Why is the relationship between autonomy-craving founders and goal-setting investors turbulent at times? It doesn’t need to be. After all, both founders and investors alike want their companies to succeed. And for that to happen, the start-up needs a dedicated CEO.
I’ve found that even the most resistant of founders can come to appreciate, and value, an incoming CEO. The secret to a smooth transition lies in how we choose the external CEO and how we manage the process of bringing them in.
Start-up investors and VCs are uniquely placed to take high-potential companies and create strong, sustainable growth from the seeds of an idea. And while start-up founders know deep down that this is true, I’ve still seen many occasions when an investor’s best efforts are met with suspicion — even hostility.
When should you bring in an external CEO?
So rather than going by the clock, start-up investors should consider the needs of the organization instead. Eventually all start-ups will need an external CEO to come in and take the reins — your start-up will get to this stage too, if it hasn’t done so already.
Does the company have scaling challenges? Is the founder great with the product and the customer, but not so au fait with the legal, financial, and organizational requirements of taking a start-up to the next level? Would the founder benefit from a strategic sounding-board — someone with proven, relevant, industry experience — to help guide the way?
These are questions all VCs should ask of their portfolio companies, to create the optimal conditions for success.
But even if the answer to these questions is a resounding “yes”, and it’s clear you need to hire a CEO, you may still face a challenge in getting the founder to agree. After all, 80% of founding CEOs have to be “pushed” out of their position.
So how do you make that transition as pain-free as possible?
How to a hire a CEO that your founder will love
To understand how to go about hiring an external CEO, you first need to consider what you’re asking them to do. The best start-up CEO will:
Establish and maintain corporate culture
You need a high-performing CEO who not only gels with the existing corporate culture but who is able to guide and develop it in a way that fits the brand’s — and founder’s — vision and values.
Set company strategy
The right CEO will see the business through a strategic lens; you need them to complement the founder’s enthusiasm and passion with experience and rationality. More so, your CEO should know how to take a strategic plan and execute it in reality — so the founder can focus on other things.
Lead the executive team
Founders come with great ideas and enormous dedication, but few have significant leadership experience — and some, none at all. A great CEO comes with years of leadership know-how and can act as a role model for founders who wish to learn these skills.
Interface with the board and/or investors
The right CEO understands investors and corporate systems. This allows them to communicate clearly and easily with board members, VCs, and the founder, to avoid misunderstandings.
Represent the company wherever required
The CEO is an embodiment of the business, both internally and for the outside world. In the words of Peter Drucker, they are “the link between the Inside, i.e. the organization,’and the Outside — society, the economy, technology, markets, customers, the media, public opinion.”
Founders typically get to where they are propelled by pure passion; the decisions they’ve made have been focused on designing and delivering, the best possible product that people want and need. Relatively few founders start off excited by conference circuits or PR, brand-building initiatives the CEO should embrace open-armed.
The opportunity to do more of what they want to do, and less of what they “have” to do, is just one way to get founder buy-in for hiring an external CEO.
Finding the right CEO for your start-up
There’s no such thing as the perfect CEO for all situations. Each potential CEO will have particular strengths and weaknesses, bringing different experiences and mindsets. What you’re looking for in a CEO for your start-up will depend on the skills that are already there, and also on what role (if any) the founder wants to play in the future.
One factor that is often over-emphasized, though, is the importance of ultra-relevant experience.
Many investors assume that a CEO who has hands-on experience with a similar product, service, or technology will be best placed to lead a growing business through scale-up. When, in fact, the opposite can sometimes be true. A mindset of “but this is how we did before” can add fuel to the flames of discontent between a founder and an external CEO — it also risks holding the start-up back.
If the CEO relies, at least in part, on the founder for a product, customer, or technical intel, then both parties see the value in working together for sustainable commercial success.
Finding a CEO who will blend comfortably with the founder and existing leadership team can seem like a huge challenge, but it’s not one you need to face alone. Good executive search firms can help you balance the needs and interests of all parties — ensuring that founders and all other stakeholders feel confident in the future of the organization. In addition, their experience, networks, methodologies, and insights can save you time and effort in the executive search process, and help you find the perfect fit for the needs of your scaling start-up.