I was thinking about first time CEOs today.
Like many other VCs, I’ve seen CEOs and boards learn some lessons the hard way.
This post focuses on the two most valuable pieces of advice that I can give to first time CEOs.
1. Share Bad News Early
In my experience, the number one blind spot that first time CEOs have is not wanting to share bad news early enough with the board.
I’d wager that every single venture backed company has had some bad news somewhere along the way.
The best CEOs tend to share the bad news (product delays, missed numbers, etc) early and to ask for help and advice from board members.
Oftentimes, first time CEOs tend to wait a while before they share bad news – thinking that they can “fix it” themselves or fearing that they will lose face with the board due to the bad news.
It’s not out of maliciousness or wanting to hide information that most CEOs wait. Rather, they are afraid to seem as if they have failed in any facet of the job.
The reality is that the CEO job is hard enough itself. It can be a lonely job with intense pressures. But being upfront with bad news early tends to save lots of heartache down the line.
Most VC investors would rather know as early as possible that a product has a high chance of being delayed in shipping by several months rather than waiting till the 11th hour to find out that it is definitely delayed.
The advance notice gives a company room to pivot if needed. In venture backed start-ups, “degrees of freedom” and the ability to pivot are critical.
Last minute notice of bad news can leave a company trapped with fewer strategic or financing choices.
2. ABP: “Always Be Planning”
The other trap that most first time CEOs fall into is the lack of scenario planning.
Again, I’ve noticed that the best and most experienced CEOs are always planning contingencies around every major product release, milestone, etc. They are always running “what ifs” in their head.
The “what if” exercise is incredibly valuable and tells me that a CEO is thinking extremely strategically and not afraid to admit that things sometimes do take longer.
I try to speak to each of the CEOs in my portfolio at least weekly and in some cases much more frequently as the situation demands.
I’ve found that the best CEOs I work with tend to actually call me most often for advice or to just to some bounce ideas and scenarios.
In consumer internet companies, first time CEOs are the norm – perhaps even encouraged and preferred. In that sector, being in touch with the product is key.
Internet CEOs in their 20s and 30s are more likely to be in the demographic of potential product users.
In healthcare, it is a different ballgame. Given the challenges of perennial fund raising driven by lack of capital efficiency, FDA risk, reimbursement risk etc, it is far more rare to have first time CEOs scale over the long-haul in healthcare companies.
Reed Prior recently had a nice post where he touched on the CEO requirement differences between healthcare and other industries.
Luckily as Fred Wilson said a few years past, “You Are Only A First Time CEO Once”