What Cult of the Founder CEO?

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Virtually every time VCs talk about how they identify groundbreaking startups, they mention the formative role of a powerful founder-CEO. And looking at the history of famously successful startups of the last several decades — from Apple to Microsoft to Oracle to Facebook — it seems clear they have a point.

Yet looking at the recent spate of IPO filings from high-profile, venture-funded companies like Pandora, LinkedIn and Homeaway, the trend actually seems to be one of smaller ownership stakes for founders and, in some cases, reduced leadership roles. Overall, it seems like VC stakes are bigger and founders have already parted with the bulk of their holdings, either through secondary transactions or the dilutive effects of multiple funding rounds.

At music streaming site Pandora, for instance, the company’s famously persistent founder, Tim Westergren — who stuck with the dot-com bubble-era company for years without pay — owns a whopping 2.39% of the company. (Westergren is the company’s chief strategy officer.) Pandora CEO Joe Kennedy is hardly more vested, with 2.71% of the shares.

VCs are the biggest shareholders at Pandora, with Crosslink Capital, Walden Venture Capital, Greylock Partners and Labrador Ventures collectively holding 64% of shares.

At LinkedIn, founder Reid Hoffman and his wife, Michelle Yee, own a sizeable 21.3% of the company. But Hoffman, now a partner at Greylock, is no longer CEO. That post is now held by former Yahoo executive Jeff Weiner, with Hoffman serving as executive chairman.

Meanwhile, at vacation rental site HomeAway, co-founder and CEO Brian Sharples holds a 3% stake, while co-founder and Chief Strategy Officer Carl Shepherd has just under 1 percent. In contrast, HomeAway’s five largest venture backers own 74% of the company.

That’s not exactly surprising, given that Sharples started HomeAway as an entrepreneur-in-residence at Austin Ventures. The strategy for building the site was also quite capital intensive, and HomeAway raised hundreds of millions of dollars since 2005, largely to fund acquisitions of vacation rental businesses.

Still, it’s a notably smaller founders’ stake than another heavily funded recent entrant to the IPO pipeline — algae-based biofuel and products developer Solazyme. The company’s co-founders — Jonathan Wolfson, currently CEO, and Harrison Dillon, CTO — each have a 9.7% stake. Solazyme, meanwhile, has raised $131 million in venture funding, according to Thomson Reuters (publisher of this blog).

But while comparatively larger, those stakes are still much smaller than some enjoyed by famous founders of IPOs past. For instance, when Google went public in 2004, Sergey Brin and Larry Page each owned 16% of the company, with CEO Eric Schmidt holding another 6.1%. And Steve Jobs reportedly had a 15% stake in Apple at the time of its 1980 IPO.

Probably the most famous case of a tech founder with an outsized post-IPO stake is Bill Gates, who owned 46% of Microsoft when the company went public, shortly after his 30th birthday, in 1986.

Are these smaller founder-CEO stakes problematic? Take our survey and let us know what you think.