The Big Step: From Founder to CEO

How to become a CEO, detailed steps and reasoning.

I have been involved in more than 15 startups in 20 different countries as a founder, early CEO, investor, and lately as an advisor. I love what I do and I care about the success of the startups I am in contact with.

I always emphasise: as a co-founder you must enjoy the ride.

When setting up and growing a business, founders face challenges from accessing finance, hiring staff, and everything in between. But perhaps a less obvious hurdle is making the challenging transition from founder to CEO. It’s a change that owners must make at some point, and I’ve seen first hand that it can be a very difficult process to deal with.

But before you keep reading let me remind you that it is not obligatory. Just because you started a company does not mean you need to be its CEO when it grows. However, if you have the ambition to become the CEO of a growing company in the not so distant future, then you have to ask yourself (and maybe some people around you) if you are suited for the CEO role. Based on my humble observations over the years you must have the humbleness to understand your own weaknesses.

Many founders can successfully transition from founder to CEO. However, it is not an easy journey and your company’s success may depend on this decision.

Let’s start navigating.

The typical story goes a bunch of guys (or girls) who know each other get together and work around a table in someone’s home, usually smaller than the idealized U.S. garage. At the moment there’s no structure in place so the one with the idea (or maybe the one that dislikes talking to people the least) becomes the CEO. At this moment communication is easy, it is just a conversation around the table. Planning is also simple. Culture? You have to be kidding me – we work our butts off and we hope to get somewhere hopefully sooner rather than later.

But one day hopefully you will be in an office of more than 200 square meters, with more than 20 people. And that my dear ladies and gentleman is called growth and it is exciting but it can also be very scary.

So there are 5 areas that I believe need to be taken care of for a successful transition into the role of a CEO. 1) Real delegation; 2) A brutally honest assessment of your strengths and weakness and building a team to cover your weak spots; 3) Bringing in the right advisors; 4) Organisational structure; 5) Culture development.

But don’t ever forget about the sixth and most important one: ensure that you always have fun while going through this hard and challenging journey.

REAL DELEGATION – LET IT GO. Let’s face it: most startup CEOs are control freaks and are used to being part of every single decision, no matter how small. But this needs to change and you need to let it go.

It is a fascinating moment and a key one for the company. It is a moment of mixed emotions, what you’ve created begins to grow, but it’s also a scary time because you have to start letting go of the reigns in certain areas. But here we have a second and fundamental point. This is not just about letting others start making decisions but in a way it’s about making sure you still have the final word. You have hired people that, in their areas of expertise, are better than you. Make sure they are empowered to make choices and grow the business based on your vision.

This is a really hard line to walk. In my previous CEO experiences, I always tried to define that balance between your people being able to make end-to-end decisions on their own, but you as CEO being able to dive in on any company matter with sufficient knowledge to make a call if required.

BE BRUTALLY HONEST WITH YOURSELF. I will always remember the first day I was made a manager. Suddenly other people expected me to show the direction. But it’s not like this for a founding CEO. In a startup, this trigger point happens when you move from managing “doers” and start managing other managers. To do so, you need to develop a totally different skill-set.

You need to start by doing an honest, brutal assessment of early employees’ strengths and weaknesses. Furthermore – and even more difficult – you must recognise your own limitations and hire others to support those weaknesses. That is the true meaning of that often-used saying: “hire people better than you”.

For this particular reason, it is crucial that you personally devote significant time to hiring the right people. This is without a doubt one of the single most important things you have to do as a growth CEO, together with raising money and keeping the vision alive.

BRING IN TRUSTWORTHY ADVISORS. You need to surround yourself with advisors who are not afraid to provide you and your company harsh criticism. In fact, this small group is the key fundamental that allows you to show your true challenges and fears. You need to listen to them. You have expressed your fears and questions, but now you must listen to what they are saying to you. These people exist to help your company’s decisions, so don’t be defensive and try to justify your past actions.

MANY FOUNDERS CAN SUCCESSFULLY TRANSITION FROM FOUNDER TO CEO. HOWEVER, IT IS NOT AN EASY JOURNEY AND YOUR COMPANY’S SUCCESS MAY DEPEND ON THIS DECISION.

It is important that this group of advisors deliver value to your company; in return you deliver them benefits. Sometimes just boosting their ego may work (by mentioning them in all speaking opportunities that you get), and sometimes it’s just as plain and simple as offering share options. It’s important to find something meaningful to them.

Many of you might think about gathering a group of grey-haired people to help you, but there are many ways to build a group of advisors. In fact, I like what some of the CEOs I advised in Latvia have done together – they simply brought in some of their colleagues from today’s most promising Latvian startups. The group of CEOs meet once a month and share sorties of their success and failures, as well as their challenges. They then put ‘to do’s’ to each other for the next monthly meeting.

ORGANISATIONAL STRUCTURE. For many entrepreneurs, talking about organisational structure or process gives goose bumps. However, your company is growing, and without the right balance of structure and processes it will become a very inefficient place and will probably fail.

Remember that the word that many of you as co-founders hate – CORPORATION – is the ultimate proof of success, showing that your startup has grown to sustain the passage of time.

To name a few of the key areas you need to define within this structure: you have to show leadership by establishing a clear vision, establish priorities and build a cohesive leadership team. Decision-making has to be clear, with defined roles and accountabilities. People and talent needs to be managed. Performance measures and incentives need to be aligned to objectives. When you deal with three teams of developers working in three different time zones, you better have effective and efficient support processes and systems, or I can guarantee you will be throwing 80% of that code in the bin.

DEVELOP A CULTURE. I could go for hours on this topic, but to save time, let me instead mention three topic areas that you as a CEO need to start defining.

(1) You need to develop the company personality (distribution of information, how conflict is handled within the company, and how you mirror each other). (2) To develop a culture you need to set the level of transparency and define how you will adjust this level as time goes by. (3)You also need to define the ‘WHY?’ You need to identify it and consistently communicate it to your team until the day either you or your company dies.

So to finish, it is clear to me that a CEO is not born. If you are self-aware, can delegate to your talented team, have good advisors, and learn how to pick up the skills you do not already have, the chances to succeed are high. But one thing’s for sure: you have to enjoy the ride.

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