Sevin Rosen Funds.

Perspectives

Hiring a CEO
by Jackie Kimzey

Entrepreneurs have a tough job. They give everything they've got to turn their big idea into a company and then, just when things start to really get going, they often have to be willing to turn the reins over to someone else.

This is the ironic truth about successful start-ups: Stepping aside as CEO may be a founder's single most important contribution to a company's success.

As a VC firm, our job is to help compress time and get a venture from idea to development to market as quickly as possible. At the same time, we try to remove as much risk from the process as possible by lending our experience and abilities to entrepreneurs. We focus a lot of our attention on the CEO because a good one can remove a lot of the risk involved in building a sustainable, successful business.

If you're a founder CEO in the process of deciding whether or not to replace yourself with a CEO from outside, you'll have to ask yourself a lot of tough questions'and answer then honestly. You'll need to evaluate your ability to fill the CEO's shoes, just as any other company stakeholder would. When looking at your ability to take your company to its next stage, consider these issues:
• At which stage is your company in the business cycle and do you have the skill set for the next step?
• Where does product development stand? If you're ready to start production, are you prepared to develop and run a manufacturing operation?
• Have you begun to build a sales team? Are you prepared to build and strategically manage an extended sales force?
• Has the company's needs for leadership and operational management grown beyond your experience?
• What is your current revenue? While in many cases founder CEOs can take a company to $50 million in revenue, getting to $1 billion in sales requires a more seasoned CEO.
• Do you have the contacts to form and build strategic relationships with partners and customers? Access to a long list of customers and business partners is one of the key assets an experienced CEO can bring to a start-up.

In our experience, solid leadership is the single most important factor in a venture's success. Many companies under-perform, or even fail, because the founding team doesn't make the right management transitions at the right time. At each critical juncture in a company's growth, founders should evaluate their role as CEO with an honest appraisal and be willing to step aside for the sake of their company's growth.