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After the first three years of any startup, a crucial period emerges where the founder’s innovation and corporate strategy are less important than the funds available to the organization. It is at this stage, that the founder needs to decide how much power and control to retain within the firm. Increased funding from investors naturally leads to reduction in control, although this gets necessary. Studies have in fact found out that per additional role that founders retain such as both chairman and CEO, the company value reduces by between seventeen and twenty two percent. Additionally, there is a whopping thirty five to fifty one percent reduction in the ability to attract financing. Investors however need to conduct a detailed due diligence as replacing a charismatic company founder too early may have negative implications for its brand image.

Source:https://www.strategy-business.com/blog/For-Startups-Giving-Up-Control-Is-Key-to-Creating-Value?

Uploaded Date: 16th May 2017

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