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Crypto crash prompts founders to exodus

Kraken has appointed a new CEO after founder and current CEO Jesse Powell resigned two days ago, with Powell citing a desire to devote more time to the exchange’s products as the main reason for vacating his position. Powell will continue to serve as Kraken’s CEO, while current COO Dave Ripley will become the new CEO.

Powell’s move from the CEO role alone might not be a headline news, although reports suggest his move has something to do with certain political controversies the 42-year-old has been fueling recently. However, the transition also follows a series of similar departures from other founders and CEOs within the cryptocurrency sector, with Genesis’ Michael Moro, MicroStrategy’s Michael Saylor and Alameda Research’s Sam Trabucco also resigning in recent weeks.

Such exits, combined with an ongoing bear market and depressed cryptocurrency prices, suggest the industry is currently going through some kind of crisis, potentially threatening the companies such founders are leaving behind. However, that would be a hasty judgement, because even if some available data suggests that founder departures are bad for companies, recent departures can just as easily be cited as a sign that an industry is evolving, maturing and moving forward.

Kraken’s Jesse Powell Joins a Growing List of Founder-CEO Departures in Crypto

Jesse Powell of Kraken commented on his decision to step down as CEO, stating that he wanted to switch roles within the exchange rather than leave them behind altogether.

“As the company has grown, it has become more and more stressful and less fun for me,” he said in a video interview on Tuesday.

Regardless of his particular reasons (and some reporters have suggested his resignation is related to previously “igniting a culture war” at Kraken), Powell joins a growing list of crypto founders and CEOs who have emerged in recent months have resigned. This includes the following:

  • MicroStrategy’s Michael Saylor, who transitioned from CEO to the new role of Executive Chairman in early August (he still serves as Chairman of the Board of Directors). His resignation came as MicroStrategy suffered a loss in its bitcoin holdings of over $1 billion.
  • Genesis’ Michael Moro, who stepped down as CEO in mid-August, amid attempts by the cryptocurrency brokerage firm to trim its costs amid losses largely driven by exposure to Three Arrows Capital. It appears that he will not take on any other role within the company.
  • Alameda Research’s Sam Trabucco, who resigned as co-CEO of the FTX owner at the end of August, citing the need to “prioritize other things” in his life. He will continue to support the company in an advisory capacity, but will only be involved in day-to-day operations to a limited extent.
  • Hetal Majithia, the then CFO of cryptocurrency mining group Mawson, resigned in early August after just a year in the role. She left the company to “pursue other opportunities.”
  • Alex Atallah from OpenSea, who resigned as CTO at the beginning of Julywith the co-founder of the NFT marketplace remaining on the company’s board.
  • Trust Wallet’s Viktor Radchenko, who stepped down as CEO at the end of March, with the founder citing the need to “tTake time out to recharge.”

There are a handful of other examples that could be mentioned (eg Robinhood’s COO of Crypto, Christine Brown), but suffice it to say that the cryptocurrency sector appears to be undergoing a sea change right now, at least judging by the number of exits.

And in many of the cases above, it’s interesting to note that those who are stepping down often report that they need some time off, as if the trials and tribulations of crypto and the ongoing bear market it’s been in is a little too much are.

Instability?

Regardless of the specific reasons, the departure of so many experienced employees from some of the largest companies in the industry raises fears of instability. Because with founders and other high-level figures stepping down from key positions, it can be assumed they lack the leadership needed to see them through this difficult time for the industry.

There’s not much reliable research on what happens to companies after a founder leaves or resigns, but what little suggests that each of the above companies might be finding life a little harder for themselves right now.

For example, a 2015 UK management survey by Network ROI found that 33.9% of UK companies believe they would not survive without their founder at the helm, although it is likely that a majority of these pessimistic companies are family run.

Despite this, a 2013 university study conducted by researchers in the UK and Norway found that 341 private businesses aged up to 10 years old saw their turnover fall by an average of 60% four years after the death of a business owner, with employment in affected companies fell by 17%.

Of course, the sudden death of an owner or founder doesn’t directly compare to what happened in the cryptocurrency sector, but it does at least give a hint of how companies can suffer without their founders.

On the other hand, some research suggests a more or less opposite conclusion, undermining the sense that there is a clear answer as to whether cryptocurrency firms hit by exits will truly suffer.

Most notably, a 2019 World Management Survey study found that founder-led companies are 9.4% less productive and consistently have poor management outcomes. Equally important, the same study concluded that productivity and management scores increased after a founding CEO was replaced.

This aligns with Jesse Powell’s stepping down as CEO of Kraken. Indeed, much has been written about Powell’s controversial political stance in recent months (including comments on gender and race), and it’s arguable that he’s partially left the CEO role to ensure such controversies don’t hamper Kraken’s productivity and team spirit.

It’s also worth noting that while many of the aforementioned departures will also move founders/CEOs sideways, Powell will remain in a fairly influential position at Kraken. Therefore, it is entirely plausible to assume that the companies affected will not suffer too much from the absence of key executives and the guidance they offer.

Likewise, there is as much continuity as change in the cryptocurrency sector right now. The high-profile founding CEOs of Binance, Coinbase, and FTX remain entrenched in their respective positions, undermining any claim that the industry is currently undergoing excessive disruption.

And as for the companies where CEOs have resigned, such moves can be seen as evidence of corporate growth and development. As the industry tries to break into the mainstream at a difficult time, sticking with the same staff and philosophy may not be enough, so all new CEOs – mostly chosen after rigorous internal searches – should be welcome.

This is especially true for Kraken, which remains the ninth largest exchange in the world by volume (according to CoinGecko) despite investigations into possible sanctions violations. This is unlikely to change anytime soon, even though Jesse Powell is no longer at the helm.

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