Silicon Valley’s founder CEO worship definitely has its merits. As a CEO backed by many valley VCs, I have immersed myself in that view for decades (e.g., Ben Horowitz’s Why We Prefer Founding CEOs). I get it, I understand where it comes from, and I do mostly agree. That’s why TSFV backs founding CEOs almost 100% exclusively.

Great founding CEOs tend to have all three traits: 1) Comprehensive knowledge of the entire company (including knowledge of every employee, product, technology decision, customer data, and the strengths and weaknesses of both the code base and the organization), 2) moral authority, and 3) total commitment to the long-term, while professional CEOs often don’t.

On the other hand, being a great CEO is more than just starting a company. It’s a super stressful job that nobody can learn overnight, and running a company with hundreds or thousands of employees is definitely a different ball game than being a founding CEO of a five-person company. However, founders who can’t scale with the company can’t stay in the captain’s chair forever.

If the two jobs are so different, why do we still prefer founding CEOs, even though many are learning on the job? Because it gives the company the best chance to become ultra-successful.

Typically, a company goes through four stages of growth. I call it the “4S’s”:

• Start: where everything begins, with just the co-founders and a tiny team.
• Sprout: achieving product-market fit, with the CEO calling most of the shots in a mostly informal setting.
• Scale: rapid growth, hiring functional leaders, building depth, and starting to establish business processes. This is often where founder CEOs, especially first-time founder CEOs, stumble as they might lack experience in hiring and leading large teams.
• Success: achieving a major milestone like an IPO or a massive liquidity event.

But the growth of a company isn’t a waterfall. An innovation company can’t stop innovating once its (first!) product has achieved product-market fit and cannot simply switch gears overnight to focus on business optimization. The most successful companies aren’t one-trick ponies; they need second and third acts long after their first product takes off.

Based on my own experience and my observation of hundreds of CEOs’ personal growth, I can confidently say that it’s far easier for a founding CEO to learn leadership than for a professional hire to become innovative and visionary. When the company hits scale-up mode, a founding CEO’s leadership needs to be solid, but any gaps can be filled by hiring strong leaders. Most founders can successfully make this jump.

On the flip side, pushing someone to be innovative and visionary is much harder, as is finding a team of leaders who can fill that gap for a professional CEO. That’s why it’s tougher for professional CEOs to succeed, though it’s not impossible. It is also possible to hire an “entrepreneurial” professional CEO, although they are rare gems.

However, this is all pretty generalized. Generalization tends to default to pattern recognition without thoughtful consideration of the specificity of the company’s situation. The ideal scenario is a founding CEO leading all the way, but sometimes, if a professional CEO is the only option, that’s what we have to work with.

The good news for TSFV’s portfolio CEOs is that you’ve got a founding CEO who’s been through it all – me! These days, I spend a lot of time helping founding CEOs fast-track their learning to operate more effectively on the job. For our professional CEOs, I offer guidance to help them think and act more like founders. Helping our portfolio CEOs is the best use of my time to ensure our portfolio companies’ success. It is also extremely high-leveraged because sometimes, even a 30-minute conversation with me can help change the trajectory of a company. After all, if our CEOs aren’t successful, it’s nearly impossible for our portfolio companies to be successful, isn’t it?

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