Not Every CEO is Cut Out for Startups, Here’s Why

Startup CEOs or founders have a wide variety of backgrounds. Conor McLaughlin determined common characteristics of nearly 600 of these professionals to determine what they had in common. Many of them hold MBAs, while others held previous roles in consulting, sales, or seemingly-unrelated fields like teaching. Still others had been vice presidents, heads, or directors in their past working life. 

While anyone can be a startup CEO or founder, not all will succeed, even if you have a stellar corporate background. If you’re interested in veering away from an established company into founding or heading up a startup, we’ll talk about key considerations about what it takes to be successful in this role. 

There’s a difference between a startup CEO and a co-founder. 

These terms are often used fairly interchangeably, but in fact, there is a difference between a CEO and a co-founder. 

In the startup world, the current CEO may not be the future CEO. It indicates you are the head of the company at the moment; this individual may have founded or co-founded the company, but this is not always the case. 

The founder and co-founder will always be the founder and co-founder, though one of them may also be the CEO at least for a period of time. The founder is the person who came up with the idea for the business, while the co-founder may or may not have come up with this foundational idea. 

Startups.com explains this distinction between founder and co-founder: 

“A co-founder may be part of the vision of a startup from the get-go, or they may be brought on very early by the original founder because they have skills the founder is lacking. For example, the founder may have design skills, but no engineering skills. In that case, it greatly benefits them to bring on a technical co-founder early in the process of launching their startup.”

Prepare to use a different kind of leadership. 

While many of the startup CEOs in McLaughlin’s survey did have MBAs and corporate backgrounds, this professional background is only useful for certain parts of the CEO’s position summary. For instance, you may be more skilled in hiring the right people and developing a relationship between the company, investors, and the product. 

At the same time, however, your education and corporate background may encourage you to think more linearly than is always helpful for a startup CEO. Instead, you want to learn on the job and forge new paths that make you a stronger visionary for your team. 

In other words, what makes a Fortune 500 company successful is not the same as what enables scrappier, smaller, and more disruptive startups to find their niche.

A startup CEO needs to be both a manager and a leader. 

Gigi Levy-Weiss is a serial startup CEO who has learned from his roles in several companies. He suggests that every startup CEO worth their salt needs to play two related, yet distinct, roles: manager and leader. 

As a manager, the CEO has five primary tasks. These are: 

• Creating the vision and strategy for the company. 
• Hiring the team capable of enacting this strategy. 
• Creating goals for a team that helps them develop the strategy in practice. 
• Helping the team overcome problems, find solutions, and set new goals.
• Overseeing the team and re-assessing strategy and hiring. 

The final part of this cycle is “having the perseverance to adjust accordingly & begin the cycle again.”

The other part of the CEO role is serving as a leader. Levy-Weiss suggests “leading a startup is 10X tougher than leading a standard company given uncertainty and the need to change your direction often.” 

So, what are the processes that create an effective leader of a startup? This infographic explains each characteristic and their interconnection:

You might need to prepare for a pay cut. 

If you’re used to earning a considerable amount in your corporate job, you can’t expect to earn the same amount right away when you become a startup CEO. In fact, nearly three-fourths of startup founders only earned $50,000 a year when their companies were only accruing $10,000 per month. Only when the company started earning more than a million per month in revenue did the startup’s founders earn more than $100,000 annually. 

Pivoting to Startup CEO or Founder

If you’re interested in heading up a startup, your previous experience in corporate America can serve you well. You’ll be familiar with creating a company vision and developing a team, for instance. 

At the same time, remember that startup CEOs are often tasked with flipping the script and following their own paths in a way that corporate professionals are not. So, while you can use the skills you already have, you also need to work on your versatility and adaptability in ways you may not have had to before.

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Have a great idea for a startup but aren’t sure where to start?

Be sure to check out Janice DiPietro and Elena Bajic’s webinar, “From Executive to Entrepreneur: How to Prepare to Start Your Own Business.”

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