A lot of founders don’t make it as a CEO. Not that they can’t, but they don’t. None more glorious that Andrew Mason and his middle finger salute to the capital markets.
“Just kidding – I was fired today.” ~ Andrew Mason (Former CEO of Groupon)
So why don’t they make it?
Well, it’s complicated. Based on the flood of recent posts from founders, CEO’s, and investors, it’s clear that every situation is different.
Venture capitalist Ben Horowitz believes in teaching founders to become CEOs. LinkedIn’s Reid Hoffman and awe.sm co-founder Jonathan Strauss made the decision that replacing themselves as CEO was the right move. Mark Suster, both a VC and a CEO, is asking the question if you should replace yourself. There are professors like Noam Wasswerman studying the founder dilemma to understand if founder CEOs are more successful than hired CEOs.
As a former first-time founder and CEO, I didn’t make it.
I didn’t understand, until it was over, just how hard the transition is from a founder to a CEO. A completely different role from getting a company off the ground, I learned that becoming a CEO is even lonelier than being the CEO. Few people know how to teach it, even less think about developing you, and even worse the people that saw you as a founder aren’t always ready to see you as a CEO.
I have come to believe that you will always be a founder. You can be a founder and a CEO. But you can’t be a CEO while you are trying to be a founder.
What it Means To Be A Founder
Being a founder is incredibly hard in its own right. The Internet is littered with these stories, especially details about the spectrum you are expected to cover from visionary to janitor. These horror stories of personal struggle are true. Willing everyone to help, buy, join, support, and invest in your company takes every ounce of energy you have. Surviving really is your only solace.
A founder, especially in the early days, is the soul of the company. The initial spirit and visionary who sees an opportunity in the market that few people around them can see, until you turn it into a cash generating machine. And even though your card says CEO, the organization really needs your founder magic to get off the ground.
Of everything you do, I think there are a few areas that are the most important.
Evangelizing: The job that never stops, you have to constantly convince everyone to be a part of your vision. No easy task, you use energy, charm, will, tenacity and anything you have to convince people that what you are building is special. Most tiring of all, you are the emotional leader for the entire team, willing them not to quit, even when things look most bleak.
Driving to Product Market Fit: Marc Andreessen is right, getting to product fit is all that matters and your job is to do anything it takes to get there. Changing the team, the product, direction, to the point that people think you’re crazy just may be part of the game. The product is all that you have, which means it takes a significant majority of your magic, until it clicks.
Hiring Carefully: As a founder you aren’t yet building a company. That sounds crazy but until you reach product market fit, hiring any roles that don’t actually make your product better, are forcing you to manage an organization you aren’t yet ready to manage. Yes, it’s incredibly important to lay the foundation with values and a simple definition about your culture, but just as important is hiring carefully, piece by piece.
Finding Capital: This role never goes away, even when you are a CEO. The job you probably hate the most, it is incredibly important. Spending before you have the money is a path to bankruptcy or investor terms that no longer make it your company.
What It Means to Be a CEO
Being a CEO is a very different role. Still the visionary and champion of culture, they are the ultimate leader. Yes a founder is a leader, but this type of leadership is not the same thing. What works as a founder to lead by example, has the opposite effect when you are the CEO. Leading not by doing, but by inspiring, enabling, and holding people accountable. Everyone has a slightly different definition, but I have found the following to be key areas of focus.
Leading: Doing the work yourself is easy. Enabling your team to do better work than you is painstakingly hard. Giving direct, consistent feedback is important to getting the most out of your team. No longer a hub and spoke model, the best CEOs are objective, critical, and people focused.
Thinking: Different from being a founder, thinking is valued over doing. No longer in the weeds, you should be designating significant time to understanding and thinking about the businesses. Because the larger your company becomes, the more disruptive pivoting is on the culture.
Evangelizing: Still important, this role shifts from one-on-one belief building to evangelizing at scale. While your personal touch still matters, the quality over the quantity is the biggest change you have to make.
Prioritizing Relationships: The people you spend time with are completely different. Being a real CEO means your leadership team and your board members take the majority of your time. Rob Bailey demonstrates just how much time should be spent on your board.
Capitalizing: A never-ending proposition, ensuring the business has enough capital is one of your sole jobs. Spending time with investors and potential acquirers, lays the ground work for future transactions.
Deciding You Want Out As CEO
“This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes.” ~ Morpheus, The Matrix
It’s perfectly acceptable to decide that becoming the CEO is not what you want to do. It is a completely different role and taking the red pill is agreeing to learn a whole new set of skills you don’t possess today. The journey to find the right path is long, unforgiving, and lonely.
Unfortunately a lot of founders are fired without any opportunity to “decide” they want out. Not every investor is as thoughtful as Brad Feld and Mark Suster, who clearly understand the emotional impact on the founder as well as the delicate position it puts the company in.
I didn’t have this at Contour. Instead I experienced a stomach-jarring, soul-crushing end realizing I had one choice. Stepping out. An emotional good bye, I could barely read my speech without tearing up. It still hurts.
If you are considering whether to step down or continue, I would suggest thinking about these topics.
Passionate About Building A Company: Your love for product and customer has to shift to a love for building the best company in the world. You have to be passionate about leading and managing people, process, and organizational structure.
Willing To Re-Learn: It takes a lot of energy and a continued commitment to being vulnerable. You will be relearning how to communicate, setting expectations, and holding people accountable. Skills that will feel incredibly awkward for a very long time.
Supportive Board Members: You can’t fire your investors, which means if they can’t help you make this transition or don’t have the patience to watch you learn, bringing in an experienced CEO isn’t a bad decision.
Quality Leadership Team: A lot of the team you built will not make it in the next phase of the company. Strong doers may not be great managers so you need to be ready to constantly reevaluate your leadership team. The stronger your team is now, the easier the transition will be.
Making the Transition to Being the CEO
“It generally takes years for a founder to develop the CEO skill set and it is usually extremely difficult for me to tell whether or not she will make it.” ~ Ben Horowitz
A lot founders never actually make the decision they want to be the CEO, at least I know I didn’t. Like a lot of founders I just assumed it was my calling. A misunderstanding that doesn’t enable you or your team to begin seeing your role in a new light.
Assuming you consciously make the decision to continue the journey the first step is recognizing when to make this transition. Not always clear, I have found two points to consider.
1. Product Market Fit
2. Raising Institutional Money
Whether you are ready or not, as soon as you bring in venture or private equity dollars they expect you to act like a CEO. Even if they invest early, they will be comparing you to the experienced CEOs in their other portfolio companies.
The good news is that when it’s time to make this transition, the founder magic you harnessed to reach product market fit is the same magic you need to create a great company. Yes, there are process focused leaders you may not have on board today, but I do believe you can learn to be a great CEO.
The bad news is that few people can teach you how to make this transition. Unfortunately, most investors have never been a CEO, which means the common answer to the learning curve dilemma is to replace you. Right or wrong, it’s the only option they know how to do.
As you make the transition, here are a few things that can help.
Define Your Role: Make it clear to your team and the organization that your role needs to change. An outside consultant can help to facilitate the discussion, but you will need to define your role, the role of the leadership team, and ask for everyone’s support as you do your best to switch from a doer to a leader. Recognizing you are no longer a peer with your co-founders, your job is to be the CEO, a change that can be hard for everyone involved to accept.
Find Mentors: Ideally, find a few CEO’s that you like, who have extra cycles, and who are great at teaching. Hiring a CEO coach is highly recommended to provide both mentorship and an emotional outlet. The best sports players in the world have coaches, being a CEO is no different.
Stop Doing: You have to complete your leadership team and hand over the reins. As hard as this is, and believe me I struggled big time with this, you have to stop doing roles that make you a peer with your leadership team. It’s their job to run the business, not yours. Yes you will have influence and you will have the final say when needed, but if you don’t complete your team you can’t even begin to really lead. If there is a role you just love too much to give up, then maybe you should step down as CEO and just do that role. A filter that can help you in the decision process.
Get Feedback: Create ways for your organization and board members to constantly give you feedback. Being direct is not a common communication style, so expect to ask for the feedback. Listening and being vulnerable are essential for internalizing and applying the feedback you receive.
Not everyone will agree, but I believe you can learn to become a CEO. The qualities you need to successfully found a company, against all odds, are relevant to being a great CEO. I also agree with Ben Horowitz that founders have a distinct advantage in knowledge, moral authority, and total commitment to the long term. Advantages you can’t just replace with an executive search.
The decision to grow into this role is critical for you to make and for everyone to support. Deciding it’s not for you is perfectly acceptable and hopefully your board enables you to make this decision.
Your development is an incredibly important conversation you should be having with your investors from the minute they invest, even if it’s on you to force the conversation. Mapping out what everyone expects and what happens if you don’t successfully make this transition is equally important. Firing the founder is never a positive experience.
Just remember that if you do choose to make this transition, recognize your job is no longer the founder. It’s to be the CEO.
Previously: Founder dating: Tips on how to pick your partner