September 4, 2009
One of the most satisfying and challenging parts of a VC’s job is helping startup founders build their management team. It’s one of the areas where your VC can really add value. It’s also an area where we can really screw things up. Take it from me, because I’ve done it.
One of the hardest things about building a startup organization is that a successful startup is effectively 2 or 3 radically different companies between founding and achieving substantial commercial value. And the people who will be great at one of those different stages often will be pretty lousy at the other stages. In particular, the proven senior executive who is fantastic at executing and operating during the scaling phase often is a great executive but a not-so-great entrepreneur. So one of the mistakes we often are tempted into making is hiring that exec before the company is ready for him/her.
In one of the best posts on startup success I have read, Marc Andreesen wrote:
“The life of any startup can be divided into two parts: before product/market fit (call this “BPMF”) and after product/market fit (“APMF”).”
This dividing line is critical to informing many different aspects of what the startup needs to be doing, one of the more important being informing the right team that should be on the field. During the before product/market fit period, I would argue that it is critical that the startup be led and populated by highly entrepreneurial individuals — individuals who are creative, risk-taking, willing to change course quickly and decisively, all in the name of finding product/market fit. And, while this is a gross generalization, very often the executives who will become critical to taking the company the distance actually are not nearly entrepreneurial enough to excel during the BPMF stage. Whereas later stage successful startups typically should be run by executives who excel at scaling a business and its organization, early stage BPMF startups typically are best off being led by highly entrepreneurial founders with great product sensibilities.
Ironically enough, what led me to this post is a conversation I had with a CEO candidate for one of my companies. While the board felt that the company’s founder was excelling at many aspects of the CEO job, both the Board and the founder agreed that an experienced CEO would have a huge impact scaling the business. And, even though we weren’t yet an APMF company ready for the scaling phase, the board figured it made sense to go out and find a CEO now, especially considering we would need to raise another financing round next year and investors for that round would likely look for a CEO who could take the business “to the next level.” So we launched a CEO search.
And last week I was speaking with a candidate who probably is the perfect candidate for this business, and had a fantastically refreshing conversation. The candidate pushed me to articulate why I thought we needed a CEO now, and why we weren’t better off hiring some mid-level folks now to help the current team respond to a growing wave of customer interest, and put off hiring a CEO until the company had enough time in the market to nail product/market fit and really be ready to scale.
And he was exactly right. Duh.
So next time your VC argues for hiring a senior exec, make sure the spec for the job fits the stage of your startup.