Founder of colony holding no flag (6)
I believe the answer is:
pennon
'flag' is the definition.
(I know that pennon is a type of flag)
'founder of colony holding no' is the wordplay.
'founder of colony' becomes 'Penn' (William Penn, founder of Pennsylvania).
'holding' is an insertion indicator.
'penn' enclosing 'no' is 'PENNON'.
(Other definitions for pennon that I've seen before include "Streamer on a lance" , "Ship's tapering flag" , "one might be all of a flutter" , "Small triangular flag" , "Knight's personal flag" .)