I Raised Money from a VC… Now What?

I had lunch last week with the founder of a SaaS software company who had just signed a term sheet with a venture capital firm where the company will receive its first round of expansion capital. He wanted to know what his priorities should be once the deal closes, he has money to spend, and gets two new investor board members.

Here’s what I see as the expansion stage CEO’s priorities:

Put yourself out of work

The number one issue that expansion stage companies face is their founding executives becoming a bottleneck to the growth of the business. This is especially so in the case of the founding CEO and/or CTO. So my number one advice to founding CEO’s is to be extremely focused on shedding the work that they do on a daily basis. In other words, delegate, delegate, delegate. When a CEO proactively sheds work, two things happen: either he has a qualified manager to delegate to or he realizes he needs to recruit one.

Start building your senior team

The expansion stage is all about building a highly qualified and cohesive management team. And it takes a LONG time to build that team. I have worked with a number of our CEOs on building senior management teams, and it has taken us 18-24 months to dial in the right set of executives each time. Why so long? Because it takes a couple of attempts to find and recruit the right team. To build a team of 6 senior managers takes anywhere from 8-10 attempts: recruit, then onboard, then wait to see if the manager is good and fits in… if not, let him go… then recruit another, on,board him, wait to see if he is good and fits in… and so on.

Make your first senior hire a CFO

I have had so many debates with expansion stage CEOs on the importance of hiring a CFO. Many resist this hire, thinking that it is expensive and that it’s too early to make. HUGE mistake. The CFO should not be measured by his cost. He should be measured by the enterprise value he brings to the table and the bandwidth he provides the CEO.

Develop the company’s management system

As software companies grow, they require a more formal management system. A management system allows the CEO to work with the senior team to set the company’s vision, mission and priorities. And it provides the mechanism through which annual, quarterly, monthly and daily goals are set and executed upon.

Build a cohesive board of directors

Board meetings, and the dynamics within them, is one of the most challenging changes for the first-time CEO. Typically, board members come in with their own egos (typically big ones) and their own agendas. Investors have to balance the interchange between wearing the investor hat and the company hat. The founder has to learn how to represent the interests of the company and the employees (dispassionately, even when that means letting go some of the early staff members.)

Enjoy what you do

The expansion stage is a completely different experience from the start-up phase. I actually enjoyed the start-up phase much much, more than the expansion stage. To the point, where I actually resigned from eEye on my 5.5 year anniversary to pursue another start-up (which ended up being OpenView). If you don’t enjoy being the CEO anymore, replace yourself and do something you like doing (within your company.) There is no sacred rule that says you should remain as CEO.