When a Startup is No Longer a Startup — And Why It Matters
/Everyone knows startups are exciting — the stuff of reality television shows and podcasts and even sitcoms. The will they/won’t they drama of startup success (or failure) is heady.
And it’s not just for those watching from the outside. The buzz and frenzy of startup life can be addicting. Startups seem to play by their own set of rules.
Of course, one of the ironies of entrepreneurship is that once you succeed at being a founder, you don’t really get to be one anymore — unless you leave and start over.
Why?
Because you will need to make the transition from founder to CEO. The CEO rulebook is completely different from the founder rulebook. And once you’re not a startup anymore, you can’t keep acting like one. If you do, you’ll risk the success you’ve worked so hard to achieve.
So how do you know when you’ve crossed that invisible line?
When a startup becomes something else
Of course, the truth is, it’s an evolutionary process. You don’t walk across a line one day, get anointed the CEO of a full-fledged enterprise, and throw your founder hat in the trash. It’s a process.
From the beginning, you’re likely balancing a bit of the founder hat and a bit of the CEO hat. The question is which gets more air time.
Or rather, the question is: when should I evaluate myself against the CEO profile instead of against the founder profile?
There are two key indicators that a startup is no longer a startup (and thus, it’s time for a founder to become a CEO):
They’ve achieved product-market fit. They’ve defined who their customers are, and they’re getting them to pay.
They’ve developed a predictable business model. They know how to get customers, and they know how to repeat the process.
Startups are risky ventures because you don’t know where your next dollar is coming from. Once you know who your customers are, what they want, and how to create that repeatable revenue stream, your risk drops considerably.
Let me take a minute to note that there’s a “special” case regarding venture-backed startups here. While we may call them startups, once you raise a large amount of outside capital, you become a different beast. If you have 100 employees and millions of dollars in the bank, you’re not really living that startup life, even if you haven’t yet found product-market fit or a repeatable customer acquisition model. “Founder-mode” is a historic artifact at that point.
So if you find yourself at the edge of no longer being a start up, what next?
Founder vs. CEO
You’ve no doubt heard the admonition about working on your business instead of in your business.
As a founder in startup mode, you have very little time to work on your business. You’re hustling everyday to get the product right, to find customers, to bring the dollars in the door. You’re in the trenches. You can’t step away and let someone else do that work — either because you can’t afford to pay them or because the ideas can’t live separate from you yet.
In fact, stepping away too quickly can be fatal to the business. I learned that lesson the hard way as the CEO of IntroNet in 2013. I’d spent so many years becoming an effective CEO that I forgot how to be a founder.
I got out of the trenches before we’d hit those critical goalposts: product-market fit and a repeatable business model. The result was that the internal workings of the company were falling apart without my realizing it.
The problem wasn’t that I was acting like a CEO. It’s that I was doing it too soon. Unfortunately, doing it too late can cause problems too. You always have to do some element of both being in the trenches and running the business, but the balance changes over time.
A good indicator of which side of the tracks you are on, founder or CEO, is where the bulk of your priorities lie. And you need to know when it’s time to shift your priorities to act in accordance with the growth, vision and needs of your business.
Once you have a repeatable customer acquisition process, you can (and must) begin looking at your business like a CEO.
A CEO has four jobs:
Defining the company’s vision
The CEO is responsible for the “Big Picture.” That means setting the vision and inspiring your team towards it. The CEO keeps the organization focused while looking towards the future and planning for what comes next.Ensuring the company’s financial health
As a startup, the founder focuses on survivability — to not run out of cash until the business model becomes viable. As CEO, the goal is sustainability (and probably growth). There are many stakeholders with a financial interest in the company. The CEO has a fiduciary accountability to owners, investors, employees, vendors, partners and clients.Getting the right people in the right roles
One of the most important — and arguably one of the most difficult — parts of a CEO’s job is making sure the team is made up of the right people. Spending time on values-based hiring and investing in professional development are Quadrant 2 activities that help a leader build the foundation of talent that enables the business to thrive and grow. Having the right team keeps the CEO out of the trenches.Being the external face of the business
If your company is closing a massive sale, that customer wants to interact with the CEO. The same is true for investors, key partners and media opportunities. In having the first three accountabilities, the CEO becomes the outside face of the business — as vision leader, fiscal leader, and team leader.
A CEO isn’t writing code or being a product manager. They’re not serving as a chief technical officer or chief marketing officer.
They’re looking at the business as a whole, setting goals and strategies and making high-level decisions while they delegate day-to-day responsibilities.
Without that focus on the overall health of the business, a company may stagnate and even begin to backslide.
What needs to change
We see many leaders that want to make the transition from founder to CEO and struggle to do so. Most commonly, they’re struggling to delegate. They don’t spend enough time on things like team building or scenario analysis because they’re putting out fires all day, choosing to focus on day to day operations.
The trick here is to take the wrong things off your plate and put the right things on. Of course, there’s really no trick to it. It’s the process of identifying and delegating those responsibilities that aren’t compatible with your role as CEO.
Consider if you have 20 employees and all of them are your direct reports, you may need to delegate some management responsibilities. If you still sign off on every product update email that goes out, you may need to delegate some communications or engineering responsibilities.
Remember: you’re not just delegating for the sake of delegating.
Once you’ve freed up that time, you can evolve into the role of CEO. You can do high-level visioning and scenario analysis. You can develop partner relationships. You can strategize about the culture your new hires are creating.
See more: How to Delegate Like a Boss
I’ve also written about the time management quadrants of Importance and Urgency as popularized by Steven Covey. We often guide clients toward spending less time in Quadrant I (Crisis, urgent and important) and more time in Quadrant II (Strategy, important and not urgent).
The biggest hurdle for a founder becoming a CEO is that they don’t prioritize the efforts that will get them there. Many find that it’s easier to do something themselves (Quadrant I) than to find, hire, train and lead someone else to do it (Quadrant II).
The obvious problem? It doesn’t scale. Growth comes when you spend 60% of your time in Quadrant II.
You’ll need to sacrifice perfection and efficiency in order to take your business from startup to sustainable.
Final thoughts
There’s no universal line of demarcation — startup on one side and sustainable business on the other. Or founder on one side and CEO on the other. That’s why founders often miss the change. They suddenly get to a point where what they’ve been doing isn’t working, and they don’t know why.
It’s frequently for exactly this reason. If you have a team of 20 but you’re still following the same playbook you were three years ago when it was just you and a few freelancers, it might be time to step up into your role as a leader.
If you’re not sure whether now’s the time, talking with a trusted advisor can help you get that outside-in perspective. We’re experts in helping founders become leaders. Contact us to learn how we can help.
