I’ve stated earlier that a successful venture begins with the right mix of market size, product or service, and Management team. Many Investors argue that the most important of the three is management. The management team consists of all individuals having an impact on decisions which may include founders, past investors, the executive team, and board members. When investors consider a deal, they scrutinize the fit, depth and completeness of the management team with respect to the CEO, integrity, tenacity, leadership, domain expertise, and industry contacts. However, since the CEO is the central figure of the company, it is he or she that is the primary focus of such due diligence exercises. The greater part of the company’s success depends on the leadership, execution, and results capabilities of the CEO.

Conduct Your Own CEO and Management Team Assessment
It is clear that most management teams do not see the same management weaknesses as investors and other outsiders. In fact, I’m somewhat amazed at the number of teams I interview that are unaware of its weaknesses, do not acknowledge them, or do not have a plan to address them.

As the management team, it is important to consider conducting your own due diligence exercise on a regular basis. This is an exercise that should be done with honesty and integrity. You may want to consider involving board members, mentors and other colleagues who are willing to be up front and candid. One other thing to consider is the skills required for the development stage of your business. Clearly, different stages require a different skill set for success. Areas to consider are:

• Does the CEO have adequate CEO experience or did he (or she) assume the role because he saw a market need, identified a product, and launched the company (this is actually quite a common assumption)?


• Does the CEO have experience that matches the industry and development stage?
  Is the CEO the right communicator, representing the venture effectively?


• Does the CEO have the right commitment and execution strength?


• Does the management team have the required knowledge and domain expertise?


• Do the CEO and/or members of the management team have a strong industry network, strategic agreements, and relationships and contacts? Frequently, I talk with management teams that lack critical contacts necessary to jump start their product development or sales initiatives. Often times this is a sign of an inexperienced management team or a team that is new to the industry.


• Does the management team have the necessary financial and market experience or is there too much focus on the product? I recently interviewed a management team offering a service based on a licensed software application. The CTO was the founder of the company that developed and patented the application logic. During the discussion he took every opportunity to expound and promote the technology. Not only does this interrupt the flow of the discussion but such positions are generally viewed as disruptions to the overall management of the venture.

If there is no intention on pursing investors or if investors cannot be found, does the CEO have the skills, resources, and network to boot strap the company for as long as it takes? It is important to note that VCs considering investment in start-ups and early stage ventures expect to find gaps in the management teams and even missing CEOs. Therefore, they anticipate having to round out the team as part of the agreement going forward. The exercise described above allows you to understand what experiences and skills are required, which ones are missing, and what plan is necessary to fill the gaps.

Seize Opportunities to Build CEO Level Experiences
I recently interviewed a CEO who was in the process of finalizing full ownership of his company. The company had recently acquired seed capital. While he was busy executing, his partners were controlling company spending. In just a short period of time, the capital had disappeared. The interviewee expressed his amazement at how fast the company burned through the money as well as the unnecessary things it burned it on. Instead of sitting back and having discussions with the other team members on the importance of spending investor money wisely, he immediately began the process of buying out the existing partners and restructuring and refocusing the company. In so doing, he demonstrated tenacity and commitment as well as acquired critical experiences and skills.

Approaching Investors as an Inexperienced CEO
Your market size and product idea may get you an audience with investors; however, it is important to understand that investors will not invest in a deal with an inexperienced CEO at the helm. Generally investors want to see a series of CEO successes and even a failure or two. If you do have a strong enough market/product combination to open an investor’s door, you can expect that they will bring in their own CEO/management team to augment yours. Following are the primary routes to consider when approaching investors:

• Wait to develop CEO experience – If your goal is to develop your skills and establish yourself as a seaworthy CEO, then get a short list of ventures under your belt before approaching investors. An inexperienced manager by any other name is still and inexperienced manager.


• Bring on a CEO – If getting your product to market is your priority, then step aside and bring on a CEO. However, be sure to pick the right CEO for your venture. I’ve seen a number of situations where a founder brought a CEO that he or she was familiar with and had known for years. Although the candidate may be a good CEO, they may not be the right one for your particular venture. Go back to your management assessment and select a CEO that meets your management requirements (i.e., CEO experience, domain expertise, strategic industry contacts, etc.).


• Allow the investor to provide a CEO – As opportunities to talk to investors arise, let them know what you believe to be the gaps in the management team and that you would welcome their help in making recommendations and/or augmenting your management team as necessary. For most investors, filling the identified gaps in a management team is the only option. Such deals do not get funded when the management team is resistant to this.

Understanding your management team and taking the subsequent actions to address the gaps can be your most effective route to successfully navigating your venture’s key milestones.