For Founding CEOs Only

Earlier today I did a guest post on Mashable. There's one key point I omitted, mainly because I thought it needed a post into itself: hiring your CEO. (In fact, it's probably way too long for a blog post, but what the hell maybe there's something useful).

If you're a founder/CEO, expect to have one foot in the corner office and one foot in a cube. Reason being, is chances are, if your company is successful your replacement will be contemplated by your board. Here is some fodder toward thinking ahead, like any good founder should...

If you're the founding CEO, the company *is* your baby. You're the CEO. No one knows your company more than you do; no one is more passionate about it; no one single person has put more emotional capital into it (except a co-founder); no one has more shoulder weight than you; no one has more on the line that you. You are lugging around a bigger pair than most and are swinging for the fences to say the least. By all accounts you ought to occupy the CEO seat until you no longer can.

Here's the flipside to all that though....

-are you fundable/credible? i.e. have you done it before? where have you cut your teeth? do you have leadership qualities?

-do you know what you don't know? i.e. you know your strengths, but what are your weaknesses, and how are you complementing them (and does is your story plausible)?

-you can launch 1.0, but can you scale it if it works? i.e. are you operational? are you management? could you get a job in management at another company? can you lead product releases, talk effectively to press, sell and manage customers/partners, manage cash, manage your board, and manage employees?

-are you a rainmaker? i.e. can you get deals done against odds? can you take a piece of technology and make it larger than life? do your customers like you?

-can you attract talent? i.e. do people want to work for you or your company because you are there? do you have a posse from the past that will follow you?

-have you been through any exits? i.e. sale of company, merger, IPO

-do you have the support of your board? i.e. do they believe in you and your instincts?

I'm sure there's a more exhaustive list of check points here, but you get the idea. You might be able to offset with a key management employee like a COO or a VP of something-rather. But then again, your board might not agree with you, and they might want you to step aside. After all, if they believe their chances improve for a better exit with a fictional rock star, then it is what it is. Any case, don't fight the battle too hard because you'll never win the war. Last thing anyone needs is noise taking your eye off the ball.

If either you or your board are convinced that you need to hire the next CEO, proceed with caution.

There's a tendency to go after older, experienced CEOs, well - because they're older and more experienced. The reality is, if they're too old they tend to lack a beat on your industry (especially if you're in a brand new industry); and if they're too experienced they can sometimes be jaded and not see the world as opportunistically (not sure that's a word, but you get the point). That said, there is big value in pattern recognition that only comes from experience. Don't count the old man out. Balance is the key.

Paul was a younger, first-time founding CEO. Six months into the project the VC offered the company more money for taking on a senior CEO type. That senior guy wasn't able to get the company any subsequent funding, so it nearly fell apart. Pete, discouraged, left the company. Ironically, the CTO who was much younger than Pete, was the last man standing and became the CEO for years to come.

DNA is also key. If your staff wear flip flops and bermudas to work, you're going to have some level of culture clash with the guy with veneers and Tommy Bahama shirts. That sounds superficial, but I think you know what I mean. Just like the rest of your startup team, make sure you can break bread and crack a beer with this guy. Trust and good vibes are necessary. Don't settle for less.

Jack was raising first round money for a company, whereby a VC (prior to funding) introduced him to a former Yahoo CEO. He was skeptical before he met him, but as soon as he met him, it felt right. He and Jack had lots of personal hobbies in common; and he was experienced in nurturing younger entrepreneurs. He never fell in love with Jack's company, so that never came together. But it was at least a reference point to what Jack would eventually want.

Your VC will likely recommend a pricey recruiter. I don't like this option because 99% of the time the candidates all look and feel the same. Your VC may also recommend a candidate or two. This can be dicey too (unless you have a great relationship with your VC) because sometimes the VC is placing his "guy", and sometimes it's for the wrong reasons. This is a long winded way of saying, you have to find your CEO yourself. Find someone you can learn from, someone that possesses the qualities you can trust to carry your vision forward, someone you can work alongside with in the trenches, someone who finds what you have to offer critical, and someone that can take your company to the next level.

Every six months like clockwork, one of Bob's investors surfaced the notion of bringing in the next CEO. It was usually just when Bob had done some big deal or something significantly positive. Bob realized he had a perpetual target on his back. When the company had little money, the board decided to hire a recruiter to bring in a rock star. Problem was, the company would need new funding within six months, and no rock star is interested in coming in, only to have to fund raise day one (without yet even fully discerning what the company does). Failure on this search was a self-fulfilling prophecy, a waste of time and money. What's more, is the recruiter cast a wide net to a variety candidates, including candidates that were actually Bob's customers and in one case even on of Bob's advisors.

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The point of this post is that hiring a CEO seldom makes sense to the founding CEO. Sometimes it's necessary and sometimes it's inappropriate. Every situation is different. Ideally, you want this decision to be one you arrive at before others on your board do - and thus, you drive the decision, the process and the selection on your terms.

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Comments

[Warrick]

Great post - thanks. I've been a CEO and COO as well as founder so I can relate to all the points you make.

I am currently on the other side of the table - searching for a new CEO gig - and its been illuminating what some of the founders/investors have focused on during their search. From my personal POV I want a company I can be passionate about, a culture where I feel I will fit and a founder who feels they are getting someone who provides the Ying to their Yang....its tough to find!