Local Tech Wire

RESEARCH TRIANGLE PARK, N.C. – Venture capitalists today are looking more for executives to lead startups who are experienced and have both vision as well as fundraising skills.

So says a new study issued Wednesday by the and executive search consulting firm Spencer Stuart.

According to venture capitalists interviewed for the study, several priorities have changed since a similar survey in 2001 during the midst of the “dot com” boom.

Key findings, according to the NVCA and Spencer Stuart:

• People remain paramount.
• Vision and fundraising are more important skills for CEOs today..
• Venture capitalists favor proven venture-backed CEO talent.
• VC-backed CEOs earn more than they did 10 years ago.
• Venture capitalists are recruiting more independent board members.
• Investors are growing more confident in their executive assessment practices.
• Opportunities exist for VC firms to assess management in a more rigorous, ongoing way.

Venture capitalists also are structuring boards of directors that more closely resemble those at public companies, the study says. A driver for that change is the fact that the “runway” toward an exit – such as a merger and acquisition or stock offering – is taking longer.

“The challenging exit market has changed the role of top executives at venture-backed companies, as different skills are required during various stage of company growth,” said NVCA President Mark Heesen in a statement. “Today’s venture-backed CEOs will need leadership skills that address a longer runway to liquidity, creating a need for a more systematic performance evaluation over time.”

Ben Holzemer, a consultant and contributor to the study at Spencer Stuart, noted that investors are being more “scientific’ in recruiting and assessing CEOs as well as board members.

One point remained consistent between 2001 and 2010: People.

VCs stressed that management team strength is the No. 1 factor in whether to invest.

Next came market sector, proprietary product or service and business model.

However, vision and fundraising skills moved up the list of prerequisites in 2010 from 2001.

VCs also prefer “proven venture-backed” CEOs in emerging areas such as clean tech (58 percent) over entrepreneurs in a particular sector with no CEO experience (31 percent).

CEOs are also being paid more in cash and also receiving more equity than in 2001 due in part to requirements for a “broader skill set.”

Meanwhile, 75 percent of VCs in the survey say they are recruiting independent board members.

In 2010, 84 percent of VCs said they believed they had recruited the “best talent” for portfolio companies, up from 40 percent in 2001.

However, only 25 percent of VCs said they conducted formal, ongoing management assessments. That result “highlights what could be the area of greatest potential improvement for talent management in the industry,” the NVCA and Spencer Stuart said.

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