Lately I have been thinking a lot about the changing nature of entrepreneurial leadership as companies scale. It has been on my mind for a few reasons, the first being that many of our companies are scaling and I am seeing many of our best CEOs grapple with the changing nature of their responsibilities as their role expands and evolves. In addition, as Kickstart is expanding its footprint, I am also making sure that our team adjusts appropriately for the challenges and opportunities that we face inside our firm. The subtlety that I am learning is this: what got you here won’t necessarily get you where you want to go.
Historical Context. When I first joined the VC industry in 2002, the prevailing wisdom was that most founders’ skill sets are intrinsically not built for scaling companies. Founders are micro-managers, too passionate, too unstable to lead growing organizations to create a “real company.” For that, you need to bring a “grownup” in to run the company. Now, there is a large body of evidence that billion dollar valuation companies (“unicorns,” in VC parlance) are almost always piloted by CEOs who were also part of the founding team. Think of the list of household tech names and their founder/CEOs – Microsoft, Apple, Amazon, Google, Facebook etc. Currently the industry has moved from “guardrail to guardrail” on this issue and now there are whole institutions built up around helping founders to scale into great leaders and CEOs of large companies led by innovative firms such as Andreessen Horowitz. Overall, this movement has been great for founders and healthy for the industry. However, when the market eventually cools (and VCs are not competing as hard as they are now) the approach will likely migrate to the middle again. As seed investors, we come down heavily on the “we help founders” side of the aisle but recognize that not every founder will be able to make the leap. We invest with the assumption that the founder will scale and it is incumbent on us to invest and teach and help them to do so.
Vision. This is one of the most important things that the leader can articulate and model for the rest of the organization and a key way that a culture and a company can scale. For a startup, it is critical that this vision not strictly be financial. For great companies this needs to be a CAUSE! Curt Roberts, from our team, penned an awesome blog post on why “mission matters” from his experience at Nike. Another great example is Elon Musk, CEO and Founder of SpaceX. The explicit goal of SpaceX is to populate Mars and save the human race through inter-planetary migration. That’s bold. Ashlee Vance in her recent book, Elon Musk, described it this way, “When Musk sets unrealistic goals, verbally abuses employees, and works them to the bone, it’s understood to be—on some level—part of the Mars agenda.” We are definitely not endorsing Musk’s tactics but an “infectious vision” can go along way for a founder. Therefore, the loss of a founder, even if they have significant flaws and drawbacks tends to kill the “soul” of the company. For this reason, we go to great lengths to try and keep founders as part of the business.
“Doing things that don’t scale.” “Doing things that don’t scale” is a well-known quote by Paul Graham, founder of Y Combinator, to describe the heroic acts that founders perform to light the spark that leads to rapid growth of startups. All successful founders that I have worked with or even read about are micro-managers, and a lot of what they do is fundamentally unscalable. They are in the details, they are uncompromising on the things that matter and shockingly cavalier about the things that don’t. For example, in a lot of our companies the founder is the first salesperson – and even after the company begins to scale in revenue – the best salesperson by a mile. Some of them are able to continue this process (of micro-management) all the way through the biggest companies in the world (e.g., Elon Musk and Steve Jobs) but that is definitely the exception. It’s a difficult transition, but most founders need to start doing things that scale for the company to scale. They need to learn to teach and empower others and hire people that they believe are better than them. Generally the first step in “scaling” is the ability of the founder to really hire well.
It takes a team. Founders are a special breed. Founding a company is lonely and risky, and the odds of success are low. This takes a very strong will, an unnatural level of self-confidence and incredible amount of energy. For a founder to be successful they have to have the ability to attract other people to their vision. They have to be able to recruit and they have to be willing to listen and collaborate. As interesting and brilliant as individual entrepreneurs are, they rarely are able to create the kind of fundamental innovation that changes the world except through collaboration. In The Innovators, Walter Isaacson debunks the idea of the lone genius slaving away in isolation and changing the world. One classic example that the book cites is the story of Shockley Semiconductor, one of the classic stories from the beginning of the tech industry. Dr. Shockley was a noble prize winning academic and had the team and the tech to lead the commercialization of the semiconductor. However, because William Shockley was such an awful manager and such an all-around difficult guy to work with, the “traitorous eight” left to form their own company when Shockley refused to step down as the CEO. They formed Fairchild Semiconductor, which in turn spun off Intel, AMD, and essentially the modern semiconductor industry. Shockley’s inability to embrace the team concept (even the team that he had actually recruited) cost him his legacy.
Implications for Kickstart. For an investor to invest, they want to see at least one entrepreneur on the team. This sounds obvious but there are many companies with full management teams and no entrepreneur. Without this key person companies rarely have the vision, passion or momentum to become great. Great entrepreneurs are necessary but not sufficient for success. It takes a team. When we evaluate teams we definitely consider whether the founders have the ability to make this transformation as described and scale with the business. One of the most important markers for this is whether they have been successful in recruiting and retaining great talent. This tends to be a tangible check on the founder’s vision and ability to scale. Highly talented people will rarely join an organization unless they feel that they will be treated well, can contribute in a meaningful way, and can buy into the founder’s vision.