Tuesday, March 5, 2013

Becoming CEO of a Venture Backed Company: Are You Ready for Combat?


            Years ago when I was much younger and contemplating starting my own dot com company, I sat down with a successful and experienced entrepreneur who had built more than one business from scratch. This particular entrepreneur was also a former Marine, so he had earned his grey hairs and steely look in more than one way. I shared my ideas with him and he gave me constructive feedback and asked thought provoking questions. Then, when we were wrapping up, he paused, looked into my eyes and said, “David, if you’re going to try to do this, I can’t predict what the outcome will be. But I can tell you something for certain. Being the CEO of a venture-backed company will be exciting like combat. The highs will be really f**ing high. The lows will be depressingly low… and you’ll be scared much of the time.”
            It all seems so easy on the surface: You find a cool technology, raise money, hire great people, market and sell your product and—Voila!—you instantly have a fast-growing company that gets bought for big bucks or goes public. Being CEO of a company that is going to raise capital and attempt to grow at extraordinary rates seems so sleek and sexy, like becoming a Jedi Knight. Yet the process of achieving that success is tough, gut-wrenching, extraordinarily hard work.  It is war and wars are not won by individuals but by teams with great leaders.  And great leaders don’t do it only for the glory or the rewards they do it because of the challenge of proving to themselves and to the world that they can do it. 
            The reality is that most venture capital backed companies never see great success.  Many successful CEOs often have had failures or flirted with failure more than once along their journey to success.  And just like war, even with the smartest, hardest working people and the best leader, it still takes at least some luck to have truly wild success.  The CEO’s job is always an uphill battle.
            On top of this, what makes the job of a CEO so utterly challenging is that, unlike most jobs, which come with one boss to please, CEOs not only have multiple bosses (i.e., board members) but also have multiple constituencies. CEOs must think not only about their board members, but also their shareholders, creditors, employees and customers. Frequently the demands of those various groups are not completely aligned. They must balance those demands like a plate juggler in the circus—and they need to be running forward at full speed while doing so. Aspiring entrepreneurs and first time CEOs rarely understand or often do not think about the challenges of pulling off that balancing act.
            The result is that CEOs often feel like the rope in a multi-directional tug-of-war between their various constituencies. Being that rope is stressful and even though people who want their time and attention surround the CEO -- it is a lonely as well. Everyone else is pulling on the rope, and while they may think they know what it is like to be the rope -- well, only the rope really knows how that feels and the last thing the CEO wants to do is show anyone the strain that they are feeling.  As a VC who has been the rope, and now is someone pulling on the rope, at least I can empathize with the CEO’s tough job. While that is mostly a positive thing, it does make things more painful when it becomes necessary to let go of that rope and find a different one.
            I have never been in combat, but I can’t recall speaking with any veteran who told me they were never scared. Fear is the normal response when faced with the risk of harm to yourself or someone you care about. The bravest people and the most heroic people feel fear--only the callous and insane do not. When faced with the prospect of losing your investor’s money, having to lay off your employees, creating unhappy customers or being publicly labeled as a failure, it is only natural to feel some fear. And the adrenalin rush that comes with it is part of the thrill of being a CEO.
            So, if you’re dreaming of being CEO of a venture-backed company, just remember that being a Jedi Knight is a difficult path that only looks sexy from the outside.  It will be lonely, brutal and gut wrenching and you’ll need the best team with you and some luck to succeed.  And if you don’t believe you will be scared, like Yoda wisely said: “You will be… You WILL be!” 
           

4 comments:

Steve Baker said...

Dead on David!
And you will get to the point that you think it's like pushing water uphill with a rake.
And if you do everything right and it still turns out wrong...welcome to the club.
Get back in the game and go again. Hell, you could even take your experience and turn it into a book like I did:
www.pushingwater.com

Go forth, be a crazy entrepreneur, work, fail, then succeed.
I wish you all the very best.
Steve Baker

Stephen Cunningham said...

Thank you david. My experience as the ceo of two venture backed companies is very consistent with what you said in this post. Fear is certainly a factor, although I think that courage, intestinal fortitude, focus and flexibility in the face of adversity are even more critical traits. Positive over negative, if you will. Still, I enjoy your comments, and thank you again for sharing them.

Jim Franklin said...

Well said. I think I'll borrow your analogy about the rope in the multi-tug of war when speaking about the role of the CEO. Also, I think there is a lot more failure in one's career than success. Even the distinction between failure and success is not entirely clear. I've had financial failures that were HR/operationally/technically successes. I've also had financial successes that were really business failures (grossly missing the larger market opportunity.)

Jenny Eggleston said...

David, thanks for your post. I can imagine the emotional intelligence required for managing such a venture. I have to believe that having a solid accounting and business management system in place would be critical to that role, but I'd love to hear your take on that idea. What are the key value points that an accounting and business management system brings to that process, both at start-up and throughout the operations of the business. Your insights would be greatly appreciated.

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