William D. Cohan, writing in the New York Times’ DealBook, characterizes the third-party valuations of private companies under Section 409A of the Internal Revenue Code as Silicon Valley’s “dirty little secret” and a “shell game.” Especially in the aftermath of the financial crisis, there has been plenty of populist rhetoric about practices in the business world, and much of that criticism has had basis in fact, but this take on 409A valuations seems awfully strained.
As described in Cohan’s article, Section 409A and the related rules require that companies obtain independent valuations in connection with their issuance of equity-based awards to employees, and failure to comply results in tax penalties. Cohan details the fact that various service providers charge significant fees to undertake these valuations, using words like “supposed” experts to make the whole enterprise seem like a racket, but the reality is that the rules do exist, and these valuations have to be done. If it was possible for just anyone to make up a valuation for a bargain-basement fee, heck, I would consider doing it as a side gig from my legal work. But the rules actually go into detail as to the required qualifications for firms providing these services. Cohan notes in the article that the SEC would not comment on these practices, but this is really more of an issue of tax law than securities law. What constrains companies and their hired valuation help from simply making up numbers out of thin air is the fact that their decisions are subject to later IRS scrutiny and sanctions.
This may be part of the explanation, but it seems to me to be confusing correlation and causation. There may be a reason other than the qualities of the founders themselves that account for the different performance. One possible alternate factor is the manner in which startups are funded. Startups that receive venture capital funding are, in my experience, more likely to see a change in leadership, sometimes imposed by the venture fund as a condition to investment. On the other hand, startups that are funded by less heavy-handed capital sources (friends and family money, bank loans, etc.) are more likely to have the founders continue in their role indefinitely.
The Wall Street Journal recently detailed 
Writing his usual daily roundup in Bloomberg View, Matt Levine, a former corporate attorney and investment banker who is perhaps the only person in the world who writes in a laugh-out-loud manner about securities law, raises interesting points on two unrelated topics: 
What if, however, a fund investor decided instead to take a Shark Tank-type approach and negotiate only the amount invested and valuation with no special rights – just common stock, no board representation, no economic preferences. (By the way, I have no idea whether the sharks on the show negotiate these sorts of rights as part of their deals – it would be too boring to describe to a network TV audience – but I’m just using the show to illustrate a point.) The approach on the part of the investor is that if a due diligence investigation shows that this is a promising venture, just give the company the needed funds and let the founders do their thing, providing advice only as requested by the company. Of course, some ventures won’t work out, but in any event the idea (particularly with venture capital funds) is to spread funds around many investments and wait for a few to pay off big. The rationale for stepping back like this is to make yourself attractive to companies seeking capital, allowing you to be more selective in the companies you invest in, hopefully leading to greater ultimate success.