It’s very common for startup companies to have COOs. So I know I’m getting myself into a bit of trouble by writing this. But…
Startups don’t need–shouldn’t have–COOs. I have this conversation with every startup that comes to see me and has a CEO and a COO. I think usually a COO title at a startup is an ego thing. You have two founders and it was agreed that one would get the CEO role so the other needs to call themselves president or COO.
But ask yourself, what does a COO actually do? In a mature company it’s often like a presidential chief of staff. They will often run all of the daily reports into them, covering off for finance, sales, marketing, biz dev and HR. Many times they also pick up product and tech, too.
In an early stage startup I believe it’s the CEO’s job to manage these functions. It’s pretty tough to convince me in a company of less than 50 people that the CEO can’t handle 6-8 direct reports to manage the various areas of the business.
Often times you find the CEO who really just likes to do product or tech. You can always spot these types because they can’t tell you what their revenue number for last month was or what their sales target is for next month. It’s actually not that uncommon for me to encounter this with young CEOs. What it tells me is that they’re not properly managing their business. They’re not allocating their time properly across all of the business functions, they’re favoring those that they like best.
Similarly I talk to CEOs who can’t do a sales pipeline review with me. They don’t know the details of the deals. They can’t name the key decision makers at their prospect, they can’t tell me who they’re competing against, etc. I once did due diligence on a potential investment where the CEO was projecting $9 million in sales for his next 12 months. His largest account was Coca-Cola, for which he was projecting $3 million alone. I asked him for a deep dive on the Coca-Cola sales campaign and he said, “That one’s not my deal.”
Ha. And I decided that his startup company was not MY deal.
CEOs run things. They run their business. If they’re not running their business, then perhaps the wrong person was picked as CEO or perhaps they need more mentorship or coaching to better allocate their time.
So what does a COO at a startup do if the CEO should be managing things?
Usually it’s a line function but they’ve been given a lofty title. Of course they “need” the title to convince customers, biz dev partners, and VCs that they’re to be taken seriously. Sure.
I think it’s better to take the title of the job for which you will fulfill. If you’re running sales & marketing then why not VP, Sales & Marketing? If you run product then it’s easy–VP Product.
If the CEO is the “chief strategist” while the COO “runs the company” then I think it’s time for a coup d’état.
What harm having a COO, or worse, a president? Clarity for staff and decision making.
Like most everything in business I learned by making mistakes at my first company. I was the CEO of my startup and my co-founder was the president. None of our staff really knew what that meant but they knew that he was a co-founder and that he was, well, the president. So from time to time he would be talking with the product team about his vision and they would react unbeknownst to me. They were taking direction from the president. But I ran product management.
He liked to weigh in on biz dev deals. We had a VP of Biz Dev. We gave him conflicting view points. He wasn’t really supposed to meddle with these job functions, but as president and co-founder he kind of had the authority to do so. It took me a while to figure out this was going on and when I did, I put an end to it.
Over the years I’ve talked to enough startup staff members at respective companies to know that this lack of clarity in decision making can be a real problem at many companies. It’s far more effective to check your ego at the door and align your job function(s) with your title.
When should a company get a COO then?
I’ve had this debate with some very successful VCs who are pro-COO. They talk about freeing up the time of the CEO to think bigger picture and plan for the long haul. They talk about the need of the CEO to be chief evangelist, speak at conference, and lead executive recruiting. They say that having a COO allows the CEO to remove herself from the continual politics and personnel management that can be a drag on management time. I know this one, as I’ve often said, the main job of a CEO is chief psychologist.
I can buy this argument as a company becomes bigger. I think when the company has the complexity of large customers, customer service and SLA management, well established sales processes, continual recruiting because you’re growing, and constant press, it may make sense to appoint a COO to handle more of the day-to-day management. I never chose to do that, but I could see how it would work for some.
We were never Google, but we got as large as 120 staff, and I never felt the need for a COO. I had an amazing CFO who helped me lead budgeting, planning, board reporting, and legal matters. I had heads of sales, marketing, business development, product management, technology, and customer service. We had team meetings where we discussed each other’s areas and I mostly stepped in when conflicts needed resolving. But at that stage of the company, as we were approaching $20 million in sales, I think, sure, a COO might have freed up my time a bit.
For now, if you’re early stage, I’m not convinced. It isn’t something that would dissuade me from investing in a company, but I’d want to be very clear with the team what their respective roles were and make sure they were also very clear with their employees.
I think the best way to protect the ego of the rightly deserving status of non-CEO co-founders is to preserve the co-founder name in their title as is, “VP Product & Co-Founder” or “VP Sales & Co-Founder.” Your right place as a member of the team that was there at inception is protected while your functional role is crystal clear.
What have your experiences been?
Reprinted from Both Sides of the Table
Mark Suster is a 2x entrepreneur who has gone to the Dark Side of VC. He joined GRP Partners in 2007 as a General Partner after selling his company to Salesforce.com. He focuses on early-stage technology companies. Follow him at twitter.com/msuster.
[Image: Flickr user meophammanahmanah]