Start-Up CEO Attributes - Reflections of a venture capitalist
June 13, 2017
I spent time recently with a venture capitalist who has reflected a fair bit on the leadership issue in the start-up game.
To this VC, early stage tech firms are like clay which, in the hands of talented artisans, in the right conditions, sometimes become art of considerable value. The creative process by which that art emerges is a blend of inspirational, improvisational, experimental and professional activities. And the finished product often bears little resemblance to what was envisioned at the outset. The irony of the start-up game is that detailed blueprints get funded while decidedly non-linear alchemy is the magic that makes or breaks the returns.
Early stage CEOs must feign being in total control while bobbing and weaving in search of their company’s technological and market sweet spot. This requires the ability to manage stakeholder expectations, implement scalable processes, build high performing teams and cultures, manage people, and continually adapt while trying to stay alive on the startup autobahn. These are decidedly mixed, often conflicting skillsets which organizations nonetheless seek in one CEO.
Since execution skills are more linear and easier to evaluate in candidates than the entrepreneurial je ne sais quoi, and because start-ups and their investors are often overly optimistic about the compelling logic of the blueprints they have funded, there is a tendency to skew selection decisions towards execution and scaling skills. This often comes at the expense of the more improvisational skills required to adapt to changing market and competitive realities.
The VC spoke of the painful experience of hiring one executive who had an impeccable track record of building several Canadian subsidiaries of large multinational tech firms. Because the person had launched these subsidiaries from virtually scratch, she considered herself a ‘start-up’ person. And because several of these firms had become runaway successes, she had the swagger of someone who attributed a good deal of that success to herself.
However, as the VC came to realize, this person had never taken a promising technology and built a company from it. She had never really contemplated or adapted business models, experimented with markets or developed ‘go-to-market’ strategies for a ‘no-name’ start-up. Instead, this person had always been handed a playbook with products, reference accounts, well-developed positioning, messaging, marketing collateral and more. Her job was to apply that playbook to the local market. Though capable no doubt, it was her driving full-steam ahead execution skills that were called for in those roles. Those alone were not enough to succeed in the startup...and she did not.
To this venture capitalist, early stage CEOs need to be part scientists. They develop hypotheses, experiment, validate via feedback, adjust, shift and start again. They engage in classic trial and error and with many potential paths and roadblocks before them, they benefit by an entrepreneurial ‘nose’ to guide their choices. While company building, execution and scaling are important, without these other abilities the CEO may pick a path and die of starvation on the road to nowhere.
It was not that long ago that investors would back an entrepreneur, wait for the inevitable slip, and then replace him or her with a ‘professional’ leader. But as this VC learned, the wisdom of such reflexive swaps is not so clear. While predictability may increase and histrionics/headaches decrease, the organization’s entrepreneurial DNA often departs with the founder. For a smaller firm still searching for its place in the technology ecosystem this is no incidental concern. This is why today’s founders tend to be provided with a little more rope, more time in the hopes they can learn, adapt and mature.
What made this VC so impressive was that the more he sees and learns the less certain he becomes about what he thought he knew with certainty. Which only means he is most likely himself growing and getting better at his own craft.
About the Author
Robert Hebert is the founder and Managing Partner of StoneWood Group Inc., a leading executive search firm in Canada. Since 1981, he has helped firms across a wide range of sectors address their senior recruiting, assessment and leadership development requirements.