If I had a hammer,
I’d hammer in the morning
I’d hammer in the evening,
All over this land.

So goes The Hammer Song by Pete Seeger and Lee Hays. Well, most VCs have just one tool in their toolbox. And yes, they use the tool to hammer in the morning and hammer in the evening. That tool is “Fire the CEO,” and it happens all too often.

I firmly believe that the founder and CEO of a company has a level of passion and commitment that typically cannot be matched by any outside CEO. And that for a startup to succeed, more than just “good management” and “experience” you need a level of passion and commitment that is so extreme that it can overcome everything else (by learning quickly on the job).

My definition of a founding CEOs job is “to make yourself redundant.” You do that by hiring people who are way better than yourself, and then by letting those people flourish. This is easier said than done. I struggled with this in my first company. I was a micro-manager CEO. Every decision had to go through me, every dollar spent had to be approved by me, every hire had to go through me. I became the bottleneck. There are only so many hours in the day, and you simply cannot do everything. That doesn’t mean that you don’t pay attention to important things, but it does mean that you need to hire people that you can begin to trust and slowly and steadily let them take stuff off of your shoulders.

Most startups, especially the ones I work with, are started by first time founders. And given my focus on technical founders, it inherently means that the founder has a learning curve ahead to transition from being a kick-ass engineering or product person, to becoming a kick-ass leader. There are founders who relish this part, and then there are those that take it on as something they have to do. The latter are setting themselves up for failure. In order to be a great founding CEO, you have to actually welcome the challenge of constantly having to learn something new. And what you’re learning is not technical skills any more, but people skills. You have to learn to hire, fire, pitch, sell, and most of all motivate and lead.

A good founding CEO is *not* a manager. He/she is a leader. The difference is in whether you have the gravity or the magnetism to attract people so that they are drawn in the direction you take them, or are you pushing them up the hill. I often describe this as Inception – based on the movie. To get someone to do something well, they have to take ownership of it – they have to believe it is their idea. The best founding CEO will be able to inspire his/her team to do exactly that. They are all part of the mission we have to collectively change the world and we’re going to make it happen.

One of the books I read a long time ago was The E-Myth Revisited by Michael Gerber. In a nutshell, the book says that most people start a business because they love to do something. Someone who loves to bake, may start a bakery. But over time, if that business is to be successful, the founder who loved to bake, will never bake again. They ultimately need to learn to run and learn to love the business of running a bakery. The two are very different. I referenced this thought in my previous post about how starting a company and running a company are two fundamentally different things. 

So a founding CEO also needs to realize that their role is constantly changing and evolving. As the company grows, how it needs to be run also changes. If he/she begins to love the challenge of growing a business, things will go well, But, if they find this to be a drag and they would much rather be writing code or doing something else, then he/she is not going to make for a great CEO. This is a level of self-awareness that founders need to have before they raise money, because once you raise money, you’re signing up for a different ballgame.

The three hardest things about a startup are: People, People, People. Ultimately, everything in a startup comes down to dealing with people. Whether it is employees, customers, partners, vendors, investors, board members, lawyers, competitors. At its core everything is about people. If you train yourself to realize that and to think about what people’s motivations are for doing certain things, you will be better equipped to handle and come up with creative solutions to problems.

Another book which is an excellent read and truly changed my perspective in how to manage situations was the classic How to Win Friends and Influence People by Dale Carnegie. I actually recommend reading it in its original version as it’s more authentic and somewhat more fun (at least for me) to read about how things were many decades ago. I’ve gifted this book to many of my founding CEOs — to help them learn how to deal with difficult situations.

Let me bring this back to the title — which wasn’t just intended to be provocative, but has a point attached to it. Most VCs really do have just one tool in their tool bag. If the company is not doing well, let’s fire the founding CEO and put someone “more experienced” in place. The worst though is even if the company *is* doing well, let’s fire the founding CEO and put someone “more experienced” in place. And yes, I’ve seen both happen before, right here in the Valley.

I detest this way of thinking. In my opinion the VCs need to understand that it is not sufficient for them to just be investors, they also have to be good coaches. A coach who will help a first time CEO learn what they need to learn in order to become a great leader. The problem is that being a coach requires time and patience, something that is in short supply in the fast-paced world of the Valley. As a result, most VCs try to take a short cut. They think that instead of waiting for the founder to come up to speed and learn what he/she needs to learn, why don’t we just bring in some one who has done it before. That would save time, and money, and be less risky. Right?

The thinking is logical, but IMHO flawed. It is flawed because of several reasons. First, bringing on a new CEO into an early stage company is like performing an organ transplant. In some cases it’s almost akin to doing a brain transplant (i.e. an incredibly high bar). Whenever there is an organ transplant, the body of the organism suffers extreme trauma. There are antibodies that can result in organ rejection. And even if the new organ is eventually accepted in to the body, it takes a long time for the body to heal and come back to the level that it used to be. And yes, it could ultimately be healthier, but only if everything lines up just right. In the context of a startup, this means that replacing a CEO is never as quick and effective as most VCs would like to think it can be. And during that time, the company is still burning cash.

Secondly, as I’ve mentioned in previous posts, “A startup is an agent of change.” If you are trying to do something that is a marginal improvement over the status quo (note: that is uninteresting to me as an investor), then sure you might be able to find someone who has “done this before.” However, if you are truly doing something that is different and unique, then there are very few analogs for what may or may not work. In that situation, my preference is to have the person in charge operate based on first principles, and not based on traditional ways of doing things. When you need to think out of the box, experience becomes equivalent to baggage.

Thirdly, any CEO joining a company from the outside is less likely to have the same degree of passion and conviction as the founders. For most it’s a job, not a mission or a crusade. There are exceptions here and if you can find someone who truly undergoes inception in the process of engaging with the company, then he/she may have the level of passion and conviction that is required, but that is a rare situation. An outside CEO would also typically have single digits of equity, a fairly hefty cash compensation, and the risk to them for joining a new company is modulated by the fact that in case things don’t work out they may have several other opportunities waiting for them.

Given this, it is my preference to give a founding CEO the opportunity, the time, and the coaching to help him/her develop into a great leader. Even if that means making a few mistakes along the way. If they’ve tried and themselves becomes frustrated with it, or if there’s simply no chance of it working, then of course there may be no option but to try the risky move of doing an organ replacement. But that should be an absolute last resort.

So I wish that VCs would put down their hammer, and stop looking at a founding CEO as a nail that’s just waiting to be whacked. Instead, look at a founding CEO as a sculpture that needs to be gently nudged and molded into shape and form of a great leader. VC shouldn’t be the executioners, they should be good coaches.

And now just for fun, here’s The Hammer Song…

You can follow me on Twitter at @ManuKumar or @K9Ventures for just the K9 Ventures related tweets. K9 Ventures is also on Facebook and Google+.