Founder ≠ CEO | LSI USA '25

Daniel Hawkins  0:05  
So I have to both take credit and apologize for the title. So founder is not necessarily CEO, right? That's just not as it's not a good bumper sticker, right? Founder not equal to CEO is a better bumper sticker. Yeah? Bumper sticker. This is really intended to take a cover off of the unspoken, which is the founder isn't necessarily, in the long term, the ultimate person to take the company forward. And note that it's not necessarily. It might be circumstances of company. Might be circumstances of individual. It might be circumstances that are related to performance of that individual capabilities. Might be a range of things. So what I'm going to ask everyone up on the panel with me here is to share in a short window, 2030, seconds worth background and how they come to have experiences on either side of the founder, CEO question, as the founder, who transitioned as the CEO, who took over as a board member, who forced the change, as a board member, who was accepting the desired change, as an investor involved in those decisions. Because I think it's important to understand the perspective from which everybody is gonna be giving some of their views. So if I could,

Paul LaViolette  1:26  
yeah, so I'm Paul LaViolette, 47 years in Medtech or thereabouts. And I did 15 years at Boston Scientific where for 10 of those years I worked for the founder Pete Nicholas, so large scale company, but nevertheless, founder transition, and then the last 1518, years, I've been a venture investor, been on 25 boards or so, and have certainly been through a few founder, CEO, professional management transitions. So I have it on both sides, but no one's ever accused me of being intelligent enough to found anything. So I'm not a founder myself, so I'll skip myself, and you guys can go ahead,

Kelly Constable  2:07  
sure. So Kelly Constable, I spent 20 years in industry on the pharma and biotech side, and then started building I was an intrapreneur. Started building digital assets inside of Amgen. I left eight years ago to become a full time entrepreneur. And the experiences that are relevant to this conversation is three times in the past eight years, I've been I've done turnarounds brought on by the investor taking the reins from founders, and then my current role is, I'm Chief Operating Officer of cloud Cath. This is not a turnaround, but I was brought on by the founder as CEO, and in about a month, he's handing the reins over to me, and I'll be taking on the role as CEO from the founder.

Todd Usen  2:49  
Hello, I'm Todd. You soon. I've been about 35 years in Medtech. I cut my teeth and spent about 14 of those at Boston Scientific last role I was my first opportunity to run a the country in the US, in a commercial for our neurovascular division, I moved over to Smith, and nephew in orthopedics, had a chance to various roles, and became the president of all of orthopedics. And then I, likewise, I did a presidency of all the medical businesses at Olympus. And then I went startup role and worked with a founder there and raised, raised a bunch of money and had some fun with that as a CEO. And then my last two I've taken over CEO roles of public companies from the founder. One shouldn't have been a public company, and, you know, we worked on that together. And the other one is we're in right now, so having a good time, and also sit on a few boards where we've had to make that transition as well.

Dan Sands  3:40  
Awesome. Dan sands, Managing Director of factor seven medical. The first 14 years of my career, I started at a startup and mentored by the two co founders for the first eight years, was a zero to 20 million very fun. Then I went to a larger company that was a merger of two companies to create symmetry medical. And within a year, I started a company for them that grew to 15 million in three years. Like this is a piece of cake. So I started my own solo and ran it for 10 years. And I went through this journey of founder, CEO, not CEO, back to CEO so and then I started the consulting group factor seven medical then, since I've taken several fractional CEO roles and dealt with a lot of different founder personalities over that 10 year, close to 30 different companies now interacting With founders and understanding what that their perspectives and and that of the investors to playing on both sides of the table can be pretty interesting at times. So looking forward to the discussion.

Daniel Hawkins  4:51  
So my background actually touches on all of these in many respects, I was a founder that was not supposed to be CEO, one of three founders of a company that. But we brought in a CEO that turned out miserably. Then I was founder of Shockwave medical, and made a determination, ultimately, that I wasn't the right person to go forward, ultimately, for personal reasons as well as I knew my limitations. So we brought in Doug, God chill, and he did a ridiculously good job. So that was a great experience. I've been on boards and watched it happen. I've been on boards and forced it happen. What I haven't done is the investor side, but what I hope you're seeing here is there's a range of reasons why these things could happen and perspectives to bring to bear. Somebody said to me earlier today, how did the word founder become a dirty word for clarity? It's not a dirty word. It's a word that's exceptional, and you should be honored to be one. But the reality is, the needs of the company might, over time, change, and as a result, your role might change. So what I put to the group here is, let's go from the perspective of many of us have taken over some circumstances around the takeover, and if you wouldn't mind, Paul, you were in an experience where one of the arguably more successful public companies had a founder, CEO, and then there was a transition. If you could share a little bit about as as somebody who was senior in that organization. What that was like? Yeah, well,

Paul LaViolette  6:25  
things change. The company grew. We grew 200,000,004 five 1,000,000,002 billion, 4 billion. Frankly, we started to fracture. We had problems. We weren't operating effectively. Todd was there. We would we would have recalls, we'd have manufacturing issue. And you look and say, you know, it's, these are infrastructure things. These are things that need to be attended to, that deep operating experience can address. But you know, if you're if you're a visionary, you don't really think that way. You're not paying attention to it. And so if you're a brilliant, visionary founder, you're so capable that you can do that for a while. You can do it for 100 200 400 million, at $5 billion it just doesn't work anymore. And so that I just think it's scale, it's the complexity of the business, it's the rate at which operating problems come. And at some point you say, you know, it's okay to grow really fast and to routinely have problems. That's the benefit of fast growth. But when the problems become so numerous that they're taking over for your ability to focus on growth, then you realize, you know what we need help.

Daniel Hawkins  7:43  
And Kelly, you were in some experiences where investors brought you in. Yes, talk about what it's like as the CEO coming in, and frankly, the dynamic with the founder, and then compare that to your current one. Oh, great

Kelly Constable  7:59  
question. Thanks. The first one was probably the most interesting. Interesting because I didn't expect to become CEO. I was brought in, and I joined a board, and I looked at the P and L, and probably was the first one. It was in Australia, and I said, either we do math differently in the southern hemisphere, or things aren't looking good. So I think it was within a day or two, I was asked to become the CEO, and that was a really interesting one, because it was a spin out from academic and was a genomic company. And for a while, the founder really enjoyed the turnaround that I was trying to lead, raising capital, deciding what was really a product, cutting restructuring. So he found it really exciting initially, but when we finally got down to signing the term sheet on the spin out, and I had found the capital, the first customer, et cetera, I said to him, you understand that now your behaviors need to change. We're taking on capital, so this time around, we need to behave in accordance with capital. It's not an academic grant. And he said, Well, what are those behaviors? And we started talking about accountability, all the things that you mentioned, infrastructure. And he looked me in the eye and said, I prefer keeping my autonomy. And so I would say to you that one was a really interesting dynamic, because at the end of the day, we shook hands and I closed the company down. I didn't continue to spin it out because I didn't have time with that tech team, and that tech team ultimately realized that what's required in your behaviors, whether you're the CEO or CTO or CMO with capital, is in conflict with what how they have their autonomy in an academic environment. So I wouldn't say it was controversial, but I would say it was very honest and transparent, and it was interesting to me, after they had run through 10s of millions of dollars, that they never understood what the behaviors look like in a private company that had capital until the very end. And so I would say it was sad. The difference with now is. That with Ali Al Badri, our founder, I would say, first of all, in regards to your comment about the dirty word, most of us would say, I have the utmost respect for founders. I would aspire to be that brilliant. It's a unique kind of intelligence. I have a lot of respect. I think that helps with our relationship. Ali is the respect for my founder, and also, I think Ali likewise respects that I bring a different skill set. So we're a team. We're work spouses, and I think it's going quite well. The driver of the change is we are both focused on return to shareholder, and that's probably, I would say, the winning recipe for why we work together so well,

Daniel Hawkins  10:41  
terrific. Todd, you had experiences coming into a public company where that is, to say the least, a storm when you're replacing the CEO. Share some brief thoughts on what it's like to do that in a very visible environment. Sure.

Todd Usen  11:01  
First, I don't know if you guys took it personally, but I did, when Paul said we had operating problems at Boston Scientific and then right away, said Todd was there. So I wasn't. I just I noticed that I'm sensitive. I took a free loves company, so I figured I was the cause. You know, it was very unique. And the first opportunity to do there was a great technology in women's health, and I had almost been groomed. And to be totally honest with you have leaders like Paul when you're growing up in a business like I was at Boston Scientific and then into Smith and Nephew, you have great mentors that you can rely on. So I was groomed at these large companies, at the level of a of a president, and with four and $5 billion P and Ls, and then I went startup. But then after you had success with that, you get the phone call, here's a technology we'd like you to consider coming back to the public world. Much smaller public company founder really had a great vision of the product. But was, was one of those. The founder was asked to maybe retire, you know, and not to, but, but was part of the recruiting process. The problem was the company shouldn't have been public. It was one of those that went public because they felt they had to, and so basically, we spent quite a bit of time in the public domain. You're basically everything you do, you're giving earnings reports, and you're, you know, you're constantly talking about the organization. You can't make big changes. You make an announcement on a press release that you're doing a restructuring, you know, which means you have to really remove some people. And doesn't matter how beautiful, well written it is, your stock's gonna go down. So, you know. And those things happen. And then at the end of the day, we were able to effectively, believe it or not, I now have a unique experience of selling it to private equity, because the stock was so low the amount of money that the private equity paid for it. When they own over 90% of a company, they can take it private, which was the right thing to do for the company. So it was a in a way, it was my first exit of selling something, and it turned out to be a public company, selling it to become private. So it was a little little battle reverse. We get it, hopefully, with class, with all the people along the way and made the company better and more much more profitable. Were there

Daniel Hawkins  13:14  
fireworks in the process,

Todd Usen  13:18  
I would say, and I can only say so much because I am a public company. Now, if you look in the sky where I am now, there'd be nice July 4 celebrations going on. So fair. And I might, you know, might be a little more, but that was, that was a different circumstance of technology, but fireworks, yes, in a sense that you need to know the people that are coming in. And there's private equity investors that are just remarkable. They're all remarkable, but they all have different visions. So as you know, the fireworks can be, you know now that they own it. Here's a decision, even if you're trying to help and work. But sometimes there's people jump into people decisions, and sometimes they jump into product decisions that they're basing it strictly on what they think is the return on investment versus what's best for the patient and the skill set of the company so that. But I don't think there. I think that's normal. I don't think first of all, there's no CEO job that doesn't have fireworks in it anyway, no matter how

Daniel Hawkins  14:18  
good. Well stated, yeah, well stated, you've had a lot of experience to cross a range. What nuggets would you share with the audience based on your experience? Boy,

Dan Sands  14:28  
so as a founder, I would say, you know, you're taking a lot of risk, and it's your baby, and you know, it's a true startup, and you've raised that capital, and you go through the rigor over the years, and you get to a point where, in a personal experience, the company hit certain milestones. And you know, based on, I guess, your self awareness and what your own capabilities, and what are the needs of the company, and just, you know, knowing you say, smart in. Have to know how dumb I am is really comes into play, and I think that leads to the humility of the founder and understanding the market and the expectations of investors, because when you take on investors, it's not your company anymore. And to have that understanding and to treat as such is very important, and so as investors, because I've evaluated and participated on the investment side, when you see founders really get, hey, this is mine, and that lack of understanding of what they're really trying to do is build value for others, is a very important trait. So I had the experience of one company that I found it I got to a certain point on that 10 year journey, is like I knew the company needed to do into a different vertical, the investors wanted it to go there. I didn't necessarily have the expertise, and I was the first one. I was like, I was ready for help. I wanted some others to come in, being capital constrained at the time, it's like you got to make some choices in what's best for the investor group. And so I went through that process with venture capital having a CEO come in that they wanted to bring in. And I was all for it. And then two years of execution, it became pretty apparent pretty quickly that it was not the right CEO, and it got really turbulent, both at the board level and with the employees too. They could sense things weren't going the way that you know, the plan outline. So, you know, it can, it can cut both ways. It's like, hey, the expectation of the founder, you have to perform hit milestones. If that's not there, you bring somebody in to do that. And there are situations where there's roadblocks, and I had to deal with the founder, brought somebody else in, and they weren't able to perform, and then it was like the board was looking at me. Is like, okay, Dan, now what? I'm like, Okay, we'll figure something out. And you just, you adapt and go. So I would say, if you're you're in that, that crosshair decision, whether led by the decision of the board or yourself, is to be open to the concept that there's no particular right way. If you're the founder, great at the end of the day, you're trying to create value from a financial perspective, and you just have to be open for those different scenarios and try to get to the finish line and win one piece.

Daniel Hawkins  17:44  
So totally agree. And lemme share a little bit of an experience that I think many in the audience might resonate particularly well with. You invented something, or you're a partner with somebody who invented something, and it's your baby. You're trying to take it forward, there's emotional investment in it. This is the three o'clock in the morning. You get up and you stare at the ceiling. Kind of investment. So when somebody else wants to take over, there's emotion involved in that. And I'm gonna caution avoidance of making that irrational emotion, right? So there's a sense of ownership that comes from the emotion. But at the end of the day, the reason you started the company, probably is the reason you shouldn't be running the company. Think about that for just a half minute, right? So there's great zero to one, zero to three, zero to four. Work that can happen, but zero to 10 work is rare in a single individual. So it took me some time at Chuck wave to realize one I had some personal reasons a young child I didn't spend much time with in the year prior to my decision to leave, but I also had the recognition that there was a 0% chance that I was going to take this to its ultimate potential. So I actually went and found somebody who I wanted to bring in as a Chief Operating Officer and as part of the recruiting I told him, I'm not going to mention his name, because he said no, so he's not going to want me to say who he is, but very experienced operator in the space. And I told him, I want you to do this job as CEO reporting to me for no more than 18 months, because I want you, I want you to then be my boss and take the company public. And that took a lot for me to go through, and I'm offering that not to say, hey, look, I was able to go through that story, but more to say, this is going to take a minute. There's a lot of emotion around that, but please remember why you started the company. You don't want to be the guy who's holding on, and the board is saying, that's a problem, and then you are exited. Okay? That's not a lot of fun for anyone. You also don't want to be the guy that is a guy or gal that's held on by the board when you shouldn't be there because now your company's not realizing what it should we've got a few minutes left. A lot of stories and perspectives have been shared. I thought it would be interesting if there's some thoughts from anyone in the audience that would want to share, ask a generalized question about how it's how it is to be on one side or another of all of this. If there aren't any that's fine. Lots more to to share. But wanted to offer that somebody up front

Audience Question  20:35  
here this, this is absolutely fascinating discussion. So I'm a strategic advisor to startups, and I've got two in particular that I'm thinking of, and I can see a train wreck happening into the future. So it it is incumbent on me and others, perhaps in the organization, to start to edge them towards the recognition of where things are going to go eventually. So I'm looking for a little of advice, what? How do you? How do you edge that founder, CEO that you know is going to be emotionally you described it very well. How do you, how do you coach them to avoid that, that that train work? Kelly, you gave an example where that didn't end well. So we don't want to go there. How do

Kelly Constable  21:20  
we? Great question, coach. I have a few examples, but let's use Ali and I as an example. And I mentioned this when we were having our pre conversation, and there were expectations. So when I interviewed for the role as CEO, I was transparent about my desires and spoke about it with the board as well as Ali, so so we all had a general understanding of the direction that this was going. I think one of the things, and also on the back of what Daniel said, I think as CEOs incoming, we also don't need to yank the baby either. You have a choice about how you go about that. So in regards to communicating, though, that message with Ali, we've talked more about it's not about he and I. We have a job to do, and that job is return to shareholders to drive value. If he wants to get his technology on a global platform, we have to do that. We all know that. So I think we've been quite objective and analytical instead of it being about Ali or Kelly, because it's not about me either. One of my interview questions was, how long do you want to be CEO? And I said, as long as I'm the right CEO, until I'm not the only answer, that's the only answer, right? So I think for Ali and I, we immediately took it not to be about us, but to be about the performance of the company. And once we understood what's the performance of the company to bring on more capital to get to the exit, well, then what is the, what is the roadmap to get there, and then what is the skill set required? And that requires bringing on more capital, more capital, expanding the team, increasing our product pipeline. Well, that skill set sits with me. Ali has got a different skill set. So I guess what I would say to you is, try to make it more objective, data driven, performance driven, and less about the individuals. And so because we are now focused on the same performance, we have the ability that I'll say to Ali, there are certain investors where I go, look. They're your style. You take them. Or there's other ones. We go, Kelly, this is yours, because we have a unified goal. So I would be fast, I would be transparent. I would not waste time, because if it's going to blow up with that founder, you've got an issue anyway, so you might as well get on with it, and hopefully they have the professionalism to focus on their job, which is return to shareholder.

Todd Usen  23:34  
So if I was going to add one thing there is, it's not just the CEO. So if you're looking at a company as a strategic advisor or not just a founder. I should say there's skill sets in every company that are ready to take a company from seed to A, A to B, and then to go, go to market, commercialize, etc. So the CEO just happens to be one of them that maybe we take this founder's brilliant ideas, whether they're engineer, doctor, whatever it is, we're going to build on that, and we're going to bring in, it's like baseball. We're going to bring in the closer, you know at the you know at the certain time, and you're just moving it on. But that's that's what I would communicate with a company in a smaller we're going to set you up for success, to deliver your vision, but we're going to make sure we have the right skill sets, and your skill sets are still needed in this role.

Daniel Hawkins  24:14  
Paul, you've had a lot of experience, I'm sure, with this as an investor. Does that look

Paul LaViolette  24:20  
like? Well, I think it's a great question, and I would look at it almost in a simple way. You break it down, what's a day in the life of the CEO? What are you doing today? What did you do a year ago, two years ago? And how are things going to change over the next year and the year after that? What are the demands of this role going to be? And let's look at the gaps that are emerging today, and they may be small. And you think, hey, we can probably work through those gaps, but let's be honest, the day in the life the job, whether it's dealing with investors or dealing with a larger employee base or more complex business, more operations. And you say, as we look this, look around the corner. Down the next three months, six months, 912, those gaps are only going to increase. And let's look at your skill set, which, by the way, your skill set as the founder, is remarkable. Again, we could not have done what you do and that, and that's not going to change, but the requirements of this role are changing, and the gaps are increasing, and if we honestly assess your skills, we say you're going to need to acquire this new skill. Okay, you're a talented person. You can acquire one skill, then you're going to need to acquire another one and another one. And now we're starting to kid ourselves that the most efficient way to manage this company is to continue to try to invest in your acquisition of new skills for a role for which you are not prepared. So honestly, and you mentioned this, Daniel, think it's great. Take the emotion out. It's but also be super sensitive to the fact we're dealing with people. You're fantastic. I've been CEO. I hate to tell you, CEO is not the most important job in the company at any given point in time, lots of other people are doing other fundamentally irreplaceable things, but we need the CEO to do what that individual needs to do. So let's find the right place for you to contribute. Let's find a role or a CEO to fill that job, and let's just admit that it's okay that you for all the value you've contributed, you don't need to be the CEO in order to contribute the most value to the company.

Daniel Hawkins  26:26  
That's 100% true. And I'm going to share a very brief experience of a founder situation where two of four board members, I was one of two, thought that that individual should, should become a not the CEO, but the founder and and it was clinically driven. So a clinical, you know, focused contributor and the chairperson had a different view, and that different view propagated and propagated and propagated to a point where the company was steering to the side and you could watch the wall approaching candidly as a board member, as an independent board member, I chose to actually just exit the situation, because it was not set up for anything like success, and the mission that I aligned with was now completely off course, and There was not any mindset towards doing what's right for the company at the board level. So it can actually go the other way, where the the founder is in the chair too long, because there might be some strength in a particular board, but I'm sure you've seen some of that where, you know, there's one or two quarters extra turned into four or five quarters extra turned into, we're on the cusp of the next financing. Gee, we can't change the founder before the financing turns into now it's after the financing the founder feels emboldened, and that mismatch has the makings of decreasing shareholder value at the end of the day, the emotional realization that you're great at some things and not great at all things is what's going to enable you to maximize shareholder value. If, as Kelly described, that's the ultimate goal that you have. So when I advise companies, one of the things I ask is, what's your goal? What are you trying to do? Did you start this company to be CEO? Then why aren't you a plumbing company? Why aren't you a landscaping company? What did you really start this company for? And at that point, there's a transitional realization. And I would ask those in the in the audience who are thinking about this for themselves and their own roles to think about that we don't have time for another question. We're going to take another one anyway.

Audience Question 2  28:46  
Well, full disclosure down, you've been very helpful for us and a wonderful advisor, Rob Israel, so I just have to say that. But I wanted to ask if the panel, if it can go the other way, and whether or not there's a CEO andor founder that can be supplemented in such a way that the board and the intelligence of the board, or maybe new folks on the board, can actually supplement that CEO or that founder to balance out some of the missing pieces along the way. And how does it work? The other way? Because, Daniel, you were just talking about how the boat tipped because of the CEO, can the board tip to the coachable CEO, or coachable founder, the other way, in your opinion. How might that supplement

Todd Usen  29:25  
it happens when it depends if you have a C, E, O, that has technical skills or medical skills. Oftentimes, in my situations, I've been brought in as a board member to offer the go to market or operations, but this found it's founder, CEO. He's fantastic, and I want to do everything I can to be his support and offer up that arm so but I know you didn't get a chance in the last one.

Dan Sands  29:49  
Well, I think it may depend on the makeup of the board and how well they're integrated, and then alignment. If there's alignment there, I. Think there's probably more openness for collaboration and making, you know, good modifications for the betterment. But I've, I've seen situations where there's not the right board alignment, and there's disparity, and then there's, you know, again, I think the the financial aspect of the founder, their ownership presented some of their rights from a voting perspective versus a board those, those are under currents, I think that really don't surface right out of the gate. And your example is like, what's the underlying expectation from the equity position? How much am I getting up? And do they really understand that that capital waterfall and erosion of that ownership percentage over time, and do they have a realistic expectation of what that really means over time? Because I've seen a really significant mismatch, and the board can't necessarily intermediate that if that is an underlying current of I've got to give up more ownership, and then I've got to give up authority and decision authority that I may not necessarily agree with that just, man, if you've got board, you know division of that board and people talking outside of the board meeting, just not a good situation,

Paul LaViolette  31:22  
but maybe one closing, I would be really careful about that. We're not replacing a CEO because they're not the right person to do the sales plan right. You can hire a sales person. You can hire another person to do almost anything. You can supplement with executive chairs and do all that. At some point you have to say, what is the leadership we're looking for? What leadership competencies does this person have? And if, if they're very close, and you can sort of fill the gap perhaps, with one thing, maybe, but be careful of the, you know, the patchwork quilt that you're creating. Like, well, we're going to patch over here. We're going to patch over here. Patch over like, as someone who likes to have a boat, like, at some point, stop patching the leaks. Get a new boat. So I just would encourage the board to be really mindful of that. That gap may may look like it's addressable today if we hire a chief this or chief that, or supplement with a board a director who's got this experience at some point, stop, you know, buttressing an individual who isn't right for the position, and just embrace the fact that the company will do better with a new person at the helm. And

Daniel Hawkins  32:37  
that's the exact situation I was referring to when I mentioned there's, there was a challenge where there wasn't board alignment, and, you know, three or four patches later, you've got a patchwork quilt, and that's not really what you want. We are out of time, which is disappointing, because I feel like there's a whole bunch of questions that are sitting there that haven't been asked. You know, to the extent any of us are available afterwards, certainly happy to chat now or up at the bar or what have you, but I'm getting the blinking red light. So thanks very much for your attention. 

Kelly Constable  33:10  
Thank You.