What a startup CEO shouldn’t miss? (part 1)

March 18, 2007 at 4:09 pm 1 comment

I would like to share some of my experience in building startup companies and raising money from business angels and venture firms. After being asked what a startup CEO should do when starting a new company and raising funds from outside capital I decided to include this on my Blog. The CEO who asked me to do this is currently building a software company here in Germany. He is starting to deal with some of the leading VC’s in Germany. Here is the context of what I told him. Take it for what it’s worth. If you find it helpful, let me know.

I am sure these points are helpful for the entrepreneurs as well as for the Venture Capital investors. Some are more strategic and some are tactical.

The first two areas I would like to reflect on are the following:

  • Management
  • Board of Directors (Beirat, Aufsichtsrat)

1) Management team, management team, management team. Build the strongest team you possibly can. This is one of the most important and critical parts of building a successful and long lasting company. Focus on key management team hires. A  key manager can make or break a young company. And please always keep in mind that a startup is a completely different animal compared to a mature, corporate company. There are only handful of key managers from big companies who are able to successfully transition from a politically rich corporate environment to a startup-environment. Do your homework and thorough reference checks. A key manager in a startup has to think and act like an entrepreneur. Focus on this issue during the hiring process. One thing I have learned is that if a hire turns out to be a mistake, don’t hope that the person will magically change, fire him/her and move on. Fire fast enough in order to solve the problem and to change the situation. Good board members can help in this process.

2) Build a solid and supporting Board. Reconsider the main tasks and goals of a Board. Your new investors will likely want 1-2 board seats. I’d strongly suggest in addition to this you bring in 1-2 non-investor board members with direct industry experience who are operational rather than “bankers” prior to finalizing the financing. After I worked with various boards I would highly recommend to focus on people who a) (most importantly) you can trust, b) have a successful track record and who understand the space(s) you are playing in, c) can bring in new and different ideas on items such as talent, financing and growth (sales, product, etc.), and d) understand the venture and growth financing landscape. Stay clear of the “name dropping” blowhard “has-beens” who are just looking for a place to earn an annual fee. But rather focus on people who can truly add real value through action.  In my last few companies, I had different experiences with each board member. I had board members who were incredibly valuable to me and the company – we probably talked at least one time per week. These people opened doors and supported me in positioning the company. They also were a great catalyst and compliment to our venture investors. But I also had board members who promised to open doors and give me access to big customers or partners or to help the company on a regular base – nothing happened. Double-check the reference and the former impact of board members hand in other starup’s before you bring them on board. As a young CEO, these experienced and valuable Board members are very important for your company. Remember, it is your responsibility to “manage” the Board.

To be continued…

But – at the end of the day: Have fun and enjoy your venture. Keep your entrepreneurial spirit and attitude. You are in charge and you can make or break it.

OJ

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Entry filed under: Investments, Startups.

Summer feeling every Saturday at 10am – even in winter VC or BA money?

1 Comment Add your own

  • 1. stephanv  |  June 15, 2007 at 10:41 am

    That sounds like you wrote it (especially) to me. 😉 Anyway, I think I’m close to point one and I really would love to have a perfect No 2.

    Reply

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This blog is a view from an VC investor, entrepreneur as well as from a private person. You'll find posts about Startups, Technology, Venture Capital, Entrepreneurship and about life and fun. If you enjoy and if you don't please send me your critical comments.

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