On Being a Startup CEO – Roles, Responsibilities and Priorities

Startup CEO

Over the years, I have mentored a number of startup CEOs, and I’ve been one myself for over 30 years. I’ve made numerous mistakes over those 30+ years and have seen others in the same position making the same mistakes. In my mentoring role, I’ve been able to help CEOs and executive teams struggling with issues that seem to follow the role no matter what the company does. There’s a remarkable similarity in what I had to go through and learn as a CEO and what I am now helping others deal with.

As I look back on my experiences, I wish I had this article to read 30 years ago. I want to talk about what’s important, what your priorities should be, what your team is looking for from you – and maybe a little of what not to do in your role as a startup CEO.

The Role of a Startup CEO

Role of CEO

Be Willing to Do Anything

First, be willing to do anything that needs doing. You aren’t the king with loyal subjects to do your bidding. A startup has an endless list of stuff that just needs to get done, and there aren’t always enough, or any, people to do it. Whether it’s writing code, being a tester, putting new ink in the printer or emptying the trash, establish the mindset that if it needs doing, do it. Your team isn’t going to think less of you, in fact, it’s quite the opposite.

You Don’t Have to Do Everything

While it may sound like I’m contradicting myself, stop believing that you have to do, or be able to do, everything. The difference is that there are things that must be done (just do them) and stuff that you are better off letting your team do (like their jobs, for example). This is part of not having to be the smartest person in the room, and instead learning how to trust your team and delegate tasks effectively.

I fell into this trap very early in my career. I was CEO of a software consulting firm that employed about 15 developers doing systems-level coding for Windows and NT. The belief I had was that, as the CEO of a startup focused on software consulting, I needed to be the best programmer in the company (I wasn’t) and had to have answers to every question that came up, technical or otherwise (I didn’t). In short, I felt I had to be the smartest person in the room, because I was the CEO. Not only was I definitely not the smartest person in the room, the fact that I believed I had to be created an undercurrent of tension and a bit of resentment.

A Startup CEO Should Believe in and Trust Their Expertise

Startup CEO Trust Your Team

The more you believe in your team and rely on them to do what you hired them to do, the more they are going to believe in your leadership abilities. I used to think that if I wasn’t the ‘best at everything’ in the company my team would wonder why I was in charge. I have discovered since then that the opposite is true. They aren’t following you because you are such an expert in everything, they are following you because they believe in your idea and that you can lead them to success. Being a startup CEO is a unique skill, focus on becoming great at that and not being the overall expert.

Learn to Delegate Effectively and Listen

I decided a long time ago that the goal of the perfect CEO should be to have nothing to do. In reality this is, of course, an unrealistic and unreachable goal, but it speaks to the need to be a great delegator as CEO. You have an executive team there because you believe they know what they are doing. Let them do it.

Ask Questions, Lots of Questions

Many times it is better to not vocalize an opinion, and instead focus on asking all the right questions. When I was running my first VC-backed startup back in the early 90’s, I would run my business meetings and always have an opinion about whatever we were talking about (smartest person and all that…). Sometimes I would cut the conversation short with ‘I think we should…’ without hearing the entire conversation or making sure everyone was heard from.

I think I did this for several reasons. Primarily, I really thought I was the smartest person in the room (this was a real problem back then), or at least had to create that impression with my team. I was fortunate to have someone on my team that was willing to be honest with me. He told me, “When you gave your opinion in that meeting, it was like putting it on the front of an 18-wheel truck and driving it through the room.” Effectively, he was telling me that moment when I had vocalized an opinion, the conversation was over. Nobody was willing to argue; I hadn’t developed that level of honesty in communication with my team.

Whatever I had come up with, no matter how wrong or bone-headed, was interpreted as the law. I once ended up with a telemarketing team that made no sense at all, just because I wondered out loud in a meeting whether we should have one. Now some of this is also based on the maturity and experience of the executive team, but if you are a new CEO, it’s likely that your executive team is also pretty new at this.

Sharing your own opinion too often can discourage your executive team from sharing opposing thoughts without fear of criticism. On the other hand, asking questions allows your executive team to feel you value their opinions (which you should) and encourages them to share those opinions without the inherent fear of speaking out against your own.

A Startup CEO Should Manage Finances Responsibly

A Startup CEO Should Manage Finances Responsibly

Watch the spending. Closely. Constantly. The most valuable thing your startup has is cash and it needs to be treated as such. It’s very typical for a newly funded startup with a founder-as-CEO in charge to go on a bit of a spending spree. New laptops, monitors for everyone, fancy staff lunches, maybe a latte machine in the break room. Everyone is coming to you asking for permission to buy something, because the bank is now open. Resist the temptation. Manage your spending as if it is your money (maybe some of it actually is) and establish strict budgeting rules up front.

If you have a Chief Financial Officer (CFO) at this point, make sure they are fierce guardians of the cash. A great CFO will make spending money painful. Successfully raising money is a tremendous feeling and you feel empowered. Running out of money is the exact opposite.

Nothing worse can happen to a startup than to run out of cash. Maybe you can raise another round of capital if everything else is running on all cylinders. If it isn’t, this is where your investors get out their sharp knives and either end up owning a much larger portion of your company than you would prefer, replace you with a more experienced CEO, or maybe they just go away altogether. None of these are good outcomes for you.

RELATED: Capital-as-a-Service: A Partnership Model to Help Startups Grow

We learned a lot of very hard lessons in the late 90’s when VC cash was flowing to anything and everything that had “Internet” in the business plan. Silicon Valley was so flush with capital that some commodities were actually scarce. Office space was impossible to find because every startup with $10 million or more wanted the fancy offices. Even office supplies were hard to find at one point. It has been estimated that up to one fourth of the VC money raised in the 1998-2000 period was wasted on frivolous things like latte carts, beer Friday and catered lunches every day. It’s also known that the only startups funded during that period that managed to survive the crash in April of 2000 only did so because they hoarded their cash and were able to limp through the next two years when there was almost zero venture money available. There was a lot of fun followed by serious pain when the money ran out. So, hoard your cash. Pretend it’s yours.

A Startup CEO Should Hire Carefully

A Startup CEO Should Hire Carefully

This is part of the ‘watch your spending’ lesson above but more specific. After a successful funding everyone on your team will be asking for new people for their teams. Every new position you are asked to open needs to be carefully scrutinized. This is a startup and is supposed to be running lean. Do you really need another Program Manager or another whatever you are being asked for? There is no faster way to ramp up your spending than to add a bunch of people to your team that you might not really need. Going through a layoff when the money starts to run out is one of the least fun things you will ever do.

RELATED: When to Hire Your First Employee (And Who to Hire First)

Over-hiring is a pretty common problem in startups. Every time I have gone into existing startups either as the replacement CEO or as a CEO consultant, I have found an excess of people on the payroll that the company really didn’t need. I have also been the startup CEO that hired too many people or allowed them to be hired just because a seemingly reasonable case was made for the position. Become the CEO that is known for asking a ton of questions about everything brought before you. Before long, your team will learn to only bring you things that will actually move the company forward.

A Startup CEO Should Maintain a Clear Direction for the Company

Don’t let any one group or individual dictate the direction of your company. This is part of the loudest one wins syndrome. I have seen numerous situations where someone has the ear of the CEO and does most of the campaigning for their position and view on things in the background in which legitimate debate is eliminated. I have also seen situations where a leadership team is essentially bullied into making a certain decision, by sheer force of personality, by making legitimate debate painful or uncomfortable to the rest of the team.

As CEO, you simply cannot allow these situations to occur. Preceding my series of articles on building a leadership team, I addressed the need for an environment in which legitimate and passionate debate is fostered in a leadership team. In those articles, I discussed the need for basic trust between the members of a team, the willingness to engage in open debate and completely buy-in to the decision on a topic.

The end-run style of getting one’s way is not just discouraged, it is eliminated if you are going to have a functional and productive leadership team. When a member of your team approaches you with an opinion about a decision that needs to be made, it is typically because they would much rather you made the decision outside of the normal process – meaning no debate about the alternatives.

The same is true if you have a team member who tries to force a decision in meetings by being louder or more in your face than is comfortable to the rest of the team. In most cases, if you allow it, the rest of the team will just retreat into the background and not offer opposing views, simply because they don’t want to be the target of the offending member.

Once a decision is made, do not allow the debate to continue. This can be amazingly destructive as it will teach your team that a decision isn’t really a decision and it’s OK to keep debating your position after the fact. Don’t let it happen. In some cases this can be a case for termination; it’s that serious. If facts change and may render the decision debatable, have the debate within the meeting construct, not in the hallways or via email.

A Startup CEO Should Remain Focused on Company Goals

Keep your company focused on the goals. Also called “moving the goal posts,” this is a situation where a company gets into the idea of the day/week/month syndrome. In an early-stage startup a particular idea or product is determined, and the company starts marching down that particular path. Funding may be obtained based on that particular idea. The schedules are determined, and the board’s expectations are set. Then the new ideas start to emerge. Conversations start with “What if we…” or “It would be so easy to just…” and can quickly gain ground and eventually result in a new direction for the product or idea that just seems better than the original. Don’t get me wrong, the subtle tweaking of a product under development can definitely be productive and is part of the learning process. You have to take advantage of new ideas that actually improve on what you are doing. What you have to be alert to is something that actually changes the trajectory of the company because it seems like a great idea.

Let me use an example to make my point. Let’s say a company is developing a product to allow consumers to better manage their home network in some way. Product features are determined based on whatever research the company does into the market and development is underway. Then someone determines that since printers are a part of the home network, the product should determine when ink is needed and alert the user. Next, of course, comes the idea of selling ink to the user. Then, later, since the product is involved in the printer now, why not make recommendations to the user about better printers that might be available. Then, later, since printer recommendations are being made, how about if the product searches for deals on printers and makes them available to the user. Then, later, since we are making purchasing recommendations about printers, why not…

You get the idea.

While the example might seem unrealistic, the point is that over a period of time the company changed their strategy from a home network management tool to a general internet shopping system, representing a significant change in strategic direction. Since this was done one small feature at a time, it’s likely that little, if any, real market research went into these small changes or that the company was actually aware that such a huge shift in the original idea had taken place. Now the well-researched business plan you started with is in the trash and you are marching down a completely different path that may or may not make any sense.

Perhaps it is a silly example (although this actually happened in the late 90’s), but my point is that it’s your job to keep everyone on task and not let this creeping feature syndrome take hold in your company. Establish a clear process for introducing new features and ideas and be willing to table an idea or feature that isn’t part of the established goal, no matter how appealing the new direction may seem. You are the leader, it’s your responsibility to maintain the direction. Above all, do not be the CEO with a new idea every week. Remember what I said earlier about asking questions rather than offering opinions. It’s very easy to make a comment about printer ink in a meeting and later find that you have a new feature because that’s what they thought you wanted. It happens.

Manage Your Board and Listen Carefully to Them

Manage Your Board and Listen Carefully to Them

I will end this article with some insight to your Board of Directors. I am going on the assumption that you have one, and if you have raised seed money from angel investors or raised a Series A round, your board makeup involves one or more investors – probably an outside board member and you.

In your typical board meeting, you will likely have members of your leadership team in attendance. In a typical startup situation with professional investors, your board is unlikely to want to get very involved in your daily running of the company and they are not likely to do more than ask questions in your scheduled board meeting. You are probably getting only a few hours of their attention every month, so the questions they ask are probably based on what I think of as pattern matching.

They have seen similar situations and are asking you questions to hopefully prevent a negative outcome. So, if your board is asking generic questions about your spending, it’s probably because they have specific concerns about how much cash you are burning. If they make comments about a specific team member while talking to you one on one, it may be because they aren’t comfortable with something that person is doing but are unwilling to be more direct about it.

Their questions can serve as an early-warning system. If they are questioning product changes, they may be seeing signs of the creeping-feature issue discussed above. Remember, they are coming in fresh each month and are probably seeing a different perspective of the company and team progress than you are. You may be too close to the trees to see the forest, as they say, so listen carefully to their questions and realize that there just may be some wisdom in their thoughts.

Summarizing What It Means to Be a Startup CEO

Being a startup CEO means being a lot of things, but doesn’t mean being everything. While you should be willing to do anything and everything called upon you, being a startup CEO means knowing that you don’t have to do everything, and it means knowing how to prioritize and delegate tasks effectively to your team. In summary, being a startup CEO means:

  • Believing in your team and trusting their expertise, as well as trusting yourself for hiring them into their position in the first place.
  • Asking questions and fostering a culture of team cohesiveness.
  • Keeping a close eye on finances and ensuring all approved expenditures are actually necessary.
  • Hiring carefully, and ensuring that necessary positions are filled with qualified people and eliminating positions that aren’t.
  • Maintaining a clear direction for the company and ensuring it stays on track to achieve its primary goals.
  • Managing your board of advisors and listening carefully, paying attention to every critical detail.

Above all else, being a startup CEO means mastering the skills necessary to balance a complex variety of unique challenges that, when managed effectively, ultimately tip the corporate scales in favor of success for your newly found startup.

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