Vinod Khosla on VC board directors and founders as CEOs

Vinod Khosla has been round the block more times than most anyone in the venture capital industry, first at Kleiner Perkins and more recently at his own firm Khosla Ventures and on Saturday he drew on that experience to pen a very thoughtful post: If, when, and how to avoid hiring a CEO. This is a very emotive subject and much of the debate is characterised by chest beating and/or positioning but Khosla gets to the heart of the matter with a set of reasoned and reasonable assessments:

  • The best case is that the founder remains as CEO
  • Founders are typically great visionaries and as the business scales they will need help from people who are skilled at execution (professional managers)
  • Professional managers can be hired either as COOs or Presidents
  • But sometimes giving them the CEO job title is more appropriate – either to attract better talent or because the founder prefers to focus on the vision, often in a technical role

Khosla’s main piece of advice to founders is to work hard to be self aware and know their strengths and weaknesses. That includes candid conversations with the board.

If that has whetted your appetite go read the full post – the extra detail is great and it is shot through with real life examples.

The other thing I wanted to bring out was Khosla’s approach to being a board director:

I feel a board shouldn’t have to vote on anything except their confidence (or not) in management. In 25-plus years of being on boards, I have never once voted against a management team except on the question of whether the CEO should be changed. I feel free to argue informally, to have real, sometimes uncomfortable discussions, and to leave the final decision to the team that will execute it. It is hard for a team to execute well when it does not agree with what a board voted to do, or conversely to be fully honest, open and objective about all its alternatives if they believe the board is going to make the final decision on an issue.

To true.

Thanks to @azeem for pointing me to this article.

  • I actually heard of a case of a board overruling a strategical decision.. Not sure if this is standard practice in UK or it is the exception. I have a feeling in UK board will be more inclined to micromanage than in US? Cultural differences. Plus of course depends on VC’s: smart VC = smart entreprenuer = no mircromanagement 🙂 ?

  • I think some boards in the US and UK routinely tell management what they should do rather than advise them. It’s a mistake.

  • There’s also the option of outsourcing a role or function as opposed to appointing another board member. This would help to keep the board lean and mean, allow the company to take time over appointments, focus on relationships, reduce probability of miss-hires. However, outsourced interim ‘professional managers’ may be perceived negatively by some, that the team is less developed. Hi Nick, I have some decisions to make on this exact question. Do you ever act in an advisory capacity, and could I contact you through DFJ about this?

  • Hi Dan – interims can work but a straight transition to a permanent hire is always better if it can be engineered.
    I’m afraid I’m 100% an investor, so no formal advisory work, but if you ping me a question on Twitter I will answer you.