Founder vs. CEO: What’s the Difference?

Entrepreneurs sometimes treat their businesses like a baby, and as any parent knows, it can be hard to let your baby go when they’re grown. Luckily, founders don’t have to let their companies go.

After founding a company, some entrepreneurs remain on as CEO, overseeing operations and scaling it up to serve larger markets. But other founders decide they can let go, recognizing the skills required to launch a startup may not be the same as what’s needed to manage a mature enterprise. They may step aside, handing the reins to a seasoned executive better equipped to navigate the complexities of expansion and long-term sustainability. 

The line between founder and CEO can be blurry, especially when one person fills both roles. Here’s a rundown of key areas where they overlap and how they differ.

What is a founder?

A founder is a person who starts a business or organization. For example, Jeff Bezos founded Amazon and Sara Blakely founded Spanx. When more than one founder starts an organization together, you can refer to any of them as a co-founder. For instance, Steve Jobs and Steve Wozniak were co-founders of Apple.

Responsibilities of a founder

Founders turn their initial idea into a business, often by identifying a market need, developing a product or service, and building the framework of the organization. They set the initial direction, determining the company’s vision, mission, and values—either directly, or by empowering a team to do so. Here’s a high-level overview of what founders are responsible for:

• Creating the company and setting its vision. A founder develops the business concept, incorporates the company, and sets the initial direction.

• Providing or securing initial funding and resources. As a business owner, a founder must secure the necessary capital and resources to launch and grow the business.

• Building a team. Unless the business is a solo operation, a founder must recruit key personnel to help execute the business plan. If the founder doesn’t aim to run the company long term, this includes installing a leadership team to do so.

• Establishing the company culture. A founder sets the tone for the company’s culture, values, and work environment.

• Strategic planning. A founder leads the way in defining their company’s long-term goals and strategies.

• Managing early-stage operations. A founder must handle their startup’s day-to-day operations, wearing multiple hats to handle disparate tasks during their company’s early stages.

• Bearing risk. Founders expose themselves to risk when they start a new venture because they spend both time and money on the new startup instead of other ventures.

What is a CEO?

A chief executive officer (CEO) is the highest-ranking executive within a company. They are responsible for overseeing the business’s daily operations and making major decisions.

In accordance with legal and regulatory requirements, a company’s board of directors hires the CEO, and they serve at the board’s pleasure and discretion. A chairman heads this board of directors and, in some cases, the same person can serve as CEO. A board does not oversee a company’s operations on a day-to-day basis; it communicates the company’s goals and financial expectations to the CEO, who is then responsible for on-the-ground management.

Responsibilities of a CEO

The CEO role is ultimately accountable for a company’s financial performance, strategic direction, growth, and long-term success. Here’s a high-level overview of what CEOs are responsible for: 

• Strategic vision and direction. CEOs set the ongoing, long-term strategic direction for their company, determining its overall goals and how to achieve them.

• Leadership and management. CEOs lead and manage their executive team, aligning them to company goals. Executive positions include a chief operating officer (COO), chief financial officer (CFO), and various positions related to security, information technology, sales, marketing, and product design.

• Top-level decision-making. CEOs make critical decisions that impact the company’s finances, operations, and future endeavors. While an effective CEO knows how to delegate work to their employees, they serve as the final authority on the company’s biggest decisions.

• Financial management. A CEO must oversee their company’s financial performance, ensuring profitability (or a path to profitability) and responsible resource allocation. A CEO’s compensation package often includes equity to create a financial stake in the company’s success.

• Company representation. CEOs serve as the public face of their company to investors, partners, the public, and other stakeholders.

• Fundraising. Many businesses, especially startups, need to raise capital to finance organizational operations as their company grows. A CEO’s responsibilities often involve fundraising, both directly and by helping their team articulate a clear vision of how the company can scale up and let investors turn a profit.

Founder vs. CEO: What’s the difference?

• Origin and involvement
• Responsibilities
• Leadership and influence
• Financial stake

The roles of a founder and a CEO sometimes overlap, but each has distinct characteristics. Here’s a breakdown of the core similarities and key differences:

Origin and involvement

A founder originates the business and establishes its core mission. They’re often deeply involved in the initial product development, business model creation, and early fundraising. Once the business is up and running, a founder may step back from day-to-day operations, remain on the board of directors, or stay in an advisory position, where they may provide input on an ongoing basis.

A CEO’s work begins when they’re appointed or promoted to run the company, whether or not they were involved in its founding. They’re tasked with managing operations and driving growth. They’re evaluated on whether they can scale the business, boost financial performance, and manage its workforce.

In many startup scenarios, the founder assumes the role of CEO, particularly during the company’s early growth stages. A successful founder/CEO should possess both the visionary drive to inspire a team and the operational acumen to manage the company. Ideally, they embody a unique blend of passion and practicality, navigating the challenges of both building and scaling the enterprise. This dual role can be incredibly powerful, but it also necessitates a delicate balance between strategic vision and day-to-day execution.

Responsibilities

In the early stages of a company, founders often wear multiple hats, handling various operational tasks, from product development to customer service. They could go from a multimillion-dollar call with angel investors to picking up lunch for their team. Their involvement in day-to-day operations may decrease as the company grows.

Once a CEO joins an organization, they become responsible for overseeing all aspects of the company’s operations. Their responsibilities include everything from boosting the stock price to ensuring a positive workplace environment. Think of a CEO like the principal of a school or the head coach of a football team. They may not work hands-on with each separate individual of the company, but they’re the driving force behind everything that happens within their organization.

Leadership and influence

Many founders are the soul of their brand, shaping its culture and values. They enjoy inherent influence due to their role in creating the company—but some founders may lack corporate leadership experience, relying on passion and creativity rather than formal management skills.

Many CEOs have formal training, from business school or experience at other companies where they built operational acumen and leadership skills. A CEO holds positional authority granted by the company’s board and shareholders, and uses it to shape corporate governance, team building, and company growth.

Ideally, CEOs employ a strong executive team and delegate power among its members. A strong team lets the CEO focus on the highest-order matters, such as their financial responsibilities to shareholders, and keeps them out of smaller workplace matters.

Financial stake

A founder typically holds a significant ownership stake in their company. They may choose to gradually sell equity or have their equity diluted through funding rounds. 

A CEO may or may not own shares in the company, depending on their compensation package. However, it’s typical for CEOs to get stock options or equity incentives as part of their pay. This gives them a more vested interest in seeing the value of those shares grow. Overall, founders often have greater ownership and long-term financial interest, while CEOs may hold less equity but can receive performance-based incentives.

4 reasons founders become CEOs

1. Sustaining an original vision
2. Navigating growth and scaling
3. Building and leading a growing team
4. Satisfying investors

While not every founder transitions into the CEO role at their company, many do. In smaller businesses, founders often learn every part of the business, from its supply chain vendors to its insurance rates, making it natural for them to assume the CEO title. Here are four reasons why the founder/CEO title is common throughout the business world:

1. Sustaining an original vision

A founder/CEO is uniquely positioned to preserve the company’s original idea and vision as the business grows. They possess an intimate understanding of the company’s original idea and core values. By becoming CEO, they help maintain the integrity of their business as it scales, preventing deviations from its foundational principles.

For example, Sana Javeri Kadri had a vision to build a different kind of spice business. She founded Diaspora Co. to execute that vision and then stayed on as CEO because her business reflected herself and her values.

2. Navigating growth and scaling

As smaller businesses expand, they require different skills and strategies. Because founders are typically responsible for nearly everything in their business’s earliest days, some may already possess the skills and strategic vision the company needs to scale up. Others may need to skill up as the business grows, but they’re glad to do that rather than bring in a new person to become the CEO of their company.

For example, Kloo Coffee co-founders Claudia Snoh and Mariella Cho built business acumen through a prolonged soft launch where they gathered immense amounts of data about customer preferences. When they were finally ready to scale up, they possessed more institutional knowledge than any outsider MBA could have provided them. They were the natural choices to oversee their company’s rapid growth.

3. Building and leading a growing team

As startups expand, they transition from small, close-knit teams to larger, more complex organizations. The founder/CEO, having been involved from the beginning, can effectively communicate the company’s culture and values to new employees.

This was the case for Aliyah Marandiz, founder of Sugardoh. Aliyah began her business in her college dorm room, which intrinsically connected her to the company and its way of doing business. As Sugardoh scaled to a multimillion-dollar brand, Aliyah stayed on as CEO to ensure that new hires would blend into the culture of a company she created in a single shared room.

4. Satisfying investors

In many cases, investors prefer founders to remain as CEOs, especially in the early stages of a company’s growth, hoping the founder/CEO’s passion and connection to the company increases the likelihood of success.

Eight Sleep CEO Matteo Franceschetti built relationships with investors by emphasizing that working with them as they challenge you to grow is essential. “What I have learned over these years is the really, really good investors, they really make a difference,” Matteo says. “They push you once per year or two times per year in a certain direction. But those two things can shape the company [or] can save the company.”