This post is an exerpt from Piyush Chaplot’s blog.
I felt like I have mined a bitcoin when i recently came across this interview with Tom LeFevre, co-founder of Intuit on assessing startup CEOs. Link here for detailed interview.
He highlighted six types of CEOs to avoid while investing - Functional Vice-presidents, Researchers, Inventors, Fund-raisers, Small businessperson, and Corporate Executives.
The first three types he called “not” CEOs because they lack general management skills. The remaining three types he called “flawed” CEOs.
1. Functional VPs: who were successful but never made the transition to CEO. When these CEOs encounter a business problem, they try to solve it using their functional skills. As an example, a CEO who had been a vice-president of sales in his past life, approached every problem by trying to get more sales. His company’s problem was in operations. Sales volume was already more than the systems could handle, so more sales orders just made the problem worse. But this CEO couldn’t make the transition from functional expert to general manager.
2. Researchers : Their passion is investigating the technology. The product never gets finished because there is always some issue they want to go explore. They spend their time and resources on that instead of commercializing.
3. Inventors : They like to invent things and may even come up with products, but they have no interest in commercialization.
4. Fund-Raisers: These people are really good at raising money for their company, but they aren’t very good at running the business. They don’t understand the customers. Products don’t get done; revenue progress is weak.
The CEO is so good at selling the potential. There hasn’t been a down round, but we’re unlikely to ever see returns.
5. Small Businesspeople: These people have the CEO title and they sort of function as CEOs, but they don’t really do the job. Either they lack focus, have low potential, or they can’t scale. These CEOs can manage a seed stage startup with eight or ten people in one location but are over their heads once the company starts to gain traction and grow.
6. Corporate Executives: They typically don’t understand the importance of cash in a start up and require high overhead to function. The company will end up with four “C” level executives, three vice-presidents, and twenty-eight managers in a low margin hundred-and-twenty-person company.