Lose Yourself

In 1995, when I founded a start-up ASP technology services company, at the age of 26, I was very fortunate.  Not only did my family and friends support me to the tune of several hundred thousand dollars, but in 1996, we received multiple term sheets for several million dollars from some of the most prestigious early stage VCs at that time.  One termsheet had a catch though: I needed to hire a CEO to replace myself.  Hire someone better than myself to run the company?  It was a no brainer, we took the termsheet.

It’s the old Peter Principle: bureaucrats, who are more interested in growing their responsibilities, hire less competent people.   More important to me is the rules other implication: founder-owners, that have an interest in growing their company, hire more competent people than themselves.

As a VC now, on a personal level, I am very reluctant to support the termination of a founder at an early stage of a business unnecessarily.  More than a couple times, I have had founders that only under severe pressure will hire managers that are better than they are for certain roles.  This is nerve wracking to me because I know that this test (hiring managers that are more competent than yourself) is the first, and sometimes last, test of competency for a founder-CEO and their team.  And I want them to pass that test because I like and respect the people I invest in, and I want them to succeed and grow wealthy.  The harsh reality is that the slower it takes a founder to come to the realization to bring on the best in class managers, the lower the ultimate value of the company will be and the smaller the economic rewards will be for the founder--and his backers of course. 

So now as a VC on a professional level, for founders that can’t or won’t hire great managerial talent, it’s a no brainer as well.  Which one are you, founder-owner or bureaucrat?

So in the immortal words of white rapper Eminen's Lose Yourself:

Look, if you had one shot, one opportunity
To seize everything you ever wanted-One moment
Would you capture it or just let it slip?

Don't let it slip. Hire managers more competent than yourself, yo!

Comments

[danny]

Excellent post Steve, I totally agree, it's a personal decision we have to make...and I for one hate bureaucracy.

On another hand, perhaps it’s worth re-examining whether there always is a better person than the founder CEO. Think Apple and the position they found them selves in.

Besides, perhaps in the time prior to the IPO and often afterwards companies need entrepreneurs as leaders - not managers, and entrepreneurs are by definition unemployable..

Basically, I am sure there are people much better suited to my job, it’s just I can’t find any possible reason why they would want to replace me.

So from a recruitment point of view- who are you going to hire who is better? A career fortune 500 lieutenant with "operating experience" or some MBA who's "almost" been around the block and now it’s suddenly his time? Actually, how many proven entrepreneurs have you seen putting in resumes with your investees? Is that even physically possible?

hehhhe, you listen to 'em? Niceeee. Did you get the last album?

[Steve]

My point was not that all founders should be replaced, or even most, or any. I mentioned in my post that I stepped down to make a point: hiring great is your primary job as a founder.

But I do agree with you, and you make a good point-- finding a founder replacement CEO is an extremely difficult job and risky proposition. So I don't tend to invest in companies where I think the founder needs replacing in the near or mid term, or can't work with other managers. If you look at my portfolio, we've only had 1 instance where the founder was blown out of the company, and he resigned voluntarily as the market for his product evaporated. However, if that founder can't or won't hire great managers, his board has no choice.

As for finding VP recruits, there a lots of seasoned vets that will kill to work for an enlightened founder. A common founder arrogance (remember I was one, and it takes one to know one)-- that no one is better than they are at every position-- is exactly the issue I wanted to raise, so thank you for your comment. One company group of founders I've counseled that has gone on to great success, early on was trying to hire a VP-Sales candidate. But they didn't like him one candidate we brought in. He was too edgy, too slick, too expensive (very common complaint) didn't come from the same PhD background as they did--"he isn't like us". But he sold a similar product into their target market quite successfully. And that's here's point I made to the founders-- you don't want to hire people exactly like you for a VP-Sales job. You have to hire someone better than you, and, as a founder get over yourself. It's hard to do as a founder, but it's critical for the growth of your company. Again, this is not a post for founders to resign, just that they hire the most insanely great people they can find. And that can be really hard to do, so find help if necessary, and take advice. I promise you that Steve Jobs at Apple, Michael Dell, and Bill Gates at Microsoft did. You want to be one of them? This is the path: hire great.

[Danny]

Thank you for writing Steve. But if I may, can we explore the issue of boards?

For example, does the recruitment ethos described above apply to the construction of the boards of directors? Is it absurd to advertise for a board member on monster.com?

Whose job is it anyway to hire board members? If it's the job of the VC, what happens if the company is not venture backed?

Are boards important, and what is a good board anyways?

Regards, (maybe this might lead to a good post)

[Joe Healry]

you're an idiot..."yo"...this is advice?