One of the most debated topics in boardrooms of VC backed early stage companies is certainly the opportunity to (or not to) replace founders with professional CEO at certain stages in the life of a company.
Looking at statistics in my current and past portfolio its appears extremely obvious that companies where the founder-s/ceo-s remained at the helm have (boldly) outperformed the ones in which external CEO have been brought in. Actually only in one case I can remember a very successful investment where a new CEO came on board (though the change took place almost in conjuction with the IPO and the company after initial post IPO successes (and luckily post our exit) performed very poorly).
Of course the stats do not really tell the all story as the samples are necessarily biased. Often when a company faces disaster a new CEO appointment can be the last attempt to save situations which might be impossible saves anyway. On the contrary when a company performs well, more inertial behaviours tend to prevail and investors tend to become much more forgiving and reluctant to change even when a change would be highly beneficial to the company's future prospects.
The conclusion I have come to when thinking about such issue based from past experience (even though on a more qualitative than quantitative basis) is that identifying from the start a founder/ceo and a team that CAN be leading the company until the exit is, particularly in Europe, a must have for at least two reasons:
- the first 6 months of any startup are decisive to create the core team (the 3-4 people who'll make the difference). Only an outstanding Founder/CEO will be able to attract top people at such stage
- external CEOs are (generally) eager to jump on board if the outlook is rosy and the IPO 6 months away but also the very first to leave a sinking ship. When this happens besides the financial loss investors end up spending their time in managing the wind-up process.
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