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14 Ways To Be A Great Startup CEO

Posted by Jason Baptiste on Tue, Dec 28, 2010

great startup ceo mark zuckerberg resized 600Everyone thinks that being a startup CEO is a glamorous job or one that has to be a ton of fun. That's what I now refer to as the "glamour brain" speaking aka the startup life you hear about from the press. You know the press articles I'm talking about... the ones that talk about how easy it is to raise money, how many users the company is getting, and how great it is to be CEO. Very rarely do you hear about what a bitch it is to be CEO and how it's not for every founder that wants to be an entrepreneur. I've spent a lot of time recently thinking about what it takes to be a great Startup CEO that is also a founder. Here are some of the traits I've found.

Be A Keeper Of The Company Vision

The CEO is the keeper of the company's overall vision. I'm not talking about the vision for the next few months, but the larger road ahead. The CEO needs to be able to keep things on course for the current quarter to make sure that the large overarching vision of the company can be achieved. The takeover the world vision of a startup usually can't be achieved in one year or even in some cases, like Google, in a decade. It takes a great startup CEO to keep the company on track to achieve that vision. A great startup CEO will often judge upcoming initiatives to see if they fit in as a piece of the large puzzle for the bigger vision.

Absorb The Pain For The Team

A startup CEO needs to be the personal voodoo doll for a startup. They need to be able to take on a strong burden of stress, pain, and torture all while making level headed decisions. You can't have the troops stressing and worrying about the difficult challenges at hand. A good startup CEO will absorb the stress, so the rest of the team can carry on. He also needs to be able to mask this pain and stress. Not that he should hide or lie to the team- I'm not encouraging that. Most of the day to day nuances+stresses of a startup aren't worth having the entire team worry about and the CEO needs to bear that pain.

Find The Smartest People And Defer On Domain Expertise

A startup CEO has a great knack for finding talent. The key is finding people that are smarter than you on specific topics. It might be technical team members/leaders or it might be a new VP of Biz Dev. A startup CEO has to have the ability to find these people and make relatively fast decisions to hire them. They also have to be able to show the fire and passion to convince them to leave what is most likely a better paying and more secure job to join the company. The real key to hiring as a startup CEO comes after the hire. A great startup CEO will be able to trust the hires that they make and defer to them on areas of domain expertise. It's hard to let go, but you have to learn to, especially when the company grows.

Be A Good Link Between The Company + Investors

Whether you want to believe it or not, you are not an investor's only portfolio company. Even if you are a superstar, they have a handful of other companies to help and a ton of incoming potential portfolio companies. A good investor will pick 2-3 new companies per year to work with. A good startup CEO will be a good link between progress, issues, and areas where they need help with investors. A good portion of early stage startups that raise money will have a board comprised of 3 people: the CEO founder, the investor, and an independent board member. You are the lone representative for your cofounder and other employees.

Be A Good Link Between The Company + Product

I have this unwavering belief that the best companies are those that keep a founder as CEO for the long haul. Not because the founders have the right to be CEO, but because the CEO needs to be close to the product vision of the company. Founding CEOs understand this the best and can carry out that same unified vision over time. To fill in the management gaps a great COO, other board members, and heads of divisions will come along. It's a strategy that Facebook has employed and why Apple has had a great resurgence with Steve Jobs at the helm. It's all about keeping the CEO as close as possibly linked to the product.

Be Able To Learn On The Job

Most startup CEOs didn't start out with an MBA or some background in growing a company from nothing to something. The best have an ability to learn along the way and embrace their failures to become a better leader. Zuck started when he was 19 and now 7 years later, runs the most powerful internet company. Don't worry about whether "you're qualified" as it's hard to put typical qualifications on the job. You'll learn the really core stuff along the way. The best startup CEOs will surround themselves with smart mentors to be a sounding board along the way.

No Experience Almost Preferred

It's almost better to have a blank slate of zero experience as a startup CEO. If you come in with preconceived notions and block out the scrappy methods of a startup founder, it actually hurts you. Traditional education often trains you to be CEO or manager for a much larger company, not for a startup of under 50 people. It's a different kind of leadership and company.

Have An Uncanny Ability To Say No

You will be inundated with a list of requests from potential partners, investors, employees, and more. They will all sound absolutely wonderful. As you grow, you will also have the resources to execute more of them. Don't. It's easy to say yes, but so very hard to say no. By having an uncanny ability to say no, you can keep your company on track with the large vision you maintain. It will also keep your team members (notice I don't like to use the word "employees") laser focused and feel more rewarded as they are able to focus on one thing for a good chunk of time. I've seen too many startups sink because the CEO keeps changing what the head of product and engineering should be doing.

Have Some Technical Knowledge And Skillset

A good startup CEO shouldn't be afraid of a little bit of code and a text editor. They don't need to be diving into the source code on a daily basis, but they need to understand the technical requirements. It's easy to say "go build this", but it's a whole other ball game to understand how to build it. What seems simple may be a huge mountain of a technical feat that just isn't feasible with the given resources and deadlines. It can also help lend some street cred with hiring early technical team members too.

Be Able To Break Things Down Into Sizable Chunks + Milestones

Remember that huge unwavering vision that you are the keeper of? Odds are it only makes sense to you and your cofounder. You will need to break it up into sizable chunks and milestones for the rest of the team to understand it. You also need to be able to pick when and where to conquer things strategically. What is the past of least resistance so you can gain traction? What can you do first with your given resources?

Have The Ability To Call An Audible

Nothing goes according to plan. Things fall through, people quit, shit happens, servers crash, and other random things go bump in the night. You're going to have to deal with it and fast. This is a football term:

"Seen when the quarterback goes up to the line of scrimmage, sees a defensive alignment he wasn't expecting, and adjusts by yelling out a new play."

You're going to come up against things that you didn't expect and just be able to call an audible. Launch faster, spend more money here, or even abandon a project.

Can Motivate The Team Through Despair

People love to talk in this business. People love to talk even more when you're company isn't fairing well. A great CEO will be able to take those moments of public despair and keep the company focused. They will be able to debunk the rumors or even approach them head on by keeping the members of the company focused on the bigger mission at hand. It can come in simple 5 minute talks or motivational emails. The worst thing you can do is avoid the situation and be passive aggressive. I repeat: DO NOT WUSS OUT.

Be A Great Communicator

You need to be able to portray the energy and passion that you feel into others...over and over and over and over and over and over again on a daily basis. As a startup founder you need to communicate the vision and hope for the future of your startup to the rest of the world. You need to be able to break down the overall vision of the company into something that mere mortals can understand. You can't speak in crazy technical jargon or industry terms. It needs to be simple, clear, and compelling. You also need to be able to argue your point. Many will pick "fights" with you just to see how strong willed you are. Be respectful, but be very confident in your answer. Often wrong, but never in doubt my friend.

Don't Be A "Fake CEO"

Mark Pincus, CEO of Zynga, makes a strong case for not being a fake ceo. In short, worry about things that produce results, not fame. If it's between going to a conference/doing an interview or completing a deal, get the deal done. Don't "leave it to someone else". You need to get your hands dirty every single day.

By no means is this an exhaustive or definitive list. In some cases, the traits listed above might be counter-intuitive. What are some traits you've seen in great founding startup CEOs? Not the glamorous job you thought it was, eh?

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Go West, Young Entrepreneur! Is The Valley Better For Software Startups?

Posted by Dharmesh Shah on Tue, Dec 12, 2006

I want to start out by saying that this is one of the more troubling articles that I’ve written for this blog.  The topic is something that is near and dear to my heart (i.e. Boston as a center of software entrepreneurial activity).  As much as it pains me to say this, there seems to be increasing evidence that Boston (and New England in general) is losing further ground to the West Coast as the place to be to start an exciting new software company.

I’ve long accepted the fact that Silicon Valley has the edge when it comes to the necessary ingredients to foster the right kind of entrepreneurial energy for high-tech startups.  They’ve got more VCs and angels.  More successful serial entrepreneurs that are putting their cash back into new companies.  More startup employees that made money on earlier startups and going back and doing their own thing.  Generally speaking, The Valley has much more of the right stuff to spark a ton of exciting new companies.  I’ve known this for a while, but was reminded of it today when I came across an article titled “Capital Between The Coasts” in the Mercury News.  If you’re involved in startups on the East coast (either as an investor or an entrepreneur), you should read it.  Hopefully, it’ll keep you up at night, like it will do for me.  Another article (which cites the original) that I didn’t really agree with is the one from Venture which claims that the east coast loses the modesty game too.  Hard to believe

I want to get on the record that I love living in Boston.  My wife does too.  We wouldn’t rather be anywhere else.  We love the culture, the academic institutions and the overall energy of the city (we’ve lived here for about 7 years now).  I’ve been an active member in the startup community here, invested in a few early-stage companies and have co-founded a new startup of my own in Cambridge.  But, the evidence is mounting that Boston may not be the place to be for software startups (particularly world-changing software startups).  A number of people for whom I have great respect are beginning to convince me that the Silicon Valley edge is large and growing.  From the above cited article, Harvard Professor Josh Lerner says “There’s considerable evidence that except for biotechnology, where Boston has a strong advantage, the advantage of California is becoming more pronounced.” 

What’s Wrong With Startups In Boston?
Here are some random thoughts and ideas I have on the East Coast vs. West Coast theme.  
  • Where did we go wrong?  On a relative basis, Boston is still the second best place to be if you’re involved in startups (of the software kind).  There’s no decision or moment I can point back to and say, “There!  That was moronic, we shouldn’t have done that…”  Reality is, we still have lots of the right ingredients here too (just not as much as what can be found in the valley).

  • As an entrepreneur that has bootstrapped two prior companies (and working on my third), I think one of the biggest “costs” of raising capital is not dilution, but distraction.  I wrote about this in my article “Fatal Distraction:  The True Cost Of Venture Capital”.  Though not specifically targeted at Boston, I think the problem is worse here than in The Valley.  We simply take too much time and energy to get early-stage companies funded.  Instead of spending time building companies, our entrepreneurs are spending too much time raising capital.

  • As investors on the East coast, we are too careful.  As entrepreneurs, we are not careful enough.  This is the point that keeps me up a lot, because I think I’m part of the problem.  Or, more accurately, I’m not enough a part of the solution, and so I’m part of the problem.  

  • In my own small way, I’m trying to change this.  Last year, I made three early-stage investments (and when I say early stage, I mean early-stage).  The average due diligence for each of these investments was < 24 hours.  Actually, to call what I did due diligence is a grave distortion.  I really didn’t do any due diligence at all.  I tried to understand the idea (as best I could), I tried to understand the entrepreneur (as best I could), and I made my bets.  That was it.  For those deals I said no to, I said so quickly and convincingly.  At some level, I think that’s how it should work.  This is why I have a fair amount of respect for Paul Graham and Y Combinator.  You may not agree with their investment thesis, but I think it’s closer to what entrepreneurs actually need.  [Interestingly, the smart folks at Y Combinator actually divide their time between both coasts].

  • This year, I joined CommonAngels (a local angel investment group here in Boston with a great reputation).  There are a great bunch of folks involved in CommonAngels, and they are certainly moving in the direction that I think early-stage investing should go, but we’re still not quite there yet.  It simply takes too long.  It doesn’t matter if the startup doesn’t have financials to ponder or customer references to check up on.  It still takes months to get a deal done.  That’s too long.  But, it’s changing for the better and I’m encouraged by this.  

  • As for the entrepreneurs themselves, I think many of them are not understanding the reality of the mindset here.  Sure, you might have a game-changing, paradigm-shifting, belief-shattering idea for a consumer Internet play.  But, you’re going to spend a couple of months finding the right people to talk to, another couple of months educating these right people and the last couple of months (if you make it that far) convincing them to invest.  At the risk of alienating a lot of the people I know in the investment community (and even a few entrepreneurs), I’ll give you my sound-bite:  Many software entrepreneurs may be better off moving to the west coast than dealing with the pain of trying to get funded on the east coast.  There, I said it.  I’m going to walk around for a little while now because I feel so traitorous. … pause…  As much as I hated to do it, I think it needed to be said.

If I sound frustrated, I don’t really mean to.  I think I’d sound a lot more frustrated if it weren’t for the fact that I’m not really looking to raise large funding for my own startup, HubSpot, which is in the online marketing for small business space.  I’m fortunate in that I can bet on myself and keep writing checks until the money runs out, sanity runs in, or the idea itself succeeds.  Let’s see what happens there.  But, not everyone else can do that, and there are lots of entrepreneurs here in Boston/Cambridge that have ideas and would possibly make great startup founders. 

For all of you budding software entrepreneurs (and the investors that invest in them), am I off-base?  Is the East Coast actually closing the gap (instead of widening it) when it comes to being a great place to launch an exciting new software startup?  Is raising money even necessary now for software startups?  Can’t most people just bootstrap?  Would love to hear your thoughts in the comments.  This is one of those cases where I’d really, really like to be proven wrong.  I really like it here in Boston.  Go Sox!!

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Why It Takes So Long To Raise VC Funding: The Emperor Has No Close

Posted by Dharmesh Shah on Fri, Aug 25, 2006

If you’ve ever attempted to raise VC for a startup, you likely know that it is a long process that takes months.  One thing I’ve found particularly intriguing is that outside of bubble-like times, the average time it takes a deal to get done (and money to exchange hands) doesn’t seem to change a lot.  Though many other industry sectors have shortened the delivery time of their offering in reaction to the fact that we live in a fast-faced society where timeliness trumps other factors, the VC industry doesn’t seem to have changed a whole lot.  Dell can ship you a custom computer faster, FedEx can deliver a package quicker and home loans can be approved more rapidly than what we have ever known before.  But, VCs still will take months to work through a deal and write a check.

My fundamental question is this:  Is the investment return a VC generates for its limited partners correlated somehow with the time spent in due diligence?  The reason I find this question interesting is that there is a sneaking suspicion I have that VCs, like other people, form very quick decisions on whether a startup is or is not funding-worthy.  If this is the case, and they’re forming their decisions early-on anyways, it seems inefficient to spend inordinate amounts of time on due diligence – as it likely will not change the original decision often-enough.  So, I asked VC friends as to why they do this.  Why spend months on due diligence if it is not likely to change the outcome?

The answer, paraphrased from VCs, goes something like this:  “It takes some amount of time to get “comfortable” with a startup before we write a check.  Not all of this time is spent doing deep due diligence.   A lot of the time is just spent letting the deal “bake” in our (the VCs) minds.  Often, it is during that “think” time that we’ll come up with insights into the business and market that we would not have otherwise.  Sometimes, it’s simply a matter of getting educated on the space, educated about the founders, etc.  Often, during this “due diligence” time (where often, not that much due diligence time is being spent), we’ll come up with good reasons not to do the deal.  These reasons would not have occurred to us in the early conversations.”

This actually makes pretty good sense.  If the VCs are not having to invest all that much time/energy in “deep” due diligence in the weeks and months that pass, and they do indeed “discover” things that cause them to filter out opportunities that are later determined not to be of sufficient value, then it seems that VCs should do exactly what they’re doing.  Why close a deal in days or weeks?  You sometimes have a small risk of losing the deal, but since everyone else behaves this way anyways, there’s little that an entrepreneur can do to accelerate the process.

From an entrepreneur’s perspective, the situation looks something like this:  The VC will likely make a spot decision (within a day or two) as to whether you’re worth even investing the time in.  But, you’re not going to get a direct “no” (I’ve written about this phenomenon before).  But, from the time that they make the mental decision to invest, they are looking to leave themselves enough time to talk themselves out of the deal.  If they fail to talk themselves out of the deal, they’ll close it. During this time, where there is no possible way they’re going to reach a “close”, VCs are likely to ask entrepreneurs for deeper, more exhaustive information.  The frustrating part is that not all of these requests are so they can learn more about the company, which will influence their decision.  .  Some of it is simply to ensure there is adequate time for them to talk themselves out of it.  Unfortunately, it’s hard to know the difference, you have to respond to all due diligence requests as if they are somehow going to change the outcome.  Such is the life of an entrepreneur raising money.

Interesting Idea From Left Field:  What if a new VC came along that offered entrepreneurs a quicker, less painful process to raise capital for their startup?  Would this VC be able to attract a better class of entrepreneur?  Entrepreneurs that would rather focus on their business and customers than on raising capital?  Or, would this new VC be doomed to failure because they were not allowing themselves sufficient “bake time”?  Could some of the risk be mitigated by having a “probationary” period for the capital.  For example, in a $4MM round, the VC has the ability to retract up to 90% of the investment within 90-120 days if the deal isn’t what they thought it was?  This kind of approach will likely never occur, but if you look at entrepreneurs as the “customer”, then I’m pretty sure there are a pool of customers out there that would like more rapid “service” than they’re getting now.  Will we see innovation in the VC sector anytime soon, or is it by design immune to the need for change?
If you are a VC, or play one on TV, would love to hear your thoughts on this.  What am I missing?

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