The benefits and risks of bringing a CEO to a startup

Larry Borsato — Mon, 25 Aug 2008 06:15:23 -0700

You've solved a critical business problem. The code is written, and out in the customers' hands. As the founder, you’ve nursed the company through the trials and tribulations of getting to this point. Is now the time to hire a real CEO to take you to the next step?

Semacode Corporation is a startup in the area of two-dimensional barcode recognition and processing using mobile devices such as smartphones (disclosure: I consult for Semacode.) Unlike 1D barcodes, which typically store at most 10 numeric digits, 2D barcodes can store over 100 characters, meaning that they can be used to store larger chunks of information, including Internet URLs.

The barcodes can also be used for point-of-sale marketing and purchasing. They allow customers to perform tasks such as purchasing an album from iTunes by simply snapping a photo of a barcode from an in-store display using their mobile phones and an easy-to-use Java application -- essentially the holy grail of single-click-to-purchase.

Founder Simon Woodside understands the business problem and the solution, and he has built a team to create the technology. To his credit he recognizes that to grow the company to the next level -- creating and expanding partnerships to drive sales -- now may be the time to bring in a CEO. But what kind of CEO, and what can they bring to the table?

The right CEO can put a business face on the company. He or she may provide the first real sales presence. The CEO may bring operational, marketing, or fundraising experience, or pre-existing relationships with customers in target markets.

Or, chief executives may bring valuable management experience in companies at similar stages of growth. They can also avoid "founderitis", providing a rational view to balance the tendency of founders to be so attached to the existing business plan that they can’t see other opportunities.

But hiring the wrong CEO can spell disaster for a startup, as noted in the book Why CEOs Fail. Any of the reasons described -- arrogance, melodrama, volatility, excessive caution, habitual distrust, aloofness, mischievousness, eccentricity, passive resistance, perfectionism, eagerness to please -- can be detrimental.

In addition, not everyone shares the belief that you must hire a CEO to grow your company. Marc Andreessen, who led the Netscape programming team and founded Loudcloud and Ning, takes this contrary view:

"Don't. If you don't have anyone on your founding team who is capable of being CEO, then sell your company -- now."

Of course not everyone has the luxury of the founding teams that Marc has been involved with.

As a startup company, you must clearly understand which combination of skills that you require. In the case of Semacode, selling and relationship skills are critical. Sitting down to determine the strategic plan that the CEO is expected to follow can clarify these requirements. This week Simon and his team will be reviewing and fine-tuning that plan, and then using it to focus and narrow their list of CEO candidates, before making that critical final selection -- and taking the next step to making Semacode a household name.

Larry Borsato has been a software developer, marketer, consultant, public speaker, and entrepreneur, among other things. For more of his unpredictable, yet often entertaining thoughts you can read his blog at larryborsato.com.

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