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.
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.
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.
"[...] 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.
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...), 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.
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.
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.