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Jun 30

Treat Your CEOs Like Children (Your Own)

Posted by: Mark Solon        
 

You might get the feeling from the title of this post that you’re about to read a glib post about how VCs should treat their CEOs like kids. Just the opposite in fact. Recently, I received a phone call from one my CEOs. He had a particularly difficult problem that he was trying to sort out, and wanted someone to help him see the forest through the trees. It was the type of problem that a CEO would usually never share with his VC (nothing to gain from sharing if he could deal with it internally). He explained the challenge he was facing and we spent a good deal of time discussing some options on how he might deal with it. I’m pretty sure that I even gave him a few ideas that he hadn’t thought of.

Okay Mark, what’s the correlation between a CEO calling you about a problem and treating your CEO like a child? Well, I’ve got nine & ten year-old kids. As any parent who has kids near this age can attest, you spend a good deal of time teaching them about the importance of telling the truth. Somewhere in a child’s mind, there’s a fear button that if you tell mom or dad that it was in fact you that drew on the walls with permanent marker or put a dent in mom’s car with your hockey stick, you’re going to be in trouble, BIG trouble.

liar

Personally, I’ve spent a good deal of mental energy trying to teach my kids that no matter how horrible a thing they think they did, if they come to me proactively when they’ve made a bad decision (which I point out to them that dad still does with great regularity), that I will never react with anger or “punish” them. Astonishingly (I know), it seems to be working. When the situation arises, I always start with a hug and thank them for coming to me. We talk about the judgment they used and try and learn from it. Over the last five years or so, it’s been tremendously gratifying to see this trust-building exercise begin to pay off.

Coming full circle, the correlation is that I try and treat my CEOs as if they were my own children. In other words, from the beginning of my relationship with each CEO that I partner with, I work hard to create a trusting environment where they feel comfortable that if they come to me with “bad” news, they’ll never get in “trouble” with their VC/board member (I’ve left out the hug part so far, but as I think about it, that might not be a bad idea from time to time). I happen to believe that being the CEO of a start-up is the loneliest job in the world.  There are things that they might not feel comfortable talking to their management team about (for example, the management team) and their spouse might not understand, but if you build a relationship based upon trust with your CEO, as a VC you can add tremendous value by just listening without your CEO worrying about you “punishing” them.

That’s not to say that you can’t have difficult and mature conversations with your CEO, or that you can’t be “tough.” In fact, none of this is to suggest that you shouldn’t constantly challenge a CEO or hold their feet to the fire.  I simply believe that those conversations belong over a beer, one-on-one, away from a board setting. Embarrassing or showing up a CEO in a board meeting is the surest ticket to an investor’s “uninformed hell” that I can think of. I just believe strongly that a VC’s job is to support the CEO, until the time that you and the rest of the board don’t believe they’re capable of doing the job anymore. And when that happens, you replace them (and they should never, ever be surprised by that move).

I can already hear some hard-ass VC out there calling me too “entrepreneur friendly” or “soft” or whatever. That’s cool. The approach that I’ve described is a guiding philosophy for all of us at Highway 12 Ventures and one that we think differentiates us from many other firms. We’re looking forward to seeing how this approach will accrue to the benefit of our limited partners over the next few decades…

 

One Response to “Treat Your CEOs Like Children (Your Own)”

  1. David Bean says:

    Right on! Good parenting, too. ;-)

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