Should big company executives run start-ups?

This topic has come up for us a lot lately, and it is a bit sensitive, so we are going to try our best to be as diplomatic as possible.

Everyone’s knee jerk reaction to this is – no, that’s a terrible idea. And certainly the history of the tech industry is littered with examples of bad outcomes here.

The stereotypical example is a start-up brings in a high-profile CEO with a long track record at some established company. They get to the start-up and find they lack many of the support systems they took for granted at the larger company. They want to invest heavily in information systems so they can understand what is happening at the start-up. They start to have executive staff meetings which always wrankle those who feel excluded from the easy access to management they once enjoyed. They want to bulk up a particular team, usually the one they knew best at their previous company, so the start-up ends up with an over-endowed sales or operations team, while other critical functions atrophy. They insist on flying business class and want a dedicated administrative assistant. And why do they always wear a suit? We have all seen this.

That being said, the reality is much more nuanced.

First, there is a high degree of individual variance. Some of our closest industry peers are refugees from big companies, and they make for great start-up CEOs. It is really a question of individual attitudes and expectations.

One of the big problems with working at a big company is that it creates habits which do not fit well at smaller companies. Many big companies have over-burdened management ranks, which makes it easy to pass responsibility around. Executives, and even middle managers, can get overly accustomed to having ample support teams. By contrast, at a start-up individual responsibility is what matters. Many big company employees can never make that transition. They spend their time at start-ups asking for bigger teams and more support, when what they really have to do is buckle down and do the work themselves. It is tempting to assign moral value to this but really it should be sign as a question of skill sets, which means that change is possible, it just takes time and some pain.

Spend five minutes talking to someone from a big company and you can get a good grasp of how they feel about those big companies. Are they frustrated by the endless meetings and struggling to affect change? They might work at a start-up. By contrast, if they talk a lot about corporate politics and individual relationships, how close they were to the big company CEO, it is likely they are missing the bigger picture.

Another important distinction is the company they are leaving. We have a secret list of companies from whom we will never hire. There are corporate cultures out there that just train their teams with all the wrong habits for a start-up. To some degree, this is a function of geography. One of the big advantages of the Bay Area is that there are so many tech companies here, there is a good chance that executives’ social circles are filled with people from other companies. They see that their company culture is different from others, and that often prepares them with sufficient perspective to appreciate, or at least survive, within a start-up. This is not to say you can only hire from the Bay Area, but it is good to be cautious about companies who are the only tech company within 75 miles.

But the most important consideration is what the hiring company is hoping to achieve. We have used the term start-up very broadly so far in this discussion, but there is a big difference between a ten person pre-revenue Seed stage company and a Series K company with 2,000 employees. Over the past ten years, companies have stayed private longer. So a well-established, private company is going to have very different needs than a smaller company. The middle ground, however, is where there is a lot of confusion.

There used to be a natural distinction in the evolution of a company – the IPO. Companies that were a year or two away from IPO would seek to bulk up the management team, adding executives familiar with IPOs and the demands of a public company. With companies no longer rushing to an IPO, the division is much less clear.

In the end, it all comes down to the individual being for the big role. There is no hard and fast rule that says big company executives will fail. Often, they bring much needed discipline and wisdom, and can be a major positive catalyst for a maturing company. For the people making that hire, often the outgoing CEO/Founder, getting a good understanding of the new CEO’s expectations are critical. Do they want to make real change? Are they frustrated by the bureaucracy they are leaving or just disappointed they lost out on the last round of politics? Do they understand the new role will be highly fluid with changing sets of demands and priorities? Does the new CEO understand that they are now Responsible for Everything?

Those people exist, and they can be a great hire, but everyone involved needs to be very clear about expectations from the very beginning.

Photo by Hunters Race on Unsplash