Why are VCs on boards hesitant to remove or replace founder CEOs who don’t deliver?
Four things:
- First, if you are going to “replace” a CEO — you better darn well have a better candidate on hand. Most VCs don’t have enough of a bench here. Some do. But often, the replacement is worse, especially if the company is struggling. Personally, I have zero candidates on hand. If any of the CEOs I’ve invested in don’t work out, or quit — I assume I’ll have to write the investment off to $0.
- Second, it’s hard to do better, usually. Founders know everything about the customers, the industry, the product, the bugs, the flaws. At some point, a market and product become mature, and a “professional CEO” perhaps doesn’t have to be an expert in product or market anymore. But you immediately lose this fluency when you bring in a non-founder CEO, at least usually.
- Third, adding a COO or other senior help is often the better course. If the CEO has gotten you this far … it’s often better to help her build out the team. Rather than hope someone new can fix the issues.
- Fourth, you have to have the right. VCs control boards less and less often these days. In my first start-up, the VCs had the right to pick the CEO. Not so much the second time.
So …
It’s not that simple.
Published on April 4, 2017