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Why are founders often brought back to steady the ship?

Pandora's co-founder Tim Westergren has returned to the streaming service as CEO after disappointing results.

by Rebecca Smith
Last Updated: 07 Jun 2016

Many founders - particularly of tech firms - find themselves unceremoniously booted after overseeing their company's rapid growth. VCs often want to bring professional managers on board, but then later down the line call back these same founders to help pick up the pieces or turn around a dire situation.

The latest co-founder to return to his company is Tim Westergren, who ran online radio service Pandora between 2002 and 2004. It has since struggled against the streaming successes of Spotify and Apple Music and chief exec Brian McAndrews recently left after disappointing fourth quarter profits and its share price fell by a third in the past twelve months. Pandora has said Westergren’s return will ‘accelerate the company’s growth strategy’. And that's often what co-founders get called back to help accomplish.

The obvious historic example is Steve Jobs’ triumphant return to Apple. He was famously ousted after bringing in former Pepsi man John Sculley. The company soon took a nosedive after Jobs' exit, teetering towards bankruptcy. Jobs came back in 1997, arranged a partnership with Microsoft, introduced the iMac a year later, returned the company to profitability for the first time since 1995 and well, you know the rest from there.

Read more on Microsoft: Can Satya Nadella make Microsoft great again?

That shows how the conventional thinking that the person who takes a company to £50m turnover isn’t necessarily the one to take it to £5bn, doesn’t always apply to tech firms. More often than not, it's the individuals with a real understanding of the company and its technology who have a better sense of its trajectory and potential. Take Bill Gates with Microsoft, Larry Ellison with Oracle and Mark Zuckerberg with Facebook, who famously turned down Yahoo’s £1bn offer to buy his company when still in its infancy

There are though of course, times where bringing back a co-founder to lead the company isn't always the best approach. Eric Schmidt had a successful stint as Google's externally hired CEO – overseeing its IPO and increasing profits to more than $2.5bn. But co-founder Page took back the reins in 2011, promptly binned a number of underperforming products and appointed specific leaders for each of Google’s business divisions.

Its share price has nearly doubled since then, but the jury's still out on whether Page returned because he was the best man for the job, or because he simply can't tear himself away from the company. It's also uncertain how Twitter’s co-founder and now CEO Jack Dorsey will fare, as the latest man charged with battling stagnant user growth. Juggling that with the leadership of his mobile payments firm Square won't be easy. 

Bringing back a co-founder to run an ailing business has no guarantee of success. But there's a lot to be said for the vision, ambition and determination of an entrepreneur. 

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