\Startup Life Opinion/

Debate: Do founders make the best CEOs?

Balderton investor Suranga Chandratillake and founder Heba Bevan debate the topic.

By Heba Bevan and Suranga Chandratillake

It’s the age old question: do startup founders make the best startup CEOs — or does there come a time when they should hand over the reins to a career CEO? 

In this ‘debate’, Heba Bevan, CEO and founder of sensor startup UtterBerry pits herself against Suranga Chandratillake, general partner at Balderton Capital.

Do European founders need to be less modest and back themselves to succeed? Can technical founders make great CEOs?

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Let’s have it out.

Heba Bevan

Founder CEOs can certainly succeed and both self-confidence and listening to experts in a variety of fields are essential.  

No one starts a business unless they believe in themselves and their ideas. That confidence should remain with the founder; it enables them to take risks and make bold decisions and it will see them through difficult times as CEO. CEOs need to wear lots of hats, however, and the founder CEO’s confidence from their technical expertise can’t turn into overconfidence to the exclusion of outside opinions and learning new skills.

Founder CEOs must be able to adapt and learn as they build their companies.”

Founder CEOs must be able to adapt and learn as they build their companies. Listening to others, particularly experts in different fields, is incredibly important to the growth of a tech startup. Examples include lawyers, accountants, clients and your team. They also include professors and people who you have worked with in the past and trust. 

Regarding product development, it is important that the founder CEO does not put their tech company in a box when it comes to innovation. At the same time, the company should focus on creating tech that people and industries will use rather than inventions for inventions’ sake. Products with a variety of applications will generally receive a greater market response and deliver a bigger bang for resource buck than niche products with limited applications.

Some companies begin life backed by significant investment, enabling them to deploy large teams to develop products in several areas. Other companies grow organically, as did UtterBerry, and their resources will typically be more limited for a period of time after foundation. In either case the founder CEO should carefully look at market needs and apply resource to achieve maximum returns.

It is also important that investors agree with the founder CEO’s vision for their company and their role within the company. For many investors, the founder CEO’s exit strategy is very important. I have been asked this by investors many times. My goal is to build a large, strong tech company with global impact, not to exit in two, three or five years. If a founder CEO has a similar vision, they should seek investors that share that vision; investors that prefer a shorter-term exit strategy for the founder CEO would probably not be the best fit in this case.

Founder CEOs can succeed by maintaining self-confidence while avoiding overconfidence; using technical expertise while learning new skills and taking the advice of experts in a variety of fields; focusing on product development with a variety of applications; and, when investment is desired, seeking investors that share the founder CEO’s vision for the company and exit strategy.   

Suranga Chandratillake

I agree with Heba that good CEOs, whether founders or not, do need to listen to a wide range of sources, from employees to investors and even competitors. But the biggest gap that technical founder CEOs have is believing in and listening to themselves. Technical CEOs who have the self-belief to go against the grain or make brave decisions in the absence of relevant advice are simply too rare in Europe, and for no good reason.

“The biggest gap that technical founder CEOs have is believing in and listening to themselves.”

I was on the founding committee of the Enterprise Hub at the Royal Academy of Engineering, and through this I have mentored and spent time with technical founders on the Hub’s programmes. What I encountered most was a fear of lack of business knowledge. Some technical founders, when starting out, think I will tell them something magical or recommend they do an MBA before starting a business.

But what I tell them is that the essence of becoming a good CEO is all embedded in the training and behaviours they have already developed as engineers. Engineers are taught to understand and work within complex systems. Understanding how to run a startup, manage people, define a financial structure and do the legal set up are a lot simpler than developing a new micro-processor or designing a bridge.

As an investor, technical founders often give me confidence in a business because they know a lot about what they are developing and what they should do with it. This is not surprising; there are many successful businesses that have or had founder CEOS who are engineers — look at Amazon, Google, Microsoft, Facebook and Apple. They have all been known to do things that seem crazy at the time but make sense later when they pay off for the business, like with Mark Zuckerberg buying Instagram for a billion dollars. 

All the examples I have given are US companies and it is more difficult to name an organisation from this side of the pond. It is a cultural phenomenon in Europe that technical people are considered to exist in a different world to the world of work — investors think this, employees think this, even engineers themselves think this. I call this the Boffin Fallacy and I think it is fundamentally wrong and should be challenged if we want more successful technical startups to succeed in Europe.

Key business decisions in technical organisations are often about the tech itself. What features to include, the strategy for the business, positioning in the market, reacting to other players — if you are close to the technology you are better placed to make decisions on these than looking at them from purely a business perspective.

Technical founders — you know your stuff. If you are only interested in the technology and not the business side of things, fair enough, but if you do choose to learn about business you will find it easy in comparison with what you already know about your product. Don’t be proud of not understanding how the business works. Gain that knowledge and show your capabilities from the lab to the boardroom to challenge the boffin stereotype and grow a successful business.

Heba Bevan and Suranga Chandratillake debated what makes the best tech founder in an online discussion hosted by the Royal Academy of Engineering Enterprise Hub and available to view here.

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Hervé
Hervé

This is a critical question indeed. In some research I did on 600+ startups, I found that a little more than one third of the companies I had assessed had a non-founder CEO at the IPO filing, which tends to say founders can lead if they desire so or have the self-confidence and the confidence of the stakeholders. (This is not self-promotion but here is the link to my analysis https://www.startup-book.com/2020/04/11/data-about-equity-of-600-startups-comments-5/)