Wednesday, April 14, 2010

Seeking CEO

JumpStart: IdeaExchange Blog » Blog Archive » Seeking CEO*

Posted By Becca Braun

Position: CEO of a breakthrough idea/company

Hours: 60-90 hours per week

Reports to: Board of Directors: 3-5 people who are great and supportive but will also drive you nuts because the whole reason you quit your job to start a company was to not have a boss and now you have 3-5 bosses. Technically speaking, they also could possibly hire in your replacement. (Hey, they’re not your friends; nor are they even the shareholders’ friends; their legal obligation is to consider the best interests of the company as a whole). For the high growth route, a Board is totally worth it because the right Board of Directors extends your reach and knowledge immeasurably.

Company Description: Acme Startup is a totally new, breakthrough idea that will grow to $50 million or more in revenues and will fundamentally change the industry in question. It will be in its industry what Southwest was to airlines, Starbucks was to coffee, Facebook was to social networking, and Amgen is to therapeutics.

Position Description: Since this is mostly an idea trying to become a company, and no one has tried to commercialize this breakthrough idea, you will spend half your time evangelizing about the product and the need, the other half trying to raise money, and the other half (yes, three halves; our executive recruiter isn’t very good with math) dealing with hiring people, outsourcing for skills your company needs, and managing your board of directors and advisors. More specifically, the job entails:

  • Developing the breakthrough product
  • Evangelizing the need, product, market, and team that’s going to grow it to be great
  • Finding cheap office space, and doing this several times over — each time you outgrow the office space you’re in
  • Outsourcing for as much help as possible, as cheaply as possible, but without sacrificing quality**
  • Creating lots of elevator pitches, executive summaries, and PowerPoint presentations of a gagillion different formats for 50-100 investor meetings, of which only 2-3 investors will end up investing; Listening to “no” in 18 different ways and for reasons that make no sense, and using the “no’s” to make you stronger; Figuring out how to create “coopetition” with the yes’s in a way that is aggressive and maximizes value but isn’t straight-out slime ball city
  • Hiring team members who are also entrepreneurial (and so also don’t deal well with the whole “boss” thing) and strive for excellence in all that they do, and working through with them the whole compensation thing too (see below)
  • Holding monthly or bi-monthly board meetings plus regularly talking or meeting with board members individually
  • Figuring out who is going to want to acquire this company, and when, and why, so that you and others can make money off of it; Meeting with those potential acquirers, and building something that they want
  • Travel is 50% or greater, usually in coach class (unless you have upgrade miles), watching big-company executives sip cocktails in Business Class while trying to rearrange your seat tray in a way that you can see your computer screen so you can create yet another investor presentation.

Background and Skills:

  • Adaptive Excellence – Whatever you do, you do it well and this clearly shows in your resume. Doesn’t mean you take the straight and narrow “achievement path” but does mean that, like cream, you rise to the top of whatever you do: video gaming, sports, hobbies are all definitely fair game, so long as you are someone who rises to the top of whatever you do. REQUIRED
  • A Predator –- Love capital markets and figuring out how to win in the equity capital markets. The equity market is a brutal, Darwinian place — Everest comes to mind — and it is not getting much better. REQUIRED
  • Strong communicator — Communicating consistently and well is pretty critical to retaining that top spot. STRONGLY PREFERRED
  • Industry knowledge – The ideal candidate will know her product and her industry, because that’s usually what it takes to have great insights. But, industry knowledge has to come with the above factors. PREFERRED
  • Prior successful entrepreneurship –- Has led a startup company to great success — raising capital and growing revenues — ultimately achieving a wealth creating exit. IDEAL***
  • For other desirable traits, see also this.

Compensation: Competitive, but bizarre. You will make a ton o’ dough, let’s just say $5-$10 million if the company does well.**** You’ll make out pretty poorly if the company craters, which statistically is more likely than not. More specifically, you should be able to make ~$90K-$300K in salary*****, which is great, and the salary is that amount because if we want someone to successfully grow this biz, we know we better pay that amount. But keep in mind that you’ll have no severance plan, likely no employment agreement (although it’s a possibility), potential months-long gaps in pay (we try to avoid it, but it happens), and few benefits (basic medical; no 401K match). Your equity ownership will be 10-100% of the company, but this will decline to about 7% over time as you build value over about seven years. Which you might think makes NO sense, but it actually does. As you build value, you bring on investors who dilute your ownership percentage. So, you own less of a larger pie, which means your economic stake is worth more $$, but your control stake declines. That’s if it works out well. If it doesn’t, then you have less ownership of a lesser-valued thing and no control either, which most assuredly sucks (sorry - hard to find another word). But that’s what risk is. So, if this story sounds too horrible for you — and it is, like climbing Everest, a very narrow and specific route with change-the-world type glory but many embittering pitfalls — then you should not apply for this position. 99% of management positions are at companies that aim to grow a little slower, at a more sustainable rate, so that the company can avoid all the hassles (no argument from us on that word –- they are hassles) of equity capital.

(Our apologies that our executive recruiter got so carried away on this compensation piece, but we thought that rather than just writing “Competitive Compensation and Benefits”, you oughta know the basics).

To Apply: Do not send resumes. Instead, please come up with a breakthrough idea, and if you believe you can execute it really well, then raise some seed or friends & family capital, quit your day job, and let’s have some fun.

* This is a sample job description. It is not an actual job description.

** Do not sacrifice quality. Instead, if you can’t afford them with cash $$, issue equity in some form to the highest value advisors.

*** It is rare to find these serially successful entrepreneurs — people who have successfully run and grown a company and had a wealth creating exit and who, rather than retiring to Naples, actually want to do it all over again with OPM (Other Peoples Money) and all the hassles therein. But, if that type of person applied for this position, we wouldn’t sneeze at that.

**** The average founder-CEO of a venture backed company owns 5-10% of the company at exit and the average acquisition for an equity backed company is about $100-$150 million, so let’s just say ~$10 million is your take, but less after built-in/contractual preferences of investors are fulfilled, so make it $5-$10 million. The range of possibility is, of course, anywhere from $0 to the low billions.

***** The salary grows within this range as you hit value creating milestones, advance through stages, grow revenues, and add investors.

Becca Braun is President of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.


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