Mar 1 2007 by Jason

What Do Venture Capitalists Think About Founders Looking For A New CEO?

Q: You (VC guy) are thinking about making an investment in a new company. The founder(s) relay to you that they are interested in finding a new CEO once the VC money comes in. As a VC, would it make you more or less confident in the founders?

First of all, it’s great when founders in a potential portfolio company are completely honest and transparent. These types of issues should definitely be raised pre-funding and conversations like this make VCs more confident in their prospective management team.

Assuming that the business needs another CEO to take the company to the next level post funding, it’s great that you realize this and are amenable to the change. There are plenty of stories of founders and VCs disagreeing on who should run the company and it is not a pleasant situation. Having a realistic view of your strengths and weakness is a good thing.

One tangential thing to note: we’ve had plenty of situations where founders brought up this issue and we believed that they were actually the best person to run the company. What was really needed was an augmented management team to help support the founder / CEO. The other day I was in a meeting with a former CEO of a large Silicon Valley success story who is now a full-time investor. He had a great quote: “I love backing first time CEOs because they don’t know what they can’t do and never limit themselves.” So before you decide completely that you aren’t the one to run the company, decide whether or not additional management team support might change your mind.