Know where you shine and where you need help to lead a startup from inception to IPO

As startup founders, we all dream of that day when we ring the bell on the NASDAQ as our company goes public in an IPO.

While waiting for those first customers to call, I imagined myself featured in the pages of the Wall Street Journal, my face on the cover of Fortune, the organizers of Davos flying me on a private jet to give a keynote speech.

But even if my startup does one day make it to IPO, I won’t be the one ringing the bell as CEO. I’ll be standing next to him or her as founder, and my greatest decision would’ve been to find and hire the right person to take the company to the next level.

It’s not that I don’t have (over-) confidence in my skills and capabilities, but I know what I’m good at and what I’m not. And by getting assistance when I need it and bowing out when I have to, I may hurt my own ego, but I’ve done the most important thing I can to help my company succeed.

Going from inception to running a large public company takes wildly different skills at each stage, and nobody is good at everything, not even me.

One question that investors often ask founders is what are your personal long-term plans? It’s important to consider this early and often before the company hits a wall due to the founder’s poor fit for the type of leader it needs at each stage.

Stage 1: Founding to $1M ARR (Friends & Family to Seed)

Founders need to be industrious and scrappy jack of all trades. In a team of 2 to 10 people, the CEO has to do everything, from setting the vision, to leading product development, to doing all the sales, to raising investment. And do it all with little or no money, living off ramen wages. It’s either the worst job in the world, or the best.

No experience with accounting? Too bad, you have to learn how to input expenses into QuickBooks and generate financial reports. Don’t know anything about UI design? Take a class because you’re responsible for the look and feel of the product.

At this stage, the most important role of the CEO is as an individual contributor, more coding and customer calls than visionary, more plumber than architect. Be prepared not only to make coffee for the office, but to go shopping for the coffee, too. Nobody else is going to empty those trash cans, either.

The earliest-stage startup needs a do-er rather than a manager, someone who enjoys getting their hands dirty. Work is apportioned rather than delegated, and everyone works together as a single team.

Everything is an experiment and pivots and adjustments have to come quickly. Carefully considered plans get thrown away after customer feedback. The business can change fundamentally from hardware to software, the business model from licensing to manufacturing. Flexibility is more important than planning.

When I get pitched on investing in an early-stage startup with an impressive founding team of highly-paid executives from leading companies, I usually pass. They’ll need a team of 50 people and $10M to do what a scrappy founding team can do with 5 people and $500K. They’ll move too slowly and run out of cash.

I’d rather invest in a founding team that knows how to do a lot with a little. It’s takes a specific personality to be a real founder.

Stage 2: $1M to $10M ARR (Seed to Series A)

The basic product is complete and early adopters are buying it. Now the company needs to fill in large gaps and make operations professional.

The CEO needs to articulate a vision for what the company will be when it grows up. She needs to hire a team and delegate some responsibilities while still doing or overseeing everything herself.

This transitional stage between MVP and fully operating business is when most startups fail. Either the CEO delegates too much to a team that hasn’t coalesced, or the CEO doesn’t delegate enough and the company hits a plateau.

Technical founders want to hand off sales and marketing to a head of sales, but at this stage, that never works out. Business founders want to hand off development to a CTO which results in great product that customers don’t want.

For many young founders, this is the first experience hiring and firing full-time employees rather than gathering friends and contractors in an ongoing hackathon. For founders with no experience as a regular employee much less a team manager, it can be difficult to know what to do.

Stage 3: $10M to $100M ARR (Series A to C)

Now the startup is humming along and growing quickly. Investors want to throw money at the company to accelerate growth further.

Selling $1M in products is relatively easy. Getting to $10M isn’t tough if you have something people need. Word of mouth can make it seem like you don’t have to do much to keep growing.

But somewhere around $10M you’ll hit a wall. The desperate few have already signed up. Now you have to cross the chasm and convince the skeptics to change. The jump from $10M to $100M is tough.

This transition is going from amateur to professional, from college football to the NFL. Customers demand perfection. Now that you’ve found a market need, the industry giants will want to take it from you. Every college kid with a computer will think they can make something better. Getting into a few local grocery stores was easy, but now you’re competing with Coca-Cola for shelf space at Kroger.

The company needs to hire quickly, expand quickly, add new features, enter new markets, scale the sales operations, find partnerships. If you make a physical product, you’re transitioning from contract manufacturers to building your own factories.

Suddenly, you need specialization. You need sales managers and marketing managers, separate backend and front end development teams, devops and Q/A managers, security and IT experts. Groups fight each other for resources.

The CEO is now a full-time manager, leading a team of a 100. The main roles are hiring the right people, training them, and keeping everyone on the same page. If you’re a do-er like me, you’re not doing much anymore.

Stage 4: $100M+ (Unicorn)

Now you’re in the big time. You have to keep growing at a blistering pace. Your investors are no longer venture capitalists who expect most investments to fail but private equity folks who demand a big exit tomorrow.

With thousands of employees in offices all over the world, you’ve never met most of your team. The product, sales, marketing, finance, and operations are all handled by people who report to people who report to you. Different groups have little communications between them and fight to set the agenda. Every problem turns into a game of finger pointing.

Your job as CEO is now manager of managers, setting strategy and direction, helicoptering in for dinner with a few large customers, placating investors every day.

The CEO needs to be slick and polished. Being photogenic is a major plus. Knowing how to talk to the press, to regulators, to the SEC, to billionaires is critical to avoid a catastrophic blowup.

This is what you dream of your whole life, but is this really you? I’ve come to realize it isn’t me.

How to Transition Between Stages

Most people are best suited to one particular stage and can do a reasonable job at two.

I love early-stage startups because I’m a jack-of-all-trades who finds satisfaction from doing a bit of everything, even the things I don’t like. I like being a leader of a small, tight-knit team where we’re all working together.

As my startups grew towards $10M, I loved the excitement, but I had difficulty delegating. I needed to be part of the UI design or I’d be dissatisfied with what got created. I hated wasting thousands of dollars on trade show setup when I could throw the booth in my car and set it up myself.

I’m a great CEO for the earliest-stage startup, but at $10M and 25 employees, I hit the limit of my effectiveness. I had a choice: either let someone else take over or change my personality.

Here’s what you can do to keep the company moving to the next level.

1. Get executive coaching

Moving from one stage you’re good at one which is less of fit can be overcome with executive coaching and a willingness to learn and grow.

If you want to stay on as CEO, realize that you will need to change your style to match the company’s needs as it grows.

2. Surround yourself with mentors and experts

There’s a human tendency to avoid people more qualified than ourselves who will tell us what we’re doing is wrong. But that’s exactly what the best leaders do.

We can’t be great at everything, nor can basic responsibilities be delegated. Finding people who’ve been in the same situation and can provide useful advice is the path to success, especially when it’s painful to hear.

Put together a strong board of directors and take advantage of their guidance. Assemble a team of advisors who you can call at 11 PM not just when a crisis strikes but when you just an experienced head to help think through a problem.

3. Hire a CEO

You might realize the head of sales you lured away from your big competitor would be a better late-stage CEO than you. Or you may start a search to find the right person to bring in as CEO.

There’s no shame in stepping aside and letting someone else handle the day-to-day grind of corporate management while you transition to head of product, CTO or COO. The company will be better off, and so will your own mental health working on the parts of the business you enjoy rather than struggling with what doesn’t fit your personality.

4. Sell the business

Once the company hits $10M in revenue, it becomes possible to contemplate selling the business. The price at this stage won’t be great, but selling the business can allow you to start over with your next startup or lead a division around your product within the acquirer’s company.

Once the company hits $100M, the company will likely be an attractive take-over target. Do you have the personality to lead a unicorn towards a billion dollars in sales? Or would you rather start over with millions in the bank to build your next startup?

Know Yourself

For us to succeed as CEOs, we have to know ourselves. We have to know how to take advantage of our strengths, and be honest about our weaknesses. We have to improve where we can and get help where we can’t. And eventually, we may have to step aside and let our creation go free without us.

There’s no failure in asking for assistance or guidance, no failure in stepping aside. As a startup founder, the only success that matters is the success of the business. The best leaders know how to contribute in the ways we’re best able.

Katie Deauville is a brilliant physicist but has some ethical challenges. Read what happens when venture capitalists give her a billion dollars to commercialize her world-changing technology in the Silicon Valley novel, To Kill a Unicorn, American Bookfest Awards finalist for Best Mystery Novel and Best Debut Novel.

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