Spot on, and it's really really hard. I had the privilege of working for a CEO who scaled his business from < 20 people when I joined to ~300 when I left. You really feel each of these stages and it's very difficult to ride the transitions through them, especially if you've done a good job in phase one and you have strong product fit with your market, the business kinda just gets sucked along for a while and it's hard to "feel" the break points if you will. There is a transition from the tactical CEO to the thoughtful CEO that is hard to describe and seems hard for many of the CEOs I coach to execute. Not transitioning quickly enough through these stages and steps, and remembering to somewhat modulate your message regarding the vision mission and purpose stuff results in very uncomfortable periods of time, especially uncomfortable if your company has caught up to your thought. I do think CEO at scale is an incredibly difficult job.
Someone simplified this to the CEO's job at less than 20 people is to say "Yes" with more than 20 people say "No". His idea was at the start you need to make sure that everything get's done and everyone get's paid. AKA, from backups to taxes there are a lot of critical check-boxes to getting off the ground and you need to get all that done while building something that people want AND selling it to them. The worlds on fire and there are far to many critical things that need to be done right now.
But, somewhere around 20 people you should have some excess time and money and choosing what not to do becomes just as important as what to do. Let's not do this manually, let's not build this in house, let's not piss off our customers, let's not stagnate, etc. At scale the minefield grows exponentially and it's not getting stuff done that's the core problem it's getting the right things done while not wasting resources.
Remember hiring people is easy, having them be a net gain is the hard part.
Coincidentally, I think the 300 number is another transition point. Until 300, you can be a CEO who really holds the wheel on many aspects of the company. Beyond this, you really have to be comfortable with delegating to your lieutenants, and empower rather than control.
The CEO at my previous employer successfully took 3 companies to exit, each at around the 300 mark. Terrific starter and operator capable of making really tough calls (like saying no to ominous AAPL supplier terms despite the obvious upsides), but quite bad at delegating.
Still wondering many years later if there are any predictors for someone who can make this transition.
I wish this piece had spent more time on the art of "Making Sure They Work Well Together." This is huge -- and underappreciated by 95% of founders. Here are four dimensions that would be worth exploring in a subsequent post:
Who does what?
What happens when we disagree?
What are the ground rules for revisiting a decision?
Do we understand one another's approach to time management, prioritizing, delivery targets, conflict resolution, etc.
Members of the early-stage leadership team aren't clones. There will be differences. Can we calibrate smoothly, or will we forever need to "talk it out"? When there's a lot of churn in the founding team, usually it's because one of these four issues isn't being handled well. In severe cases, cycling new people into the job just starts the fail loop afresh -- no matter how amazing each new candidate might be.
Good point. I'd specifically mention how incentives interact with each other. Conflicting incentives across teams and team members is always a problem, but it is crippling for a company if it goes all the way to the top.
This took me a year to really internalize- I wish I had read this a while back when we were 20 people. It wasn't until we passed 45 that I really took a thorough look at how I was spending my time. I intellectually understood the transition to delegation and leverage but a lot of the rest of the company didn't and it caused me to take longer than I should have to refocus on recruiting an exec team and defining the company strategy. Excellent writeup.
This essay is absolutely fantastic - one of the best pieces of writing I've ever read on growing a company. The description of the phase one/two/three CEO Model makes a ton of sense, and the examples given (SpaceX mission, Pixar culture) were enlightening.
I have just one criticism: I think the headline under-sells the rest of the essay. I see this more as the YC guide to growing your startup beyond phase one.
I took me a while to figure this out but i agree with Ali. However, i'd argue that as a CEO with a product background (the same probably goes for engineering) you can still spend time with your product teams through Phase 2 and maybe even in Phase 3. It is just a slightly different role, a more guiding function.
The second thing a CEO should focus on is building a repeatable sales model. Some products "sell themselves" but most products need a lot of experimentation with the sales model until they become profitable.
The second job of a startup CEO is actually everything outside of building a product. Everything from hiring the right team, to making sure people are happy, to finding sales/distribution channels, marketing channels. It's not a question of what else the CEO should be doing but a question more of how long he/she should be doing those things.
> Doer-in-Chief. You must be deeply involved in both building the product (observing/interacting with users, writing code, designing product specs)
I slightly disagree here, I would rather start with the Second Job or Phase 2, 'Hiring a Leadership Team and Making Sure They Work Well Together'. The more you focus on finding and setting up the best team early on the better. You can do yourself a prototype, write code or do market research to see if you are on the right track. However, I recommend to setup the founding or leadership team before anything else. Once you have the team in place the project gets momentum and pace will be 100x compared to before. And finding the team plus setting up all legal matters will be a full-time job your first weeks if not months.
Executive is a very different skillset from individual contributor, and hiring executives too early on in your company's life is a huge mistake. They have nobody to manage; their strength is in coordinating lots of different people, but you can't afford lots of people. And their presence will be demoralizing to the strong individual contributors who you do need to build the product, because somebody who's rolling their hands up and getting dirty with code or sales is understandably resentful of someone placed above them, drawing a fat salary, who does nothing but give orders that are at best tangentially related to the actual problems your startup faces.
(Source: once worked at a startup with a CEO, 3 VPs, a Chief Architect, 5 engineers, and 6 high-school kids. Yeah, they didn't ship.)
Over-hiring executives early in a company's life is one of the biggest anti-patterns out there. Their skills are, at best, tangential to your early-stage needs and the suck up money, time, and attention that would otherwise go towards getting things done.
If you and your co-founders are not capable of being the sole executives in your (early-stage) startup, you should seriously reconsider your team.
Good question and this will be the biggest challenge. The answer is equity. But be careful before giving too much equity too easy away. You should have a big pipeline of candidates and know exactly what you expect from whom and how much you are willing to give away and on what conditions. At the beginning some might join your venture full-time, some not. Latter ones are easy to get but eventually it might be hard to get them out of the current jobs if the prospects are not to positive or let's say the first round is rather small.
Once in later funding stages (A, B) you have much better financial power and thus, you'll update or upgrade your senior management team anyway.
How realistic is it to bet your company on people working for equity? In its early days most rational people will not join a startup for equity alone. A few will join for cash and comp; for most,cash alone is good enough.
The stereotypical image of the CEO is that they are
Backslappers and they play golf.
Not so in Silicon Valley I suppose.
The main factor I see for CEOs in a startup is
Time horizon. If you want to be around for thirty
Years, have fun, and incidentally build a useful
Product - you will do things differently.
The Steve Jobs/ Sun Tzu type of anecdote is the best.
If you spend 50 percent of your time on strategy or
Thinking, it is for the best.
A final point is that keeping a good attitude is
Important, not just for you but also for your team.
This is often underestimated.
I'm not so sure about the implicit assumption that growth/phase change should be measured by head count. Sure you need some estimate but I do find the stage3 = 400 employees a bit strange. Especially given WhatsApp happened.
I would have preferred if the article used some other measures to indicate the state changes (profit, net promoter whatever) or at least discussed this a bit more.
That being said it's a pretty good article. I think it makes the product/market fit -> company building shift pretty clear.
Why did YCombinator blog switch to Wordpress from their own "free forever" Posthaven solution?
Their new site feels tacky and generic kinda like this blog post. Taken together with less news on larger batches of startups in recent years, it feels symptomatic of a slow dilution/degration of the YC brand.
I don't have first-hand experience, but I would guess it would be the same reason most people do: (1) when you roll your own CMS, you have to build all of the features your editors and designers request yourself, the scope of which people tend to underestimate significantly and (2) when you use a hosted solution, you can't customize the site to be exactly the way you want it to be — WordPress offers self-hosting and full customization.
Despite its warts and un-sexy image, WordPress just works for most people's needs when it comes to a simple blog, has a wide range of plugins that solve most anything someone would need from a CMS, can be truly customized, and allows them to move on and spend time on more important things.
Caveat, I'm not the CEO of a company, but I feel like the priorities in this are wrong (but maybe I don't strictly prescribe to the SV/startup mentality). At first, especially if you are technical CEO, it makes sense to build the product either alone or with your CTO/co-founder. However, I wouldn't consider this a "first job" because while it's necessary at the beginning it isn't the job of a CEO. For example, this post says, "Delegation should not be a word in your vocabulary." This is really not true; good leaders and those who get lots of things done are the ones who can delegate extremely efficiently and who can trust those they delegate to do get the job done. In my opinion, building the product is maybe 10% of the job of a CEO, even in the beginning. The 90% of the job is actually building the company, building the brand, getting the word out, delegation.
I would say that the first job of a CEO is building the company, the second job is building the product. If I have time after all of my other priorities were done, then I would help with the product (as in commit code, create or collab on a design or product workflow, etc.). The title CEO isn't just a random arrangement of letters: sure, it's fine to be part of the product in the beginning when there's only a couple or few people, but once it moves beyond that (and not at the 20 person level like this post says) the CEO should really trust that the CTO and the product team can do their job while the CEO handles all the other non-product aspects.
> I would say that the first job of a CEO is building the company, the second job is building the product.
The problem with this is you don't really have a company until you have a product to sell. And not all products can support companies. The roles in the company have to orient around the product. Product has to come first.
Exactly this. I associate "company first, product second" with the kinds of organizations that seem to exist for the sole reason of playing company.
The mentality that important decisions within a new company boil down to which friend gets which corresponding C-level title is just trivial to me. You don't have a product and you're wasting time on the unimportant things. Literally, your startup needs a CEO to guide the ship and a team who can help build the product. Not a CEO, a COO, CTO, CMO, a Director of Engineering, a SVP of Marketing, and who knows what other fancy titles you can come up with.
Product is king. Without a product, you don't have customers nor revenue.
That sounds logical, but once you've actually worn the CEO hat, you'll realize how much time you waste building a company before you have a product. The company related tasks you cited (ie - building the brand, getting the word out) will almost certainly be a waste of time until you have a product equipped with some serious fans.
The article is trying to present a certain abstraction. It is not 100% true in any particular company, but over a wide swath, I think it makes sense.
I think the title is catchy, but not in tune with the message of the article. The article would be more accurately titled "The role of the CEO in the first three stages of a company's lifecycle".
Lol. The job of a CEO is to implement the will of the board, of the people who actually own the company. It is normal for startup CEOs to also be an owner, or to know them all socially, but that doesn't mean they aren't a CEO.
If the board wants to expand, the CEO works to expand. But increasingly boards fear rampant expansion. Some aren't looking to cash out via an IPO or buyout. That path is becoming exceedingly difficult. Some want to see profit much earlier. I know one startup with TWO customers, big customers, that is totally focused on them and isn't seeking to grow. That board places customer focus above anything else and instructs their CEO accordingly. He isn't happy. His dreams of rampant expansion and market dominance have been quashed, but he is still doing his job as CEO.
