Tag Archives: OnStartups

5 Traits of A Great Startup CEO

I’ve been meaning to post about Jason Baptiste’s 14 Ways To Be A Great Startup CEO for a while now. With so much myth and misunderstanding slung around the web as advice on entrepreneurship, it’s unusual to see 14 good points in a row on this topic. I’m highlighting my five favorites here, but all 14 are valid. This is my selected best five. (And all the bullets here are direct quotes from Jason’s post.

1. Be a keeper of the company vision

No explanation needed on this one. 

2. Absorb the pain for the team. 

Be a keeper of the company vision doesn’t need explanation. Jason explains absorb the pain for the team:

A startup CEO needs to be the personal voodoo doll for a startup. They need to be able to take on a strong burden of stress, pain, and torture all while making level headed decisions. You can’t have the troops stressing and worrying about the difficult challenges at hand. A good startup CEO will absorb the stress, so the rest of the team can carry on. He also needs to be able to mask this pain and stress. Not that he should hide or lie to the team- I’m not encouraging that. Most of the day to day nuances+stresses of a startup aren’t worth having the entire team worry about and the CEO needs to bear that pain.

I love the voodoo doll metaphor. And although Jason’s explanation winds around a bit, it’s a tough concept to deal with: The right mix of absorbing and sharing the problems is critical. No extremes here; somewhere in the middle. 

I think my absolute favorite is…

3. Find the Smartest People and Defer on Domain Expertise

Jason lumps two things together under this point, both very important: 


The key is finding people that are smarter than you on specific topics. It might be technical team members/leaders or it might be a new VP of Biz Dev. A startup CEO has to have the ability to find these people and make relatively fast decisions to hire them. They also have to be able to show the fire and passion to convince them to leave what is most likely a better paying and more secure job to join the company.

And second:

The real key to hiring as a startup CEO comes after the hire. A great startup CEO will be able to trust the hires that they make and defer to them on areas of domain expertise. It’s hard to let go, but you have to learn to, especially when the company grows.

This seems obvious I think from the outside, but I can say from experience, it’s really hard to do. I found as I grew my company that, especially in the beginning, it was hard as hell to let go of me knowing everything best. As Palo Alto Software grew up, we had trouble dropping the flat organizational structure and going from decision by team vote to decision by functional expert in charge. That’s a hard change to make. But vital. 

4. Have an uncanny ability to say no

It’s all about focus. Jason says a startup CEO gets a flood of suggestions, many of which sound wonderful, few of which can be implemented. One of my mentors once told me management is knowing when and how to say no. And there’s the important displacement principle that says everything you do rules out something else you don’t do. 

5.  Have the ability to call an audible

“Call an audible” is a American football reference to changing the pay at the very last second. I want to close this post quoting Jason on this one: 

Nothing goes according to plan. Things fall through, people quit, shit happens, servers crash, and other random things go bump in the night. You’re going to have to deal with it and fast.

Amen to that one. And I totally believe in planning, but that’s planning process for me, the Plan-as-you-go method. which means planning is steering and steering is constant review and revision. 

Q&A: Valuing a SaaS Business

This question was posted on my “ask me” page on my timberry.com site. I can’t promise to answer all the questions I get, but I try, and I’m particularly happy when I get one whose answer might be useful to other people. So here’s a question:

Do you have any idea how to value a SaaS business? Do we use our users, growth in users, revenues, margins, or what? What do investors like to see?

My answer: I’m probably a bit biased on this one because of my position in Palo Alto Software, which publishes our LivePlan SaaS offering for online business planning. But I can’t say I haven’t thought about it. Here’s what I can do to help:

  1. I really like How should you value a SaaS company, posted a few months ago by Robin Vessey and then edited by Joel Spolsky on OnStartups. Joel knows software. You’ll see there that it’s about a variety of factors, usually done on a case-by-case basis. It’s a combination of baseline revenue multiple, market potential, value of the technology, and what’s needed to take it to the next level. This is a good discussion.
  2. Notice that Robin and Joel don’t even mention profits or margins. High-tech companies are almost always valued on growth and revenues, not profits. I explained why in profits are overrated here on this blog.
  3. I read recently that publicly traded SaaS companies are valued at 5-20 times revenues. Publicly traded means that their stock appears for sale to anybody on a major stock exchange, which makes them inherently different from the smaller startups. And, unfortunately for you and me, we smaller private companies take a discount on the numbers of the big companies because we aren’t big and our stock isn’t liquid and we don’t have to publish financial information. Even there, however, it’s still more about growth and revenues than profits. A SaaS company showing strong growth and breaking even or losing a bit does better than a SaaS company with profits and stable.
  4. Investors vary on revenue vs. growth in users. I’d say that revenue is much better than just growth in free users, but then look at Twitter and Facebook and the like, which got huge valuations first for huge user bases and then only later for revenue models. So that’s debatable. When I read a business plan I mistrust user numbers that aren’t tied to revenues, because that’s too easy.

What really matters is the future. Valuation isn’t what something is worth, but rather what somebody will pay for it. So what really sells, in SaaS, is its future. There’s nothing better for valuation than indicators of growth in paying users, stories that tell about market need, and a team that can push it. And it’s magic. There’s no MBA algorithm that applies.