Your face is not your moat: The double edge of the founder brand

Every company, during its early years, takes a decision. Sometimes quietly and sometimes with some fanfare. The suggestion is that the founder should be the face of the thing – and the rest of the team either has a favourable opinion or not. It feels obvious to some and cheap to others. But it works. The press likes people much more than it likes products. The investor remembers the person who presented long after they have forgotten the slides. A customer who couldn’t tell two infra vendors apart can tell you which founder they would perhaps consider having dinner with.

That is the bargain of bringing the founder’s charisma to the table. November 12 this year showed us what that costs.

On this day, Nvidia announced that its poster-boy CEO, Jensen Huang, had resigned, effective immediately. CFO Colette Kress had stepped in as interim CEO. The cause? We all know by now. An extramarital affair. One involving a woman U.S. officials believe was recruited by Beijing to spy on the massive enterprise. The other involving an executive who reported to him. The company’s stock price? Well, that lost about $550 billion in market value in just five days. Resignation day was what the pundits call a bloodbath – down 16% on the announcement, before finally settling at -4.3%.

What Gets Built Around a Person

Now, Nvidia is one of the most technical companies on Earth. Very few people on the outside, apart from engineers, can explain why a GPU cluster matters. So, the company had to invent something that was non-tech and could go beyond the spec sheet if it had to build a story around itself. Huang gave them that story! The Denny’s booth was brought in, the leather jacket was thrown on, and the stage presence of a man who made product launches feel like concerts was highlighted.

The street food walks through Taiwan’s night markets were the humble cherry on top. The dominant tech giant now had a human face. But it also did something that was a little less visible. It taught its investors to believe that one person’s judgment was all there was to the way the company worked. Nvidia was Jensen, and Jensen was Nvidia.

Now, that is a powerful thing to teach your investor. A double-edged sword, even. Because it converts a complicated business into a simple act of trust. A leap of faith, because that trust has now been concentrated in the hands of one human being.

When the news broke, Nvidia was already in the eye of the storm. They didn’t need a new story to drive it up a notch. The existing one had done enough damage. The founder’s instinct was the secret ingredient that had been popularised for Nvidia. So when his judgment itself was being doubted, it soon became a doubt about the whole company. The same press that wrote reams about the founder and his greatness now began to write differently. The structure was built around a single leader. Once, it was the epitome of speed, but now it had become a place that didn’t have enough checks and balances in place. Surprisingly, there was another announcement in the same breath – about Nvidia’s first-ever independent board chair! Imagine a company that large that didn’t have one, with NBC describing this as a major governance shift when all it had done was rely on Huang for decades.

The Succession Question

Yes, succession was in question. The market’s reaction, again, was not kind. Kress had served the company for over 13 years, but expectations of her serving barely a year before a permanent CEO took over were tough, to say the least. The board, meanwhile, stated that it was weighing both internal and external candidates. Now, imagine a company that had such deep talent in engineering and top software ecosystems but was falling short of leaders when the time came?

But then it had to look in that direction because the attention had always been on one name for years now. No one else on the leadership team had ever been in the spotlight. This gap looked like a gaping hole in visibility. That too, at the worst possible moment.

Design Decisions Worth Making Early

A week could destroy a founder-led brand. We saw that here. But does it have to end like this? Yes, it does need some deliberate choices. Most of them are easy to make when everything is hunky-dory.

The first one is the simplest. Keep the founder focused on the work! The founder has to be used as a lens that focuses attention back on the product, its customers and its engineers. What you are still selling as a company to both customers and the media is the product. Not your founder. Because once it is the person who is being sold, you have taken a loan against your founder’s private life. That can be very tough to repay at a certain stage.

The second is the choice of qualities that have to be promoted. Competence can be defended; virtue cannot. You can call the founder a strategist, a technical mind, a builder. But positioning him as disciplined, morally exceptional and tireless is pushing it a bit too far, given his humanity and fallibility. He cannot keep meeting and beating that standard permanently. Hence, even a small chip-off will surface as a major flaw when things go south.

The third is to begin building institutional equity when the markets are in your favour. Apple did that cleverly from Jobs to Cook, and Microsoft did that well from Gates to Nadella. Why? Because, in good times, the spotlight had been moved to the product, the platform and the operating discipline, rather than just the fact that the founder was iconic. You don’t see that kind of groundwork. It is tedious and invisible, and it pays off on days like this when trillions in market cap are at stake. Spread the spokespersons out by giving the engineers the stage, the finance guy a voice, and the software moat an acknowledgement every now and then. At least as much, if not more, than the founder.

A Simple Test

If you still want to get a dipstick check done, ask a customer, an investor or maybe even a journalist to name three people at the company apart from the founder. If the answer comes slowly or not at all, you will know the brand has a dependency that can be as fatal as this one today.

Charisma is great, and there is no need to hide it. But it is borrowed energy. It can only carry a company from bootstrap to listing. But beyond that, the loan comes back for repayment. And rarely on a convenient date. Nvidia will still be there in the next quarter. Its chips, its CUDA ecosystem and its engineers will all be around. But it only remains to be seen when the markets will stop looking for the quintessential jacket.