VCs make it tough at the top

Think before you sell your company to a VC: in most cases, you’re signing your own P45...

Last Updated: 31 Aug 2010

That’s the conclusion of a survey of more than 50 European venture firms by the European Leadership Programme. It found that less than one in twelve expect to leave the founder in charge after buying the business, with 92% suggesting they would bring in a new CEO instead. And the outlook is no more cheery for the incoming boss – a third of these investors will only give the new broom a year to prove themselves, while 70% expect to need at least two CEOs during their ownership of the company.

There seems to be a vicious circle going on here: a shortage of talent means these firms have to hire inexperienced CEOs who are left to get on with it; and when they fail to live up to investors’ high expectations they very quickly get the boot – meaning they have no time to develop this skill set. And so it goes on.

What’s equally worrying is that these VC firms show no inclination to do anything about it. Although the respondents unanimously agreed that CEOs need more support, not many of them are actually providing it. Less than 10% offer executive coaching, for instance. Given that the process of bringing in a new boss is both expensive and time-consuming, it seems crazy that they’re not investing in the people they’ve already got. As ELP’s Ashley Ward says: ‘The next generation of investors need to acknowledge that life is hard at the top, and their CEOs need all the help they can get.’

As an organisation that provides development programmes for CEOs in VC-backed companies, ELP clearly has a vested interest here. But it’s also clear that it’s hard work running one of these businesses. The rewards are fantastic if you do well, but the pressure to perform is ever-present. Successful venture firms pride themselves on their ability to act decisively to protect their investment, and more often than not it will be the CEO who carries the can.

So although training and personal development don’t tend be high up the agenda for most VCs, the simple fact is that it could save them two of their favourite commodities: time and money. It’s just a shame that not all of them seem to have cottoned on to this yet. Especially if you're one of the unlucky 92% to get the boot...

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