CEOs for Startups

One of the big challenges in starting companies is getting good quality CEOs to run those companies. While most startups we encounter are started by founders who have not previously run successful companies, the odds of success, based solely on our own history in this regard, are dramatically better for companies starting with experienced CEOs.

Who starts companies?

Most people who start companies are small business people. They start a company to generate income over time and potentially grow into something larger, perhaps a legacy for their family. Most of them have experience in their field of endeavor, buy into a franchise, or leave a previous similar company to start out on their own. They know their business from the inside out or work with partners who know their parts of a similar business. We often call these lifestyle companies. These are NOT aimed at rapid growth and exit. I have run and continue to run several of these companies myself. But that is NOT who this article is aimed at.

People who found companies intended to rapidly launch, grow, and sell their company by leveraging investments from strangers who invest to create or expand their wealth are what are often called ventures. Lots of folks try to do this for a wide range of different reasons, most of them are relatively inexperienced, and most often their fundamental motive is getting rich themselves. Most of them have never run a company before, and most of those who have run companies before failed in their previous attempt, in the sense that the previous company did not rapidly grow and exit leaving them wealthy. They may have succeeded in many other ways, but if you don't do what you set out to do, I will call it a failure in that sense. Hopefully they learned.

The third substantial, but smaller group of folks who start companies, are experienced entrepreneurs who have had successful previous exits from companies they started or were early leadership participants in. They often made substantial amounts of money, but usually not so much that they can simply retire, or even if the could, not so much that they had to spend the rest of their lives managing it. These are the so-called serial entrepreneurs. Usually they have failed and succeeded different multiple prior attempts, and learned many lessons along the way.

And of course there are exceptions. There are folks who started one company, grew it rapidly, became wealthy, and went on from there. Congratulations of you are one of these - hopefully you will become an investor in some of the other companies with founders.

I am strictly speaking none of these. I am a parallel entrepreneur who starts multiple companies with many different partners and I have gotten systematic in my approaches to this so as to become relatively scalable and highly efficient at it as a lifestyle company owner whose lifestyle companies own parts of other types of companies. I currently have equity in about 30 companies, run 2 of them myself (effectively CEO), help to run several others (fractional whatever they need), and intend to continue to do this as a lifestyle until I fall over or feel I am too old to keep doing it. I do it for the fun of it, but also to make money, because I am not so wealthy that I can afford to do nothing, nor could I do that if I were so wealthy because I would be bored to tears. I enjoy what I do, so I never work a day in my life.

Why CEOs fail and which ones I bet on

My preference is to bet on the third group. The so-called serial entrepreneurs. The reason is obvious. They are still hungry, they are more experienced, knowledgeable, and skilled because they have put more time into it and seen a lot of the bad parts of the movie before. Unfortunately for me, I don't encounter that many of them who are seeking my assistance. So I end up working with more of the 1st and 2nd group folks, which is fine and entertaining. But also as a side effect, I learn many more of the failure modes than I would prefer to know about.

There are lots of specific reasons for failed companies, way too many to list here or anywhere else. But at a generic level, I will pick a few of the top root causes I have identified to list here. But first a note on who is to blame.

It's the CEOs fault. Always and without exception. Running the company is their responsibility day to day and strategically. My failed companies are my fault. And yours are yours. Any other approach demonstrates the first failure mode listed below:

Most of the best CEOs I have encountered have failed because of more than one of these in their careers. That's not a shameful thing. It's called experience. And it's something to be proud of... that you are still here, that you got back up again, and that you have overcome these sorts of issues to become successful when you tried and tried and tried.

The CEOs we seek

When we are looking for CEOs for startups, there are things we want to see and things we don't want to see. Here are the extremes:

The ideal candidate is something like this:

  • Successful CEO
  • Recent $1B+ exit
    • Closely related field
    • No restrictions on competition
  • No need for cash
  • Still hungry for the next success
  • Incredibly well connected
    • For funding sources
    • For connections in the niches
    • For great executive team
    • Popular in the media
    • Trusted by all
    • Loved by most
  • Has team ready to go
  • Has customers waiting to buy
  • A super sales person
  • Great personality
  • Extremely humble but self-confident

We don't find [m]any of these.

The worst case looks something like this:

  • Never succeeded at anything
  • Only has failure exits
  • Wants to try being a CEO
  • Knows nothing of the field
  • Recently fired w/ strong non-compete
  • Needs money now
  • Has no connections
  • People don’t like them
  • Unpopular, Untrusted, Reviled
  • Nobody wants to work with them
  • Can't sell well (or at all)
  • Blames others for failures
  • Bland or bad personality
  • Lots of ego and bluster
  • Doesn't care about other people
  • Wants money money money
  • Is hard to deal with
  • Demands more of others than self

We find too many of these.

We don't generally believe the ones who claim to be in the left hand column, usually they are liars. And we won't engage the ones in the right hand column, even though we would like to help them get out of it.

The CEOs we find

We find CEOs across a wide range. The closer to the best case, the better, but realistically, no CEO like that is likely to want to do another startup, and likely to not need much in the way of help.

Most CEOs we encounter are founders who have never been a successful CEO before. They usually don't realize they are less than ideal for CEO of their company, and those who succeed in getting to cash flow neutral or better usually don't want to give up the position to a more qualified party once they got that far. And they are right in many ways... however...

For a successful growth business to prosper beyond a certain point, it almost always needs to replace its founding team with a professional team. Even if the CEO continues, the team is very likely to change. That's for a good reason. Great startup people are rarely great growth people.

Maturing a company

The fundamental challenge has to do with maturing the company. This has little to do with the maturity of the people in the company, and a lot to do with the inherent personalities of people who start, grow, and operate successful large companies.

CEOs for Startups

Every startup needs a CEO, and as they mature, they very often should change to another CEO. We can help them do that of course, and we do. But then there is another plan at hand...

Many folks who have a working technology beyond the prototype phase, perhaps with some actual users and paying customers, do not want to or are not reasonably able to make the bet of becoming an entrepreneur in a startup company and failing the first few times before learning to be successful.

One of my companies has, as one of its main missions, creating the technical capabilities and supports to create and measure companies to help them rapidly get them to the managed maturity level. We typically do this in 6-12 months.

At Angel to Exit we help grow companies, including advising them and supporting their efforts with an ecosystem and community. CEOs for startups is our program intended to accomplish these goals by taking technologies in a reasonably mature state and combining them with CEOs properly prepared and positioned to help them grow, providing additional part-time team members and pre-built basics like contractual instruments and business technologies, helping them with a strong advisory board, helping them find suitable investors, and with the goal of helping them become a successful growth company within 2 years.

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