10 C-Level Positions That Are Red Flags For Funding

It’s your startup, so you can give early partners any title you want, but be aware of potential investor and peer implications. VCs and Angel investors like to see a startup that is running lean and mean, with no more than three or four of the conventional C-level or VP titles. More executives, or other more creative titles are seen as a big red flag.

In reality, startup titles should be more about the division of labor than an executive position. The most common ones I see and salute are CEO, CFO, and CTO. A few other credible ones would include Chairman of the Board (COB), Chief Operating Officer (COO) and Chief Marketing Officer (CMO). Some would say that if you have a title at all, you are not doing enough work.

Where the titles don’t seem to fit the situation or size of the startup, investors start looking hard for other anomalies. Here are some pre-conceived notions about what non-standard titles in a startup, like the following, might mean:

1. Chief Inspiration Officer. This person may be an extraordinary communicator, who rallies employees, customers, and colleagues around the vivid future he sees. Or he may be the founder’s brother, idea person, or inventor, who can’t be bothered actually working on the nuts and bolts of the real business.

2. Chief Evangelist. This is a role made famous by Guy Kawasaki in the early days at Apple Computing. Evangelism marketing is an advanced form of word of mouth marketing (WOMM), now largely replaced by Facebook and Twitter. Unless your business is a religion, I don’t recommend it for a startup these days.

3. Chief Sales Officer (VP Sales). What you really need is a VP of Marketing and Customer Development, who can help with lead generation and honing the message, rather than an executive to manage a sales team and existing customers. See this anecdote by Steve Blank on how a hotshot sales executive can sink your startup.

4. Chief Brand Officer. Branding is indeed an important role within a startup, but the implied scope of the role is far too narrow. The more conventional VP of Marketing role should cover branding, as well as other marketing advertising, design, public relations and customer service requirements.

5. Chief Risk Officer. This role is most common in financial institutions, and it seems like it should apply well to startups, since they carry the highest risk of failure of any businesses. But here is another example of a role that everyone carries in a startup, so investors can’t imagine paying anyone uniquely to do that job.

6. Chief Human Resources Officer (VP Personnel). This is a fancy title for a personnel manager in a large corporation who keeps track of all the hiring and firing, and has a staff to build job descriptions and personnel policy documents. In a startup, that’s your job as founder, and it’s a job you can’t afford to delegate.

7. Chief Diversity Officer. Diversity is generally only an issue in large organizations, and if your startup is that large, investors will definitely be nervous. In general, I’ve not known diversity to be a challenge or problem in startups, especially if Gen-Y is part of the team.

8. Chief Information Officer. All the IT work in most startups is done by a college intern, or the owner’s son. Assigning them the title of CIO seems like a bit of overkill, especially these days of serious “cloud” computing, meaning big servers have left the building.

9. Chief Legal Officer. Also known as General Counsel, this position is an expensive one to fill and maintain. If your business is managing contracts and patents, it makes sense, but the CLO for most startups is LegalZoom on the Internet.

10. Chief Security Officer. Here is another role that shouldn’t be so large in a startup that it needs to be a full-time task, separate from other executive roles. Frankly, the CSO role has always sounded like the warden at a prison to me, so I would be hesitant to recommend it, even to a large business.

What other strange titles have you seen? In all roles, a startup needs executives who are comfortable with daily chaos and change, rather than defining and following a repeatable formula for success. In addition, you are looking for executives who don’t need a title to get things done. They should get their satisfaction from building their business, rather than building their title.

Marty Zwilling

10 Key Traits Of An Ideal Entrepreneur Partner

A while back I talked about how and where to find a co-founder in “For a Startup, Two Heads are Always Better Than One”. The feedback was good, but some readers asked me to be a bit more specific on attributes that might indicate an ideal startup partner. Even if you are looking in all the right places, it helps to know what you are looking for.

In this context, I’m broadening the definition of partner from co-founder to “business partner.” The reason is that good attributes apply equally well to “external” partners, as they do to internal partners, like a co-founder or CTO. A good overall example is the synergy between Google co-Founders Sergey Brin and Larry Page, as well as with Chairman Eric Schmidt.

In all cases, the challenge is the same, of finding people that you can work with and enjoy in the business relationship. The relationship has to have trust, communication, and respect in order to work. Otherwise, like a marriage, it will be doomed to constant conflict, second guessing, and unhappiness. So the following traits have to apply to both sides of the partnership to work:

1. Enjoy working with other people. You may be too independent to be partner material. If you find it hard to trust others, love to work alone, always have to be in control, or insist on micro-managing, you probably won’t find a partner who will satisfy you.

2. Does not need to be managed. Good partners are people who are confident in their own abilities, and willing and able to make decisions, take responsibility for their actions, and able to provide leadership, rather than require leadership.

3. Compatible work styles. Most entrepreneurs work long hours and weekends to get the job done. If you team with a partner who likes sleep until late morning, and reserves the weekend for other activities, the partnership will likely not work.

4. Common vision and commitment. It doesn’t take long to sense someone’s real commitment, or vision and desired outcome of a joint project. Is your project seen by both as an end in itself, or a means to another end?

5. Similar values and goals. If one of your core values is exceeding your customer expectations for quality and service, and your potential partner ascribes to the low cost, high profit mantra, a successful partnership is highly unlikely over the long-term.

6. Level of integrity. High levels of integrity are important in business, but more important is your level of comfort with your partner’s integrity. This is a critical element of a good relationship, but a tough one. This is probably the best place to apply your “gut” feeling.

7. Complementary skills. If both of you are experts at software development, even though one loves design and the other loves coding, that still won’t get the marketing done. Look at the big picture first of development, finance, and marketing/sales.

8. Passion for what they do. The passion has to be in the business context – meaning results oriented, customer oriented, and sensitive to competition. In many cases, experts with academic or research credentials are not good partners for a business venture.

9. Ethical and diversity boundaries. How the leaders of your company handle adherence to the spirit as well as the letter of the law will be seen by all employees, customers, and investors. Ethics and the view of personal boundaries should be explored fully.

10. No historical baggage. Partner decisions are more important than hiring decisions. Thus you should do the same or more due diligence on educational background, previous work, and references. Look impartially from all angles and do the follow-up.

Beyond the core team of two or three startup partners, every startup should seek to “outsource” the rest of their strategic requirements to external business partners. It’s faster and cheaper than building a large team in-house, and usually more effective.

By using this checklist, you should be able to objectively match potential partners with your own needs and expectations. Then, as I suggested before, it’s time to establish a formal agreement or contract to cement the partnership. With that, you will have a strong foundation for success, as well as a great working relationship for the next thirty years.

Marty Zwilling

‘Do-It-Yourself’ Startups Have Never Been Easier

Sponsored by VISA Business

If you have a unique product or service, and you are not selling it around the world on the Internet, now is the time to start. The cost of entry has never been lower. Anyone can be an entrepreneur today, without a huge investment, bank loans, lawyers, venture capitalists, or Angels.

In the early days (20 years ago), most new e-commerce sites, for example, cost a million dollars to set up. Now the price is closer to $100 if you are willing to do the work yourself. Here are the key steps for a personal home-based business website selling your consulting service or a few products (as an alternative to eBay):

1. Go online to reserve a website domain name. Be sure it matches your business, and get a hosting agreement from one of the popular providers like GoDaddy. The cost for the domain name is maybe $10/year, and the hosting starts around $50/year. Start simple.

2. Download free website tools. Many hosting services offer free tools, or will build a default website for you. Other popular tools are available at low cost, with built-in e-commerce capabilities (pay via credit card), including this Top Ten list. Or, fall back to the old standby DreamWeaver by Adobe.

3. Personalize a simple web site. Customize your website using one of the tools above, selecting one of the standard templates for design and layout. You probably want at least a home page, product page, order page, and contact page. The menu should include a link to your blog, separately set up on Blogger, Wordpress, or TypePad – all free.

4. Publish the site and now you are in business. But, don’t be fooled into expecting people to flock to your site after you tell a few friends. Now the real work begins – promotion, marketing, blogging, and all types of search engine marketing. But even these can be done for almost no cost, if you are willing to learn and do the work yourself.

Obviously, commercial e-commerce sites handling thousands of products and back-office functions are more expensive, and usually require professional help to do the custom programming and special site navigation features. All this may cost a few thousand dollars, but don’t get talked into an Amazon.com replacement just yet.

The next step in complexity is building a software product that you can offer as a service to your customers, or a mobile smartphone app. A simple example might be a mortgage calculator to add to your real estate sales site. Any credible software developer should be willing to tackle this kind of tool for a couple of thousand dollars.

Then there are full-featured software sites like Facebook. The logic behind all these features is millions of lines of code, and cost millions of dollars to develop and maintain. Don’t expect that you can create a new social networking site in your garage, and steal all the users away from Facebook. Facebook is making big money today, but only after a $150 million investment.

Even Facebook started simple, and then developed more and more robust iterations as user interest caught on. I give this advice all the time – “launch fast and iterate.” You can’t get it all right the first time, and the market will be gone if you try to include every feature in the first version.

The net is that if I see a website business plan today with a projected development cost greater than $200K, I suspect the founder must be including some fancy perks, or they don’t understand the market dynamics of website applications today.

Budding entrepreneurs and home-based businesses should be writing business plans before they start, so they understand and can manage the tasks ahead, but no outside investor need ever see the plan. Fund-it-yourself (bootstrapping) and do-it-yourself entrepreneurs are the best kind, because they can focus on the business, rather than fundraising, and have full control of their destiny. Life is more fun that way.

Marty Zwilling

Disclosure: This blog entry sponsored by Visa Business and I received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa's. Visit http://facebook.com/visasmallbiz to take a look at the reinvented Facebook Page: Well Sourced by Visa Business.

The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently.

Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner's success. For additional tips and advice, and information about Visa's small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.

Team Member Competency Is Critical To Your Startup

Most people think that the Peter Principle (employee rises to his level of incompetence) only applies to large organizations. Let me assure you that it is also alive and well within startups. I see startup founders and managers who are stalled transplants from large organizations, as well as highly-capable technologists trying to start and run a business for the first time.

Forty years ago, in a satiric book named “The Peter Principle”, Dr. Laurence J. Peter first defined this phenomenon. The principle asserts that in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent, and there they remain, unless they start or join a startup to get the next level.

In all environments, the move to incompetence often occurs when competent technical people try to step into management or executive positions, for which they have no aptitude, interest, or training. How many technologists have tried to run startups and failed?

So what are the keys to avoiding this problem for yourself, and recognizing the signs and requirements in your own team, before the “level of incompetence” paralyzes your startup:

1. Focus on communication skills. The ability to communicate effectively and often to your team and to the outside world becomes more and more critical as you move up the role ladder. Practice and training are critical. If communication to others is not your forte, then stick to a highly focused non-management role.

2. Look for ability to direct, as well as act. Many people have trouble directing the task and not doing it themselves. Both are hard work, and both are valuable. Executives get paid for what they know, not for what they can do with their hands—for managing the job and not actually doing it.

3. Comfortable with a spectrum of responsibilities. As a manager, there will be many new responsibilities, most of which are a little fuzzy. A tech promoted to manager must change his mindset from one of focusing on a problem and solving it, to multi-tasking a broad range of responsibilities, and keeping them all moving.

4. Consistent demonstration of high-level competencies. You need ‘portable’ competencies—those that you can take with you to any level of the corporate ladder, and which you can tap into in a managerial capacity. For example: be solutions-oriented, able to balance both sides of an issue, and be a quick study.

5. Provide mentoring and formal management training. If you are seriously looking at shifting someone to a management role, make it top priority to get them formal training, not only on business management itself, but especially on people management and interaction skills. Talent and good intentions are not sufficient.

6. Evaluate passion and current position. A management position is not for everyone, and a specialist career may be much more exciting. Great technical gurus get paid very well, and have visible top positions like Chief Technical Officer (CTO) for prestige and respect. You can still be the founder, and bring in a CEO to run the business.

Another important point is to recognize and deal immediately with occurrences of the Peter Principle. If you are the CEO, and you tolerate ineffective people in important positions, they will suck the life out of your startup. The good people will fade away, and only the bad will remain. You will be tagged as the one with the Peter Principle.

It’s something that we all have to deal with, in our own career, and with other team members. In a small startup, everyone has to carry a maximum load for survival, and everyone sees the non-performers. If you are the last to see the problem, or the last to react, maybe it’s time to look in the mirror.

Marty Zwilling

A Founder’s First Key Decision Is The Business Name

First things first – your startup needs a name! This may seem a silly and frivolous task, but it may be the most important decision you make. The name of your business has a tremendous impact on how customers and investors view you, and in today’s small world, it’s a world-wide decision.

Please don’t send me any more business plans with TBD or NewCo in the title position. Right or wrong, the name you choose, or don’t choose, speaks volumes about your business savvy and understanding of the world you are about to enter. Here are some key things I look for in the name, with some expert help from Alex Frankel and others:

1. Unique and unforgettable. In the trade, this is called “stickiness.” But the issue of stickiness turns out to be kind of, well, sticky. Every company wants a name that stands out from the crowd, a catchy handle that will remain fresh and memorable over time. That’s a challenge because naming trends change, often year by year, making timeless names hard to find (remember the dot.coms).

2. Avoid unusual spellings. When creating a name, stay with words that can easily be spelled by customers. Some startup founders try unusual word spellings to make their business stand out, but this can be trouble when customers ‘Google’ your business to find you, or try to refer you to others. Stay with traditional word spelling, and avoid those catchy words that you love to explain at cocktail parties.

3. Easy to pronounce and remember. Forget made-up words and nonsense phrases. Make your business name one that customers can pronounce and remember easily. Skip the acronyms, which mean nothing to most people. When choosing an identity for a company or a product, simple and straightforward are back in style, and cost less to brand.

4. Keep it simple. The shorter in length, the better. Limit it to two syllables. Avoid using hyphens and other special characters. Since certain algorithms and directory listings work alphabetically, pick a name closer to A than Z. These days, it even helps if the name can easily be turned into a verb, like Google me.

5. Make some sense. Occasionally, business owners will choose names that are nonsense words. Quirky words (Yahoo, Google, Fogdog) or trademark-proof names concocted from scratch (Novartis, Aventis, Lycos) are a big risk. Always check the international implications. More than one company has been embarrassed by a new name that had negative and even obscene connotations in another language.

6. Give a clue. Try to adopt a business name that provides some information about what your business does. Calling your landscaping business “Lawn and Order” is appropriate, but the same name would not do well for a handyman business. Your business name should match your business in order to remind customers what services you provide.

7. Make sure the name is available. This may sound obvious, but a miss here will cost you dearly. Your company name and Internet domain name should probably be the same, so check out your preferred names with your State Incorporation site, Network Solutions for the domain name, and the U.S. Patent Office for Trademarks.

8. Favor common suffixes. Everyone will assume that your company name is your domain name minus the suffix “.com” or the standard suffix for your country. If these suffixes are not available for the name you prefer, pick a new name rather than settling for an alternate suffix like “.net” or “.info.” Get all three suffixes if you can.

9. Don't box yourself in. Avoid picking names that don't allow your business to move around or add to its product line. This means avoiding geographic locations or product categories to your business name. With these specifics, customers will be confused if you expand your business to different locations or add on to your product line.

10. Sample potential customers. Come up with a few different name choices and try them out on potential customers, investors, and co-workers. Skip your family and friends who know too much. Ask questions about the names to see if they give off the impression you desire.

If you are still unsure of yourself, you should know that there are many dedicated firms, like Igor and A Hundred Monkeys, who can relieve you of $1 million of your hard-earned funds to come up with just the right appellation. Hmmm. I wonder how much they spent on their own names?

Marty Zwilling