the bank, the CEO's job at Code42 had become completely different from what Dornquast once had been doing.

In tech start-up circles, this is called the need "to scale," meaning figuring out how to get a lot bigger quickly. To do that the CEO's bag of skills has to "scale" as well.

"There are a lot of expectations that people have here that are simply unrealistic for one person," said Michael J. Skok, a Boston-area investor, entrepreneur and teacher who writes on the topic of founders and corporate leadership.

He doesn't think of a founder's career as requiring just one transition, but a whole series of them. None are easy. At the start, it's idea generation, and next it's figuring out if the idea can make money in the market — the true job of the entrepreneur.

Then that person needs to become a business builder, doing things like assembling a sales team. Then the CEO needs to figure out how to do the job of what Skok called an "operator," with an eye on efficiency and business ­processes.

There's at least one more step, too, when the operator becomes an "enabler" and visionary, more of a coach than a hands-on CEO.

"I have just walked you through dozens, and no exaggeration here, dozens of different skill sets," Skok said. "Many of them are diametrically opposed to each other."

It's no surprise to him that maybe only one out of 10 founders completes the journey, even with the best-intentioned coaching from board members, investors and other advisers.

"The statistic that's really important to me is not the one out of 10, it's the nine out of 10," Skok said. "It's actually an art to help the other nine remain part of the success of the business." That, he added, is "essential."

The company said Dornquast plans to remain an adviser and board member, but this all sounds far more orderly than the way this transition appeared to have ­happened.

Had there been a plan that was being carefully implemented, the management transition would not have been "announced" last week in a bland CEO quote dropped into the fourth paragraph of a forgettable news release announcing the kickoff of "Backup Awareness Month."

The quote was attributed to "co-founder and CEO" Mitch Coopet. Not Dornquast.

With Dornquast no longer the frontman for Code42, a search for a permanent CEO is underway.

Now it's inevitable that the spotlight will fall on younger CEOs in the Twin Cities. Maybe one of them can be the next Bill Gates.

On the last day of April, I joined a line hundreds long in the Warehouse District of Minneapolis, waiting to crowd into the open house at the new headquarters of LeadPages and see one of those high-potential young founders.

LeadPages is a marketing software firm that went from a standing start a few years ago to rolling out its products, raising venture capital and turning itself into Minnesota's fastest growing technology start-up, according to a late 2014 ranking.

After a "fireside chat" with co-founder and CEO Clay Collins and his two venture capital partners, a handful of us baby boomers stood around comparing notes. We all reached the same conclusion: that Collins just may be that chosen one, another Bill Gates who manages to lead a business from a start-up to a big company.

Saying that out loud was probably unfair to Collins, because it puts even more pressure on a 34-year-old leading what's still a very young company. The odds are dramatically stacked against it ever happening.

One reason, of course, is that Collins may decide along the way to just be rich instead of CEO.

lee.schafer@startribune.com • 612-673-4302