Question, from an e-mail: When Do I Hire A CEO? It’s a good question, and it comes up a lot, so I want to answer it here. First, the background, from the same e-mail:
I’m an engineering inventor currently working for a big corporation. I have no previous business experience other than what I’ve gained from my current job. My research tells me that my invention has sustainable competitive advantage. I’ve written a business plan that I think supports my idea. I’m ready to try and interest people to fund the project. Probably $1 million initial funding.
Of course nothing is ever as simple as it seems. I don’t know the person who asked that question, or his or her background, so I have to do some guessing. What I end up with is a series of reactions: Choose your answer from the list of possible answers. And I can’t make all the possible answers consistent with each other. Sorry.
1. Are you sure you’re not underestimating yourself?
One classic model for the entrepreneurial invention-driven startup is run by the hard-driving passionate inventor-entrepreneur. The investors hope the original founder can accommodate others in the team, listen to advice and step aside as the company grows so big that it requires more management skills than plain passion. Maybe you should rewrite your history to make yourself more like the CEO. Most people who end up as CEO start out like you say you have, with “what I’ve gained from my current job.” Humility is nice, but self-confidence and competence are nice, too.
2. Investors don’t want to invest in ideas without teams to run them
The business plan development period is the time to build a team. If you’re not the CEO, whom do you know that would want to team up with you and enhance that business plan? Do you have somebody who can manage, somebody who can sell and somebody who can produce? A team normally includes several people with different skill sets, but–and this is really important–all of whom believe in the venture and are prepared to jump on board as soon as it is financed. They should join in the plan development and join in the meetings with investors. You don’t hire a CEO at this point; you find a potential CEO to join the team, contribute to the plan and put his or her résumé into the appendices.
3. You have the cash
You might be recruiting a CEO to be hired after funding, but you don’t want to hire anybody before you have money to pay. Get the commitment to join now, then the funding and then do the hiring. Find the people now. If they don’t buy into your idea, keep looking. If they’re not excited by the opportunity, then keep looking.
4. Watch for clues
If you can’t find anybody who really wants to join you, then there’s something wrong here. Why not? Have you overvalued your idea? Is this an early warning that investors won’t want it, either? Better to deal with that now, before you’ve invested too much of your time and energy, than later.
So there are some possible answers to that question. Take your choice, as many of them as work for you.