When it’s time for that eighteen-year-old CEO to move over
The dotcom revolution gave us many things – ecommerce, Internet apps, cloud services, and a whole new culture of innovation and disruption. It also gave us a whole new class of twenty-something CEOs who have no experience.
Youthful exuberance made things happen that the old guard would never have attempted. But this model has led to a unique problem – what happens when that startup matures, and growth plans call for a more seasoned leader to take the company to the next level? Do you stand aside and let some old bald guy in a suit take control of your baby?
The thing about those old bald guys in suits is that they have experience, and connections that you, as a twenty-something CEO, probably lack. They probably play golf with all those VCs you’ve been trying to get an audience with. And more importantly, they have the unbiased approach that can be useful in letting you know what’s working and what’s doomed to failure.
They can come in and effectively advise you on your best ideas, and at the same time, steer you away from what’s likely to be an abysmal failure. If only Pets.com had someone like that, to tell them that selling huge bags of commodity dog food online was probably a bad idea! On the downside though, there is no way they will have the same enthusiasm and entrepreneurial startup spirit as you, the twentysomething founder who built your company from the ground up, starting in some dingy dorm room.
To achieve the greatest success, a balance must be struck. Sharon Baker, founder of executive search firm Baker Montgomery says that a lot of young founder CEOs work on a set of assumptions. As is the case with any startup, the “pivot” is an essential part of success, and those initial assumptions have to be tested. “The CEO help these founders test those assumptions, because more often than not, they’re not the only ones building something like this. The founders of these companies don’t get that. That’s what a top-line strategy consultant does, helps people realize what’s going on and position things.”
So what happens to the founders after the big guns are brought in? “You want to keep the founders for institutional knowledge and passion and enthusiasm. But these companies are at the point where if they don’t have ‘adult supervision,’ they don’t get financing.” But it’s not a matter of reigning in that youthful and sometimes irrational exuberance that is so typical of high-tech startups. Baker Montgomery partner Bill Baker adds, “You don’t want to rein it in, you want to channel it. You don’t want to lose the essence of what is growing. You want their passion. They bring in the new executive team, and become the luminary, the emeritus, the institution of knowledge, the soul of the company. And you never want to get rid of the soul of the company.”
Bill and Sharon see the founder’s role as becoming the “face” of the company, with the CEO coming in as a consultative, mentor role. “It needs to be positioned as a consultative role so that the founder sees that they have been given something they really needed, which was somebody to help them do the things they don’t really want to do. And the CEO should not be setting creative goals for the company or telling the company what products to build. The CEO should be in the role of looking at what the creative types want to do, and helping the creative types evaluate the choices they need to make. ‘You’re going to have to select from the options that are available to you, because we can only afford to do this right now,’ for instance.” The new professional CEO is the facilitator of the founder’s dream.
Bringing in the operational heavyweights quickly becomes a necessity when a startup gets to a stage of rapid growth. The heavyweights “come in and help that founder figure out how to go into new markets, how to price things in a global marketplace, technologies that are the right technologies for delivering the product in an economical and profitable way, then there’s legal and financial. The founder doesn’t want to do that. The founder doesn’t have experience doing that.”
That “tipping point” when a startup stops being referred to as a startup, and becomes a “grown-up” company is when the big guns have to come in. The dotcom boom was littered with failures, multi-million dollar companies run by 19-year-olds whose only other job was one in which they wore a paper hat. Some of the greatest successes though, where the founders brought in outside, professional C-level leadership and went on to become incredibly successful, including companies like Groupon.
The greatest challenge of all though, is having the right “chemistry” between the founding team and the new team of outside C-level professionals. “On a personal level,” says Baker, “It’s very important for there to be a connection there. They need to understand the role boundaries. The CEO has to do a lot of selling, the CEO has to sell the founder on the fact that the founder is going to be successful, because he’s arrived there. He’s not trying to steal the limelight. He’s not going to come up with new ideas to supplant the founder’s ideas, that’s not his role there. His role is not to change the mission of the company, the role is to facilitate the mission coming through. The CEO will have to assess what the founder knows how to do, where their talents are, and then be able to back into what he or she needs to do to help them get things done. It’s a constant process.”
Updated April 3, 2014 at 10:24 a.m.