“Should we fire the CEO?” That’s the question at the heart of every board meeting. It’s the only thing I can really do as a board member, really. Even if I never say those words, the question is always in the back of my mind.
-Anonymous Board Member & Entrepreneur
A founder called me today. His lead investor was in the news in a bad way:
Rothenberg Ventures, the four-year-old, San Francisco-based seed-stage venture firm, may be on the brink of implosion, say several sources close to the firm.
“I thought startups were the ones that failed,” he said. Through the phone, I could hear him shaking his head in disbelief. “It never occurred to me that my VC would implode.”
[Disclosure: The founder in question gave me permission to write about this. ]
The founder was young. No professional experience outside of a couple menial summer jobs. But the business was surprisingly solid and well thought out. The boy could sell and he had the numbers to prove it.
But he’d just started raising money again. And here was his lead investor, the only brand name on a cap table littered with unsophisticated friends, family and randoms, going through a very public meltdown at the worst possible time. The other investors had looked to Rothenberg for guidance on how to respond to the many unpleasant gyrations that come with being a minority investor in a fledgling technology startup helmed by an inexperienced CEO.
“Dude, this is not good.”
The founder had called me, laughing nervously as he joked about having shat his pants “multiple times” throughout the course of the day.
We talked it over.
Did Rothenberg have a board seat? No.
Was he relying on Rothenberg as an ongoing source of capital? No.
Could Rothenberg call the note? When did the note mature? He didn’t think so, but he was looking into it.
Could Rothenberg sell their stake to someone else? Looking into it.
Was anything about his operating plan going to change as a result of Rothenberg melting down? Not a thing.
“Honestly,” he explained, “it just looks bad. I’m not sure how to address it when we talk to investors.”
Address it head on, I advised. You can’t hide it or run from it, so just directly acknowledge the problem, explain how it affects you and what you’re going to do about it.
This is what leadership is all about.
As an entrepreneur, you’re always being judged––by investors, by your team, by your board. It sucks, but it’s what you signed up for, so embrace it.
You’re always either gaining credibility or losing credibility. Remember that.
The surest way to lose credibility is to go silent.
Silence is like darkness. People are afraid of the dark, the unknown. It invites their fears to run wild. It feeds the monsters in their head. And those monsters, that fear is not your friend.
Good CEOs control the narrative. Good CEOs fill the silence.
Bad shit happens. This is true in startups, business and life. You can’t control for it.
Instead, what you can do is:
Work fast and do whatever you can to make sure they hear the bad news from you –– this sets you up as in control of the situation and in the know. Nothing makes people freak out like reading, for the first time, bad news about themselves on the wide open internet.
Acknowledge that bad shit has happened –– this demonstrates that you’re firmly attached to reality and not clueless. As my anonymous board member friend explained to me once, a clueless CEO is fired CEO.
Explain how the bad shit affects your business, specifying that which you know for sure and that of which you are still uncertain –– this demonstrates that you understand the gravity of the situation. It’s always better for you to define that which you fear than it is to leave it to someone else’s imagination (or worse their officemates)
Lay out your plan of action ––this is the essence of leadership, this is what everyone wants to hear. People want their leader to be a man (or woman) with a plan. Now, you and I both know that your plan might not work, but that doesn’t matter. Having a plan means that you’re in control, that they don’t need to worry, that you’re on top of it.
Ask for help –– this transforms the problem that you own into a problem that the group owns, which will at least soften the blow in event that you fail, and at best lead to new ideas and more actual help. If the problem is yours alone to bear, then it’s easy for other to sit back and entertain their primal desire to blame you.
Aside: On a tactical note, I find that SMS and iMessage are a better way to communicate with stakeholders than email. Message composition is faster because it’s less formal. Response time is faster because the channel is so noise-free. How many times have you had an email sitting in your inbox forever, just waiting for your response. But you don’t respond because your thoughts are too complex, you’re too nervous, etc. The same can happen with a text message, but it does so much more rarely.
If you don’t know it, the iMessage hack is pretty useful. Oftentimes, you don’t need a phone number to send an iMessage. Just past the person’s email into iMessage. If the text turns blue, it works and you can be sure it’s tied to the person’s account. If it stays green, maybe they’re on Android or it doesn’t work. It’s an easy hack and a great way to cut through the noise. Be warned though that not everyone will appreciate your invasion into their personal space, so be prepared to cajole and apologize away your way into the recipient’s comfort zone.
People always want to be led, especially in times of uncertainty and fear.
Communication is the bedrock skill of leadership. Do it right and you’re a hero. Do it wrong and you’re in a world of hurt.
“It’s times like this when you learn to be a CEO.” I said, signing off. “Inspire confidence. They will follow.”
PS If you know of any founders that need coaching or startups that need a hustler, send them my way. I recently left Dishcraft and am figuring out what’s next. Contact me: @MattMireles or firstname.lastname@example.org