Moderators: James Geshwiler, Managing Director, Common Angels Ventures; Jodi Goldstein, Director, Harvard Innovation Lab
More than 80 CEOs gathered for the morning session at the 2015 MassTLC unConference. While most members of the group were leaders of companies with fewer than 20 employees and many were first-time CEOs, several seasoned CEOs, CFOs and CTOs also were in attendance to offer their perspective on issues of management team composition and evolution, fundraising, business process and other key areas of corporate growth.
The area that drew the most sustained interest and richest discussion was the question of management team composition and executive team building. Many entrepreneurs – and newer CEOs, especially – had questions about:
1. CEO evolution – skill growth and knowing if and when to step aside for more seasoned help
2. Recruiting CTOs and technical co-founders
3. Fundraising, investor outreach and relationship building
There was general consensus that strong CEOs are leaders of teams that cover all of the key elements of running a company: technical/product, sales/marketing, and finance. It is the rare individual who can cover all bases entirely and those skill gaps often become apparent as startups reach the $3-5 million revenue stage. So, it is incumbent on CEOs to do two things: first, invest time and energy in educating themselves in every area of their business to develop a working knowledge of all that’s happening inside their company. Second, CEOs should develop an inner circle of high-level experts that cover each of those functional areas at the expert level. This “whole brain” concept of team building says that the areas of expertise should be covered by skill and experience, if not always by title, and must represent the spectrum of corporate needs from vision to action to sustained operation. From an investor’s perspective, teams that cover these areas and show few if any gaps are the most likely to get funded, stay intact, and grow and evolve with their businesses.
One of the great takeaways concerning CEO evolution was something attributed to Andy Grove, legendary former CEO of Intel who said: I wasn’t the only CEO of Intel. There were five of them but they just happened to be me every time. The job changes.
Regarding CTOs and the specific need for a technical co-founder, the group consensus was that a technical expert was necessary at an early stage. Good executive pairs are sometimes characterized as “a hacker and a hustler,” and many investors consider the technical innovation aspect of a startup to be its most investible asset. Many session attendees saw a real disconnect, however, in how new founders approach potential CTOs and technical co-founders by offering too little equity, too little incentive to partner, and too little professional respect. Fundamentally, great techies are not lacking for opportunity in this market and it is to every startup executives’ best interest to not only trust and nurture a technical co-founder but to make the equity split as close to 50/50 as possible to develop a true and highly functional partnership.
At the end of the morning session discussion centered on best practices for new founders seeking VC investment and the lack of transparency inherent in the process. A few of the attendees likened the investor-startup relationship to courtship and marriage because these relationships should be long-term, mutually beneficial and fully transparent. Startups seeking funding can help themselves most by doing plenty of homework and “stalking” potential investors to uncover their past investments, how often they invest in first-time CEOs (and how often those first-timers get replaced) and the relative size of their deals to see if it makes sense for the startup to attempt a meeting with a particular VC. Sources such as CrunchBase and LinkedIn are good for seeing an investor’s history and for finding referral sources and connections to potential investors. It’s as important for startups to interview VCs as it is for the investor to vet the startup to make sure the fit between them is solid. And, whenever possible, startups should seek to cultivate a champion -- an insider at a particular firm who can advocate for the startup and help navigate the particular investment culture at the VC firm.
Despite the official close of the session at 11:45, the roomful of CEOs hung together to continue the discussion in small groups and individually.
Resources cited during the session:
1. Co-Founders Lab, https://www.cofounderslab.com
2. The Hitchhikers Guide to Boston Tech http://bostontechguide.com/
3. The Founder’s Dilemma, Noam Wasserman, http://www.amazon.com/The-Founders-Dilemmas-Anticipating-Entrepreneurship/dp/0691158304
4. CrunchBase, https://www.crunchbase.com/#/home/index
5. LinkedIn, https://www.linkedin.com/