The #1 Objective for Early Stage CEOs: be a captain not an officer

Friday night in December*

«Cheers» «Prost» «Merry Xmas» loud greetings resonate, covering the cheerful percussive sound of Glühwein mugs and beer bottles clinking together. Music starts as we turn our heads towards the stage - I immediately recognize the song although one can hardly hear the lyrics:

Oh, what a night    
Late December back in '63         
What a very special time for me  
As I remember, what a night

“Look at him! I can’t believe he’s singing!”, says a loud voice in the crowd, while everybody else starts roaring along. Performing on stage, Sebastian, a brilliant iOS developer. Rather restrained at work, not a marvelous singer but tonight this is not important – passionate execution of a minimum viable product: that’s Karaoke. Once the surprise fades away, I start feeling anxious. I attempt to evade being next song’s performer, before peer pressure swings me up on stage. As I am rushing to the terrace in the hope of being forgotten, the joyful start-up employees slowly turn around and stare insistently. My heart skips a beat, and as I feel the music’s bass vibrate in my ears, I pull out a tissue with the intent of drying my forehead. I usually don’t mind being looked at but being the one who massacres some Schlager music in front of founders and their employees…not my jam. I finally manage to breathe when I realize I was not the center of this sudden attention. Just behind me, Sebastian’s colleagues from the Customer Success Team are rushing towards the stage as the next song starts:

Is this the real life? 
Is this just fantasy?
Caught in a landslide       
No escape from reali
ty


It’s not the strategy

Some context: Other than in my previous blogpost this time I was invited. A Christmas party of one of “my” startups and I couldn’t be happier about attending. By now you know that I love spending time with founders outside the meeting room. Conversations usually happen between representatives sent for their impeccable presentation skills. Team events, however, are different: they are a great way to get to know those who are no pitching experts. Not only do you get to know co-founders in a relaxed atmosphere, you can also see how they treat others, the complicity between them, the thoughtful or silly ‘Secret Santa’ present they picked or the daring karaoke song they chose (the one with the high notes). Is there peer pressure to drink another shot even when it’s obvious that the last one was already too much? Late nights - that’s when for an outsider it’s easier to capture the real power structure of a company. I particularly like to listen to CEOs speeches - most of the time they try to be funny. But more importantly you can tell whether it's all about themselves or all about the company. As an early stage investor, to join a startup team event is one of the rare situations to get a peek under the lid, to take a deep dive into the organization’s “culture” – that is said to be the most important ingredient of success. This is no VC “BS”. You’ll find confirmation everywhere including research results by famous universities. 

“Culture eats strategy for breakfast” - how often have you heard/read that again and again? I commit, me too - can’t stand it anymore. Now that we know that, what is much more interesting is how to build culture? And what follows then? In other words: what’s on the menu for lunch?

 

Is it hard work?

A “lean” office party to save some money, a fancy restaurant to show appreciation, or a cooking workshop before hitting the dancefloor until dawn. I’ve seen startups organizing a full day team-workshop to be ended with a great party. As a founder you are also a team leader, and therefore it’s not only about planning the party. It involves putting some thought about the content, the speech, the values that you want to transmit and yes, sometimes also about the presents. If you struggle choosing a present for one of your first 10 employees, you might want to ask yourself if you put enough effort in getting to know the person you hired and who will build your business.

True leaders give options, and make these events not only possible to attend, but also easy to leave if needed. Not only to your board member. The way out of your team event would be after dinner for example when you change location for the dancing. This is also a need for some employees that can't dance all night as they need to be home to look after their kids or any other reasons. Building a culture and common values does not work with peer pressure – some people just feel uncomfortable to sing. Pushing doesn’t work, try pulling. Building culture is hard work.

 

Is it HR responsibility?

When you built your start-up, you made sure to have a cool ping-pong table and you’ve made sure your employees got unlimited access to free energy drinks. They love to rock the company t-shirt – even outside of the office. Your night-owl developers can choose to sleep-in in the morning and focus on coding marathons in the evening. You have a theme song. You have a theme movie. You feel like you’ve finally gathered the high-school crew you’ve never had. Nothing like your previous corporate job where you had to suit up and sweat the whole day, sitting in boring meetings.

How could anyone be unhappy in this awesome environment you created?

Start-ups can be as toxic and unhealthy as the corporate world and having a raging party at the karaoke bar once a year won’t fix it. The marketing and developing teams need to be able to communicate about the product on a regular basis, not only half-drunk around Christmas time. The employees managed to solve the riddles of that team-building escape room, but only because participants were fighting each other to look good in the eyes of the CEO. Having a positive and ‘always hustling’ attitude is the spirit needed for success, but your employees might not dare to ask for reduced hours to take care of their mental health and will most likely end up burnt-out.

Bringing-in a mediator or a HR consultant for a couple of hours every other month or organizing design thinking workshops where different teams must cooperate is a great and cost-efficient way to observe and assess your company culture. But it won’t work. Building your culture is not another task of your HR department. I have seen many cases of company culture gone wrong, and I know the triggers. For example when the very classical co-founder fight leaves scars and employees are asked to take sides.


It’s the CEO, stupid!

Ask yourself: How did I end up in that Karaoke bar in the first place? How could I find a co-founder or a Business-Angel? How did I convince our first employee to join? All that includes an unusual kind of shared trust. You trust someone to take a huge risk. It starts with trusting the CEO. And if you are the CEO, then it starts in trusting yourself. Trust in my opinion is a result of a (multi) relationship building process. A startup CEO (at least in the early stage) is not an (executive) “officer” nor should he be a manager. He needs to be the captain of the ship.

Real leadership of a CEO is not shown during a presentation. What is real leadership anyways? It’s probably an attempt to get to know yourself and your team: truly understanding your strengths, your limitations, your culture is the only way to be able to help you make powerful changes to your company when things turn ugly. And be certain, they will.

Years ago when I was a managing director of a startup struggling with its culture I read an article by A16Z: “Building a Culture that works”. Writing this blogpost I found it again - I couldn’t agree more. The CEO is the cultural epicenter. The organization reflects the behavior and characteristics of the CEO and that establishes the culture. Ok. A flawless CEO will be able to build the most successful culture? The opposite is true. CEOs who build companies from scratch, like Anadn Sanwal are very much aware of their shortcomings and happy to share them. It’s the self-awareness that counts. If you can’t accept self-awareness, you should not be CEO.

By now you know I love sailing but I believe anyone may relate to this example: Christopher Columbus who discovered the viable sailing route to the Americas must have been a true captain. He convinced investors, sailors and even the pope to sail towards world’s end (!) 500 years later it still sounds unbelievable. Think about the discussions after 4 long weeks of sailing. They were past the point of return – with supplies for max. another two weeks. Little did they know that a few days later they’d arrived. How often do you have a similar discussion in your startup? Runway of approx. 8 weeks, no signed termsheet and the new back-end developer starting next Monday while you spot the CFO purchasing a book on Amazon “insolvency proceedings for dummies”…

A captain builds relationships of trust thereby builds a “culture” that is a competitive advantage. He doesn’t do that by being the best and brightest but by self-awareness and by leading by example. In difficult situations co-founders, employees and investors, all eyes turn towards the leader – who will follow the orders of an officer anyways? You can't be Captain on two boats at the same time - your startup needs 120% of your attention. If the Captain fights with his co-founders all crew members will be on a constant fight losing their energy for the real storm in front of them - out at the waters.Be a Captain, listen to your officers, follow your gut, take decisions! Lead.


Back to the Karaoke bar

I made it. Somehow still managing to balance a glass in my hand, I fled the singing and stepped outside joining a few guys busy discussing and arguing about some work projects. I was eaves-dropping, but they brought me into their circle, treating me just as any other team member. Breathing fresh air while they are smoking a cigarette in the muffled sound of snow, I understand between words how critical it is to develop this new app feature or which difficulties they faced earlier this year. Each team member gets to give you a piece of the puzzle and in a startup each team member is critical to success. Although I can smell the dawn and I’m still afraid of signing I do not leave. Tonight, I get to meet the ones who never stand in front of a PowerPoint or design a pitchdeck. And after a while you can see it: the sparkle in the eye, the true passion. The reason why they are doing all that, far away from their sometimes all-too-rehearsed pitch. It can be a sick relative, a documentary that made them think, a motivational speaker that pumped them up. In this split second, you find their true why. I accept this revelation like a present, my true Christmas present.

 

Truth is, every board member will be flattered to be invited to your team event. But not everyone will show up. Yes, there is a difference. And yes, Investors should certainly not try to change your culture. They can grasp it and take it into consideration when helping the founders taking decisions. First Round is right, 80% of your culture is your founder. It’s the driving force of a business in the early stage. It’s your only competitive advantage to hire talent. Choosing your investor, actually means hiring a board member. If you want a board member to fit your culture, think twice before you sign.


please help 

Have you ever seen a perfect startup culture - what was its secret source? Have you tried offering "TVA" (take vacation anytime) or any other Google-Style perks to attract talent and this strategy worked/failed? Do you agree that 80% of your culture is your founder?

Leave a comment or write me directly whether you agree, disagree or simply if you think there is something that needs to be added.


*The story is based on real events. However, I merged, shortened and defaced them to respect the privacy of the characters.