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Your Startup’s Guide To Hiring The Right CEO

The best CEOs of new companies are driven by conviction and big ideas, but they also know when to pass the torch.

Your Startup’s Guide To Hiring The Right CEO

If you’re an entrepreneur starting a new venture, don’t assume you have to be its CEO. You might have many roles on the operational team, or you might only be a founder yet still add enormous value to the company. But if you don’t serve as CEO yourself, it falls to you (and your cofounders) to find someone who can.

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At any great company, a CEO has to be able to motivate people under difficult conditions. She should have high integrity that earns employees’ loyalty and trust. She must also be able to listen and have a mind capable of adapting to changing situations—all while making important decisions on strategy, culture, recruiting, milestones, products, and much more.

So how do you find a candidate who meets all those qualifications?

The Courage Of Conviction

Vinod Khosla, one of the world’s leading venture capitalists, told us when we spoke that there’s a certain of the type of CEO he prefers to invest in and on whose boards he prefers to serve. He seeks out those who have radical new ideas—the kind that create new categories of business not just by having a bold vision but through the managerial skills for actually executing it. “It’s not about people who have focus groups to determine products, which reduce everything to mediocrity,” he said.

“It’s not about consensus or common opinions . . . The development of really new product concepts is done by vision, not by process—it’s about vision, passion, and the courage of convictions.”

In our own experience of developing the personal voice assistant Siri, new ventures that depend on a breakthrough technology almost always garner two critiques from doubters. They say it’s already been done, or they say it’s impossible to do. It takes a CEO with the kind of leadership style Khosla discusses in order to move the company forward, armed with the conviction that it is possible and has not been done before.

There are many ways of looking at the talents of great CEOs, but the ability to inspire people to do the impossible is high on the list. Ken Langone, cofounder of The Home Depot, put it well in an interview last year with Grant’s Interest Rate Observer:

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A great leader gets people to do things they didn’t think they could do. A great leader gives them confidence and self-assurance, and it’s okay if you fail. If you fail, it doesn’t make you a bad person. It just means you have got to try harder or differently the next time.

What Makes CEOs Fail

Even with a compelling concept, ventures can fail because of poor leadership. Some CEOs and teams don’t have a clear enough vision for their product and its potential. Many lack experience and expertise in the market and technology domains. Others lack the ability to motivate people or to navigate difficult events. Still others might be visionaries but aren’t operationally skilled and can’t execute well.

But perhaps the biggest failing of unsuccessful CEOs at new companies is an inability to assess timing when it comes to entering the market and generating revenue. Because time translates into cash burn, misjudgments lead new businesses to run out of money before achieving certain goals that might have encouraged further investment.

These challenges test the mettle of startup CEOs. Delays are sometimes unavoidable as the price of entering new markets. But the time lag between technology readiness and market acceptance can be a huge problem for many new products and services, and that can make or break a CEO.

It was several years after the founding of SanDisk before a major market came along for flash memory devices. As CEO Eli Harari recounted to us, “The company kept losing money beyond the period that we had scheduled, because the first application, digital cameras, took longer to gain acceptance than we expected. However, once they did, our company took off like a rocket.” In the interim, SanDisk was fortunate in having a tenacious CEO and a supportive group of investors who continued to fund the company.

What Makes A Great CEO

Successful CEOs share one common trait: the ability to lead by example and gain the loyalty of talented people willing to give their best for a common objective. That’s often thanks not just to generous stock options and other financial incentives. It’s about cultivating inspiration. The lure of pioneering is powerful, and it attracts people who are willing to forgo immediate financial returns for the privilege of accomplishing something truly novel together.

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In fact, employees are often just as reluctant as founders to sell before they’ve achieved some elements of the dream that made them toil day and night in their companies’ early years—even with the prospect of substantial financial rewards. That’s the true measure of a startup designed for quick wins versus real, long-lasting impact.

At the same time, it’s a mistake to think of CEOs as CEOs for the life of the company. As a company evolves, different leadership talents become more necessary as others fall away. In our experience, CEOs don’t typically last more than four or five years at many tech startups. A great founding CEO will know when the company has reached a stage that demands new strengths and new leadership. Not only does stepping down to let someone else take the helm propel the company forward, it frees the outgoing CEO to find her next early-stage company to lead.

This article is adapted from If You Really Want to Change the World: A Guide to Creating, Building, and Sustaining Breakthrough Ventures by Henry Kressel and Norman Winarsky. It is reprinted by permission of Harvard Business Review Press.