

Why We Prefer Founding CEOs - jayliew
http://bhorowitz.com/2010/04/28/why-we-prefer-founding-ceos/

======
grellas
The craze to bring in outside CEOs reached its peak in Silicon Valley in the
bubble era when the "goal" of many of the dot-com startups became one of
packaging themselves for a quick IPO exit - in such an environment, bringing
on a "big name" CEO who had taken one or more previous companies public became
indispensable to the packaging process - so much so that startups were
routinely willing to give as much as 7% of their stock immediately prior to
the IPO to such persons just to get their name value added to the offering.

That trend (at least in its reflexive and frenzied form of "let's
automatically dump the founder CEO once we get to the stage where we need a
real CEO") died with the IPO craze that accompanied it and this wonderful
piece explains why it met a well-deserved end - you need to build real value
for something lasting to come of it and those who have the vision to found
companies and build innovative products are very often best positioned to
build such value and to guide that process.

------
rgrieselhuber
This is particularly important in the early to mid stage of a startup. I've
seen cases where professional CEOs were brought in pre-funding or just as the
company was getting funded.

The CEOs that I saw in these instances simply didn't know how to operate
creatively in an environment with tight constraints, so they did the only
thing they knew how to do: bring in unnecessary layers of middle management
which of course results in burning through cash before achieving a scalable
business model.

------
Enderdoon
This is Yujin Chung, the grad student at Wharton who helped Ben with some of
the research. One thought I had (which I will blog about) is the context
supporting Ben's three reasons is large founder equity stake (which is
generally many times larger than a professional CEO stake). More specifically,
on "moral authority," it's not just having the guts to change a company's
direction, but having the actual shareholder and board control to force such
strategic decision.

------
hga
A fantastic and very important essay.

" _[...] innovation is the core competency for technology companies._ "

And this shows up in their financial results.

And with _very_ rare exceptions (two are mentioned) professional CEOs don't
have what it takes to do that (three reasons are detailed) and (many) founder
CEOs can learn what they're missing.

------
akkartik
This earlier article it linked to is interesting as well:
[http://bhorowitz.com/2010/03/14/notes-on-leadership-be-
like-...](http://bhorowitz.com/2010/03/14/notes-on-leadership-be-like-steve-
jobs-and-bill-campbell-and-andy-grove)

------
avk
I'm glad to see Steve Blank mentioned. Having recently heard Blank talk about
the Transition from Scalable Startup to Large Company (slide 34 of
[http://www.slideshare.net/sblank/why-accountants-dont-run-
st...](http://www.slideshare.net/sblank/why-accountants-dont-run-startups-
sllc?from=ss_embed)), I've wondered whether I care to make the transition. At
least right now, my heart is in the chaotic early stages. Of course, I can't
speak for being a "real" CEO later on but my gut tells me I'd have more fun at
the startup stage.

------
Detrus
Of all the blogs about how to run a startup from the discomfort of your own
home, this one stands out. It's well written, has some research and it's
obvious that the writers spent time on the posts.

But perhaps too analytical, too long for getting a conversation going. There's
not much to argue about.

