[pbiggar]

The two are not equivalent, as you need different attributes in each case. The CEO needs to have the product vision and complete information about the company (see http://www.bhorowitz.com/why_we_prefer_founding_ceos for discussion), which typically only the founding CEO can have. You'll note that this is a continuation of the role they had when the company was small, though of course it requires a massive amount of learning.

However, for all other roles in the company, the important thing is having the experience to scale and lead that part of the company: sales, marketing, product, support, engineering. When the company is young, those roles will be filled by allrounders: people a few years experience who do everything in that area. As the company grows, you'll want to hire VPs who have the skills to lead those areas, often people with >15 years experience as a practitioner and/or leader in those areas.

It's not just engineering: you want a VP of Sales, a VP of marketing, a VP of product, etc. Those people will have the skills to take your existing sales/marketing/product/engineering org, and scale it without damaging it. If you have that skillset in your engineer #2, than it would make sense for them to do that role, but it's unlikely that they do, and certainly doesn't seem like it in th OP's case.