4 Lessons I Learned on My Journey from Venture Capital to Founding CEO
Someone could be an expert in designing and building swimming pools, but that doesn’t make him a great swimmer.
That was the first lesson I learned when I transitioned a major job from venture capital to CEO. After several years at major venture capital firms in the Gulf region, I decided to go the other side and become a co-founder and CEO of a cybersecurity company.
I was now at the deep end of entrepreneurship, and it felt completely different. I quickly realized that no matter how much I imagined as a venture capitalist what the CEO role would be, no matter how many corporate leaders I’d advise, living it up was another matter.
To swim rather than drown, I knew I had to understand and appreciate the differences between the two movements and hone my leadership skills accordingly.
It’s hard to know how often venture capitalists go to the corner office because no such data appears to exist. I think it is somewhat unusual. The most common is former CEOs turning into venture capital, a recent example being Bessemer Venture Partners. Advertising In May, Sameer Dholakia, the former CEO of SendGrid, joined the company as a partner.
However, I suspect we may see more investors making the switch this way Competition Among venture capital firms it is heating up, and at a time in the world where people generally tend to look for new experiences.
In some ways, of course, the roles of venture capital and CEO are two sides of the same coin. Both types are driven by an innovative spirit and a passion for building and nurturing companies that will change the world, or at least the markets. Venture capital provides an opportunity to work with really smart people, and vice versa.
But in other ways, as I’ve learned, financing a company, creating and running one, is very different. Here are four examples anyone else considering a relocation could learn from.
Venture capital supplies the dollars, but the responsibility stops with the CEO
Venture capital is invaluable sources of funding and expertise, but the CEO has ultimate responsibility for every aspect of the company’s operations, from growth to communication with board members to the company’s reputation. What a deep responsibility.
In other words, daring investors persevere in discovering great investment opportunities and helping those companies along with tips, executive talent introductions, and other added values. But it is up to the CEO to implement the creation of a successful brand, in myriad ways. They must own every decision that is made.
It’s a hat too big to wear, and I had to wrap my head around it. I would suggest any other venture capitalist moving into a CEO position take it up with open eyes to the glaring differences and be mentally well prepared.
Strong CEOs must take risks more often
Venture capital operates on a portfolio model, i.e. the venture capital will invest in, say, ten companies expecting one or two to make significant gains while the other will fail. This puts the inherently investment capital in perpetual risk calculating mode. To optimize portfolio growth, they should be strict in identifying the potential downside of the startup as the upside.
However, the CEO should always be optimistic, and focus squarely on achieving growth with every available dollar of capital. The equation is significantly more weighted for opportunity than risk, as is the case with VCs. If they specialize in risk, CEOs can end up analytically paralyzed, constantly overthinking and falling prey to the maxim that “more is wasted by indecision than by wrong decision.”
It’s just a different mindset, which took me a while to fully appreciate. So I decided to take risk-based opportunities by allocating up to 10-15% of our company’s capital aggressively to risks that could change our course. I believe this has helped our company to quickly identify new market opportunities while also strengthening our culture. That’s because a culture that embraces risks enables employees to take calculated risks without fear of retribution.
A CEO job can be an emotional roller coaster
You wake up one morning and marvel at the momentum of business; You wake up the next day convinced he’s in trouble. CEOs of startup companies tend to be emotionally volatile. It is the nature of the game.
Of course, what this really means cuts to the heart of the entrepreneurship and risk-based outlook I described in the second point: the company’s founders and leaders thrive on this exciting journey. In fact, if the CEO does not experience these fluctuations, then something is wrong. They shouldn’t risk enough!
Of course, venture capitalists experience some of these dynamics as well, but not as strongly as frontline CEOs who have invested their entire being in the company’s success.
CEOs have to deal with more weeds than venture capitalists do
Sales commission structures. Recruitment and retention. The best way to manage leadership team meetings. These are just a few of the everyday items on a CEO board that are different from what typically takes venture capital time. While venture capital is concerned with how a company manages a portfolio from a 50,000-foot view, the CEO is working on the ground to make it all happen.
For example, I knew early on that I wanted to nurture a ethos on our company’s leadership: that every perspective has value. It is very easy in any organization to bias the CEO on any topic to color the discussion.
However, the “my way or my highway” attitude prevents creative and bold thinking. So I made sure from the start that the meetings would be conducted in such a way that everyone was encouraged to express their opinions on every issue at hand. I try never to make a decision without genuine consideration for other people’s points of view.
As these four points show, the transition from venture capitalist to CEO is not as easy as it might seem. But it has been an amazing journey, and I hope these notes will help venture capitalists and CEOs alike better understand what makes each other better.
People Sinha He is the CEO and Co-Founder of Zero Trust Data Security rubric. Before that, he was a fatherartner at Lightspeed Venture Partners, where he focused on the software, mobile and Internet sectors, and at Blumberg Capital, where he was the founding investor and board member of Nutanix and Hootsuite.