Founder is not a synonym for CEO

Recently, we have seen too many startups putting their existence at risk or destroying their value simply because the founder sees him/herself as a CEO for the lifespan of the company.

As a startup grows, managerial challenges become different. They evolve from vision+product to vision+product+team to vision+product+team+finance.

Founders end up spending most of their time managing PnL, relation with investors, forecasting revenues and dealing with large clients.

Most of them never studied those skills, most of them dislike those activities and more importantly most of them are not good at it.

Because they see the founder as the leader since company inception, they see themselves as a de facto lifetime CEO.

CEO is a key role, a real job. You need to understand finance, management, how to deliver projections. It’s a tough job.

As a founder, becoming a real CEO comes at a cost: being less involved in the product decisions, more in spreadsheets.

So if your investors or mentors start to tell you you should consider bringing a CEO on board, here are a few things you should consider:

1) It’s your company, it’s your decision,

2) You are the founder of the company, nobody can take that away from you. As founders, we look up to Sergei Brin and Larry Page, not Eric Schmitt,

3) You have created this company to solve a real problem most probably not to manage KPIs and finance,

4) You are the or one of the largest shareholders of the company, so your first role is to take the best decisions for the company not for your ego.

5) Your job as founder is to bring the best talents including for the CEO role.

So if one day, you reach this decisive moment, we hope this checklist will help.

PS: Consider appointing a CEO as a success, it means you have created a large company when 99% of the startups fail…

Does valuation matter at early stages?

We always tend to say valuation is a vanity metric.

While the right metric is in fact an equation: Amount of cash + Valuation + Investor smartness + Terms

When fundraising entrepreneurs tend to forget two things:

1) Roughly 90% of startups fail

2) As an individual, there is little difference in your life, if your net worth is $20m or $40 or $100m.

But there is a massive difference between having $0 or $20m+

So your only objective as a founder is to ensure your startup sustainability. The best way to achieve this is to surround yourself with talented people as committed as you to your startup success and it also includes your investors.

Never forget that to make it personally your startup needs to make it first.

It seems trivial but we see too many entrepreneurs completely discounting the potential added value of investors, considering all money equal and therefore focusing only on valuation.

You are building a company and a team. Investors are part of that team. If you have brilliant and well connected angel investors your chance of success dramatically increases.

So, as you have to recruit amazing team members, it’s part of the founders’ duties to also assemble game changing angel investors.

Identify them and hunt them. All startups we have seen with great business angels and seed investors have dramatically increased their success rate.

Once again a great round is the right balance between amount of cash, valuation, investor smartness and terms.

One example, Aaron Levie, Box’s founder and CEO.

I quote him “don’t be too anxious about valuations before Demo Day, our angel round was $80K on $240K pre”.

Box is now IPO’d and valued $2.7bn

Building a startup is a fantastic journey but also a long and risky road. Early rounds are here to help you build solid foundations for your business. It is way too early to pull out your calculator to estimate your future net worth.