Five Key Lessons for First-Time Startup CEOs
A speaker at one of this year’s Envestnet | Yodlee Incubator bootcamps, Mike Grossman may well be the quintessential serial CEO. He has led five entrepreneurial, venture-backed SaaS companies over the past 20 years. Currently the CEO of cloud back-up provider Zetta, he previously helmed SugarSync, Attributor, Tempo Payments, and LiveCapital. Along the way he picked up some critical lessons, which he imparted to the next-generation CEOs taking part in one of this year’s Envestnet | Yodlee Incubator bootcamps.
The top five lessons learned he’s learned?
- It really is about the money. Entrepreneurs often start businesses because they feel passionate about something, and view money as a byproduct of an idea that can change the world. In reality, a business is only successful if it is financially successful.
- Culture matters. A company’s culture may well be the difference between success and failure. It needs to be formally defined and explicitly managed, not allowed to develop ad hoc. The founders need to discuss, agree upon and write down the values their company stands for. They should implement a system for measuring how well they are exemplifying the culture, individually and as a company. In interviewing potential employees or reviewing existing ones, the company’s values must be worked into the discussion. Cultural fit is usually more important than a candidate’s resume or skill set. Define, measure and enforce.
- Pay attention to the size of the market. If you’re entering a big market, you can get away with some mistakes for a period of time. If the market is small, you can’t. When the sources of business are truly finite, you can’t afford to let any slip away.
- Don’t confuse the business with the business model. The idea you start with may not be – and in all likelihood won’t be – what makes your venture successful. A slight pivot can make all the difference. Many of the components of the business model – the product, the channels, the audience – are built on assumptions. Don’t be hesitant to break the model apart and rearrange the pieces as the assumptions are either confirmed or disproven. If you see the need or the opportunity to pivot, get the team involved. Make them part of the change. And above all, get ahead of your investors – be in a position where you are telling them about the change, rather than waiting until they tell you something has to change.
- Remember that it’s really hard. The early stage is stressful and often lonely. Other people don’t understand what you’re going through. That’s why the start-up world is not for everybody. It’s essential to stay focused and find ways to smooth out the “sine wave” of emotion.
Grossman makes a distinction between founders and CEOs. The vision and passion needed to create a business around an innovative concept do not necessarily translate to the expertise to run and grow a business. The CEO’s role is often perceived as being outward facing – raising money, dealing with investors, selling to customers. In fact, Grossman says, the early stage CEO must be both outward and inward facing, focused on operating the business and developing and motivating people.
As someone who has raised a lot of investment capital for many companies, Grossman advises start-up CEOs to be selective about whom they bring in as investors. One of the big reasons for becoming an entrepreneur, he points out, is the freedom – not wanting to be a cog in a wheel, enjoying autonomy, and having fun. You don’t want to have an investor who is going to make your life miserable.