When investors write a check for an early-stage company, there needs to be a standout leader. But what are the key qualities?
Well, to get some answers, I recently talked to Adam Marcus, who is a managing partner at OpenView, which is a $700 million venture capital firm. No doubt, he has spent many hours vetting CEOs — and only a few have been able to make the cut. But then again, the payoff has been strong. Consider that OpenView has funded companies like ExactTarget (which was purchased by Salesforce.com) and Mashery.
For Adam, he looks at the CEO role as involving the following key factors:
Objective: The ability to look at a variety of data points and hear a variety of opinions – and synthesize these into a conclusion that is unfettered by emotion.
Driven: Building these companies is incredibly difficult and none of them move in a nice straight line. So without having that drive, companies will fail.
Adaptable: The tech markets are moving faster than ever and CEOs need to adapt as product markets change and customer needs evolve. Just look at what Reed Hastings has done with Netflix.
While all these are great, they are traits that are hard to find…in one person. And this may mean that the founder should not be the CEO. “You might like building a product,” said Adam, “not spending much of your time in management and investor meetings. That’s not to say you have failed in any way. In fact, it’s important to recognize where you excel and are willing to hand over the reigns to someone better suited or more interested in running the company at its current state.”
Even though Adam likes to focus on things that can be measured, he also realizes there is lots of subjectivity. For example, one area is with stubbornness, which can be a double-edge sword.
“On the negative front,” said Adam, “a CEO can be so stubborn that he or she doesn’t read the market correctly. Unfortunately, this can lead to a company losing product market fit, churning customers, losing their leadership position or even worse, stalling out.”
But there can also be managerial challenges. When a company starts to scale up, the CEO’s time allocation becomes much different. “Early on, a CEO can spend the lionshare of his or her time on product strategy and development,” said Adam. “Yet over time, and as the company hits product market fit, the CEO needs to transition into a more leadership type role where the primary responsibilities are setting high level strategy, hiring great people, managing the board and motivating the troops.”
However, the right kind of stubbornness can lead to outstanding outcomes. “Building private companies is really hard and it’s never up and to the right,” said Adam. “As such CEOs can tend to thrash as the market moves. We have seen CEOs who stay the course and focus on their true north even as their board or team advised differently. In this scenario we have seen CEOs emerge from the noise with the right product and strategy and generate significant value.”
He points to Salesforce.com’s CEO, Marc Benioff. “He’s taken a vision and executed on it while maintaining a high set of values and a core focus,” said Adam. “He had a vision before the cloud existed and the notion of SaaS was so prevalent and against many naysayers, he stayed focused on executing his vision.”
Again, it’s all about finding a balance. But when its done right, it can work miracles.
Tom Taulli (@ttaulli) is an Enrolled Agent and the founder of BizDeductor, which offers services and apps to help save a bundle on taxes.