It’s rare I can dust off a 6-year old article, find it still relevant and repost it without any changes. But that’s what happened this morning, I felt provoked by this VentureBeat title: Even start-ups need a COO – wanted to respond, than I had that “I’ve already said this” feeling and realized I would not say it any different today… so there you go, from the 2005 vintage:
As a Founder, you may find hiring a COO helpful, but think twice if you seek VC funding.
Steve Shu ponders on an older article in Entrepreneur.com on the subject.
The author describes situations where the COO is taking on operational functions, ranging from HR, Finance, vendor relationships, order fulfillment, Product Management, QA ..etc, but almost never Sales, Marketing or external PR – these being CEO responsibilities.
Steve’s experience is somewhat different, having performed COO roles with a heavy Sales / Business Development, Account Management slant. I myself served as President at a startup with major focus on Sales, and as VP Sales in a smaller company where I ended up doing a lot of corporate development, which the President didn’t do.
It all boils down to what makes sense based on the individual skill-sets in any specific company… except when you need VC funding. The big difference is that while you, as Founder/CEO are trying to find the best solution for YOUR company, the VCs mission is not how to help YOU, but to find the best investment opportunity. There is a process of elimination to get there, and having the right team & roles is a major criteria in that process.
“Almost no early-stage startup seeking VC funding should ever have one founder as the “CEO” and another as “President” or “Chief Operating Officer”. This is almost always a sign of title inflation (usually to assuage someone’s ego). Almost guaranteed, any startup that has both a CEO and a President/COO has the wrong person in one or the other (or both) of those roles. This sort of title inflation and proliferation is almost always – like most other “contortions” of the standard org chart – a red flag to VC’s. Can easily be taken to indicate that some of the co-founders are more worried about titles (and ego’s) than success.”
The quote is from Mayfield’s Allen Morgan, whose 10 Commandments, in fact his entire blog should be on the Must-Read list of any Entrepreneur seeking venture funding. I would add to Allen’s reasoning that other than title inflation, there may be REAL business reasons for a Founder to bring in a COO, and I am by far not advocating that startup Founders should not make the right business decision to “look better” in front of VC’s. But a potential problem in the Management Team is a red flag for VC’s, and as long as their pipe is full, they have no reason to invest in less-than-ideal companies. Then again, some startups may be better off without VC funding at all.
Update: the above views are a bit skewed towards the VC world, since VC Funding was almost the only way to grow a successful startup. Today I’d probably not focus on the VC angle, but the conclusion would be the same, avoiding startups with inflated titles. And while at it, the same goes for EVP, SVP of this and that when their entire department is 3 people ..etc.
Don’t get me wrong, I am not against titles … Lead Magician sounds cool:-)