This is part of my series on what makes an entrepreneur successful. I originally posted it on VentureHacks, one of my favorite websites for entrepreneurs. The full list is now posted there if you want a sneak preview. I’ll try to add a few extra comments in my posts to keep in interesting.
I started the series talking about what I consider the most important attribute: Tenacity. I then covered Street Smarts, Ability to Pivot, Resiliency, Inspiration, Perspiration and Willingness to Take Risks.
8. Detail Orientation / Hands On – One of the easiest ways to rule out people who are pitching to me is when they don’t know the details of their business. There are easy tell-tale signs. I’ll start with an obvious one – I talk with the entrepreneur about competitors. You can always tell during this discussion whether the entrepreneur has logged into their products, talked to their customers, read all the news stories and gotten all of the back channel info on the competition. You can tell if they have a deep-seated competitive spirit. Can’t go a mile deep on competition? Buh-bye.
Let’s talk about your product or let’s look at your financial projections. Can’t walk me through it on a granular basis? Did someone else pull you’re financial model together while you did “your job?” Not good enough. The best entrepreneurs focus on details. They can tell you the square foot costs of their property, they can tell you how much they spend on Amazon Web Services every month, they can tell you the 12 features that you’re working on for your next release.
One other big tell for me is the CEO’s grasp of the sales pipeline. I can’t tell you how many CEO’s I’ve met with who can’t walk me through the details of their sales pipeline. I want the names of the key buyers, the last time you met them, who the competition is and what are the criteria for a decision. You think we’re just going to talk about your largest lead? Sorry. Let’s go through the whole pipeline, please. I care about the details but I’m more interested in finding out whether you do.
Along with detail orientation I have a strong bias for “doers.” When I ask for a quick demo and the CEO tells me that he’ll schedule a follow-on meeting with his sales rep because, “I’m not a demo guy. The sales team doesn’t like me to give demos,” I usually think to myself, “a follow up meeting probably isn’t necessary.” Similarly if you need your CFO to walk me through your financial model you’re probably not the right investment for me. Ask any of the previous CFO’s when I was the CEO – they did the hard work but I edited the spreadsheets cell-by-cell. In fact, I usually built the first 3 versions of the financial model (but then my ADD took over and I needed a great closer to make the model complete. Luckily I had CFO extraordinaire, David Lapter, who’s now the CFO at KickApps. One of his investors called him, “the best CFO in our entire portfolio.”)
I wrote a blog post about being hands on where I argued that startup founders need to be hands-on or in my words, “you can’t run a burger chain if you’ve never flipped burgers.”
I once had a startup team pitch me for an investment where the President of the company led the first call with me on his own. I told him that “president” was a strange title for a startup. He announced that they also had a CEO. Interesting, “what are your different roles?” I asked. He told me that the CEO set the strategy but that he, the President, traveled to all of the conferences evangelizing on behalf of the company. Hmmm, “so who runs the company on a daily basis?” “Oh,” he responded, “we have a COO.” The company had sub $1 million in revenue and was burning $850k / month. It had a strategy-setting CEO, a limelight-seeking President and a COO who ran the company.
I gave one of the cheekiest responses I have given in my 2.5 years as a VC, “You don’t want to raise money from me. The first thing I would do is fire you. Then I’d fire the CEO. Then I’d cut the burn to a realistic level and build a company.” (yes, I really said this)
They got their round done anyway from a big late-stage VC. One of the large parts of the burn was PR, Marketing and attending conferences. As I said, there are VCs who are fooled by all this but it doesn’t equal success. 12 months later the president and the CEO had moved on. Bad VCs funded this madness in the first place and weren’t close enough to the company to see what was going on. When the CEO of an early-stage startup tells me that they plan to hire a COO I’m usually not interested in the next meeting.
It’s different when you’re co-founders and one person gets the title COO. But even then I think it’s funny. Anyone who’s ever presented to me with these titles hears the same questions: “OK, so who does tech report to? Who does finance report to? Who does sales report to? You’re slitting that stuff? Then what does COO mean? Isn’t it a confusing title?” My vote is that co-founders should pick one lead as the CEO and the other should have a functional role & title like Head of Sales & Marketing, CTO, VP marketing or whatever. But that’s a digression.
Funny side-note: The company was recently nominated for a Crunchie Award. Money can’t buy you ultimate success but it’s clear that money CAN buy you awards. Unfortunately.
(Cross-posted @ Both Sides of the Table)