Companies are usually the reflection of their founders. They have their virtues, their principles and their way of doing things. They obviously inherit their personality, bad or good.
When you remove the founders, you lose it all. And with that, most of the times you lose the reason why that company was successful in the first place. Most companies never recover and they simply go on to become zoombies. Mediocre products, unmotivated teams and flat revenues.
If you are new to this world, you might ask “why are founders so critical?”. There are many reasons, but the only two that matter are: because they have the gut to follow their instincts and they are the most knowleadgeable about their business, industry and market.
When founders are in charge and have commitment, they solve problems no other executives will ever solve and they create products that you will never have without them.
Why private equity doesn’t work for founders
Because in PE there is no appetite for risk. Zero. Nada.
There is no appetite for new products that are working just in the founders’ mind and little interest in waiting months or years to test things out. Founders are visionaries, they are stubborn, sometimes arrogant and willing to take big bets. PE is nothing like that and the people you work with have never “lived” or “built” a company. They come from great business schools and have lots of financial knowledge.
Most importantly, your vision, your intuition and everything else isn’t of interest to them. Your company is a spreadsheet and ebit is the only thing that matters.
This is why you often hear how bad it is PE for tech companies and for their founders. Tech is about innovation, bets and creating something that doesn’t exist yet. It’s not what private equity is about, it’s actually the opposite.
Sometimes it works, but it rarely works keeping founders at the helm. Founders can make a ton of money with PE (nowadays, unfortunately, that’s often the only exit strategy), but they rarely maintain their companies or stay there for long.
A well balanced read about PE for founders: https://www.saastr.com/rise-private-equity-saas-gift-founders/