Upscale Partners / Uncategorized  / When to change the CEO

When to change the CEO


This month saw the announcement that life science company, Ziylo, had been acquired in a deal which could total £624m.  The business was set up in 2014 by Bristol University graduate, Harry Destecroix, who went on to lead what could constitute the largest academic spin-out exit this decade. Ziylo is just the latest in a long line of founder CEO success stories – so should there be a greater emphasis on keeping the original team in tact as a start-up evolves?


We often talk about iterations in the development of a scale-up’s leadership, as it looks to growth and then onto an exit.  From the early ‘friends and family stage’ when resources and cash are tight…to building out the senior management team – which often happens in line with funding rounds, driven by key milestones such as commercialisation, execution, scale-up and exit.  This can take the form of making additional appointments that support and bolster the founder, or there may come a point where the company looks to change out the CEO entirely.


In order to investigate these strategies further, we looked at the portfolios of two prolific investors. One that invests primarily in university spin-outs; and the other in a broader range of technology and tech-enabled businesses.


In the case of the spin-out investor, only 20% of its exited businesses still had the founder as CEO.  In the main, they were founded by academics and, as the company moved beyond venture stage, had looked to access a more commercial skillset in the appointment of a new Chief Executive.


Conversely, of the exits the other investor had achieved, 60% of them still had the founder as CEO – so a much higher proportion.  In fact, of the remaining portfolio, only 35% were no longer founder-led and the majority of these had appointed their new CEO prior to receiving investment.  This speaks to the emphasis this particular VC firm places on investing in exceptional leadership teams.


Within this portfolio, the majority of the founders were either seasoned business leaders with deep sector knowledge, or had been fortified with the appointment of experienced professionals around them who could supplement their skills.


An example of this is SwiftKey, the developer of a keyboard application for Android and IOS devices.  Founded by Jon Reynolds and Ben Medlock (both relatively fresh out of university), they successfully built the business and, following a Series B round, brought in James Bromley – a highly experienced tech executive – as COO. Bromley was tasked with driving an exit for the business and, as well as focusing on execution, played a central role in the discussions with Microsoft that led to SwiftKey’s acquisition for $250m.


This was a truly great success story; however, Reynolds feels that the 18 months it took to go from idea phase to prototype would now take 3-6 months “because of the experience we’ve gained in building a company first time round.”


This is an important point and whilst a founding CEO certainly can achieve a successful exit, they cannot do it alone and bringing in experienced people around them can often help companies get there quicker with greater results.