My internal compass has always steered me strongly toward the belief that founders who can scale with their startup companies are better to back that founders who eventually need to hire a CEO.
I have talked about this publicly a great deal – how I prefer “missionaries” over “mercenaries.”
But lately I’m more swayed by the wise words of Reid Hoffman.
“Founder is a state of mind, not a job description”
We all love the mythical stories of our great founder heroes who drove startups from scratch and led their businesses many years later: Bill Gates, Larry Ellison, Jeff Bezos and so on.
Very few founder CEOs go into the job ever expecting to give up their seat. It’s your baby. Your idea. You took the biggest leap of faith. It becomes an extension of self rather than a job.
So give up the CEO role?
But it’s actually not that simple.
Jonathan Strauss took this issue head on in a blog post that I believe every startup founder should read on “Replacing Oneself as CEO.”
“After 3 and a half years of fusing my self-worth with the success of the company in the crucible of startup survival, it was impossible to tear them apart without pain.
But while my first reaction was disappointment and failure, it was almost immediately washed away by a wave of relief.
I knew change was inevitable, but I had no idea how stressful and exhausting maintaining my internal reality distortion field had been until they gave me permission to turn it off.”
I can’t imagine many founding CEO’s who don’t read Jonathan’s words and know exactly what he means.
I saw this first hand. The confidence, energy, passion and humor that are hallmarks of Jonathan became muted in the pressures of needing to show financial successes to match one’s enormous product vision and ambitions.
I told Jonathan (and believe) that this would be the best year of his professional life. He gets to return his focus and energy back to what got him so passionate in the first place – product – while now having a seasoned leader and enough capital to fulfill his vision.
I spoke with TechCrunch TV recently about the decision to give up the CEO seat, the stresses of the job and my perspective of the situation as an investor. You can watch it here.
I have never felt prouder of the team & product at awe.sm (please visit to check out our latest & be ready for our next big product announcement due out in next month or so) and yet we just brought in a new CEO to the company, Fred McIntyre.
How could these statements live in the same sentence?
An Awe.Sm story
I first met Jonathan nearly 4 years ago. I know because I marked the occasion with a blog post on how to have a great VC meeting. I wrote about Jonathan’s visit (but never named him by name until now) because it was so memorable. His vision for social analytics and tracking the conversion funnel was better than any I had heard at the time (or since).
He talked about how we were going through a period of time in which people were measuring “likes” and “followers” but not the real value of social media conversion by tracking what actually converts into business and that few people understood the catalyst of what drove a successful campaign in the first place. It is what he set out to build and he had huge initial success in landing big clients like Disney, Zynga, Gilt and TopSpin.
I funded Jonathan’s first $500,000. For the entire first year after I funded the company he refused to take a salary and I had to admonish him to make sure he paid his expenses. He worked his ass off and delivered an amazing technical infrastructure to support a “big data meets social analytics” platform that could be used by any developer.
Yet our initial customer success didn’t translate into big revenue growth and we faced issues such as:
- Do we support developers, end-users or both?
- Do we price for volume of consumption or for enterprise integration with other platforms?
- Do we have a heavy-touch implementation and support or a lightweight one by integrating with products that white-label us?
- Do we optimize for “social sharing tools” or merely for back-end analytics?
The decisions were endless, the choices not obvious and the VC involved a pain in the ass. The financial pressures of running a startup started to hit Jonathan. I saw it first hand.
I have a very public seed stage investment policy and awe.sm was definitely in the bucket of amazingly talented founders with a great product that hadn’t yet proved product/market fit.
So I wrote another check to extend our runway another year. The second check was $400,000 out of a $500,000 round. And I forced Jonathan to start paying himself.
Our product really started to show its strengths in attribution as we were able to prove publicly that Twitter was driving more traffic than people had acknowledged but it wasn’t showing up in referral logs due to what is known as the “last mile problem.”
We had inbound M&A requests from some of the biggest names in tech. We did a gut check and I asked Jonathan what he wanted to do. He knew that I didn’t want to give up on his journey but I would if that’s what he wanted.
He told me he couldn’t give up when there was so much more to prove. He remained as committed to the company vision as when we first met.
We had VCs show interest in funding awe.sm and settled on Foundry Group and raised $4 million ($1 million more from me). It was great to get some new ideas around the table and to have some money to execute on our plans with more resources than before.
Yet with major advances in our product infrastructure we still hadn’t proven we could scale sales. It was really hard to look at the situation and know that the answer was that Jonathan needed help and that what he really needed was a boss. The board was unanimous in our opinion of this including outside director Ian Rogers who has served as Jonathan’s mentor and friend.
We knew what was right for the company and wanted to see the company succeed more than protect Jonathan’s short-term ego hit. Jonathan shared that experience in his blog post so I won’t repeat it.
But we did offer Jonathan his second gut check. We knew we had a valuable product that an acquiring company would gain greatly from and a world-class engineering and product team that would be valued by a buyer. If he wanted to sell we would enable it, but if given the choice I preferred to see the team fulfill their dream and I never lost confidence that our market was there. Nobody has stepped in with as complete of a vision as awe.sm has.
Jonathan went through a reflection period and chose to continue the journey. We have spend the last 6 months working on our next generation product and as one of the main beta testers I can tell you it’s the best stuff we’ve put out to date so I was very pleased with his decision to fight on.
We set out to find Jonathan’s “co-founder.” Somebody who had lived with the marketing consequences of trying to track online conversion from websites, google, mobile and social.
We found Fred McIntyre who had worked with Ian Rogers in the past and therefore we had a strong connection with his past skills, drive and determination. He has joined the team as CEO and shown an immediate desire to “live the company” in the way that founders did. To be a founder in state of mind.
My Own Journey – And Replacing a CEO
I actually don’t talk about it publicly much but I am one of those people who gave up the CEO role in my first company so I know the emotional roller coaster it can be.
I had never even considered it, it wasn’t an option. But I was part of a networking group called YPO, which has a subsection called “forum” in which a small group of your peers meets monthly to discuss life. Topics range from aging parents, marital strife, infidelity, disease, stress, life’s true mission, giving back – you name it. I was staggered to hear people talking so openly.
I wish the tech community would found its own version of YPO Forum. It might help us better prepare for the enormous pressure & stress of being a founder, it might help us realize when there are people with serious depression in our midst (and try to spot people considering suicide), and frankly it might just be a great outlet for all of those insecurities you can’t tell your team, your co-founders and your VCs.
In my case it was the encouragement to hand off the role of CEO of BuildOnline before the company was eventually sold.
I had stayed for 6 years. I loved the entire journey – good and bad – and the employees and customers. But I was also in a rut where I felt I had lost the ability to be innovative and I had lost a bit of the passion & fun that came with the early days that were more existential and involved more intellectual challenges and less managerial ones.
The truth is I have never enjoyed running team meetings, managing processes & procedures and deciding HR policies, promotions and org structures.
There is no better article on the topic than Reid Hoffman’s post about giving up the role of CEO at LinkedIn.
“CEOs need to derive satisfaction from the nuts and bolts of building a company, not just building product and articulating the vision. They need to be passionate about leadership, management, and organizational processes as the company scales.”
In this day and age many people will tell you that you can have your cake and eat it, too. You can simply hire a COO to do these things while retaining the CEO title but focusing mostly on product.
I have previously written why I don’t believe in the COO role at early-stage startups.
Reid weighed in eloquently on this topic.
“[to be CEO you need to] devote substantial time to time consuming things like running meetings and other business process. You can’t just do the exciting stuff like making the final call on product and speaking at conferences, while shuffling off everything else to the mythical COO who loves doing all the dirty work and doesn’t want any of the credit
… I had thought about the COO option, but I knew that the company needed someone who felt like they “owned the ball.””
Mythical COO who loves doing the dirty work with no credit. Kind of like a mythical Vice President of the United States who wants to be behind the scenes but doesn’t want the top job.
Therein lies the dilemma.
The best people almost always want the top job if they’re going to put in the real work effort. Of course there are exceptions – the most obvious one being Sheryl Sandberg.
Reid’s admission of his interests sounds like something I would have written myself verbatim
“I’d rather be solving intellectual challenges and figuring out key strategies, not debating which employees should get a promotion, or configuring project timelines.”
So Reid set out to hire a CEO. His first attempt was Dan Nye who had some success but apparently one key missing ingredient. Reid believes that you need a CEO who is also passionate about product and he later found that person in Jeff Weiner.
Jeff joined early enough to feel like a “founder” even though he wasn’t there at the “founding.” He was as passionate about the product as Reid and became the biggest eater of the LinkedIn dog food. He had founder mentality.
This seems to be the exact situation at Twitter. While Dick Costolo wasn’t there at the founding it seems clear that he has become the reasoned voice of the growth of Twitter. And while it was another team entirely that sparked the product adoption that is now Twitter, there is no doubt in my mind Twitter would not be its current success without Dick at the helm driving product, user engagement, capital raising and revenue growth.
Again, captured eloquently in the words of Reid Hoffman
“Being there at the start isn’t the only path to being a founder. “Founder” is a state of mind, not a job description.”
So I look forward to watching the next awe.sm chapter unfold. To watching Fred lead our sales, marketing and implementation efforts and driving the recruiting & financing of the company. And watching Jonathan to continue to build on the product vision that started 4 years ago from his desire to fix a large part of the Internet’s inefficiencies.