Reid Hoffman (founder) and Jeff Weiner (CEO) of LinkedIn are amongst the most famous pair of founder / CEOs to buck the stereotypes that:
The only person who can take your company to it’s final destination or IPO if the founder
That the founder must leave the company if a new CEO comes on board
In fact, Reid wrote the definitive piece on the topic.
Many people don’t know that I actually became Chairman of my first company and relinquishing the CEO role before the company was sold. It’s a topic I’m well versed in personally and I understand the difficult emotional decision of whether to hand the reigns to someone else of the baby you’ve struggled so hard to launch into the world. Will they treat it with the same seriousness that you did through your years of blood, sweat and tears?
Some founders make great CEOs until the end, some don’t. And some (like me) love the first 5 years, first $30-50 million in revenue, leading the first 150 employees but don’t love the role after that point. So sometimes even if you want to stay put (as Reid Hoffman did) – it may make sense to bring on the new CEO that is more experienced and enjoys more the scaling / large growth phase of a startup.
I recently sat down with Fred Wilson, amongst the best investors of our era, and we discussed this topic in this short 2-minute video well worth your watching.
In it he talks about the skills of willing an idea into existence and whether those are the same skills to take the company to the next level. In my personal case I knew that my company had outgrown both my skills and my desires.
A shortened, better edited and with nicer pictures version of this post first appeared on TechCrunch. But if you want it in it’s full V1 glory read on …
You’ve never been a CEO but might like to be one some day. But how? Nobody sees you as a CEO since you’ve never been one? I wrote this conundrum and the need to take charge of how the market define your skills in my much-read blog post on “personal branding.” If you don’t create the message about yourself, the market will. And if you want to be a CEO one day you need the messaging to reflect that.
The strange thing is that once you’ve been a CEO even one time the market will see always see you as a CEO but nobody really wants to give a new-comer chance.
Of course you could start your own company. For many people that’s the right answer. As I talked about in “
Recruiting. It is the bane of every startups existence because it takes up so much time, it is so competitive to sign people and it feels like unproductive time because it’s not moving the ball forward on product, engineering, sales, marketing, biz dev, fund raising. It consumes time and energy and the payoff doesn’t come for a long time.
But of course great teams build great companies and great startup leaders know that they must always be recruiting.
Yet most startup companies I’ve ever worked with or observed make one crucial mistake: They assume that their recruitment process for a candidate is over when that person accepts his or her offer. The truth is the process isn’t over until after the employee starts with the company, updates her LinkedIn profile and emails all her friends.
In fact, it’s worse than that. The moment your future head of sales, marketing, product or even junior developer says “yes” is the moment you’re most vulnerable of losing them. I’ve written about this before relating to any sales process –
One of the interesting things about being a VC is that you often see companies in transition. If you’re an early investor like I am that often means writing the first $2-3 million check into a business that previously had either survived on fumes or on a $500,000 angel round.
I also see companies as they move from having taken $1-5 million from me to their next round where they raise $8-15 million from Series B investors and sometimes I lead at this round (we’re stage agnostic but 80% of our deals are seed & A).
Moving from a company that had less resources (and presumably by the time they’re raising depleted resources) to a company with newfound resources can be telling.
I have seen many companies raise their first $3 million and still act like a company that has no resources at all. And while this might sound to the inexperienced person like a sensible idea – it is not. In a VC business when you raise additional capital you need to “level up” and act the round you are.
Of course I’m not preaching crazy, irrational spend or having Kid Rock at your next company party. But you do need to find a way to do activities that are more scalable.
Almost every startup company starts off “scrappy” and there’s a well established culture in the tech startup scene to embrace the “be cheap at all costs” mentality.
So we have the proverbial garage startup or the small team working on desks that are handmade out of scrap wood or former doors from a construction site. But at what point do you need to flip from scrappy to “scale-y”? Um, well, that word choice doesn’t exactly work.
I have seen this problem up close so many times. You have a seed-stage company who had raised $500,000 and then later raises $8 million still acting like a seed-stage startup. Similarly you have the A-round company who has raised a $25 million round still behaving like a 10-person startup with the CEO still micro-managing every decision.
I have weighed in on this topic before. I wrote that the most controversial hire after an A-round is actually an office manager / admin person for the company. My rationale is simply.
One of the unavoidable realities of building a startup is having to fire people.
In a normal business you can often sweep bad performers under the rug and not deal with them. When you have millions or billions of dollars of revenue you can suffer a few bad performers or bad apples. You can miss a quarter’s target and not cull the inefficiencies. I’m not saying you should, but you could.
But in startups this equals death.
Death because just 3 extra non-performing employees in a company of 15 can either accelerate cash out date or can dramatically lower your productivity.
I’ve spoken about this before and my mantra, “Hire Fast, Fire Fast.”
When I first started my career I came across a term for this that has always stuck in my head and serves as a useful reminder of this mantra.
We called it “PURE.”
Previously. Undetected. Recruiting. Error.
My premise with “hire fast, fire fast” is that some companies over-analyze potential recruits and therefore chew up valuable months with functions unfilled.