SteveJobs, MarkZuckerberg, Jack Ma, Jeff Bezos, Elon Musk – these are among the best examples of company founders who can lead a company from before it starts and as it grows to $billions of revenue and a real IPO. It’s quite rare to find such exceptional people as CEO, and so we should all learn from their histories and their experiences to understand what makes a CEO of that calibre.
They are rare indeed. Most company founders are not the same people who can best lead acompany from day zero to IPO. This should be acknowledged at the beginning, and particularly by the earliest investors in a new enterprise.
I have learned over the years, starting in my own entrepreneurial days three decades ago, that one might consider three different types of, and purposes for, a CEO in a rapid-growth tech company. Only some times can the founder "be"all three types. Often today Iencounter founders that think they're going to generate such a big flash-in-the-panas they start the business; that they have such a powerful idea and such skills to see it through rapid growth;that they'll be snapped up or IPO in no time – Ihad one in my office a few days ago. Right. Sure thing. Next!
I have found that, at the beginning, the CEO is often:
the tech (or non-tech) innovator who has the idea (and is a visionary);
finds, motivates and pulls together the starting team and early supporters;
gets the company into the market with a product/service; and
creates optionality while finding the right path(s) for initial corporate growth.
That's one set of skills. (My friend Kevin was just in my office and referred to CEO/founders at this stage as ‘players.’I like that.)
Then there is the CEO who can build a team with multiple layers of management – being able to assemble a competent multi-layer management team is in itself a skill, and it's always required for real, non-flash-in-the-pan, non-quick-flip companies.
Along with that skill, often:
---serious capital-raising skills are needed,
----substantial business partnerships must be put inplace, and
---sales have to be expanded from one-offs to bunch-at-a-time.
These are all skills which the founder/visionary CEO may not have, or she/he may not have the deeper management skills to hire and work with (and bring together into acohesive group) the people who do have those skills. (Kevin called these CEOs ‘coaches.’ Agreed – the ability to coach up and down the organization is an important skill at this level, more important than at the next level.)
Finally,the third type of CEO is the one that can build a billion-dollar business,drive it to great profitability, focus on operational efficiencies, trimoptionality (really? Yes, in some cases trimming fundamental corporate-pathoptions can be essential for the right kind of profit growth) and maybe take the company public.Those who know me, know that I rarely think an IPO is the right final-step for a tech startup – it’scertainly not the right driver for a founder and early investors. And almostnever is it the right exit for a non ‘sexy’ non-tech startup, IMHO.
Seriously large multi-level management skills are the biggest requirement for the CEO at this ‘third’ or final stage, along with the vision to see how all the pieces should be structured and interoperate across all the different parts of acompany (sales, manufacturing, R&D,product development, HR, finance, legal, international, shareholder management,etc.) And if an IPO is a possibility, a CEO that looks good to the marketsa nd can put in place the corporate structures required for public status is,obviously, key. Kevin and I got lost in our discussions and didn’t ever get back to naming this final stage – I would welcome your suggestion – email or WeChat it to me.
Rarely is any situation as simple as any one of, or all three of, those types of CEO –but I have found value in looking at entrepreneurs and management teams at various stages with an eye on those three types. And particularly, I am careful to make sure the discussions about possible future changes/transitions are had with management and investors, and that plans are regularly under consideration for adjusting the management team – including the CEO – as the company grows.
As always, feel free to contact me if I might be helpful as you wrestle with any of these questions orother topics about any of your Investments across your entire portfolio,whether your investments are liquid or illiquid, private or public.
This article “Three Stages of CEO as a Company Grows” is the latest written by Pierre duPont of HPM Partners, LLC at www.hpmpartners.com. Mr. duPont is willing to share his investment and business knowledge, and guide private company owners on topics related to their businesses and business growth strategies.
He also helps clients on their personal and family financial matters including global asset allocation, portfolio management, business and personal financing, and a wide range of private banking matters.He works with business owners and multi-generational families in the United States and in Asia to plan for growth and succession - and especially toconsider and integrate the perspectives of born and not-yet-born descendants,whether or not there is a business still in the family.