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Are start-ups bad at hiring the right CEOs?

VCs say most start-ups miss out on funding by appointing weak leaders

Executives in a business meeting

Start-ups and SMBs miss out on crucial funding because they put the wrong people in charge, according to a new study of venture capital (VC) fund managers has claimed.

VCs get scared off by what they see as weak leadership, believing it points to a lack of talent and skills, the survey by executive search and interim management firm Intromezzo found, with 81 per cent of the 100 respondents saying this was the case.

Another 60 per cent of respondents said identifying skills gaps is a major or moderate challenge for companies.

Additionally, more than a quarter who had invested in a start-up admitted to always or frequently feeling the need to replace existing CEOs.

Dermot Hill, chief executive of Intramezzo, said: "The make-up of the executive board is crucial to the success of any organisation, but more so for start-ups and high-growth businesses, where they do not yet necessarily have a proven business model or high-levels of revenue.

"The tech scene in the UK is thriving but we are struggling to produce many unicorns or global giants, and a lack of executive talent could be the main reason why."

He added that start-ups must appoint CEOs capable of leading 100 million businesses, telling them to think harder about how they identify talent. 

"Businesses and investors, must begin to understand what they need now, as well as what they might need in the future, and make sure they choose a candidate accordingly," Hill added. "Having the right people in place to propel the business through its next phase of growth is crucial. 

"A successful talent strategy is dependent on recognising whether the existing leadership team is capable of meeting not only current objectives but the longer term ambitions of the business."

The majority of VCs surveyed were based in the UK, though the study was conducted globally. 

Earlier this month, it was revealed the UK's tech industry had secured record-levels of investment from VCs in 2015, raising 2.5 billion - 70 per cent up from the previous year. 

But while a KPMG report last year found that overall demand for tech workers had increased, permanent roles had hit a 25-month low due to the tech skills gap. Tech charity Go ON UK launched a scheme in association with Google to help SMB employees gain vital digital skills in October. 

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