Founding CEO succession

In both my venture-backed companies I was founding CEO; but wasn't CEO forever. The data says this is quite typical. Noam Wasserman's book The Founder's Dilemmas, cites the following statistics out of 3,600+ startups surveyed (9,900 founders) over 10 years:

If you're a founding CEO, what should you think about this?

A couple of days ago I saw a pair of articles by Vinod Khosla, the well-known west coast VC, on the topic. The first is If, When, and How to Avoid Hiring a CEO, and the second is Signs it Might Be Time To Consider Hiring a CEO. I think the articles are pretty spot on, and recommend any founding CEO to read them (as well as Prof. Wasserman's book).

I have a couple of thoughts to add to his good articles.  First, I think Vinod is optimistic in his expectation that a 2nd+ CEO will be as committed to keeping the founding CEO active and engaged in guiding the company's evolution. In Part 2 he says:

"The best hired CEOs will still let the founder’s role and vision flourish while they help successfully execute it. Usually, founders are better at setting, iterating and evolving a vision, while the CEO/managers are good at helping an organization achieve the vision."

Supporting this, in Part 1 he gives the example of Scott Cook & Bill Campbell at Intuit. IMHO, that kind of outcome is not very common. I think the statistics will suggest that the founding CEOs from Noam's chart above are typically being replaced because the Board has concluded that the founding CEO "isn't leading the company right". The average investor or Board is not as likely to hold Vinod's distinctions on the roles of the founding and new CEO. The new one will most commonly bring a strong sense of how he/she thinks of what that "right" way is, which will trend away from the founder's vision & role.

This can be avoided, though it will only happen if the founding CEO builds a plan for it in advance. See more below.

Second, I'm less sanguine than Vinod that CEO success can be learned by most founding CEOs. As you'll see as you watch this blog over time, I'm a big believer in Behavioral Interviewing, which holds that the most accurate predictor of future success is past behaviors in a similar situation. Behaviors don't change in people very easily; they "are who they are." So it's important to figure out whether a founding CEO's behaviors matches that needed to be the long-term CEO. Happily for really young CEOs, many of those behaviors are still being set during their early-20's, which I suspect is why it makes such good sense to back their companies.

I think the key to my initial question above - how a founder should think about all this - comes from Vinod's second article, where he states:

"The hardest part is trying to hire before the need – don’t wait too long. This means understanding your challenges ahead and anticipating when they might be too much to handle alone."

In the spirit of full transparency, I didn't know I was going to be replaced when our Board called me at Pingtel and said they wanted me to have a different role. That wasn't fun.

So at Acquia, I had an open dialog with our Board early - even before Series A - about two things.  

First, that they would let me know well in advance when they wanted me to start looking for a CEO. I think this worked great for me. I got the company through the A-round, hire the principal management & technical staff, build initial products, validate the business plan, and essentially get the business to where it we had de-risked enough of the business to attract a CEO that was more appropriate for later-stage growth. We then spent a year looking for the right follow-on CEO, adding Tom Erickson just as we put the B-round in place.  I stayed on at Acquia for another 3 years before getting back to startup-world. By this time, Acquia was a rocket-ship.

Second, I got them to agree to let me define my subsequent role before we hired the new CEO. This went less well, but still ok. I defined a role very early - even pre-Series A again.  But on arrival, Tom didn't like the role I'd defined, and changed it. I'd rather have done what I set up, but I was able to make the revision work.

I have to say that I'm proud of how I handled the CEO successsion.  I believe strongly that it's important that the new CEO be seen as the guy in charge, and I never, ever challenged Tom's authority or decision making among the staff or management. In fact the opposite is true: I was often his defender when the occasional recalcitrant exec would come complain to me - even when I agreed with that exec.  Tom, my co-founder Dries, and the Acquia Board have all frequently expressed admiration for how I handled this in the company.

I would add one last thought, though. Assuming you're hiring a new CEO in a planned, friendly manner, don't forfeit the role of founder. Be cooperative and supportive - not a doormat. If you do it right, a founding CEO that hires his/her replacement will continue to have significant influence in company culture, hiring, product direction, messaging, etc.

Comments welcome.