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Qualities of a startup-stage CEO vs a growth-stage CEO. How is the latter achieved?

It is sometimes remarked by investors or experienced entrepreneurs that a Founder CEO that works well in the early stages of a company might not be the right fit for later stages of the company, like for example when the company starts to go global.

My question is, what are the specific qualities that are being used to determine whether this is the case with a particular CEO? And, what can that CEO start doing NOW (in the early years) that will prepare him to be able to fill that larger pair of boots when the time comes? Of course, some might say it is "experience", but I don't accept that as an answer. Every large-scale-company-CEO had his FIRST time in that role. I accept that there is something to learn and which can be learned SOMEWHERE, from some book or training or mentor, etc. My question, how does one go about preparing for that?

13 Replies

Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
I've noticed that many people who eventually fill the "growth-stage CEO" role come from larger companies, where they were made CEO (for the first time) after several years of being groomed as a VP. There seems to be this notion, perhaps true, that large-company CEOs know how to manage a startup as it grows better than CEOs with more startup experience.

I suspect you'd find it easier to make a case to continue into the growth stage if you strike up a mentorship relationship with the CEO of a larger company. You'll get a chance to learn that "special touch", and more importantly, you'll be able to make the case that you have that "special touch" to your investors when the time comes.
Michael Barnathan
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Michael Barnathan Entrepreneur • Advisor
Co-Founder of The Mountaintop Program, Google Alum
A more cynical view is that these people were being groomed to take over your company from childhood, and are in a fundamentally different economic class even after you've bootstrapped a startup to modest success. Many have ivy league backgrounds, powerful connections, etc. etc. In a way, you can't not see them as a CEO; their entire life history screams it. Knowing some of the biases in finance, traditional finance people - and that may or may not include your investors - will eat this up.
Jeff Mills
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Jeff Mills Entrepreneur • Advisor
Global Vice President of Sales at iMerit Technology

One thing that jumps out at me is if the Founder CEO has managed departments in a larger organization. Have they dealt with those complications? I am known to be a builder and take pride in my ability to get products from $0 to $100M in revenue. Most companies go from building to optimizing and figuring out how to squeeze more margin by creating efficiencies. Generally speaking, these are two different skill sets, but more than likely it is what someone enjoys spending their time on. I don't like to push paper. I like to hammer nails. Now, if the Founder CEO has managed departments in larger organizations, they could potentially do both stages. A great Founder CEO will know when it is time to take on a different role in the company and when they should still be CEO. Remember, CEO is just a title with specific responsibilities. Those responsibilities are getting more specific as the company gets larger. It doesn't mean the Founder CEO isn't great and shouldn't still be at the company. The bigger question is if they are the right fit for those specific responsibilities.

Dave Boothe
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Dave Boothe Entrepreneur
President at Allstates Refractory Contractors, LLC
There are several schools of thought here. One is that a good manager or CEO surrounds him/herself with those people who have expertise in areas where he/she is deficient. This course of action could apply here where a founder is anticipating an entrance into a global market. Another approach is to become educated in the aspects of and transition into global participation. This might require some continuing ED, consulting with those who already participate in that aspect of marketing and have experienced the transition or hiring an already globally experienced individual to assist in guiding the company going forward. Regardless of which course of action the founder takes, there is a learning curve as it applies to his/her specific product or service. It is advisable to do so when the potential transition is least likely to create a majorproblem or cause a chaotic scenario. I have, over my 35+ years experienced several market changes, diversificationsand global involvements. It does not require the insertion of a "large" corporate experienceCEO to handle that endeavor. If conceived in an informed andstructured environment, it can be accomplished with a minor amount of pain. Like the advertising folks have always said, "There in no one who is a better sales personthan the guy/gal who created the entity"! Bringing in a CEO who has little knowledge of the history of the product of service and is just bringing the global experience, may not be the best choice.
Christopher Owens
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Christopher Owens Entrepreneur
Founder/CEO at LincSphere, Inc.
I appreciate all of the feedback so far. Thank you. Just to clarify, mine is a tech startup, early stage mobile app company. Do any of you feel that in the realm of saas companies that end up scaling into large companies that the rules are a little different? For example, Mark Zuckerberg - obviously had no experience running a large company, yet he is still there even after their IPO. Not sure if there are other representative examples of this kind of situation with SaaS companies or if he is just an anomaly, and if so, why that is.
Scott McGregor
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Scott McGregor Entrepreneur • Advisor
Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.
There's a fundamental difference between what a start-up has to achieve and what a growth company needs to achieve, and skill sets that make one good at the other are not transferable. Some people have both, but most don't.

A founder has the task of finding a product market fit that has never existed before. And before that fit is found there is no assurance that such a fit will ever be found. You can't ask your customers what they want, because you don't have them yet. In fact, the big problem you face is to discover who they will be, and they might not be who you expect! So a founder CEO needs to be good at exploring the unknown, searching for where that place is (and isn't!). Until you achieve and sustain breakeven this work isn't done, and failure is still a strong possibility.

Once a company punches past breakeven you know that you already have enough customers to sustain the company. This is your cash cow, and you need to make sure you protect it, while you grow. Since you have customers now, you can actually ask them things. Growth are much clearer: there are really just two types: 1) Find other things your existing customers like and sell them that new stuff. Or 2) find people who are a lot like your existing customers, only slightly different, and tweak your product(s) just a little and sell what you already have to them too.

Another way to think about it is: a founder needs to experiment with different strategies over and over until he or she finds one strategy that works (gets the company to breakeven). Ability to iterate (fail fast) over a bunch of possibilities before the company hits the end of the runway is what makes such founders successful.

In contrast, the growth CEO needs to AVOID broad experimentation -- they have a working recipe. They need to keep repeating that recipe over and over. Small changes (continuous improvement) are good. And making the money making machine work reliably over and over again is their goal.

But reliable repetition only makes sense when what you are repeating is a proven success strategy. Rapidly, reliably repeating a strategy that doesn't make money just assures you go broke faster and more certainly.

As you can see, the experimental skills that makes the founder successful will ensure they fail as a growth CEO (throwing away the success recipe in search of another), and the skills that make a growth CEO successful would fail miserably when you don't yet have customers and a product market fit.

People generally try to repeat what has worked for them before. This often means that founder CEOs don't want to stop experimenting once they hit breakeven. When their board removes them they are often much happier and become serial entrepreneurs where they can keep repeating the skills that made them happy and successful in their previous start-ups.

Similarly, every so often there are successful growth CEOs who try to start up companies and are rapidly frustrated that there are no customers to talk to, and that you can't repeat success when you've never achieved it yet.


Christopher Owens
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Christopher Owens Entrepreneur
Founder/CEO at LincSphere, Inc.
Scott,

A very well explained response. Thanks for taking the time to write all of that out. In my case I am really quite familiar with the iterative "customer development" cycle, but I am also comfortable with switching gears into a "maintain it and grow steadily mode". Perhaps I'm an anomaly in that respect because I'm comfortable in either "gear".

My conclusion from all of this feedback is that it is possible with some people to wear the hat in both phases of the company, but certainly uncommon. I think that if the person is comfortable switching gears, then they should be trainable or mentor-able into getting the details right.

Anyone know of good reading material on this subject (i.e. the CEO in growth phase)?
Peter Johnston
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Peter Johnston Advisor
Businesses are composed of pixels, bytes & atoms. All 3 change constantly. I make that change +ve.
There is an interesting interview here with Eric Schmidt which sheds some light on this...https://medium.com/cs183c-blitzscaling-class-collection/cs183c-session-8-eric-schmidt-56c29b247998

He says that small companies are full of energy and no process. And his job was to create plans (really he means systems) - internationalisation plans, sales plans, product plans, accounting plans etc.

Usually the early stage CEO is the founder - he or she is there because of their ideas. But later the CEO is head of the systems - repeatable methods for generating revenue, getting product to point of sale etc.

I personally would add another - which Schmidt was very good at, but may not wish to disclose. Connections. A good CEO opens doors. He knows the right people - and they are impressed with the company because he is involved. He gives the company clout and credibility in the right circles. To do that he needs to be already in those circles.

A good founder knows how to step aside and let someone else be the figurehead for the company, while retaining operational control - or at least the bit he wants to control.
Lonnie Sciambi
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Lonnie Sciambi Advisor
"The Entrepreneur's Yoda"- inspiring, guiding entrepreneurs to achieve their dreams - CEO Mentor/Advisor, Author/Speaker
The most critical thing for you to learn is to never stop growing, either personally or professionally. Be a sponge. Learn from every situation and everybody you come into contact with. Cultivate advisors and mentors. Learn from them as well. Use them assounding boards, especially when moving into areas outside your experience base or your comfort zone.

And notice, I said, at the outset, personally and professionally. You can't grow professionally, if you don't continue to grow personally. Learn about and study application areas which you have had no experience, but will help you grow further. Like if you are a technology guy, learn accounting principles or selling skills. Expand your vistas. Try to new things, meet new people, especially outside your business. Keep a part of your life, even if you have a significant other or family, that is just for you.

Long and the short of it is that you are correct. Every entrepreneur starts without all the experience they need to have for their role as head of their company. They then either grow into the role or they don't. If they do, they flourish and their company does (Mark Zuckerberg/Facebook), if they don't, they get replaced (too many to list). Good luck, Christopher and keep growing.
Susannah D. Kirksey
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Marketing, PR and Business Development Executive, Executive Coach and EMDR-Trained Psychotherapist
Sales-oriented CEO from 1-100, then you need to bring in an operational leader.
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