Who becomes Startup CEO among co founders?

When you start a startup, titles don’t matter. There’s probably 2/3 of you in a room getting a product up, doing some basic marketing and seeing if your idea has legs.

The moment you start hiring staff or even considering fundraising, then one title becomes important.

That is the CEO.

The Startup CEO matters.

  • Investors want to deal with the startup CEO
  • Staff want to know who the end ‘boss’ is and that there is a clear decision-making framework
  • Press wants to know who the CEO is etc.

Whilst you need to agree on a CEO once your startup has legs, it’s best to agree on who the CEO is upfront as you are starting the company.

One great reason is that you don’t actually want to have multiple CEO types on the founding team in the first place. One of my friends said to me “we’ll never do a startup together because we are both CEO types”. The point is that we both have very similar skill sets and that’s not what you need in a founding team (Read about investible founding teams here).

So who is the startup CEO?

It’s always obvious.

No democracy should ever exist. The ‘nice version’ should be a benign dictatorship.

It’s always easy to tell who the CEO is. If it’s not, then there is an issue.

No VC believes in some hippy BS.

I like to ask this question “Who is the CEO?” Then add “The Boss” to stir things up.

If no one blinks and stares at one person you are good. If co-founders are still vying for their place, the company is in disarray.

I told this story to a VC friend of mine over drinks and he laughed knowingly and said “you’re such a dick! But you’re right.”

I know multiple founders who literally say ‘this is a dictatorship’ and the co-founders agree.

Wolt has 7 ‘co-founders’ in total but is still totally kosher with it being a dictatorship. The CEO said it more than once in front of other co-founders and no one blinked. That CEO (Mikki Kussi) is generally regarded as the smartest person in tech in his country. I don’t have grounds to disagree.

I’ve never met a startup that worked out that was not 100% clear on this. But sure, disagree with me and let me know something about Russian nail factories that I don’t know.

I’m kidding. It’s just obvious. A strong leader is chosen without a vote. If your role is in question… then… you know. You aren’t the true CEO and there can be only one (Highlander reference made, achievement unlocked!).

What does the startup CEO do?

CEOs basically have two jobs:

  1. Raising money
  2. Hiring talent

That’s the big stuff. Ok, but you probably want some more details so let’s dig.

Cash flow

You raise money because you are not profitable, or not profitable enough to sustain your growth targets.

If you run out of money, then you have no business to operate.

If you have a CFO or external finance wonk, it is still the CEO’s job to ensure the lights are on and staff gets paid (they have rent and shit).

The CEO should be metrics-driven to run a successful company and knowing and managing the numbers is one of the key jobs. You have to be competent at this, though let’s face it, few actually enjoy this!

Vision

Having a vision for the company and a mission you continually drive into the heads of the staff are critical if you want to be a big shot.

The CEO needs to be the flame bearer.

If you are a tech/product-driven company (such as in SaaS) the CEO should ideally be the product visionary. I’m a little less firm on this as a founder CTO/CPO could be better placed for this. It depends, but the CEO having the vision for the product is certainly a plus.

Hiring

Groan, I know. Hiring is the most important aspect in running a startup. The quality of the people dictates the quality of your company. These days all a startup is a bunch of hopefully talented people.

As a CEO you should be spending about 30% of your time hiring. If you are growing, that’s a necessity, if you aren’t then you are still going to have attrition with better-funded companies stealing your talent so you ideally want to have been courting back-ups.

Ideally, the CEO has an eye for talent and can close the deal. These days that matters. My friend is senior at a company that has raised over $1b and he said that there are 4 closers (including him) that are tasked with getting engineers to join- yes, it’s that crazy in the Bay Area!

“Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?”

Raising cash

I’m going to assume you aren’t bootstrapping here which I encourage.

Most startups want to raise money out of the necessity of the fact they didn’t save enough money, so someone has to be tasked with the enviable role of raising money. Typically you just pick someone as CEO because they are the best at raising and talking shit.

PR/brand

Paid marketing is expensive these days so you have to do what you can to get noticed by customers for free.

If you can build a strong brand the whole act of selling gets easier, be it conversion on-site, partnerships and the like.

PR is a nice win for many startups. If the CEO has the gift of the gab, well, you probably know who should be the CEO.

Decision maker

Normally, you should push department decisions to the department head. There are always going to be times when someone needs to make a big and final call though.

The Startup CEO needs to be that person.

Why there is conflict about being the startup CEO

I can tell you from personal experience, people envy aspects of the CEO role.

The two main areas that draw the ire are:

  • Fundraising: A lot of neophytes think that talking to investors is glamorous. Those are the people that have never raised before. I think they see the CEO come back from a grueling meeting and just think “what fancy lunch did he just have whilst I’m doing the real work!” Smarter ones probably think this isn’t going to be my only startup, and a network of investors would be useful. They miss that they are going to meet the investors should a process proceed.
  • Talking to the press: People get the green-eyed monster when they see their CEO in the press and think why not me? I want girls too…!

The question as to whether they are suited to undertake the tasks is not something that crosses the mind of some. This is the Lake Wobegon effect alive and well.

The Lake Wobegon effect is a natural tendency to overestimate one’s capabilities and see oneself as better than others. Research psychologists refer to this tendency as self-enhancement bias and have found evidence for its existence in many domains. Most of us think we’re funnier, smarter, warmer, more honest, or more conscientious than we really are.

As a CEO you can’t do much about envy. What you can do is make an effort to ensure your cofounders get exposure to something they feel they are missing out on. If you sense resentment then bring them to some meetings, ensure the founders all get mentioned in TechCrunch, etc. Especially with the press, they will appreciate it.

Who should be the startup CEO in your startup? What should they be good at?

  • Answers: Who has the answer for everything, or can make a good decision quickly with the information that is presently available. They ideally listen to everyone first and don’t mind if their view is logiced to be wrong and accept a different course of action. They should be aware of the challenges the business is going to face and make decisions ahead of the curve.
  • Energy: Startup sucks and there are always dark days with no real progress so they need to keep the team energised and motivated. I can tell you when I was a young startup CEO I was often tired and stressed- that fed into the office. Someone told me I need to smile more as when I was in a bad mood everyone felt it. I started smoking three fags and having two cans of red bull before I came into the office and started high-fiving everyone. High fiving is my thing…
  • Mr fix-it: I’ve seen three startups in my life that were close to extinction. One time my VC partner said “Only Cole could have pulled off that series-A raise”. The CEO has to be someone that when you get stuck in the trenches with 1000 Nazis firing machine gun bullets over your head figures shite out and makes it happen.
  • Has the big picture: The CEO needs to know what is going on in the industry you are in and ensures you are catching the right wave. They should be the type that talks to the competition (and gets more out than they share). They think about if you are doing the right thing, not what things you are doing. Whilst everyone is rowing the oars, they are at the back calibrating the rudder.
  • Jack of trades: The CEO needs to know something about everything. They need to know the work of others to know if they are doing things right. If you need to build up customer success, they may jump in and set things up ghetto style till you have the funds to hire someone to take over. A great startup CEO learns all the time.
  • Charisma: People should like the CEO. Not all CEOs have charm, but the best ones do. I manipulate people a lot, I call it ‘mind-fucking’. I should write a blog on how I do it, but I’m not sure. I’ve taught my CEOs of companies I have venture built to do it, but that was overtime. They’ve since become masters themselves. Mind fucking is not about being manipulative in an evil way, it is about getting people to do the things they need to and that they know they need to but aren’t. It’s about getting staff to act in a way that is congruent to themselves and their aspirations. The main way I mind fuck people is by understanding their core aspirations and then asking “Karl, is doing what you are doing going to help you to be the youngest CTO to IPO?” They then say “Alex, you’re right. I know. I’ll fix it.” That’s mind fucking done ethically.
  • Experience with VCs: Not everyone has experience and that is fine, you can learn. That’s what you are doing on my blog! But if a founder has raised before (successfully ideally), they are a prime candidate for obvious reasons.
  • Enjoys the spotlight: There are a lot of people that are introverted. And there are people who are introverted that are Kool and the Gang with getting up on stage at a moment’s notice and turning the energy up to 11. I’m quite nerdy and don’t like a lot of people (I like talking about startup and not much else). The thought of talking to random idiots at a startup conference galls me, but I can do it. It’s not that I like attention, but I am good at talking shit on the spot. The CEO should either enjoy the attention or know how to deal with it. The later is safer because people with an ego worry me and end up doing stupid shit (WeWork for example).
  • Deals with pressure: The notion of thriving under pressure is a double-edged sword. Why can’t you thrive normally? Stress is a huge cause of death, so I avoid it like the plague. There is always pressure in a startup so a CEO needs to be able to deal with it healthily. If you are close to death you need to have a plan and execute on it and effectively communicate with the team to do so. If pressure makes you freeze, you should not be a CEO.
  • Pays attention to everything: As your company becomes larger silos between departments will develop. People get titles as head of a department, not the head of marketing and making sure product marketing, product, tech, customer support are all aware of our activities. When I was MD at Lazada (Sold to Alibaba) I kept getting calls from the group CEO shouting about running yet another promotion. I told him “Max fuck off. Things aren’t working. My buyers’ suppliers aren’t being paid so they aren’t happy! Supply chain management isn’t giving finance exactly what they want with the invoice and PO stapled together so they aren’t paying suppliers. Buyers won’t share their contacts with SCM so SCM can’t fix the issues and get what they need to give it to finance. I’m not going to get discounts from suppliers till they are paid and the buyers are afraid of pissing off their contacts knowing they will leave eventually and still have the relationships!” Max didn’t give a fuck, he wanted more orders. If I wasn’t talking to buying, SCM and finance and getting to explain what their struggles I wouldn’t know this so that I could fix it.

My personal experience as a startup CEO

I do feel it seems immodest for me to say this given the way I normally write, so give me a pass please ;).

After I quit banking I did a few startups. Some never got off the ground (I was clueless), others did. I was a 26 y/o ex FIG M&A banker. I work hard etc, but I knew nothing then.

In two startups, I found co-founders in their late 30s/40s, some of whom were serial entrepreneurs and far more experienced than I. In both startups they just assumed I was the CEO. This really confused me. I brought the topic up each time. I was seriously ignorant in my view. But, they nominated me CEO, there wasn’t even a conversation at some point there would be a comment like “You’re the CEO you tell us?”. I didn’t want to be CEO. They wanted me to be the one to push.

Later, conversations in founding companies I was told ‘I presume you will be the CEO’ (Which could be bad, who knows!), but the point is you sort of getting picked to be a CEO… or people sense whilst interacting with you.

Honestly… Anyone who knows what it means to be CEO wouldn’t want to be. The upside is typically not worth the stress. I actually distrust people who say they want to be the CEO. I wonder if they are naive? Being the CEO sucks.

Ultimately, there is a degree of control-freakery that is baked into people. Yes, I’m a total control freak.

But as I originally wrote, it’s not something you choose. You get chosen. And… if a better choice comes along, you aren’t the obvious choice anymore.

Frankly, if you have vested your shares all you should really care about is the fat $ exit, so if people start mentioning bringing in a CEO you should be Kool and the Gang about that as that person might do a better job and make you more money. You may enjoy the yoke of the CEO’s responsibility a pleasant weight to be lifted of.

How do you pick the startup CEO?

I’ve already told you. It’s always obvious who the CEO is.

Choosing a CEO when founders consider themselves peers

Fellow Top Writer on Quora, Brett Fox wrote about picking CEOs. Here is his story about AMD.

You may have more than one person that wants to be CEO. And usually one of the prospective CEOs ends up leaving the company eventually when that happens.

Take the story of the founding of Advanced Micro Devices, better known as AMD. AMD’s CEO for over 30 years was the legendary, larger than life Jerry Sanders.

But did you know that the person that believed he was AMD’s CEO (Jack Gifford) brought Sanders in to help run sales.

“He thought I was the sales guy, and I said, ‘No I’m the President.’” Jerry Sanders.

Now Sanders could do something that Gifford was unable to do in 1969, and that was raise money. And the tie breaker is usually the person that can raise the money.

The bottom line was that Sanders could raise money and Gifford couldn’t raise money, so Sanders became CEO.

Then Sanders fired Gifford.

It’s difficult choosing a CEO when the founders are peers.

So go for it if you really want to be CEO. Present your case to your fellow founders, and then assume the position.

But understand you likely will end up leaving the company if you lose the fight to be CEO.

But maybe you’ll end up like Jack Gifford. Gifford wound up founding one of the most profitable companies ever in the chip business, Maxim Integrated Products.

How to manage conflict

Ok, but what if it is not or you are arguing about it? Sure, let’s cover this.

Let’s assume there are two co-founders who expect to be startup CEO as they assume they are too. You believe strongly that you should be the CEO because, well, read above. The other person is more technical and CTO makes more sense.

  1. Organize a quiet chat
  2. Start asking them why they want the role?
  3. Then explain what a CEO does and what they need to be good at
  4. Ask them if they think that really plays to their strengths?
  5. Tell them what they are really good at
  6. Then explain why you are suited to the role
  7. Explain that you are a team but there needs to be a CEO to raise, hire and make the final call on things

You should be able to reason a solution.

If you can’t, well you may as well pack things in. Everyone has to agree there is a CEO and they have the final say.

Investors do not want to pick the CEO for you. In fact, if it’s not clear who the CEO it is a major red flag for their investment.

Brett fox

The decision of who will be a startup CEO is a non-issue most of the time. There is a clear and obvious choice for who will be CEO.

However, there is one scenario where who becomes CEO is an issue:

What if there is a situation where no one wants to be the CEO?

In this case, you need to ask these questions and then pick someone who comes out on top.

  1. Who wants to be the startup CEO? Or rather, who would hate being the CEO the least?: Forcing someone to be CEO is a recipe for disaster. They will not commit and your staff will know it. You are a ship without a rudder.
  2. Who has the closest startup CEO skills?: CEO is not someone who is the best coder. Who has the best personal skills? Who likes organizational design? Who can get up on stage and talk? Who likes to network the most?
  3. Who is prepared to learn to be a good CEO?: No one was born knowing how to be a startup CEO . I certainly didn’t have a clue what I was doing – I had to learn! A CEO needs to be the person who loves to learn all the time and does so fast. They probably are extroverted in how they draw information by reaching out and asking others questions.
  4. If you have a town hall, who does the talk?: I can talk, I enjoy it and I’m good at it. At one startup my friend was my boss and he hated talking. I often did the talking. I’m a startup CEO type, but I technically had a boss. There are a lot of things he is far better than I was at, so it made sense he was though. Point being it doesn’t have to be clearly obvious for everything who the CEO is.
  5. Who naturally commands the respect of staff?: This is a nuanced one. Do staff naturally ask one of you the big questions? This is especially relevant if it appears one of you is the real boss, but they talk to the other founder anyway.
  6. Who has the big picture?: You both have great ideas for the business, but one of you might think the bigger picture, whilst the other like the micro. You want the person who can communicate that vision to staff and external people the easiest.

It will be hard, but one of you will take it.

Here is a real example of the discussion that happened at a startup.

Nick Cole and Drew Reggies started Digital Press together and neither wanted to be the startup CEO .

When Digital Press got to a point where we brought on advisors and actually moved from filing as an LLC to a corporation, suddenly [there was] a question of, “Who is going to be CEO?”

They saw the roles of CEO and COO as this:

  • Founder/CEO: “I speak outwardly about our industry, our business, what pain points we’re looking to solve, and why.”
  • Co-founder/COO: “I focus internally on ensuring what is being spoken about is also being effectively delivered on.”

Here is how the conversation of picking the CEO played out:

“We have to list who the CEO is going to be?” said Drew, on the phone while I was cooking spaghetti for lunch in my apartment.

“We have to list someone?” I asked.

“It says we have to, yeah.”

“Do you want to be CEO?” I asked. Whose name we put down didn’t change the fact that we were building Digital Press together and making decisions together.

“I honestly don’t care,” said Drew. “Do you want to be CEO?”

I stirred my gluten free noodles, talking on speakerphone.

“I don’t care either,” I said. “I just want to build something special.”

“Same,” said Drew. “I guess from a perception standpoint it makes the most sense to put you as CEO. I’m gonna just do that. I’m doing it. It’s done.”

I picked up the pot to drain the noddles and laughed.

“Now that that’s over with — what’s next on our To Do list?”

Nick explains why Drew said that regarding the ‘perception’:

I assumed the role of “founder” for a few reasons:

  1. I have a strong personal brand on the Internet.
  2. I am heavily involved in the industry we were looking to disrupt.
  3. I am more extroverted and willing to speak outwardly (aka be the “face” of the company).

Girls vs guys as the startup CEO

I hate that I feel I need to mention this, but here goes.

The reality is that there are more male CEOs than females in startups as there are more men starting companies. It’s called math.

I have a number of friends that are CEOs and also happen to be women. They’re all badass. Two examples are Juliette at Goxip and Alexis who sold Luxola (To Sephora- looks like they shuttered the site).

There’s no reason to pick a dude over a chick as the CEO. Staff will not respect a girl any less, VCs don’t care (and actually want to fund more women due to pressure), bus dev partners don’t care etc.

In fact these days, you will get a shit tonne more PR if you have a female CEO. It’s a great hack atm, and I’m shameless about working smarter and hacks.

With companies I’m starting, I actually want to have a female CEO even if they are a figurehead, as I know there are a lot of benefits.

If you’re a female CEO and dealing with imposter syndrome, get over it. Everyone has the same issues.

Conclusion

It’s always obvious who the CEO is. I was getting smashed with one of my investors on rose the other week and we talked about this point briefly… he said “Yeah, it’s always obvious who the CEO is“.

When you decide who the CEO is you have all agreed not to a partnership but a dictatorship. Everyone has to be Kool with it and defer to the CEO. It doesn’t mean that the founders don’t get a say and can’t wield power in their department, but like arguing with Mom, Dad needs to say, listen to your mother. She’s the CEO, bitches.

If you are stuck, book a call with me.

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