Monthly Archives: April 2014

CFO No No

One of the things I find fascinating is the titles that founders assign themselves. Why is the first thing thing on the agenda after coming up with an idea for a company is to assign C-Level titles to everyone involved? Here’s some observations I’ve made based around start-ups and those titles.

If three technical people start a company you’ll often find the guy who ends up being CEO is the least technically able of the bunch. Why? Because the CTO is almost always going to be the most technical of the group and probably the one with the idea for the company in the first place. When the time comes to raise money the three people look at each other and go “hmm we need someone to spend time talking to investors and creating presentations.” Usually what will now happen is that the least technical person offers themselves up to do this role. If they don’t then it will be forced on them by the other two using the logic that the most technically able people should be working on the product. Once the CEO and CTO titles are assigned usually the other person will get the title of COO. I honestly don’t know why people think a Chief Operating Officer is the next most technical person but for some reason this just happens.

Here’s where this can really go awry. I’ve seen in more than one case where the person who was chosen to be CEO just doesn’t have the skill set needed. They’re not as knowledgeable about the product, they’re often not as passionate about it, and in the worst cases they have really poor people skills. Many times I’ve been in a meeting where the person with the CTO title literally runs the meeting. They’re friendly and outgoing, they answer all my questions while the person with the CEO title sits back and defers all questions to this person.

What does this tell me about your company? You’ve got a really bad day ahead of you. It’s the day when the CTO finally wakes up and realizes that the CEO title isn’t right for the person to whom it’s assigned. More than once I’ve had this hard conversation when they’ve come to me asking me what to do. Unfortunately there’s no easy answer here. How do you go to a person, probably your friend, and explain to them that they aren’t cutting it as CEO? Now maybe you’ll get really lucky and they’ll know that they’re not right for the job. There is the slim possibility that they’ll actually be relieved that someone else besides them realized this and is saving them from drowning in the role. But the more likely outcome is that you’re now going to have to ask someone to either leave the company or take a demotion to a different role. Usually the latter turns into the former anyways.

CFO. Do yourself a favor and don’t ever end up with this title in your startup. What the hell are your responsibilities in a 2 or 3 person company as Chief Financial Officer? Are you the guy in charge of the quickbooks account? When I’m introduced to a company with less than 10 people who have a CEO/CTO and CFO I immediately jump to the following conclusion. CEO/CTO are the technical guy and the business guy or perhaps two technical guys with one of them being the leader. The CFO is the roommate or buddy who was with them at the bar when they came up with the idea. Sorry to be the bearer of bad tidings but if you’re walking around with the title CFO in that size of company you’re probably dead weight.

My suggestion is in the early stages of your company it’s best not to assign these titles that really don’t mean anything. There’s nothing wrong with being founder or co-founder. In startups you should all be working together towards a common goal anyways. By not assigning those titles early on, you’ll save yourself the later headaches when roles naturally emerge that conflict with some arbitrary earlier assignment. However, please don’t take this as a pass to assign yourself a title like “Chief Code Grinder”. I know you probably think it’s original and super cool, but I can assure you it’s neither.

Funny story I was judging a student start-up competition and the two guys walked in with the titles CEO and CFO. This threw me for a loop as there wasn’t even a CTO. Either the CEO was the tech guy or they had no one on board as the technical person. So I told them that I’d like them to switch their titles to co-founders as it might serve them better in the future. They told me that they actually had been using those titles until a week prior when they had met with another adviser who told them to switch them to CEO and CFO.