Topic of the Week (TOTW): “CEO for Start-ups Without an Entrepreneur”

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Commercialization of IP through new venture development is a difficult task for university technology transfer offices or research institutions. Researchers frequently want to see their ideas come to life and benefit the larger community but don’t have the business experience to make it happen.  Without a CEO to lead the formation of a company many outstanding ideas never see the light of day.

All start-ups need a leader, someone to guide the enterprise through the first formative steps.  Often there is little or no money to compensate anyone working in the start-up and it is difficult to find a permanent CEO willing to work for equity who shares the vision and passion of the Founder/Researcher.

The biggest lament of VC firms is not lack of good ideas; rather it is finding credible management teams led by an experienced, qualified CEO associated with those ideas.  Many great product ideas are developed by individuals who have no personal desire to actually run the business; in other cases, they may have the desire, but not the experience, time, or discipline.

That CEO role also changes over time.  For instance, the early CEO may be terrific at organization and completing the series of routine steps to the get company up and running but not adapt at fund raising or acquiring customers.  So how does one navigate the need for different CEO skills as the venture progresses?

The solution is a part-time, limited duration Ramp CEO.  From day one a Ramp CEO directs the entrepreneurial venture development.  The Ramp CEO is a puzzle builder, someone who handles the development role and precisely crafts the entity to a perfect start.  He or she is capital-efficient; the start-up does not have to hire a long-term, full-time person and place them on the payroll until the needs of the company absolutely justify it and the new entity understands exactly what its long term CEO needs to look like.

The Ramp CEO leads a number of key early stage work efforts:

  • Creating the legal entity: structuring legal agreements, stock issuance, IP protection, organizational planning, etc.
  • Negotiating rights, royalties, and licenses, etc.
  • Validating the product or market
  • Business planning review, revision and strategy
  • Optimizing the overall cadence for moving the venture forward including pivots when necessary
  • Developing the process and reporting structure to keep stakeholders informed
  • Optimizing financial planning, projections and direction
  • Leading capital raising efforts and planning for funding cycles
  • Establishing and developing culture
  • Being the face of the company in marketing, public relations and community efforts

The most important characteristics of an interim Ramp CEO are:

  • Specific, relevant skills. Does the start-up need an industry expert or a team builder? Relevant skills are frequently more important than industry experience to achieve high impact results.
  • Experience Level. What’s important is that the candidate’s experience matches the specific situation and requirements. The right candidate is sensibly overqualified; better than the job requires at the time of hiring.
  • The candidate’s personality/chemistry must complement the existing leadership team. It is a huge mistake to ignore cultural fit simply because the position is neither permanent or full-time. Work style, ego and culture must fit even with a Ramp CEO.

Opus Faveo is often asked, “Why would an experienced CEO be willing to work for little or no compensation in a start-up?”  Not all will, and even some that may wish to, do not have the aptitude to become entrepreneurs. But for those that do, the answer is simple.  Business builders covet the opportunity to work in the high energy world of start-ups alongside smart people who need their expertise.  These senior managers enjoy the excitement of working with a diverse group of companies.  Since they get a small equity stake in each company they create their own diversified risk investment portfolio.  Many who have spent time in large bureaucracies appreciate being able to enact plans not just offer guidance.  They like bouncing between entrepreneurial roles, pitching investors, calling on customers, arranging strategic alliances, etc.  Some have already secured their financial independence and want now to stay relevant and involved in new adventures where their experience and skills can make a difference. When the time comes to hand the reins to a permanent, full time CEO they are happy to do so and move to a new opportunity.

Hiring the right talent is both the most difficult thing for a start-up and the most transformative for the business.  Hiring the right full-time CEO takes effort, variously estimated at between 8 and 12 months.  During that time, start-ups frequently feel stuck and the lack of success begins to burden growth, often tempting the venture to settle for someone less competent or a bad fit. To avoid the long term cost of a hiring mistake and the frustration of finding the right CEO, a part-time Ramp CEO is an ideal contribution to the start-up venture.

Posted in News & Views.