At Fireside Ventures, we have a very long roster of co-founders. Some are married to each other, others are siblings, and still others are friends and colleagues who developed their startup idea together as collaborators. In all these conversations, a constant thread that runs through various stages of business, is the one on evolving roles of the founding team.
Who is the CEO? And why is it important to pick one?
Often founders who start off together, end up taking a co-founder tag, equal equity, and distributed responsibilities of different functions. The stated thinking is that this way they won’t step on each other’s toes. While that is absolutely the right thing to do in terms of expertise and focus, companies don’t run in isolation or as separate functions. There is always decision making required, tying it all up together.
Then there are other times, where the person driving fundraising, or the one who had the idea first and got the rest of the folks together, is given the CEO title.
Choosing the CEO among the founders signals clarity of thinking - to the outside world and to the inside. It indicates clarity of roles, decision making and shows up in the direction of the company. It’s as important for your investors, as much it is for your employees to have this clarity.
At Fireside, we recommend the earlier you make this decision, the better. We ask for this clarity at the time of investment decisions. Don’t delay this decision – when you’re thinking of going IPO, you will have to call out a CEO to the public eye!
Do remember, though that CEO is a role and not just a title. The CEO is the captain of the ship, and there can be only one captain!
Here are some qualities to seek while deciding on the CEO:
- Strategic thinking with a bifocal lens – Ability to look at today’s business and think about tomorrow’s. Sets the vision for the company, the design of the organization, and drives the business strategy for growth.
- Problem solving – Solves problems across business areas and technical areas, connecting the dots across functions.
- Storytelling – Shares the startup story with a wider audience, outside and inside the organization, get speople to buy into the vision. The byproduct of this skill could be a fund raise.
- Leadership – Inspires, motivates, and mentors people. Ability to attract high quality/ senior talent from the outside and build the organisation from within, work well with people, and take them along on the business journey. Since they’re the captain of the ship, can also groom the other co-founders and help them with their journeys.
- Decision making – Ability to consider multiple factors, data points and use judgment to make high impact choices on a regular basis. Is also the final call on decisions or disagreements within the founders.
The CEO role might not always show up in equity split, and all co-founders can choose to have the same equity stake. In our experience, we’ve seen that the CEO shouldn’t have lesser equity among all founders – that signals some inequity in decision making for the role.
Once you decide on the CEO, it’s important to align on decision making for other functional and leadership areas of the organization.
Evolving roles as the startup grows
As the startup evolves in its journey, so do founders. It is critical to align how founder roles evolve with the stage of the company, what do each of the founders spend their time on, who keeps the day-to-day running vs. who thinks about the future. Define and re-define founders’ roles at every stage - basis strengths and areas of aspiration for sure, but also per the priorities of the business for the next 3-5 years.
In our experience, founders who have undertaken executive/ leadership coaching at critical inflection points of the business journey have seen significant impact on their personal and professional evolution – in their ability to handle the new phase of growth, think of their own role differently, and take decisions to set the organization and business for scale. It has in turn had a direct linkage to the accelerated pace of growth in their business.
Nurturing relationships within the founding team
The co-founder relationship like any marriage needs to be nurtured. Set aside team norms and rituals to manage conflicts and disagreements. It’s as important to spend agenda-less time with each other, times where you can release pressure, and check in with each other periodically.
Common reasons for dysfunctional founding teams:
Not getting enough autonomy to operate – While reporting clarity of different functions is set early on, the problem occurs when the other one is not doing their bit, or their autonomy of decision making is in question. There is mistrust and the organization’s outcomes suffer. In such cases, don’t delay hard conversations. Figure out mechanisms to be able to share feedback with another.
Both/many want to be the CEO – Make this decision very early on in your journey. Then in case of disagreements, you know how to make the final call.
Not having shared goals – Companies evolve and so do people. Having a different vision for the company or different work ethic and expectations often tends to creep in as you evolve that might set founders apart.
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