Why Silicon Valley Is Abuzz Over ‘Founder Mode’

"A debate is brewing among investors and entrepreneurs: Are hands-on founders, such as Steve Jobs and Brian Chesky of Airbnb, the key to start-up success?

How should a C.E.O. operate?

Silicon Valley has been abuzz in recent days over one topic in particular: How hands-on should founders be in their companies? In the framing of Brian Chesky, the Airbnb co-founder and C.E.O., and Paul Graham, the Y Combinator co-founder, it comes down to “founder mode” versus “manager mode.”

It’s not a new question — and it draws on longstanding examples like Steve Jobs — but it has taken on fresh significance as start-ups struggle with how to grow while keeping antsy investors happy.

Graham kicked off the latest discussion. “Till now most people even in Silicon Valley have implicitly assumed that scaling a start-up meant switching to manager mode,” he wrote. “But we can infer the existence of another mode from the dismay of founders who’ve tried it, and the success of their attempts to escape from it.”

He explained how the founder C.E.O. operates:

It’s pretty clear that it’s going to break the principle that the C.E.O. should engage with the company only via his or her direct reports. “Skip-level” meetings will become the norm instead of a practice so unusual that there’s a name for it. And once you abandon that constraint there are a huge number of permutations to choose from.

Graham took a shot at business schools for missing the trend, saying of the more hands-on founder mode, they “don’t know it exists.”

The prime example Graham cited was Chesky. The Airbnb boss shared his story at a recent Y Combinator event, and also discussed it on a podcast: “The less hands-on I was, the more I got sucked into problems. And by the time I got sucked into a problem, it was like 10 times as much work,” Chesky said on the podcast.

Instead, he decided: “I’m going to be involved in every single detail. And Airbnb is not going to do anything more than I can personally focus on.”

That has gotten results, Graham wrote, with Airbnb now having some of the best free cash flow in Silicon Valley. Then again, Airbnb’s stock price is 31 percent below its 52-week high.

Examples of founder mode include Jobs, whose approach Chesky said he studied; Jensen Huang of Nvidia, who has 60 direct reports; Elon Musk, who is deeply immersed in the operations of his many companies; Mark Zuckerberg of Meta; and Sam Altman of OpenAI.

Outside tech, Howard Schultz, who built Starbucks from a local Seattle coffee chain into a global colossus and was famously hands-on, also fits the mold.

Many founder-C.E.O.s applauded the approach, including Tobias Lütke of the e-commerce company Shopify. (Graham noted that among those who reviewed drafts of his post were Musk, Patrick Collison of Stripe, and Ryan Petersen of Flexport, as well as the investors Ron Conway and Jessica Livingston, and the Y Combinator leaders Garry Tan and Harj Taggar.)

Dan Rose, who held leadership positions at Amazon and Meta, wrote that Jeff Bezos and Zuckerberg “were both micro-managers, deep in the details of the product and business. They never set expectations of autonomy, and they fired anyone who resisted their oversight.”

Others said there were nuances. Jessica Lessin, the founder of The Information, argued that founders do need capable managers, noting that Jobs relied on Tim Cook to oversee the vast and intricate manufacturing operation that became one of Apple’s most crucial assets.

A start-up investor, Henrik Torstensson, agreed that execution mattered, citing Microsoft under Satya Nadella as a “Hall of Fame example” of manager mode done right.

Others riffed on the debate with memes and humor, joking that it’s another phrase for micromanaging. “Everyone loves founder mode this weekend until the average ceo starts applying it on Tuesday,” Packy McCormick, a writer, posted on X." [1]

1. Why Silicon Valley Is Abuzz Over ‘Founder Mode’: DealBook Newsletter. Andrew Ross Sorkin; Mattu, Ravi; Warner, Bernhard; Kessler, Sarah; Michael J. de la Merced.  New York Times (Online) New York Times Company. Sep 3, 2024.