Are You Willing to Take Responsibility?

The reality of building and growing an expansion stage software company is brutal. Early stage company founders tend to have this idealistic vision that they will ride through the growth of their venture to its eventual exit and beyond — in the same leadership role they started with — and, in turn, reap the large bounties of their hard work and aspirations.

Things rarely work out that way.

The one unequivocal constant about expansion stage software companies is that there is no constant… Especially in the ranks of the senior managers.

Here’s what typically happens (and by the way, I went through a similar experience myself)

• One of the founders is a former regional sales rep. In the startup he co-founded, he becomes VP of Sales because he’s the only member of the founding team that has sold something before. He does a good job through the first few startup years, getting some revenue through the door and starting to hire and manage a handful of sales reps. He’s what is typically referred to as the Renaissance Rep. The company raises money to expand growth; expectations rise; and the sales team and process complexity grow exponentially. He starts to get overwhelmed by the process and management complexity. He starts to get stressed out, other managers get stressed out. The board gets stressed out. CEO finally takes the initiative and replaces him with a new VP who is qualified to take the sales team through the next level of growth.
• Founding CEO is a passionate and driven individual with a vision to build a unique solution to a market problem. He grinds through the startup years, endlessly tinkering with the product and the operations of the company until something clicks. Company generates revenue and is starting to grow. When revenue is below $3 million, he is fully able to run the whole show as the sole senior manager. As the company starts to grow beyond that level, he starts recruiting senior managers to help him. Suddenly things are not going so well. Building a cohesive senior team is proving very hard. Goals become elusive and execution begins to drift. With some prodding from the board of directors, the CEO realizes that he does not have the skill set to run a larger and more operationally complex company and agrees to step aside to let a more experienced CEO take his place.

I could go on and on. A founder on the board of directors is swapped for an experienced independent board member. An independent board member is swapped out for another with more relevant experience. A director of QA no longer reports to the founding CTO and has to start reporting to a new VP of Engineering. An inside sales rep stops reporting to the CEO and starts reporting to a director of inside sales.

The point I’m trying to make is that we all should accept the fact that role changes within expansion stage companies are constant, necessary and vital.

It takes a lot of courage, humility and responsibility to raise your hand and announce that you (manager, CEO, board member) are tapped out and that you need help. There is no shame in that. Better to come to that conclusion yourself than to have someone else do it for you.

As venture capital investors, we are constantly dealing with these kinds of personnel issues in working within our roles as board members and advisers to the CEOs. The sooner these realities are dealt with, the easier they are to get through. The worst thing is to resist the inevitability of change in early stage companies.