An Entrepreneur Prepares to Pass the Torch

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I was surprised at how investors really thought I would resist that changeover, and I don't have that resistance at all. I guess I can't say it enough: I know how successful it can be. I also know it takes people who are far more experienced than me. I've created something out of nothing—out of a byproduct—and taken it this far."

Her coach: Lauren Flanagan, the managing director of Madison (Wisc.)-based Phenomenelle Angels Fund, is one of White's five coaches. She's also the primary investor in White's business and wants others to invest. Flanagan has been an entrepreneur as well as an investor.

Her advice: "White is a passionate entrepreneur who built a company around a product idea and now understands it's really a scalable brand. But she's not a consumer packaged-goods veteran. She's never run a big company before. She's kind of the classic entrepreneur who created a market. For entrepreneurs, the big fear is that they'll get an investor who will throw the management team out and put some of their cronies in—and those people won't know what they're doing, and they'll drive the company into the ground. Sometimes that's justified, but there's no reason an investor would willingly or knowingly put some bozo in charge of the company they're putting money in. So presumably they would try to put together a team that is going to really advance and grow the company.

"But the challenge in doing that is not to demotivate the team or lose the founder's engagement. It's very critical that the founder and the existing management team welcome the change and are part of the process. Those are the keys to making it successful. You have to really work through it. Entrepreneurs always tell you, 'I know, I have to step aside at the right time.' But they don't always mean it. The problem is how do you communicate that in a way that sounds good to investors. It's a normal problem. The founder-entrepreneur is not normally the CEO you need to scale it. I think the mistake founders make is thinking they can do the whole thing. The number who do actually take it to IPO or high-volume M&A is a very small percentage. It doesn't mean you didn't do a good job to get it where you did. You might just need someone else to help you take the baton the next relay lap.

"And then [another problem] is the investors who think they're doing the company a favor to try to find the team and put them in without involving the existing management team. That can lead to culture clash, or defection of the management team, or the founder, worst of all, or acrimony. And that's when the whole thing just falls apart. It's a classic problem for early-stage companies and investors. Because if you screw this up, you'll kill the company. But if you don't do it, the company is not going to be successful at getting as big as it could be because it won't have the support it needs."

The plan: The hiring will take place over time, with White serving on the search team and the interviewing team—and weighing in on the pros and cons of each potential hire. When pitching to investors, White will refer to herself as the founder and current president. When she gets to the management slide of her presentation, she will explain that one of the uses for the requested funds is to expand the management team and find a packaged-goods veteran to help lead as CEO.

Leiber is Small Business editor for BusinessWeek.com .

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