Category Archives: CEO

The Startup Board’s Hippocratic Oath

Posted on October 9, 2025 | 4 comments

The Hippocratic Oath is a well known oath of ethics taken by physicians. It requires them to swear, among other things, to do no harm in dealing with patients. While chatting with a VC the other day, it occurred to me that we should have a similar concept for startup boards.

Unfortunately, I think “do no harm” actually sets too high a bar.

To help startups succeed, boards need to challenge leadership teams, ask hard questions, and get them to consider new ideas and approaches. While I think boards should refrain from giving directive feedback, there is always the chance that a hard question leads the company down a path that ultimately proves unproductive. For example, if a board member asks if a company to consider a PLG motion for a new product, that could lead to the company launching a new sales motion that ultimately fails.

This example, by the way, shows both why boards should not give directive feedback (i.e., “do a PLG motion”) and why founders should not listen to them when they do. Think: yes, we’ll consider that, but only try it if we think it’s a good idea. Throwing a bone to board members by agreeing to try ideas you don’t believe in is a losing strategy. If they fail, you are more likely to get scorn for poor execution than credit for the openness in having tried. When results are the only thing that matter, only place your bets on things you think will deliver results. (And yes, the possibility that you threw good execution at a bad idea seems conveniently never to be in consideration.)

If “do no harm” sets too high a bar, then what oath might we use? After talking to my friend, I think I found a great alternative: do no demotivation. “I don’t want executive teams leaving board meetings feeling demotivated,” he said. And he was absolutely correct.

How do we want people to feel at the end of a board meeting?

We want the board to feel like they attended a well-run meeting, had a chance to help the company, and understand the plan to address current challenges going forward
We want the management team to feel like the board is knowledgeable, helpful, and supportive
And we want the management team to feel energized to go execute the plan

That’s it. If you get those three things, you had a successful board meeting. And demotivation is nowhere on that list. Demotivation doesn’t help anyone.

It doesn’t improve the odds of executing the plan successfully
It definitionally doesn’t make anyone feel good
It does make the e-staff start to question the CEO and each other
It does make people wonder why they’re grinding so hard
It does make the team feel unappreciated and potentially vulnerable

So I’d propose Do No Demotivation as the Hippocratic Oath for startup boards.

I’ll finish this post by listing some common ways that boards demotivate executive teams (and feel free to put more examples of your own in the comments):

Expressing surprise over things they should have known.
Asking trap questions: “do you think our sales productivity is substandard or very substandard?”
Placing blame: “clearly, since our CAC payback is so long, we have an inefficient sales organization.” (Maybe we do. Or maybe we have a hard-to-sell product. Or weak gross margins. Or something else. The high CPP is a fact. The reason for it is not always a bad sales team.)
Cherry-picking: taking top decile benchmarks, or public comps, or even just top quartile numbers but across 4 different metrics. It’s like comparing your child to the best mathematician, athlete, musician, and writer in the school. (It’s quite rare when one person is all those things.) Or, my favorite: benchmarking without regard for situation. Yes, our CAC ratio is high, but 75% of our deals are dogfights against a price-slashing competitor. And yes, I know what “sell value” means, thanks.
Expressing anger in pretty much any form. While I’ve seen some howlers, fights in board meetings are not OK. They demotivate everyone. And they take focus off the top busness priorities.
Ratholing, failing to take things to an offline meeting or working group. OK, I do this one from time to time. (“But I promise it will be quick.”)
Making easy things hard. When in doubt, if a topic is not strategic, just do things the standard way at the good-enough level.
Expressing negative or hopeless sentiments: “at this course and speed, I’m not sure we’re creating any value.” As opposed to: “we need a new plan that creates value and that means we need to find a way to accelerate growth.”

So before you attend your next board meeting remind yourself to do no demotivation. It’s the new Hippocratic Oath of startup boards.

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Posted in Boards, CEO, Management, Startups, VC

Three Ways To Get Fired as CEO

Posted on May 13, 2025 | 2 comments

While I could write the equivalent of 50 Ways to Leave Your Lover when it comes to variations on how to get fired as CEO, the purpose of this post is simply to discuss three things CEOs can say to their boards that will perk their ears and get them to start asking questions that could lead to the CEO’s termination.

Here are those three things:

“I’m getting tired of running the company.”
“I’m running out of ideas for how to fix our core problems.”
“I think we need to sell the company.” [1]

First, let’s note that it is much harder, sometimes actually impossible, for a founder/CEO to get fired than a hired (aka, “professional”) CEO. The former have a powerful combination of moral authority, share ownership, and/or contractual protections. The latter — even if they joined very early and built much of the company themselves — will never be seen as founders, but simply employees who, in the end, are replaceable much as anyone else.

While it’d be stretch to call hired CEOs “goldfish” — as one of my old CFOs used to refer to SDRs [2] — in the end, you’re either a founder or you’re not. So this post is largely for hired CEOs, but it should nevertheless be of interest to founders as well.

While it’s probably somewhat self-evident, what’s so scary about the three above statements?

They each say the CEO is effectively giving up on solving the company’s challenges
They are not easily fixable by the board — a stock grant, a pat on the back, or a bonus program isn’t likely to fix anything
To the extent you define the CEO’s job as “to get what matters right,” they each signal that the CEO is no longer interested in doing it

And scariest of all, each statement is a bell that is impossible to unring. Think: Oh, just kidding, I have tons of ideas. Or, oh, I was just messing around, I don’t think we should sell the company. It was just a modest proposal, in the Jonathan Swift sense. Sure.

It’s like saying to your spouse, “hey honey, I think we should start dating other people.” It’s very difficult to roll that back.

This means the CEOs should think very carefully before making statements like these. Because once they’re said, they may be stuck somewhere in the board’s mind forever:

We keep missing quarters because Mary’s tired and not pushing the company.
We’re only shooting for moderate growth because Bob’s out of ideas for how to grow more quickly.
James isn’t investing for growth because he wants to sell soon and is trying to juice up profit.

Why? Because the CEO told us so. If I were a bell, I’d go ding, dong, ding, dong, ding.

Now, it’s certainly possible to try and walk these statements back: “oh, I was just tired that day because I had some personal stuff going on and I was sick.” But they’ll always be there in the back of the board’s mind. Think: Maybe Joe said that because Joe meant it.

So the best thing to do is never say these things in the first place. Not unless you’re very sure how they’ll land and ideally have socialized them 1-1 in advance with key board members. Or, if you decide to say them anyway, at least understand the potential downstream effects. Otherwise, you may find that a simple, off-the-cuff comment may haunt you for some time.

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Notes

[1] The notable exception here is a PE-backed firm where the company has achieved its target financial profile and ergo hopefully its target valuation, and it really is time to sell. In VC-backed firms, where the general goal (and belief that underlies the VC’s investment thesis) is to “shoot the moon,” saying you want to sell can be seen as betraying the mission — especially if the company is performing well — and/or if the VCs still believe in the company’s bright future. Saying you want to sell before there is consensus that hope is dead can be seen as a premature admission of defeat.

[2] On the theory that they often perish, and if you find one floating in the bowl, you just get a new one.

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Posted in Boards, CEO, Management

The Paradox of Saying, “It’s Time To Sell The Company”

Posted on December 30, 2024 | 6 comments

A critical part of the CEO’s job is realizing when it’s time to sell the company. I’m not talking about the easy cases, like when you’re in year five of running a PE-backed company, and the numbers suggest an exit that produces a 3x+ return. Everyone knows the point was to sell the company one day and that PE generally wants a 3-5x return in 4-6 years. So saying, “it’s time to sell” in this scenario has all the shock value of saying, “it’s six o-clock, I guess I should get started cooking dinner.”

I’m talking about the much more difficult case where the company is performing well financially, but the CEO sees storm clouds on the horizon that indicate the future will quite probably not be as rosy as the past.

Four things combine to make this a difficult conversation:

There is no data to suggest the firm is in trouble. In fact, the data suggests quite the opposite, that the future is bright. Think: “You’re on the same trajectory as our best-in-class firms.”
The storm clouds are unfavorable trends, not performance problems. But by the time those trends manifest as performance problems, it may well be too late to get a decent valuation for the firm.
Your viewpoint will likely be interpreted as self-interested. “What Joe’s really saying is that he wants to cash out.” Or, “Joe’s lost faith in the company because he’s lost confidence in his ability to lead it.” Conclusion: “We need someone running this company who believes in its future and who is capable of taking it to $250M.” Adios Joe. Even though poor old Joe never actually said either of those things.
The “hits” nature of the VC business. Selling a winner early can have a devastating impact on the IRR of a fund (e.g., removing the top two performers can change a fund’s IRR from 35% to 12%. Think: “There’s no way we’re taking a double on this investment when I think this can be a home run. I’d rather get thrown out sliding into third.”

The incentives are all wrong. The VCs can’t see the problem in the data because it’s not impacting performance yet. They often don’t want to see the problem because the company may be one of a few winners in the portfolio that they’re hoping will return the fund. It’s very easy for the CEO in this situation to get fired. Think: “If I believed this could be a $1B company despite these storm clouds, then I’d want to fire me, too. But I don’t.”

The ultimate problem is that you can’t see around corners when you’re only looking at performance metrics. Even leading indicators like pipeline won’t be leading enough to show these problems. The best chance of seeing the problem in the data is if a few of your earliest, most visionary customers have moved onto the new thing. But due to switching costs, this doesn’t often happen. Other companies, who skipped your generation of technology, are more likely to be the first adopters of the new, new thing.

For founder/CEOs, recognizing the situation is even more difficult than for hired CEOs because:

The founder’s inbuilt reality distortion field. Founders are gifted at willing the world into what they want it to be. This is awesome for driving disruptive visions. It is dangerous when used to imagine away a harsh reality.
The “they said we couldn’t get this far” fallacy. Founders have been told so many times by so many people that, “you’ll never be able to do X” that when faced with stated obstacles they immediately rationalize them away. They said we’d never get PMF. They said we’d never get to $1M in ARR. They said the megavendors would crush us. They said we’d never be able to hit $10M. They said we’d never be able to sell enterprise. They said we’d never get to $50M. Most of the time, this obduracy is helpful. Except for the one time when “they” are right.

The are two morals here. First, founders need to try to objectively evaluate facts and disable their knee-jerk, “they said we never could do X” reflex. Second, boards — knowing how difficult it is for a founder to reach the conclusion that they may be in a Kobayashi Maru scenario — should immediately perk up when they hear a founder say that they might be.

To make this concrete, let’s provide a few examples of these storm clouds. I’m not talking about a squall here, I’m talking about clouds that presage a full-blown typhoon:

Megavendors entering the category. Worst case, they give away their equivalent of your product to sell their own core product. But even when they sell an entry in your category, they may do so at a lower price. This begs the questions: How much is your differentiation really worth? At what price point can you still compete? How much is your neutrality worth compared to the integrated solution? Examples: Microsoft Power BI, Databricks Unity Catalog.
Omission from a category consolidation. When a best-of-breed category is transformed into a suite by the market leaders, such as the integration of query, reporting, and OLAP in the 2000s, or the integration of conversation intelligence, forecasting, and sales engagement today. Actuate was left behind the first example, Fireflies might well be in the second. In rare cases, the neutrality of vendor independence is valued (e.g., Informatica) but, most of the time, the standalone solutions end up neither best-of-breed nor integrated.
Category superannuation. The category is crushed by indirect competition that replaces it. For example, what many see AI doing to RPA today. Or MarkLogic (an XML database), which was superannuated by NoSQL. You don’t get beaten by a direct competitor, but simply replaced by a new category of software that does what you do as a subset.
Imminent commoditization. While lazy marketers bandy this term about too freely, sometimes categories do commoditize either in the sense of a lack of differentiation among alternatives or, more commonly, price pressure brought about by loss-leader entries from megavendors or open source alternatives. You still offer something of value, but customers can get roughly the same thing elsewhere for free or nearly so.

Why do I call this a paradox? Because, unless you’re a founder with control provisions, it’s very easy to get fired just by starting the conversation. Can you ever tell the board that it’s time to sell a high-performing company without getting fired for doing so?

Having failed at this once myself, “perhaps” is my best answer. Here’s what I would recommend to maximize your odds of being able to successfully lead this conversation:

Get the technical founder(s) on board first. If they don’t believe the industry changes are an existential threat, the whole debate may be impossible.
Go slowly. Don’t drop the whole idea on the board in one fell swoop. Instead, signal over a series of board meetings that there is a potential storm brewing. This isn’t always possible (e.g., a surprise megavendor entry), but it usually is.
Lead the horse to water. Ask questions, don’t make statements. Understand that saying, “I think we need to sell the company” is a bell that you cannot unring — so don’t say it. (Yet at least.) Use my formula for having meaningful strategic board discussions.
Never signal any personal interests. Never talk about personal liquidity or your ability to scale the company, lest any comment made will never be forgotten. Always just talk about the business, its health, and its value.
Bring data. Analyst reports, megavendor speeches, customer interviews, and buying intent surveys can all help show people what’s happening.
Do business development. You do not need the board’s permission to build relationships with potential strategic acquirers, particularly when the context is strategic alliances, OEM distribution, or potential investment. (You should be doing this anyway.) This gets the lines open if and when the board does decide to explore options.
Leverage personal relationships. Build and use your 1-1 relationships with board members to have these tricky conversations, particularly with the “lead” or “alpha” director.
Be open to alternatives. If people raise valid pivot strategies, consider them openly. Never appear wedded to a given solution (e.g., sell the company) particularly when your ability to execute it is beyond your control.
Leverage independent directors and advisors. Hopefully these individuals can be more objective in evaluating the firm’s situation and offer wise counsel on how to proceed.
Watch your back. Try to detect if board members start meeting without you, e.g., by staying close to the founders or select board members you know and trust well.

I think selling a high-performing company in the face of a brewing storm is among the hardest tasks a CEO can undertake. Hopefully, in this post, I’ve provided a few good ideas for what to do if you find yourself in this situation.

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Posted in Boards, CEO, M&A, Startups, Strategy, VC

A Simple Rule For When To Consider Selling Your Startup

Posted on October 30, 2024 | 1 comment

The cleverest answer I’ve heard to the question “When would you sell your startup?” is, “When somebody offers me more than I think it’s worth.”

It’s clever alright, but it’s not that helpful. It’s a meta-answer that sidesteps the question of value. In this post, I’m going to offer a simple rule for when you should consider selling your company if someone comes along and makes a serious offer.

Selling a company is a hugely difficult decision that involves both personal considerations and big, strategic questions like:

If I say no, what might that strategic suitor do instead? Will my top partner become my top competitor, potentially overnight?
What is happening to the space at large? Are my competitors being gobbled up? Might I be the one left without a chair when the category consolidation music stops?
Does the market require a Switzerland, an independent vendor who’s not owned by any of the megavendors? (For example, as data integration has historically.)
If I “keep on keeping on” — given my size, growth rate, and financing ability — where I am likely to end up? As a clear market leader? As an undifferentiated, fifth-place also-ran? (And those don’t trade for median multiples.)
Or, will I “pull a VMware” and sell a business for $625M that will one day be worth $60B? (And conversely, if I own 30% of it, how much difference will that 100x uplift actually make in my life?)

In this post, we’re going to keep it simple by focusing not on whether you should sell your company, but on whether you should consider selling it.

And, as is often the case, I have a simple rule. You should consider selling your company when an offer takes three years of risk off the table.

What does that mean?

Go look at your three-year model (and this is one of many reasons why you should have one)
Find your ARR is twelve quarters out
Multiply that ARR by what you think will be a reasonable ARR multiple given your future growth rate
If the offer on the table is greater than or equal to the number you just calculated, you should consider selling.

Why do I think this formula works? Because:

Most three-year models are optimistic. For most companies, you’re looking at a best-case estimate of what ARR will be in three years.
You’ll probably overestimate the “reasonable” multiple. If the market data suggests 4-6x, you might round up to 6-8x. Human nature.
You’ll therefore generally arrive at a generous future valuation that will take no small amount of work to realize.
And a lot of shit can go wrong along the way.

Why consider taking that valuation? Simple. Because building companies is hard. As one founder often said, “not just harder than you think, but harder than you can possibly imagine.” I’ve played a leading part in building four enterprise software companies and I’d say it’s just plain hard. But maybe that’s because I have a better imagination. Or an imagination fueled by more experience.

So, if you want to pay me now what I think the company will objectively be worth in three years — if everything goes smashingly — then I’m going to need to seriously consider that offer.

Note that I am not suggesting you should automatically take any offer that’s N times your 3-year forward ARR (for whatever value of N). You need to answer all those personal and strategic questions first. But I am also saying that — unless conversely you see storm clouds on the horizon — that you shouldn’t invest too much time considering offers that take 1-2 years of operating risk off the table.

Why?

Your one-year-forward ARR is basically your operating plan. And, if you’ve followed my planning advice (“make a plan that you can beat“), then you should have pretty high confidence in that plan. So an offer that takes one year of risk off the table shouldn’t be that compelling.
Your two-year-forward ARR is not the layup that your one-year plan should be, but if you think your model is realistic — and I admit this is completely subjective — selling off two-year-forward ARR just doesn’t seem worth it. You’re trading away future upside for a number that you’re still pretty confident you can hit. Two years is a long time, yes, but not that long.

For me, at three years, the tone changes. A lot can happen in three years. New competitors. Category consolidation. New vendors entering the space. Bad C-level hires. Product development disasters. Failed acquisitions. Geographic restarts. Channel programs that don’t take. And other scary things that go bump in the corporate night.

Yes, everything may go right over your coming three years. Maybe you’ll even beat that optimistic three-year model.

But at three years, I start to do some hard thinking about both strategic and operational risks. I’ll need to feel very good about the future to say, “no thanks, we’ll roll the dice.” Particularly if that suitor is a megavendor with intent to enter the market anyway. Or, if multiples are currently high relative to historic averages — meaning that I might get offered 10x $50M today, but by the time I’m actually at $50M, the market may be trading at 6x. That’s three more years of work for 40% less money assuming everything goes great. All because multiples moved down on me.

Let’s insert a little model to make this concrete:

Using my rule, if someone offered me $675M for this company, I’d have to seriously consider it. Note that’s 45x this year’s ending ARR and 22x next year’s. But since it’s November, I’m already worth $233M, the 15x multiple coming courtesy of my 107% growth rate. (Feel free to quibble with me on the numbers; I think they’re representative, but the approach is the point.)

If someone offered me $354M, then I’d say no and roll the dice on achieving my operating plan. Because once I do, I’ll be objectively worth that in 12 months.
At $535M, I start to get queasy because that’s 2.3x what the company is objectively worth today. This is why I made the model — to make things concrete — because I might well consider that offer, particularly because my decelerating growth drops my 2027 multiple to 8x, meaning only $141M of incremental value is created in 2027. I wouldn’t definitely consider it, but I probably would and I’d be arguing the whole time that we can make it worth more given “only” three years’ work. (My change in tune here is a negotiation posture.)
At $676M, I’d definitely consider the offer for the reason stated above: that’s what the company should be objectively worth in three years if everything goes well. And a lot can go not-so-well over a three-year period.

Note that I did one sneaky thing in the model. I included the number of AEs I’d need to make those numbers using that as a rough proxy for work. To make the plan work, I’m going to have to hire 35 reps — net of attrition — over the next three years. And all the support resources they need and/or generate, e.g., SDRs, SCs, managers, post-sales consultants, CSMs. For me, it helps to make the anticipated work visceral.

Let me address some anticipated objections to this approach:

It doesn’t consider long-term strategic value. You’re right. It doesn’t. That’s why you need to consider that under the big strategic questions. Don’t pull a VMware. Or, arguably, a YouTube.
If I did this three years ago, I’d have sold for pennies. To be concrete, let’s say the company’s annual ARR ramp was (0, 1.0, 2.5, 7.5, 15.5), which dovetails into the table above. That means you’d have seriously considered an offer of $46.5M three years ago when you were $1.0M in ARR. If you’re VC backed, there’s no way you’d sell, so you can consider it as much as you want. And if you looked at personal and strategic considerations, you probably would have said no anyway. But yes, the rule doesn’t scale particularly well back to $0.
This will backfire going into a valuation bubble. And it will. Say multiples now are 6-8x for your growth rate and you model off 6-8x in your three-year calculation. If the market gets frothy, those multiples could double to 12-16x. Ergo, this formula will underestimate your future value by half. I have two responses: (1) the opposite is true as well; you win when you apply bubble multiples to future non-bubble ones, and (2) the ARR figure is probably over-estimated which should mitigate but not eliminate that effect.
It doesn’t include a hockey stick when we hit some market inflection point. That’s Silicon Valley speak for the model might underestimate three-year ARR because of [insert miracle here]. And it might. But for every 100 companies I see waiting for those miracles, maybe 2-4 get them. It’s rare. And if you really think that inflection point is going to happen, put it in the three-year model.
All the great founders are all-in, YOLO. I have two words for you: survivor bias. I know lots of great founders who were all-in, got sunk on the river, and wish they’d taken some money off the table. Ultimately, this will come down to your personal goals. (And it’s one reason why I think VCs love second-time founders. Dave Duffield was never going to sell Workday too early because he had all the money he ever needed from PeopleSoft. And since VCs would generally rather sell too late than too early — because it’s a “hits business” — that creates a deep, natural alignment.)

My purpose here was to give you a rational framework for thinking about this decision, and here it is: think about how many years of risk gets taken off the table. That’s what you get in exchange for trading away whatever potentially bright future awaits.

The rest is up to you — and your board. Good luck with it.

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(Revised 3:59pm. Sorry, this was accidentally published before final spellchecking and copy editing was complete.)

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Posted in CEO, M&A, Silicon Valley, Startups, VC

The Keys to Nailing and Scaling Go-To-Market: Slides from my 10X CEO Accelerate Presentation

Posted on September 12, 2023 | 2 comments

It’s fun when the person who ran marketing at one of your rivals asks you some 20 years later to speak at their annual conference. It’s even more fun when it’s a fellow CMO-turned-CEO and he’s assembled quite an amazing group of people to address. I’m speaking of Brian Gentile managing director of 10X CEO, an accelerated learning environment for high-performing, venture-backed CEOs — or what I might simply call a CEO peer-networking, support, and learning group.

I’m familiar with several of these groups, know many CEOs who swear by them, and have tried a few myself. The core idea is simple:

A lot of CEOs are first-time founders and could certainly use some help in doing their job. (Heck, first-timer or not, founder or not, it’s useful to have such a peer network.)
The CEO job is indeed a lonely one — virtually everyone around you has an agenda of some sort, from the board to the e-staff to the rank-and-file employees.
So it’s enormously helpful to meet with peers, outside the company, who are truly neutral when it comes to matters affecting your business.
All the better if the organizational structure is individual peer groups that convene in an annual summit — and if they provide coaching and learning resources to boot.

I know at least a half-dozen members of 10X CEO and to a person they rate their experience highly. If you’re CEO of a fast-growing company that’s $10M+ in ARR, you might contact them to learn more.

Long story short, I was happy to hear from Brian and be invited to speak. The topic I spoke on was The Keys to Nailing and Scaling Go-To-Market. In my speech, we drill into two things:

My thoughts on scaling a startup in general:

It’s about growth engines. The more, the better.
It’s about people. Some jobs are harder to stay in than others as a company scales. Pay attention to that.
And it’s about abstraction. When you start go-to-market, it’s about people and deals. When you scale go-to-market, it’s about numbers and models.

The five keys to scaling go-to-market:

Design good experiments, so you can be pretty darn sure that something works before scaling. (Note: were you pretty darn sure the last time you scaled something that didn’t work?)
Run a systematic expansion strategy, where you’re crossing the pond by hopping a series of lily pads, instead of trying one big, dangerous leap. (It’s not just boiling for which frogs are useful in business metaphors.)
Model-driven scaling, breaking down go-to-market into a series of models, each of which is defined by goals, roles, and ratios. You can compare these models by calculating contribution margins for each of them.
Metrics-driven execution, building a data-driven culture where you spend a lot of time reviewing and discussing shared data in a standard template. (See my SaaStr 2023 talk for more.)
Dance with who brung ya, one of my more contrarian positions. Silicon Valley is obsessed with the next big thing to the point of sometimes forgetting the last. When scaling, I think it’s key to not forget the people, product, and customers that brought you to the dance.

I’ve embedded the slides below. If they’re too hard to read, go to the PDF here.