One aspect is that companies can grow much faster than people do. Someone who's decent at managing 5 people will need many years of experience to become capable

One aspect is that companies can grow much faster than people do. Someone who's decent at managing 5 people will need many years of experience to become capable at properly managing 500 people, and a company can grow to needing such a manager much faster than that. Just as you can't expect a skilled individual contributor to be able to instantly become a good manager (they can, but that's a different skillset that needs both learning and practice which will take some time), so if you suddenly need a bunch of good managers now then you have to hire them instead of promoting your contributors; and in the same manner you can't expect a skilled team-lead to become a good CxO in a large organization (the difference in the daily work and skillset is comparable to that of IC to manager), so if you suddenly need CxOs to become a larger organization from a small one, it's exceedingly likely that none of your managers are qualified at the moment - they might become qualified with, say, two years of personal growth if targeted at that, but a fast growing company likely can't wait those two years and need a CxO that can start doing these things properly now.