Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

First Time CEOs Must Continue to Learn to Become Functionally Autonomous on the Road to Building a Successful Start-up Company

Many first time CEOs of start-up companies do not have a broad background or skill set.  More often than not, these same first time CEO’s have spent their careers in a job function that has had a specific focus, including, engineering, marketing, sales, etc.  In addition to this, often these same first time CEOs have worked their whole careers in a large corporate environment where other individuals, within specific niche functions of the organization (e.g., Finance, Contracts, etc.), have had responsibility for tasks not germane to their specific job function.  This “cocoon” type functional existence, within a large organization, has not only limited one’s skill set development, but hurt their ability to function autonomously as dictated in the start-up company environment. In order to function as the CEO of a start-up company, an entrepreneur needs to be able to see the whole picture.  This includes understanding the details across all functional disciplines and being able to make important, sound decisions on issues that are not germane to their backgrounds. This requires these same individuals to continue to learn and grow in order to build a successful start-up company.   In what follows is a short discussion regarding the requirements of first time CEOs learning to become functionally autonomous on the road to building a successful start-up company.

Understand Financial Statements

Most first time CEOs lack any understanding of financial statements. This is truly a hindrance to budding entrepreneurs. Why, because venture funding is driven by financial experts and money managers.  Financial statements are their language of communications.  As a first time CEO, if you do not understand financial statements you will not be able to talk intelligently to angel investors or venture capitalists.  This will be a red flag and more than likely hurt your chances of securing venture funding. So in order to interface with the financial community, as a first time CEO you need to take the time to know and understand financial statements including the balance sheet, income statement and statement of cash flows. You not only need to learn these statements and how they interact, but you need to understand the specifics of your own start-up company’s financial statements.  More often than not world be, first-time CEO’s do not know the details of their own start-up company’s financial statements.  This will not impress your potential investors. So during the process of writing your business plan take the time to understand financial statement. It will broaden your skill set and allow you to make more effective decisions for your start-up company.

Developing a Critical Eye on Contracts

Contracts are another area where many first time CEOs do not have any background or experience. This again will hurt both their short term and long term success in building a successful start-up company. Why, because all formal business relationships require contracts.  In the corporate environment, contracts and this associated responsibility is often left to a legal team of corporate lawyers. But, as a first time CEO of your start-up company, if you do not understand the basics of “good” contract structure and what constitutes acceptable terms and conditions for specific legal relationships (e.g., employee stock options, venture funding, strategic partnerships, sales channels, technology licensing, etc.) you will be at a loss in determining if a legal contract is beneficial or detrimental to your own start-up company.  So take the time to review and learn all you can with regard specific types of contracts for various legal relationships.  Your start-up company’s lawyer can provide you with a basic contract structure, but all deals are different, and it is the details of the individual contract that require a critical eye in order to make them successful for your start-up company.  So, do not depend solely on your legal counsel for all of your legal contracts and legal issues. They all have good intensions, but remember your legal counsel should be used as the final “reviewer” of a given legal contract, and not solely responsible for all of the critical terms and conditions of a given contract.  As the CEO of your start-up company, you need to take the lead and drive all critical content into any given legal contract.  If you do not, you will not end up with a contract that serves your needs and will not ultimately benefit your start-up company.  Therefore, as a first time entrepreneur, you need to broaden your skill set to understand the basics of contract law; it will help facilitate the success of your start-up company.

Understand All Corporate Operational Functions

With a narrow background (e.g., engineering, sales, finance, etc.), most first time CEOs know very little regarding the all of the other corporate operational functions of a start-up organization. This again will be detrimental to your ability to function as an effective CEO. Why, because a successful start-up company must have all corporate operational functions running smoothly and within the defined parameters of your given industry.  So, as a first time entrepreneur you need to take the time to understand all of the details of the various operational functions within your organization.  You should not rely solely on your functional heads (e.g., Vice President of Engineering, etc.) to be the first and last say in important operational decisions.  The buck stops with the CEO. If you do not understand the details of each of the operational functions of your organization you will again not be able to ask the hard questions, make important trade-offs, and ultimately make the prudent, effective decisions that are required to make your start-up company successful.  So, as a first time CEO, learn the details of all the operational functions. This will require you to:

  • Review the corporate financials and understand the details,
  • Sit in on engineering development meetings,
  • Go on sales calls to visit with customers,
  • Go over market strategy with you business development team,
  • Review all contracts with your legal counsel,
  • Other

By doing the work to become an informed and autonomous CEO, this will allow you to make better decisions and help put your start-up company on the path to success.

Many first time entrepreneurs have very narrow backgrounds and know little about the details of running a successful start-up company.  To enhance their skills and broaden their backgrounds they need to continue to learn in order to function autonomously and make informed decisions in steering their start-up companies to success in the market.  This includes, understanding financial statements, developing a critical eye for contracts, understanding the details of all of the operational functions within their organization.  Anything less will hurt your chances of success in the market.  On the other hand, by taking the initiative to continually learn and broaden you skill set and background you will substantially increase your chances of becoming an effective and successful CEO of your start-up company.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.

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July 5, 2010 - Posted by | Venture Capital | , , , , , ,

3 Comments »

  1. Sometimes it’s really that simple, isn’t it? I feel a little stupid for not thinking of this by myself.

    Comment by sistemi roulette | July 23, 2010 | Reply

  2. This brings me to an idea:…

    Comment by roulette strategies | July 24, 2010 | Reply

  3. Great idea, thanks for this post!

    Comment by Rulett techinikak | July 26, 2010 | Reply


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