About you
In the first blog article, I outlined what it takes to succeed in the CPG business. My plan has been to revisit those points in more depth. In a later article, I said that the most important factor for success is a high gross margin. That is certainly necessary for a company to grow. But perhaps that was wrong, looking at the bigger picture.
The first thing an experienced venture investor will want to know is “Have you had a successful exit before?” If so, many investors will assume that the risk in the current company is low. After all, you have more experience now, and you succeeded last time.
I have been in pitches to angel groups where investors said that directly. Personally, I didn’t think the risk of the company at that stage was low, but the investors saw a previous exit and they thought the risk was low.
Let’s unpack this. When I was an investment banker, I met with many companies. I came to realize that a company needs three things to succeed: A good product, a good strategy to get that product to market, and good management. Most companies had surprisingly good products. Sometimes they didn’t have the right strategy to sell the product, but that was something we could help them with. But often, the people running the company were either inexperienced or incompetent as managers. And that was not something we could fix.
If you have a successful exit behind you, most VC investors will conclude that you know how to manage. And you clearly have experience in the industry. Often, they are wrong, frankly. Investors assumptions aside, what are the qualities in you that are required for success?
A competent CEO is the most important determinant of success. If the product or strategy is wrong, the CEO can change that. For instance, Slack started out as a video game company and pivoted. What makes a competent CEO?
Industry Experience. Years in the industry mean that the executive has learned a lot of expensive lessons. An expert is someone who has made every possible mistake. Without experience, your investors are going to pay for your education. That tuition is expensive. Even experience is no guarantee of success. The market may have changed, or you may be missing some other qualities, such as:
Management ability. In addition to being an inspiring leader, you also have to attract competent people, organize and plan their work, delegate the right work to the right people, make sure they communicate with each other, and hold them accountable. This is not easy. CEOs who can do this are in high demand. Most people think they can do this, but they can’t. Accordingly, VCs often replace the CEO after Series A.
Business Intelligence. You have to get information about what is going on in the market, analyze it, and make the correct strategic and tactical decisions about what to do. This is difficult. You may be faced with a strong competitor, or an upstart who is out-innovating you. You need to swallow your pride and course-correct to meet the threat. Maybe you were wrong about your initial strategy, and you need a different product.
Behavior The captain of the ship needs to be strong. If you are not sufficiently healthy physically, emotionally, and mentally, you need to step aside as CEO. You may not be able to lead and manage the company. You also need to set an example by working hard. Employees will follow your work style. No great company was ever created without dedication.
Product Love You have to be great with your products, and understanding what customers want. This is what Steve Jobs called being a product person. You have to be able to help develop new products yourself and want to be involved in them. Never accept that a competitor has a better product.
Attitude. Be hard-core. Business is a rough sport, and you have to be switched-on 24x7 and willing to make hard decisions to win. If that means being feared, then perhaps that is required. One of the best managers I ever knew told me that there can only be one asshole in the company, and he was happy to be it. He wasn’t an asshole by any means, but he was tough when necessary.
Most websites have an About Us section. This article is the About You section. This article discussed what personal qualities you need as CEO.
Our company mission is to ensure the survival and prosperity of your company. There is only so much we can do without a competent CEO.
If you have any questions about what your company needs to do to succeed, please contact us. Don’t become a statistic.
