What should a start-up CEO be doing?

Well, one answer to this question could be:  "Anything and everything."  In some sense, this is true...a start-up CEO needs to be *able* to do just about anything and everything except perhaps some of the deep technical stuff.  But I've seen CEOs get bogged down in the science way too much, and the business side or fund-raising side of the company then suffers.  I've also seen CEOs being penny-wise and pound-foolish...spending too much time trying to save a few bucks, at the expense of losing much more in opportunity costs, or missing the market window.  What are the most important jobs of a start-up CEO?  Raising money.  Refining the business strategy.  Talking to potential customers and partners.  Keeping his team motivated and the development plan moving forward.  Keeping agile as the market evolves.  Hiring the best talent.  Keeping the company financially responsible.  Wow, now that company has a good chance of succeeding.

You have to think and act like an entrepreneur.

Starting a company is tough.  It takes lots of hard thinking, lots of busy-work, and lots of time.  It's not a 9-to-5 job, and it will be taxing on your marriage and family life, if you have one.  You will be thinking about the job almost 24/7.  And you will absolutely love it, which enables and justifies this commitment.  Now, if this description doesn't fit you, then you probably aren't a 100% entrepreneur.  Sure, you can put your toe in the water and be half-committed, and maybe you'll be successful (or ride on the coattails of others who are committed), but most companies these days don't succeed with a part-time effort, and if you're the only one who isn't committed, then your job is in jeopardy.  No easy ride.  Feel free to reply with any stories or insights you have on this topic.

But I don't know how to do that.

Starting a company requires many disciplines, not only in the formation and administration of a real company, but also in solving some of the really hard issues that your company will encounter.  Whether it's how to enter a certain expense into your finances, or even finding a bookkeeper who knows how to do this, or solving a technical hurdle that your technologist just encountered, or whether you're suppose to draft a term sheet first (or let your investors do it), don't think that you have to know all of the answers.  Your first go-to place should be your co-founders and your own database of contacts, then your board, if you have one yet.  These sources will probably have a vast database of contacts, several of which will have your answer, perhaps after one more level of reference to the right person.  Don't hesitate, thinking that they might think you should already know the answer.  Few CEOs and founders can run a company without support.  Tap these resources for your answer and move on to the next challenge.  Now!

Analysis Paralysis!

Okay, I can be nerdy and analytical, too, wanting to test, optimize, test, refine, test... all to make the product even better before I finally release it to customers.  But it's easy for this process to continue with no end in sight.  At what point do you say enough?!  "But the customer would love to have this new bell/whistle that I just thought of."  "But I need to try this slightly different formulation...I think it will work better."  Enough already.  Save something for a follow-on product.  Get the product out-the-door, and get some feedback from your customers before you do any more analysis/optimization.  That feedback is so much more valuable than continued optimization in a vacuum.

Too many markets...I want to go into all of them!

Someone recently asked me the following:

"If what you're developing can go in many different products, but you need a product to select a market, do the market research, diligence, and even look for partners with experience in that specific product space...what's a good way to go about that, and still keep yourself open to pivoting in the future?   For me, say you can go into the personal app space, or the healthcare transcription space, or the commercial IVR space, or license technology capabilities, or any number of others, the initial people I'd want to reach out to to bring on board or help are all different for each."

Good question.  Unfortunately, there's no easy, quick solution.  As soon as you have your core product somewhat defined, you (or someone from your team) should be doing a comprehensive market analysis, which looks at all possible markets.  For each market, one needs to assess the market size, how difficult is it to penetrate, what are the margins, how much does your solution benefit them, etc, etc.  Lots of work here!  If you're lucky, you can get a team of business students to do this, maybe even for free, but the timing has to be right w.r.t. their course series.  Or, you might be able to find a business student to do an independent study project, again, for free.  Other options exist as well.  But, before you do any of this, you must have a list of proposed product features to help you define potential markets.

Sometimes, an easy, low-hanging-fruit kind of market is obvious, and that's often a good starting point, even though it might not be a huge market or perhaps not a high-margin market, but it could potentially bring in some early revenue.

Which market to target first?

My past posts have included discussions about the importance of a market niche and the importance of a product family (not a one-trick pony).  So, you've picked a niche and are developing a product family.  But how did you decide upon that niche?  Was it the largest one?  That would be a logical answer, but what if that niche requires much more money to develop and sell into?  What if that niche has a much longer sales cycle?  Be sure to consider all aspects of the niche you plan to target first.  The best one just might be the one that will provide the quickest revenue for you.  This is sometimes called the "low-hanging fruit."  Now that you have some revenue coming in from this niche, you can fund some other niches that might require more money to develop and/or have longer sales cycles.  Oh, and beware of niches that have seasonal sales cycles.

Compensate your advisors appropriately

Good advisors can be the difference between success and failure of a start-up.  Seek out advisors who have expert knowledge of your company's business and market (or some aspect of it).  And when you find one, make sure you make it worth his/her time to give you dedicated time.  If you're just starting up your business and know you still need to raise lots of money, don't offer your advisor 0.25% of the company vested over four years...there's just not enough upside for the advisor to justify spending any time with you, especially after one considers all of the dilution that is still to occur as subsequent financing rounds occur.  Two percent vested over two years is more appropriate.  Now, if you've already raised all the money you need to for a while and little or no dilution is foreseen, and you're close to revenue, then 0.25-0.50% over two years is more appropriate.  There are other factors that play into this as well, like what is the total projected upside for the company, etc.  Bottom line:  If you find an advisor who can provide great value, work with him/her to achieve a reasonable compensation package.