How do you get to be CEO? I’ve done it a couple of times now and I’d be happy to do it again. I assume we are talking about a startup of some kind rather than a large company. But if a private equity fund takes a semiconductor private they face many of the same issues in their choice of CEO.
The reality is that the number one criterion that anyone is going to look for if they have a free choice is that you have been CEO before. Better still, is that when you were CEO before, you had a good exit, selling the company you ran for a good price or at least generally having left the company in better shape than you found it.
So if you’ve been CEO before and not made too much of a mess of it, you can get to be CEO again. So how do you get your first gig? Well, you are not going to get headhunted to run a class-A company. Before anyone is going to trust you with a class-A company you have to have taken a mess and made something of it. Everyone’s first CEO job is to take a company with little hope and try and turn it around. This isn’t as bad as it sounds since expectations are low and so the standards that the board will judge you by are not as demanding as if you took a company with great potential. This type of CEO job typically comes along because you are in the right place at the right time. My two stints as CEO came about this way. At Compass, I was “on the bench” in the finance division doing M&A when VLSI decided Compass needed new leadership. I was someone who knew the company and could take over instantly without needing to do a CEO search. At Envis, I was VP marketing (actually only working part-time as a consultant) when I was asked to take over.
If the board has time to do a proper search for a CEO, probably the most important criterion is that you are “fundable.” By that they mean that investors are going to view you as CEO as an asset not a liability. The best proof of fundability is that you have raised money successfully in a previous CEO job, but a substitute is the right combination of business savviness and track record. You’ve probably heard that VCs invest first in the market, then the team and only then in the technology. So the CEO is really important. The perfect CEO can raise money simply on his name (imagine if Marc Andreeson decided to start another company). More mortal CEOs are regarded as an asset to the company, a CEO who isn’t going to need to get swapped out later. Lower down are people who are at least OK for the current stage of the company, with a question mark over whether they will make it long term. That sounds bad, but in fact 75% of founding CEOs don’t make it so it’s not as disparaging as it sounds.
Of course, the guaranteed way to be CEO is to found your own company. You get to choose the CEO and can pick yourself. But whether you make a good CEO and whether you can get funded are not questions that go away. You just have to answer them yourself.