Why Co-CEOs Are a Bad Idea for Early-Stage Startups, Almost Always
Take a look at the leadership at any major company -- tech or otherwise -- and it’s very unlikely to see a co-CEO title. Can you name a single company with $10 million in sales that has two CEOs? There are a few, but not many. At Techstars, we’ve been very vocal about why having two CEOs at the helm of any company is generally a bad idea, but that doesn’t mean it never works out.
You may be reading this introduction, glancing back at my title, and feeling very confused. Techstars has been around for over 10 years, with David Cohen and I having a working relationship for over 25 years. Largely because we’ve worked together so long, being co-CEOs works for us, but it is generally not the case in an early-stage startup. We’ve seen countless examples of two CEOs leading a startup -- some of which are no longer with us, others that have restructured.
Related: Select Your Co-Founder Carefully
When building your organization from the ground up, it’s best to assign employees (and co-founders) to specific roles to ensure smooth operations. When employees and funds are tight, it’s best for your future that everyone has their own path, with their own, distinct responsibilities.
Why co-CEOs don’t (usually) work
When an idea for a company happens, it’s more than likely the brainchild of more than one person. Co-founders may be thinkin, This is our collective idea, so we should share collective ownership of running the company. This is where they are wrong.
Co-founders don’t want to create a hierarchy between them, which is perfectly understandable, but not in the company’s best interests. By creating co-CEOs, the company as a whole now views the co-founders as equals. If you take a deeper look into day-to-day activities, the co-founders probably aren’t all that equal -- there may be one person who is carrying the weight of the other founders. This can create bigger and more deeply rooted founder issues that have the potential to bring your company to its knees.
Some co-founders decide on co-CEO titles because they don’t believe titles are relevant, or they don’t want to have the discussion at all. If co-founders are brushing off a conversation on titles, they will likely brush off more important discussions that need to be had.
Founder issue amplification
When two CEOs are working together to call the shots, there will be times when the two simply can’t agree. When they don’t, who gets the final call? Even worse, which CEO do employees go to for counsel and decision-making? When one is out of the office, is the other in charge and vice versa?
In most cases, employees are conflicted and feel the need to get sign-off from both, which leads to slower decision-making, or in some cases an all-out halt in productivity. Other times, employees do the classic “mom vs. dad” approach, latching to the CEO that generally agrees with their point of view or signs off based on trust in their relationship.
When growing a company, bringing on more and more employees, this conflict is bound to happen. And when the founder issues are too much to bear, one founder and CEO will back away -- maybe backing away from decision-making due to constant bulldozing, or pulling out of the company altogether. These issues may have never occurred if roles had been broken out at the start of the company.
Defining roles early on
While some co-founders might feel it difficult to knight a CEO, early business interactions should be a telltale sign of who should be the one in the big chair. Some questions to ask each other:
- Who thrives on the business issues and defers to the co-founder on the technical issues?
- Who is tapped for media interviews, or leads investor pitches?
- Who deals with contracts, negotiations and partnerships?
- Who is perceived by others as the person in charge based on personality, attitude and assertiveness?
When a decision is made, the other founders should pick titles that match their specific strengths. The key here is that co-founders need to determine how they interact collectively as the executive leadership team. Communication and proper processes to discuss the smallest details of strategy, the business or the product should be in place from the very beginning.
Why best practices may not always be best for you
A startup with co-CEOs doesn’t necessarily mean the company is dysfunctional, but in early-stage companies the dual CEO can certainly lead to some problems that aren’t easy to fix. Internal power struggle, conflict avoidance problem, no clear chain of command -- all issues that can lead to internal and external strife.
Whether you and your co-founders decide to name one CEO, or split the role, the key to success is execution from the founding team. If the founding team is having struggles communicating or making decisions on who leads and who owns which aspects of the business, it might not be in your best interest to jump into the startup world together.
If you do plan to take the co-CEO route, here are a few best practices I’ve learned along the way:
- Decide that a yes/no from one CEO is a yes/no from both.
- Know each other's strengths and weaknesses, and let the stronger CEO be the tie-breaker in decisions that match their personality.
- If you are unsure, discuss the smallest details of together.
- Finally, trust each other!.