FTX and the Problem of Unchecked Founder Power

Startup founders typically face a fundamental tradeoff: They can grow the company, increasing its value and the value of their shares, but to do so they must give up some control. Or, they can keep control, at the expense of growth. That tradeoff exists for good reason: Investors who supply the capital necessary to grow want to make sure their money will be well spent. Co-founders and employees who join the startup want to know that it is well managed. To grow their startup to its full potential, a founder needs to relinquish control. But in cases like the collapse of FTX, this tradeoff breaks down — with predictable but disastrous results. It’s time to retire the founder-as-monarch model. 

The collapse of the FTX cryptocurrency exchange is a case study in what goes wrong when a startup grows quickly without any checks or balances. Although we rightly associate a startup’s success with the vision of its founder, there’s a reason we don’t…

Continue Reading →

This article was written by Noam Wasserman and originally published on hbr.org