At the earliest stages, a startup Founder/CEO is typically the star of the show. She or he is often the one who brings the early team together. Even with a full founding team plus early integral employees, the responsibility of truly driving the startup forward rests on the CEO. And perhaps most importantly, the startup CEO is the face of the company: to employees, to customers, and to investors. Usually it is the charisma and communicated vision of a Founder CEO which is able to convince the earliest of investors to put their risk capital into the venture. Their name becomes synonymous with the company.
However, as a startup matures, investors are looking to see a leadership team that can scale, not just the powered CEO who can do it all. This is especially true when the early founding teams are “doers” and not (yet) leaders who will be able to take the company to the next couple of levels.
For me, there is a mental yardstick once a startup reaches Product-Market Fit: the team goal then becomes to hire & promote for the future, not just for today. And in conjunction with that shift, there becomes a need for the projection of the company to go beyond the Founder Show.
This necessary change matters in two ways. First, in the early days of a startup where everyone is a doer and wearing multiple hats, the search for PMF is about survival, so a Founder/CEO-driven organization makes sense for efficiency’s sake. Once there is a real business that is working, ready to scale, the horizon opens where the venture’s goal isn’t about merely surviving, but about thriving. The cast of characters required to create that play (to carry the analogy further) must be larger and not just filled with only supporting roles.
Second, the shift also directly relates to fundraising and interactions with investors. There is a tension between a CEO running the entire fundraising process by themselves to insulate the company from the distraction vs. bringing other management team members into the process to send a signal about who is integral to the company. The right answer is that it’s a balance, and showing up to a VC partner full pitch by yourself sends a message. A CEO-only road show can make sense during the early part of a process, but later in the process as firms are really digging in, I believe it’s helpful to show that there’s a whole team involved, not just a sole alpha individual.
Those interactions with venture capitalists carry over once an investment is made. Investors most often have a one-dimensional view of a company — what’s filtered through a CEO. They don’t have the benefit of being “in” the company, and seeing the day-to-day of who is doing what, who is leading which initiatives, etc. Often what’s presented is merely an org chart, which certainly never does justice to the team’s contributions. A board’s interactions only with one founder can make sense in the early days. But as a company matures past PMF, successful exposure of the management team to the board is very beneficial.
With some founders, particularly earlier in careers, there is some hesitancy to bring in outside new leadership talent or even highlight others within the organization. It can be (sometimes unconscious) pushback against a “babysitter adult in the room” scenario. However, it’s in fact the most capable of CEOs who recognize this need to prepare the company for the future and not just manage for now.
Here at NextView, we affectionally talk about the time when our portfolio startups become ready to go “beyond the Founder Show.” Of course, there are plenty of truly exceptional companies that exemplify a cult of personality that shine a spotlight on one individual. But all organizations are comprised of people greater than the sum of its parts. Empowering other actors into leading roles into leading roles further catalyzes any organization into a great one.