Founders aren’t only necessary to get a business off the ground, but their continued presence could be necessary to make sure it keeps innovating.
This provocative thesis comes from Peter Thiel, the PayPal co-founder and venture capitalist behind some of Silicon Valley’s most successful investments, including Facebook, Palantir, and SpaceX. Speaking from his experience as both a founder and investor, Thiel presents a compelling argument about the fundamental relationship between company leadership and innovation capacity. His perspective challenges the conventional wisdom that mature companies benefit from bringing in professional managers to replace entrepreneurial founders.
“One of the questions that I’ve spent a lot of time thinking about as a venture capitalist is how these companies get founded. How long does the founding period last?” Thiel explains. “And I think the founding period is the period when you have innovation. And once that’s over, it sort of becomes a normal business that runs in a bureaucratic, mechanistic sort of way, and it’s a very important question. How long can one enable the founding in these companies to last?”
The crux of Thiel’s argument lies in his definition of what he calls the “founding period” – not just the initial startup phase, but the entire duration during which a company maintains its innovative edge. According to his framework, this period is inextricably linked to founder leadership, and its end marks the beginning of bureaucratic stagnation.
To illustrate his point, Thiel draws on one of Silicon Valley’s most famous cautionary tales: “The classic example where people sort of cut the founding off too early, I would argue, would be Apple, where the judgment the board at Apple in 1985 made was that computers were like Pepsi. It was just a marketing thing. There’s gonna be no more innovation in the computer industry. You could get rid of the founder and you could replace the founder with someone who’d run the business in a much more predictable, mechanistic sort of way. And that turned out to be a bit of a mistake.”
The Apple example serves as both warning and vindication of Thiel’s thesis. When Steve Jobs was ousted in 1985, the company’s board believed the computer industry had matured beyond the need for visionary leadership. They brought in John Sculley, a professional CEO from PepsiCo, expecting him to manage Apple like a consumer goods company. The result was more than a decade of declining market share and missed opportunities in emerging technologies.
“It’s unusual for the founder ever to come back once these mistakes are made,” Thiel notes. “So sort of miraculously, Jobs came back and then we saw another 14 years of innovation at least through 2011 in the case of Apple.” Jobs’ return in 1997 transformed Apple from a struggling computer maker into the world’s most valuable company, revolutionizing multiple industries with products like the iMac, iPod, iPhone, and iPad.
This transformation reinforces Thiel’s central claim: “I do think the businesses that are led by founders are the ones that are able to innovate. The ones that are not led by founders are generally not able to innovate. And if you are in favor of innovation, you have to figure out ways for founders to stay in control as long as possible and to avoid selling a business or substituting someone other than the founder as CEO.”
The implications of Thiel’s thesis extend far beyond individual companies to the broader innovation economy. In an era where technological disruption determines market winners and losers, his argument suggests that founder-led companies may have an inherent competitive advantage. This perspective helps explain the success of companies like Amazon under Jeff Bezos, Tesla under Elon Musk, and Meta under Mark Zuckerberg – all of which have maintained founder leadership while continuously reinventing themselves and their industries. Conversely, it might explain why some previously innovative companies have struggled to maintain their edge after founder transitions, highlighting the delicate balance between entrepreneurial vision and corporate governance in driving sustained innovation.