This post was written so that you can better understand how startup/scale-up CEOs typically think. Use this knowledge to help maneuver yourself in your career. If you’re a founder, use this guide to see if you have any large gaps that need to be closed. If you’re an investor, this can be helpful to dissect how CEOs are thinking about their business, and how they’re reporting information to you.

How do Startup CEOs see their company?

CEOs see things from a different resolution than you

Unless you are a founder, a startup CEO probably views their company through a lower resolution lens than you. When you see trees, they see the forest. What does this mean? They are responsible for the whole business, and a business has too much complexity to understand how everything works. So they have to create a model of how the business works in their head that compresses the information in a way that they can still make decisions on it, which they then can use to drive changes in the business. Whereas if you work for a startup, you’re expected to know the ins and outs of whatever you are responsible for since the complexity is more manageable.

Startup CEOs and Founders have an expected future state that’s much better than the present

From a startup CEO’s point of view, everything hinges on an expected future for their company that is significantly better than the present. A big reason why employees stick around and work extra hard, why the board keeps betting on them, and why they’re able to garner investors all hinge on the expectation that their company has the potential to be enormously successful in the future.

What does this mean for you if you’re not a CEO?

Be careful about being “sold the dream” because it’s being told by everyone who has everything staked on it being successful. So it’s no wonder why you’ll find yourself nodding your head when you listen to their pitch. It’s important to remove the blinders and do your own thinking before joining (or continuing with) a company.

Cash is king

CEOs care a lot about their monthly cash position (how much is currently left in the bank account) and monthly cash burn. Balance in the bank account divided by monthly cash burn determines how much runway they have. Runway matters more than any other metric because if you run out of money, the company’s operations cease to a halt. 

A CEO’s boss is the board and by extension their investors

Whether they can keep getting cash from investors is based on the progress that they can show and whether it shows the potential of the business. And a CEO has to regularly provide board/investor updates to show how progress is going. So showing good news is usually a milestone that CEOs look to focus on. 

How do startup CEO’s convince investors to give them money?

In short, it’s showing the progress that matters to investors. “The progress that matters” depends on the investor and the maturity of the business they expect. These expectations are fluid since they also depend on market conditions, such as the total amount of capital expected to be available for the Venture Capital market as a whole.

Here are the most reliable ways to raise money:

1. You are capturing market share at a rate much higher than competitors
2. You have excellent unit economics
3. You have a technological or business moat that will make it hard for competitors
4. You have a product that people love, and the business is in an early enough stage that they can convince investors they need the money to grow their user base

How do startup CEO’s make decisions?

Startup CEO’s need to act quicker on decisions than most people because they have a lot of of them to make; otherwise decisions pile up and the CEO becomes a big bottleneck for the business. The types of decisions they make are usually the most difficult, or they would have been dealt with by the rest of the team. Tough decisions are those that have the most uncertain probabilities associated with them. So, if you see a CEO with a batting average above 70% on their decisions, it’s a sign they know what they are doing. Close to 50% is average since many decisions are “coin flips” (even the best decision has a close to equal probability of a decision turning out well versus failing). 

Strong startup CEOs focus on the most important decisions they need to make in order for them to be successful. By their nature, these decisions have the biggest impact and therefore biggest risk associated with them, because they will require the most resources. 

Decision-making normally revolves around how to get to the next important milestone for the company. Most startups have negative cash burn (meaning more cash leaves the bank account than enters it every month). So their decision-making usually hones in on what decisions will produce the best odds to get the next round of funding. This type of thinking can be very destructive to the business, since it often trades long-term, lasting changes for short-term growth.

How do startup CEO’s spend their time? 

There are no formal rules that determine what CEOs work on, so it really depends on their strengths, their team, their business, and the market. CEOs spend time on different business units like sales and tech depending on their personal strengths. Here is a list on things that CEOs typically work on:

1. Critical business issues: it’s not uncommon for a whole department or multiple to be in trouble at any given time, which in turn is having a big impact on the core goals for the business. It’s ultimately up to the CEO to make sure these overall goals go well, so it’s their job to jump in and dig into any failing part of the business and fix it if they need to.
2. Fundraising: getting more cash from equity sales and debt. 
3. Business vision: which is the expected positive future state of the company
4. Org restructuring and personnel issues: hiring and firing, carving out new levels for promotions and moving personnel into different places. 

The red flags to look out for in a founder/CEO

1. The self-indulgent CEO: when there is an inordinate amount of cash spent on the office and personal expenses like parties, it’s a sign the CEO is using startup funds to directly enrich themselves.
2. The yes-man CEO: some people surround themselves with people who won’t disagree with them. It’s usually due to insecurity or a fear of conflict. The trouble is that when people don’t argue, everyone ends up agreeing with the CEO all the time, instead of the best idea winning out.
3. The no-decision CEO: CEOs that aren’t okay with making decisions under uncertainty will instead delay them, which in turn holds a lot of the business back from progress. 
4. The low-expectations CEO: a CEO that doesn’t create consequences around not achieving goals, creates a culture where it’s acceptable to fail which permeates itself throughout the business. There is a fine line however on what “failure” means since innovating requires a lot of failures.
5. The ego-driven CEO: many people who get a taste of power also attain an over-inflated sense of self. This is a destructive signal because feeling you are better than others in a position of power will lead you to not treat others well.

What are the signs of a good startup CEO

1. Doesn’t make you feel uncomfortable when you talk to them 
2. Humble: is able to take in new information and accept when they’re wrong 
3. Aware of blind spots: aware of how their current position might be impacting 
4. Not too argumentative: it’s very easy to overpower people in conversations due to their role in the company. So if CEO’s are too argumentative in conversations, they’ll never be wrong. 
5. Makes good personnel decisions: if you hire and retain people who lack integrity, it’s a sign the CEO doesn’t have integrity or can’t make tough personnel decisions.
6. Makes the hard calls when they matter: difficult decisions delayed fester for the rest of the company. 
7. Creates a strong vision: a strong vision means the whole company can see what the expected future state of the business and the world looks like after everything is done. 
8. Has done it before: first-time CEOs have a lot of blind spots since there are no “literature” or blueprints on how to be a great CEO. So having someone who’s done it before, even if they failed, means they’ve had to take a hard look at themselves on where they made big mistakes and where to improve. 

How to be successful if you report to a startup CEO

Here is a list of things to do in order to make sure you’re successful working for a startup CEO.

1. Understand what matters to them and give them that 
2. Do little tasks to save them time: because their ROI on time is much higher than anyone else’s.
3. Think like an owner: Startup CEOs want their business to do well, so if you show them that you think the same way, this is something they will consider rare and valuable. 
4. Be indispensable: Become responsible for a core business unit, and make it so that it would be very difficult to replace you.
5. Create executive summaries: Startup CEO’s view things through a lower resolution than you, so it’s harder for them to digest all of the context that you send them. That’s why executive summaries are so useful since they can get a high-level overview of whatever they’re reading. 
6. Help with growth first, then burn second: being willing to use cash to grow the business is a useful skill that takes time and experience. But it’s important to understand the scale you’re burning cash at in order to achieve your goals. If you’re hesitant to pay for $79/month landing page software even though it will double your conversion rate, it likely means you don’t understand how little impact something like that type of expense has on burn. 

Conclusion

The universe of startup CEOs is littered with examples and counter-examples, so it’s difficult to really understand how most of them think. But there are certain constraints they exist under, like having to make sure the business has enough cash. And these constraints can help us understand why people do the things they do. But maybe it’s what those do within those constraints that really measures their character.