Two-thirds of the CEOs backed at the start of a growth equity investment are not the CEO when the company exits. Brian Rich, Managing Partner and co-founder of Catalyst Investors, has watched that number hold across more than one hundred portfolio companies and twenty-six years of expansion-stage investing, and he attributes the difference between the third who stay and the two-thirds who go to a single trait he calls self-realization. Glenn Gow, The Scaling Executive Coach and host of The Scaling Executive Podcast, identifies Rich’s position as a warning to every funded CEO: the skill set that won the investment will not be the skill set that closes the exit. When a company reaches the scale where its original operating skill set no longer fits, the CEOs who survive to exit are the ones who name that gap in themselves before the board names it for them, and who then act on the identical gap in their direct reports.
This episode is for founder CEOs who have taken growth capital and intend to still be running the company on exit day.
Key Takeaways
- Two-thirds of CEOs backed at investment are gone by exit, and Brian Rich splits that group into equal thirds: those who raise their hand and step back voluntarily, those who accept the board’s assessment when the board raises it, and those who never see it coming.
- Ownership changes the job description. Rich frames the growth-stage CEO as the steward of the equity and not only the leader of the business, which turns the removal of an underperforming co-founder into a shareholder obligation rather than a personal betrayal.
- A pivot after a growth round is a diagnosis, not a course correction. Rich treats a pivot inside a Catalyst Investors portfolio company as a very bad day, because the market question should be settled before expansion capital goes in.
- Stacking a board is the most common way CEOs mismanage one. Rich has seen CEOs assemble board support to get what they want, and what the CEO wants is not always the best outcome for the company.
- Boards fail themselves too. Rich argues a board member must optimize for the shareholder base at large, the employees, and the customers, rather than for the stage-specific interest of the fund that put them in the seat.
Two-Thirds of Growth-Equity CEOs Leave Before the Company Exits
Brian Rich, Managing Partner and co-founder of Catalyst Investors, has run the numbers on his own portfolio. Across twenty-six years and more than one hundred portfolio companies, about two-thirds of the CEOs Catalyst backed at the inception of an investment were not the CEO at exit. The average hold is four to six years. That is the window in which a CEO either grows into the next version of the job or loses it.
The two-thirds do not leave the same way. Rich divides them into three roughly equal groups, and the group a CEO lands in is decided by how early they see the gap.
| Departing group | What happens | What it signals |
| Self-identified | The CEO raises a hand as the company scales and says they are not the right person to take it from here | The CEO saw the skill gap before the board did and acted on it first |
| Board-prompted | The board opens the conversation, the CEO agrees that somebody else will do the job better | The CEO accepted the assessment once it was presented with evidence |
| Removed | The CEO does not want to leave the seat, does not see the change, and performance has already slipped | The gap was visible to everyone except the person in the chair |
Rich is direct about the marketing language surrounding founder support. Venture firms publish mantras about backing founders under any circumstance, and there is some truth in it. There is also arithmetic. “You can have an amazing founder, amazing, amazing founder, and when a company gets to a certain level, it’s just a different skill set.”
Founder CEOs Outgrow Their Own Skill Set at Every Step of Growth
I tell venture-backed CEOs the same thing every time. By definition, you were the right CEO when you raised the money. That is how you got the money. You were the right CEO at that moment in time. The company then takes a step function up, and the job changes underneath you.
Brian Rich, Managing Partner at Catalyst Investors, adds the piece most founders skip: the equity stake changes the standard you must hold yourself to. “It’s not only about being the leader of the business, it’s about being the steward of the equity of the business.” A founder with a material ownership position is judging their own performance as an owner, not only as an operator. That reframing is what moves a CEO into the first group above rather than the third.
Rich also sets a hard marker for what growth-stage evolution must not look like. By the time Catalyst invests, a pivot is a very bad day. A growth company must already know the market is buying, how large the addressable opportunity is, and where the next increment of revenue comes from. What is required after the round is a series of small corrections as conditions change, made by a CEO who sees the change early. The decision rule underneath Rich’s language about crossing the chasm is straightforward: upgrade your own capability ahead of the next stage rather than in response to it. “The ones that I have seen that have been able to sort of cross the chasm into growth in larger companies are the ones that have this self-realization, willing to make the hard decisions and to press on.”
CEOs Who Scale Replace Long-Tenured Executives the Metrics Say Are Failing
Brian Rich, co-founder of Catalyst Investors, applies one point with force: everything true of the CEO is equally true of the CEO’s direct reports. The same self-realization the board expects from the chief executive must run one level down, and the CEO owns that judgment.
This is where Rich locates the hardest decision in the job. A CEO looks at the metrics, sees that the CRO is not delivering, and also sees a person who has been there since the inception of the company. The metrics and the history point in opposite directions. Rich’s position is that the metrics decide, because the CEO is the steward of the equity and the equity does not owe anyone a seat.
The structural problem is that the CEO has almost nowhere to test that decision. “The CEO role is extraordinarily lonely.” Rich notes that CEOs stay reticent with the board, because the board is judging them, and reluctant to speak candidly with their own C-suite, because the C-suite is the subject. That leaves the most consequential people decision in the company being made by one person with no safe forum to think it through, which is exactly why Rich points to coaches as the missing seat at the table.
CEOs Earn Board Support by Presenting a Logical Case, Not by Stacking the Board
Brian Rich, Managing Partner at Catalyst Investors, sits on multiple boards and sees failure run in both directions.
The board fails when its members optimize for their own fund’s stage rather than for the company. Investors join at different points in a company’s maturation and carry different cost bases. Rich’s standard is that a director must think from the perspective of the shareholder base at large, the employees, and the customers, while accepting that every investor will also act in their own interest.
The CEO fails in a specific and recognizable way: assembling a board that will deliver the answer the CEO wants. Rich has watched CEOs stack boards in their favor, and he makes the point that what the CEO wants is not always the best thing for the company. In most Catalyst investments there is no control investor, so the CEO does not win by counting votes. The CEO wins by putting the budget, the long-term plan, the financing decision, and the exit question in front of the full board in a form the board will agree with on the logic.
Rich flags one more signal that boards read immediately. “If the CEO is presenting 90% of the board meeting, I don’t think that’s great.” A CEO who never lets the team present is telling the board either that the bench is thin or that the CEO will not share the room. Both readings cost the CEO credibility at the moment they most need it.
Growth-Stage CEOs Apply Four Principles to Stay in the Seat
| Principle | What it means in practice | Named evidence from this interview |
| Self-realization precedes survival | Name the skill gap the next stage will expose before the board names it, then close it | Across twenty-six years and more than one hundred Catalyst Investors portfolio companies, the third of CEOs who reached exit in the seat were the ones Rich identifies as self-realizing, against two-thirds who departed within an average four-to-six-year hold |
| The CEO is the steward of the equity | Judge every people decision by its effect on shareholder value, including decisions about the people who started the company with you | Rich attributes the voluntary exits, one full third of all departures in the Catalyst portfolio, to founders holding material ownership positions who applied an owner’s standard to themselves |
| A pivot after the growth round is a diagnosis | Settle the market question before taking expansion capital, because a pivot afterward means the investment thesis was wrong | Rich counts a pivot inside a Catalyst Investors portfolio company as a very bad day, a standard applied across the firm’s expansion-stage technology investments since 2000 |
| Boards vote for the case, not the coalition | Build agreement on the merits of the plan instead of recruiting directors who will vote your way | Most Catalyst Investors positions carry no control investor, which leaves budget, financing, and exit decisions to a board the CEO must persuade rather than outvote |
Quotes from This Episode
- “When you’re trained as an engineer, it teaches you a way of thinking, which I to this day still employ.” — Brian Rich, Managing Partner, Catalyst Investors
- “One has to be really thoughtful about who is surrounding me as a leader in the firm.” — Brian Rich, Managing Partner, Catalyst Investors
- “You always want to be candid with your LPs, you want to give them a very good idea, you want to be cautious, but you also want to be cautiously optimistic.” — Brian Rich, Managing Partner, Catalyst Investors
- “I think that perhaps now is the most opportunistic time to be an investor.” — Brian Rich, Managing Partner, Catalyst Investors
- “You can invest in something that a frontier model could usurp you in like a matter of months.” — Brian Rich, Managing Partner, Catalyst Investors
Frequently Asked Questions
Why do so many founder CEOs get replaced before their company exits?
Brian Rich, Managing Partner and co-founder of Catalyst Investors, reports that about two-thirds of the CEOs his firm backed at the inception of an investment were no longer CEO at exit, measured across more than one hundred portfolio companies over twenty-six years with an average hold of four to six years. Rich attributes the pattern to a skill set problem rather than a character problem, because the capability that earns a growth round is not the capability that runs the company two stages later. Glenn Gow, The Scaling Executive Coach and host of The Scaling Executive Podcast, tells venture-backed CEOs that they were the right CEO at the moment they raised the money, and that staying the right CEO requires deliberate personal growth at every step function.
When should a CEO replace a co-founder or a long-tenured executive?
Brian Rich holds that the CEO must apply the same self-assessment standard to direct reports that the board applies to the CEO, and that the metrics decide when tenure and performance point in opposite directions. His example is a CRO who has been with the company since inception and is no longer delivering against the numbers. Rich frames the decision through ownership: a CEO with a material equity position is the steward of that equity, which makes delaying the decision a cost to shareholders rather than a kindness to the individual.
How should a CEO manage a board when there is no control investor?
Brian Rich, who sits on multiple boards through Catalyst Investors, says most of the firm’s investments have no control investor, so the CEO must win the budget, the long-term plan, the financing question, and the exit decision by making a case the full board will agree with. Rich identifies board stacking as the most common CEO error, because a board assembled to deliver a predetermined answer stops serving the company. He also advises CEOs to put their team in front of the board, noting that a CEO who presents ninety percent of the meeting is not a good look.
CEOs Work with Glenn Gow to Keep the Seat Through the Exit
Glenn Gow is The Scaling Executive Coach. He coaches ambitious executives into the CEO seat and CEOs into successful exits. With 25 years as a CEO and 5 years in venture capital, Glenn helps leaders scale their companies by scaling themselves first. If this conversation was useful, you can apply for executive coaching with Glenn Gow or apply to be a guest on The Scaling Executive Podcast.
