3 Paths for Founding CEOs: Adapt, Assemble, or Move On
As companies grow from the startup to the expansion stage, founding CEOs are faced with three potential developmental paths.
The roles of startup CEOs and expansion-stage CEOs differ greatly. They require completely different skill sets, and the majority of founders end up recruiting replacements to take over the companies they created. As I’ve written about previously, there is absolutely nothing wrong with that. It is a common reality that accompanies the shift from searching for a business model to executing and scaling it effectively.
Navigating a company through the expansion stage takes operational expertise. You have to know how to recruit senior managers who have specific functional expertise, and you must be able to establish an operating rhythm that gets your growing team working toward the right goals. As your company transitions to the next stage, you must transition with it, and as you do you are faced with three paths.
1) Adapt to the New Reality
If you are dead set on remaining CEO, then you need to pick up the new skills needed to address the blind spots and manage your company’s expansion. That means you have to augment those skills that got you where you are now: your audacity to do something new, your passion to inspire others to take risks, and the tenacity to create and disrupt markets. In addition, you need to focus on managing through others and developing a rhythm for your team.
It’s extremely rare for a founder to have both start-up and growth-stage skills, and it’s even less likely that you can pick them up as you go. So, consider whether you’d hire yourself to run your company now that you are expanding — chances are, the honest answer is no.
Successful Example: Rand Fishkin, Co-Founder and CEO, SEOmoz
Hear Fishkin discuss the challenges of navigating the transition from the startup to the expansion stage and the ways his leadership approach and responsibilities have evolved: Labcast: SEOmoz’s Rand Fishkin on Managing the Biggest Challenges of Your Company’s Growth
2) Assemble a Crack Team
Another option is to surround yourself with an executive team that brings the growth-stage experience and expertise your company needs. In a guest post for VentureBeat, I outlined the reasons why hiring a COO makes sense for a company progressing beyond the start-up phase, and one reader asked about recruiting a CFO instead. Depending on where your skills come up shortest, this can be a suitable alternative.
If, for example, you need more cover on overall operations, financial forecasting, and legal matters, then a CFO makes sense. For most companies entering the expansion stage, however, a sales and marketing-focused COO is the right choice.
Successful Example: Oren Michels, Co-Founder and CEO, Mashery
When it comes down to it, companies aren’t run by highly effective individuals, they’re run by highly effective teams. In this podcast interview with OpenView Senior Managing Director and Founder Scott Maxwell, Michels discusses how in the early days of Mashery, he surrounded himself with the best people possible who were experts in the areas he was weak in, which allowed him to focus on his strengths: Startup CEOs: Who Should You Hire First?
3) Transition into a New Role
The majority of start-up CEOs recruit their replacements as the company grows beyond $15 million in revenue. It’s that simple, and it’s usually the right choice. Work with your board to bring on a new CEO and transition into a new role. Don’t let your ego drive an emotional reaction. Put the company first, just as you always have, and you will come to the conclusion that it’s the right decision.
Successful Example: Scott Johnson, Chairman and Founder of AtTask
Learn what it takes to make a successful CEO transition by reading up on the great example of AtTask: Founding CEOs: Do You Know When (& How) to Move On?
When do you think it’s possible for founders to evolve into effective operating CEOs?
Use this as a guide for controlling costs, getting to cash-flow positive and extending your runway as quickly as possible.
Companyon Ventures enhanced our Expansion SaaS Benchmarks Data Explorer by building the accompanying SaaS Benchmarks Modeling Tool to measure the current and projected performance of their portfolio against other high-performing SaaS startups. Check out the tool here.