To scale to $100M ARR, "Owner Mode" beats "Founder Mode"

I weigh in on the recent debate and outline a third path - “owner mode” - that allows startups to scale without losing what makes them special.

Founders today are awash in advice on how to scale their startups. "Move fast and break things," they're told. "Talk to actual users." "Focus on product-market fit." While these mantras may serve well in the early stages, they often fall short when a company hits its second major growth spurt, typically around $10M ARR. It's at this inflection point that many founders face a major identity crisis.

Christian Owens, founder of Paddle, put it succinctly on the B2BaCEO podcast: "There comes a point, usually around $10M ARR, where founders need to shift their attention from the product they're building to the company itself. The organization itself becomes the product, demanding the same care and vision that went into the original offering."

As Owens hints, this crisis isn't only personal. As I outlined in my March newsletter, a new set of business challenges emerge as startups hit this revenue milestone: 

• Churn, once a manageable concern, becomes an existential threat. 

• Overselling features, a common early-stage tactic, risks creating a cohort of dissatisfied customers.

• Lack of robust onboarding and support processes causes even well-designed products to not deliver value, as they can’t be implemented effectively.

• Technical debt accrued during the "move fast and break things" phase comes due with a vengeance. 

• Pressure to maintain growth rate can lead to hasty expansions into new markets and customer segments.

Underlying all these symptoms is a root cause: an exponential increase in organizational complexity. After 150 employees, companies surpass Dunbar's number - the cognitive limit to the number of stable social relationships a founder can maintain. As teams scale further, the number of potential interactions between employees increases at an exponential rate.

This complexity isn't just theoretical. It manifests in tangible, frustrating ways: games of telephone, duplicated efforts, and misaligned priorities. Founders begin to feel disconnected from their companies - less like hands-on builders and more like detached architects, plotting designs on paper.

"Founder mode" vs. "manager mode"

This pivot point in a startup's trajectory speaks to a tension as old as Silicon Valley itself: founders vs. non-founder executives. It's a debate recently thrust back into the spotlight by Paul Graham, co-founder of Y Combinator, in his provocative essay, "Founder Mode."

Here, Graham champions the hands-on, highly involved leadership style of iconic tech founder-CEOs like Steve Jobs. He argues that founders possess a unique ability to cut through bureaucracy and maintain a startup-like ethos even as their companies expand. These leaders reject the notion that they should engage with their company through layers of management. Instead, they dive into details, maintaining a personal grip on all aspects of their business.

"Manager mode," by contrast, is a place where innovation goes to die, suffocated by slide decks and middle managers. In Graham's words, it involves treating "subtrees of the org chart as black boxes." Direct reports relay rose-colored results to the founder-CEO, who stays out of the details. This delegate-and-trust approach empowers "professional fakers" who "drive the company into the ground."

Graham's narrative is seductive in its simplicity. It feeds into the Silicon Valley mythos of the visionary founder, the Jobs-ian archetype who bends reality through sheer force of will. It's a story to which we in venture capital are particularly inclined. After all, we're in the business of funding 100x breakthroughs, not incremental improvements.

Yet, as is often the case, the reality is more nuanced and complex. 

The case for "owner mode"

At its core, the "founder mode" debate is about how to preserve the innovative spirit and speed that characterize successful startups as they scale into large enterprises.

Brian Chesky describes this as the difference between "micromanaging" and "being in the details." By staying deeply involved - without making every decision - leaders can provide meaningful guidance and hold their team accountable. This approach allows founders to stay connected to the ground truth and evolve their understanding of the business from the bottom up.

Brad Porter, a robotics founder with a long tenure in big tech, frames it as "engaged leadership." The pitfall lies not in bringing on managers, but in founders believing they can simply pass the baton to seasoned executives and step aside. Leadership, Porter argues, isn't a competency you can outsource.

This resonates deeply with my experience. I've seen too many technical founders, brilliant in their domains but new to leadership at scale, hire experienced executives expecting a magic fix. Instead, they often end up with the crisis that Porter describes: the founder feels adrift, the new hires lack crucial context, and the company culture - never crisply defined to begin with - starts to fracture.

Nikesh Arora, the non-founder CEO of Palo Alto Networks and former guest on the B2BaCEO podcast, advocates for what he calls "owner mode." Arora argues that the "founder mindset" isn't a mystical quality, but a set of attitudes and behaviors that can be fostered and spread throughout a company. The goal is to cultivate a leadership team that thinks and acts like owners. Every executive should feel personally accountable for company-wide outcomes, empowered to take initiative, and invested in the business's long-term success.

Putting "owner mode" into practice

This begs the question: How do you actually operationalize owner mode in a growing company? Here are three approaches to consider:

📊 The 70/20/10 rule

Sanjit Biswas, in a recent B2BaCEO podcast episode, shared his framework for resource allocation: 70% to core improvements, 20% to adjacent opportunities, and 10% to high-risk, potentially transformative projects. The idea is to institutionalize the spirit of "founder mode," ensuring that innovation becomes hardwired into how the company operates.

🛠️ Execution > strategy

Frank Slootman, a seasoned non-founder CEO, adds another dimension to this debate. In our B2BaCEO podcast conversation, he emphasized that prioritizing execution over strategy is a key aspect of "founder mode." An obsession with strategizing can act as an escape from the hard work of actually getting things done. The most effective founders, in his view, use execution to clarify strategy, not the other way around. 

✨ Meta's "founder mode 2.0"

Meta's recent evolution under Mark Zuckerberg offers a third case study of owner mode in action. The company has come full circle, from dorm-room startup to corporate behemoth and back to a leaner, more nimble version of itself. This time, it's a new breed of founder-led company - one that strives to marry a startup’s ethos with enterprise scale.

Zuckerberg laid out this vision in his "year of efficiency" memo last March, just before the company's fourth round of layoffs that affected more than 20,000 employees. After a hiring spree that nearly doubled the company's headcount in just three years, Meta faced its first-ever drop in users and a slowdown in its ad business. 

Zuckerberg's response? Double down on what he saw as the core strengths of a founder-led company. His three mottos:

• "Flatter is faster": Stripping away layers of middle management to reduce the "latency and risk aversion" that plague large organizations.

• "Leaner is better": Ruthlessly prioritizing only those initiatives that are aligned with Meta's core mission.

• "Keep technology the main thing": Reaffirming the engineering-driven culture that fueled Facebook's initial success.

Zuckerberg operationalizes these principles by fostering "founder-like behaviors" in his leadership team. Instead of rewarding managers for building large teams and complex processes, he prioritizes those who can drive new initiatives from start to finish. In this paradigm, the ideal manager isn't just an overseer, but a doer - an IC at heart.

By many accounts, Meta is now the most innovative of the internet-era incumbents, leading the charge in open-source models and the developer ecosystem surrounding them. This turnaround suggests that "founder mode 2.0" can indeed be effectively scaled, even within big tech.

Where I land: Six principles for founder-CEOs

Pitting "founder mode" against "manager mode" presents founders with a false choice. As their startups scale from $10M to $100 ARR, the best founders chart a third path: one that preserves the agility and innovative spirit of their early days while creating the structures needed to coordinate a growing team.

This is where "owner mode" comes into play. It's not about maintaining iron-fisted control, but about propagating the owner mindset. This means making intentional, explicit choices at every level of the company. Every organizational decision - from how you spend your time to how you run meetings - shapes your company's DNA. Collectively, these decisions define your culture and determine whether your company operates in owner or manager mode.

I often take inspiration from Reed Hastings, co-founder and chairman of Netflix, a Foundation Capital portfolio company. Through his widely circulated "culture deck" and popular book, Hastings has clearly and repeatedly articulated what makes Netflix's culture both high-performing and unique. This transparency aligns the team internally and attracts like-minded talent.

As you (a founder-CEO) make these choices, here are six principles that may be helpful to consider:

1. 🎯 Ensure laser focus and strategic alignment 

• Define what truly matters: In a startup’s early days, focus and alignment come naturally. With a small team, everyone knows what matters and how they contribute to the business’s goals. However, as the team grows, it's common to see what I call "priority creep": an ever-expanding list of focus areas akin to feature creep in project management. As the saying goes: "The main thing is to keep the main thing the main thing."

• Align metrics with business goals: Define clear metrics to measure progress against the business’s core priorities. Snowflake under Frank Slootman's leadership provides an excellent example of metric realignment. Initially, Snowflake focused on bookings, a common metric for SaaS companies. However, Slootman recognized that Snowflake was more akin to a utility or cloud computing company than traditional SaaS and shifted the company's focus to consumption metrics in response. This change better reflected how customers actually used and paid for Snowflake's services, aligning the company's KPIs with its true operational model.

• Watch out for the OKR trap: While OKRs and MBOs are meant to drive alignment, they often become vehicles for managers and individuals to push personal agendas and jockey for individual success. For companies under $100M ARR, I believe everyone's bonus should be tied to the company's overall goals. Exceptional ICs can be rewarded with special grants (e.g. founder grants), while those not moving the meter should be let go.

2. 🗣️ Communicate constantly

• Play your message on repeat: From my perspective, the most crucial aspect of communication is repetition. As Jeff Weiner, former CEO of LinkedIn, puts it: "You need to repeat a message so often that you get sick of hearing it." In a startup's early days, when everyone is in the same room (physical or virtual), staying on the same page is easy. As the company grows, intentional repetition becomes essential.

• Simplify as you scale: Marcus Ryu, co-founder and former CEO of Guidewire, makes an insightful observation: "No matter how smart the people are who you're communicating to, the more of them there are, the dumber the collective gets. [...] As the audience gets bigger and bigger, your message has to get simpler and simpler, and the bullet-point list has to be shorter and shorter." Clear, simple, and repeated messaging is key as your team scales.

3. 🔥 Maintain a sense of urgency

• Fight organizational inertia: As companies grow, there's a natural tendency to slow down. Work often expands to fill the time and resources available, and people begin to feel they need to "align" with others before making decisions. While alignment is critical, it shouldn't become an excuse for reducing pace.

• Set the tempo from the top: When someone proposes a deadline, ask why it will take that long. Inquire if there's an 80/20 version available much earlier. This isn't a one-time exercise - you need to demonstrate urgency every day to counteract the natural bias of organizations to slow down as they grow.

4. ✂️ Stay flat and lean

• Minimize layers: As organizations grow, there's an inevitable need for more management. However, companies often end up with too many managers and not enough doers. Consider Jensen Huang's approach at NVIDIA: having 50+ direct reports. As Huang explains, "The more direct reports a CEO has, the fewer layers there are in the company. It allows us to keep information fluid. … Everyone is empowered by information and our company just performs better because everyone is aligned and informed by what's going on."

• Fewer, more focused meetings: When I was at Microsoft, it was common to have meetings to prepare the agenda for other meetings! Founders need to push back against this trend. Question the goals of every meeting, whether it's truly necessary, and if everyone in the meeting has an active role to play. The key is to reward doing and expect everyone to actively contribute rather than just "coordinate" or merely manage.

5. 🔎 Stay connected and dig into the details

• Keep your ears to the ground: As a leader, it's crucial to stay connected to the ground truth of your business. Ask tough questions and encourage others to do the same. When discussing an issue, push to have the person actually doing the job in the room, rather than relying on layers of management. Routinely conduct skip-level meetings and expect your leaders to have details at their fingertips.

• Lead by example: Elon Musk famously slept on the shop floor in 2018 to show solidarity with employees when Tesla's Model 3 production fell behind schedule. This level of CEO commitment sends a powerful message throughout the organization.

6. 🏆 Keep the talent bar high

• Stay involved in hiring: This may be a controversial view, but I believe founders should continue to interview every employee until their company reaches $100M ARR. Over time, founders will need to delegate some of this responsibility, but they should do so gradually and only to carefully selected "bar raisers." Remember, a company is only as good as its people, and B players tend to hire C players.

• Implement a "keeper test": I'm a strong proponent of Netflix's "keeper test." As CTO Elizabeth Stone summarizes: "When assessing their team, a manager should ask, 'If this person were to quit tomorrow, would I work hard to try to change their mind?' If not, they're not a keeper, and the manager should find someone they would fight to keep."

As you scale, the challenges you face will constantly evolve, so your organizational principles and leadership style need to evolve too. This evolution isn't about becoming less "founder-like." It's about finding new ways to express your founding vision and drive as your startup grows.

In the end, "owner mode" isn't just about how one person leads, but about how an entire organization thinks and acts.