A VC in Vacationland

In a previous post, I outlined the three stages of managing a start up–managing for survival, managing for growth and managing for exit.  The management challenges varied widely across each stage and requires a different leadership style over time.

Managing for survival–Here is where the entrepreneur is usually at his or her best.  Each day has big challenges to solve, whether with securing funding, product beta releases, or landing those first few customers.  Key leadership skills include blatant cheer leading around the vision, the ability to extract investments from all sorts of distant relatives and an unmatched ability to charm customers into being guinea pigs. But seriously, early stage leadership does require a huge amount of faith on the part of the founders, enabling them to make skeptical employees, investors and customers true believers in their vision. The founders also need to provide the leadership discipline to set realistic release deadlines for their products and services and meet them without fail. The best way to describe the most effective managing for survival leadership style is the "worry wart" phase, where the entrepreneurs need to constantly check and recheck that all is being done right to achieve a successful launch.

Managing for growth–Once the launch clients have solutions which are creating value and new investors are in the fold, leadership priorities must evolve as well.  Leadership now must focus on building out sales and channel partner strategies, ensuring a stable and content workforce and creating effective marketing.  Here is where the passionate entrepreneurs must learn to back off and let other people run parts of the show.  Trying to have a hand in every decision is a recipe for disaster, and one many entrepreneurs fail to learn.  Why did you spend all that money hiring sales, marketing and customer support gurus?  To spend a lot of time second guessing their decisions?  Not a great strategy for success.  I refer to the managing for growth leadership style as the "letting go" phase, where entrepreneurs must learn to build the right team to take them to the next levels of success.

Managing for exit–Exits can be thought of in two ways: the departure of the founders for new adventures or the sale/IPO of the company.  In either case, the same leadership skills are required. The founders must continue to work hard in building the right teams, instilling a positive, achievement-oriented culture and creating a marketplace aura that they are the industry leading solution. More time need to be spent with customers, making sure that the current solutions are delivering on the expected results and that new solutions in the product pipeline meet or exceed their expectations. Another key leadership space is networking in the industry community with all sorts of private equity, investment banker and advisor’s who can help the leaders formulate correct exit strategies, or perhaps prepare for a new growth stage. But the most important part of leadership in this phase is spending the time with key people to develop the leadership team of the future.  I refer to the managing for exit leadership style as "preparing the next generation" phase.

Finally, recognizing when your company is ready to move form one stage of growth to the next is a critical skill all entrepreneurs must cultivate.  The best way to know when the company is getting ready for a transition among growth phases is to ask your constituents–customers, investors, and employees.  They all may have different ideas about whether a company is ready, but you should be able to assemble a good overall sense of readiness for transition from their insights.