2 Great Startup Tips From a Three-Time Public-Company CEO
Grow Your Business, Not Your Inbox
If experience is the greatest teacher, then Mitchell Kertzman should have a wealth of good lessons to share.
Before signing on as a managing director at Hummer Winblad Venture Partners, he served as chairman and CEO of Liberate Technologies, a company that's been public since 1999 and that provides software for the delivery of digital services by cable television operators. He also founded and served as CEO of client-server development toolmaker Powersoft, which merged with Sybase in 1995 in a $900 million stock swap. Then he served as chairman and CEO of Sybase, which SAP acquired for $5.8 billion in July 2010.
Now Kertzman is a full-time venture capitalist who sits on the board of NuoDB, a Cambridge, Mass.-based database-software company that competes with Oracle, Microsoft and IBM.
While serving as a public company CEO, Kertzman often sat on the boards of 12 to 15 other firms. In an interview this week, Kertzman told me, "That has helped me to see that the biggest problems that face founders -- especially of software companies -- relate to building teams and managing expenses."
And Kertzman offered up his insights on just how to deal with these challenges: To create effective teams, hire people smarter than the founder and create a culture to encourage all players to collaborate for the greater good, he advised. And the key to managing expenses is to track whether the company is meeting quarterly revenue goals, figure out why it missed any targets and adjust spending based on such analysis.
1. Building a great team. Founders fail if they don't hire people who are better than they are and who don't stretch beyond finger-pointing, according to Kertzman. "Founders are afraid to hire people smarter than they are," he said. "I joked ... when I was CEO it was easy to hire people in sales, engineering and marketing who were better than me."
But the key lies not only in hiring great talent but arranging for all players to work together to benefit the company. "A great CEO can attract and lead top talent," Kertzman said. "Instead of the salespeople pointing the finger at engineering and marketing, complaining that the product is not good enough or marketing is not telling a good enough story, a great CEO will create an environment in which each function will do its own job well and help out other members of the team so the company excels in the marketplace."
Finding a standout CEO is not easy, the venture capitalist said. "I don't look for an operational manager who tries to use performance metrics to make each function perform optimally," Kertzman said. "I check with board members, investors, direct reports and others who have worked with a CEO candidate to see if they are great leaders. You can also tell by their track records."
2. Managing expenses. Many founders raise capital and then assume they will meet with success. If they have $25 million in capital, they spend it all because that's what they projected would be needed to achieve their goals.
But new business leaders might be wiser to proceed more cautiously, according to Kertzman. "I encourage founders to set a revenue and expense budget," Kertzman said. "Success almost never comes as fast as founders think it will. About once a quarter, I encourage founders to look at whether the company is meeting its revenue goals. If it's falling short, I try to understand whether it's because the product is not competitive or whether the market is developing more slowly than anticipated."
The results of this analysis can dictate how best to manage expenses. "A startup usually does not miss its revenue targets because competitors have better products," Kertzman said. "But if the startup is not competitive, I may advise it to spend more on improving the product and cut back on marketing for a bit."
Added Kertzman: "And if the market is developing more slowly than expected, I might throttle back on some expenses or allocate the money differently so the company is around when the market does develop."
This kind of analysis is critical but should not be done too frequently, Kertzman said: "If you keep adjusting the plan every four weeks, people will get confused about what they are supposed to be doing. Every three months is about the right frequency for this kind of analysis and adjustment."