We talk a lot at Notion Capital about investing in great founders and supporting them to build big, successful, even iconic businesses; businesses that solve industry-defining problems; business that create substantial value for their customers, their market and – of course – for themselves.

In my role – leading our post-investment portfolio services - this is something I’ve been thinking about a lot, struck as I am about how much we talk about it and how little I know.

Sometimes writing is useful to explain a point of view, but sometimes it is just as useful as a means of structuring one’s thoughts, figuring out what you do and don’t know. And this article is definitely more of the latter. Once I have been in this role for five, maybe ten, years perhaps I will revisit this as an opinion piece with some authority and evidence, but until then…

Why is this important?

The facts speak for themselves – Atomico’s research covered in Techcrunch at the start of last year shows the correlation between keeping original founders and achieving billion-dollar valuations.

133/156 companies (85%) pushed through the billion-dollar threshold by sticking with their founding CEO. Furthermore, of the 27 companies founded since 2010 that have reached billion-dollar status, only a single one does not have a ‘founder-CEO’. The trend might thus be accelerating.

Why this is the case is neatly summarised by Ben Horowitz.

Etymologically, the word technology means 'a better way of doing things.' As a result, innovation is the core competency for technology companies. Technology companies are born because they create a better way of doing things. Eventually, someone else will come up with a better way. Therefore, if a technology company ceases to innovate, it will die. Ben Horowitz.

Horowitz argues that true technological innovation is “insanely hard to do” and if the company stops, it dies, but that the fundamentals of running a business can and are learned by the very best and complemented by co-founders and leadership teams.

These innovations are product cycles. Professional CEOs are effective at maximizing, but not finding, product cycles. Conversely, founding CEOs are excellent at finding, but not maximizing, product cycles. Our experience shows—and the data supports—that teaching a founding CEO how to maximize the product cycle is easier than teaching the professional CEO how to find the new product cycle. Ben Horowitz.

So what skills are important as a CEO?

In one of his short and concise blogs, Fred Wilson summarised the role of a great CEO as encompassing three skills:-

A CEO must three do things:-

1. Set the overall vision and strategy of the company and communicates it to all stakeholders.
2. Recruit, hire, and retain the very best talent for the company.
3. Make sure there is always enough cash in the bank.

If we accept that we are discussing tech business, then ‘sets the overall vision’ encompasses the constant product innovation that is at the heart of every great company.

Reflecting on personal experiences of eight years at Oracle in a previous life, it was clear that Larry Ellison understood these three skills, and that he was at the forefront of the product innovation cycle and hard on the heels of his team to execute at a ferocious pace.

So building on this – and reflecting the fact that our focus is on bridging the gap from seed investment or Series A to the big growth round (or Series C) - we can evolve those three priorities as follows.

The role of the early stage “product CEO”?

• Establish product market fit, maintain ongoing innovation and establish a leadership position;
• Communicate the vision to all stakeholders;
• Recruit a great leadership team and establish a culture to attract and retain the best people;
• Build an economically viable and capital efficient business; and
• Drive the business forward relentlessly to successfully navigate from Seed to Series C

Clearly there is much more involved, and as some of our companies are pre-revenue and pre-product market fit the emphasis and importance of these five evolves as they achieve the critical funding milestones of their business.

Chris Tottman takes a typically forthright view and as ever, his interpretation is pithier than mine, and based on hard earned experience.

A CEO must:-

1. Set the overall strategy and execution cadence;
2. Hire and evolve exceptional talent;
3. Raise a truck load of capital at increasingly eye-watering valuations
4. Consume, keep and grow customers with increasingly less friction and costs

The genius of the founder CEO is not about building a massive business it’s the brilliance of the idea, its rapid iteration and their ability to get the right people to make it transform at every stage. Chris Tottman.

What skills do they need?

There are some very specific, yet less tangible skills these founders need to take the business from the founding stage - small teams, intuition led, anti-structure, ethereal vs practical - to the professional - data driven, operational logic, scaling culture, clear outcomes and goals, with trusted points of truth and measurement.

To get there, founders need to adopt certain skills:

1. Decision making. Listen to voices, under a strict time frame, then make imperfect decisions fast.  You can always change them.
2. Don't fall in love with your team. Hire smart, develop them, then deploy. But if it’s not working under a tight timeframe, fire fast.
3. Let go of your preconceived notions about leadership, management, and structure to adjust to the diversity of your growing team.

In short, become a quick but thoughtful decision maker, drive your team to excellence, and forever adjust your perceptions of the truth.

Maximising personal potential

It’s useful to have these parameters to ensure that we stay on track, focus on what’s important, and don’t allow the important to be drowned out by the urgent. Everyone likes a list.

But it’s also important to consider that much of what makes a CEO (or any person) great is the ability to maximise your own potential: understanding your own strengths and weaknesses, how those need to be augmented or mitigated, how they need to be complemented by others.

Building a multi-faceted human organization to compete and win in a dynamic, highly competitive market turns out to be really hard. Ben Horowitz.

In discussions with one of our Notion Experts, Martin Palethorpe he explains that often the answer is to look within.

There are two vital psychological keys to success. Firstly, understand how your thinking actually works and to knowing that you have what you need inside you. Martin Palethorpe.

The application of psychology dates back a long way and focuses on applying psychological knowledge to understand behaviours and tackle problems at work, but I wonder how many founders are looking inside themselves to understand what makes them tick, how they think, how they communicate and the impact those behaviours have on others around them – employees, investors and customers. From personal experience I learned early in my career at Oracle some of my own limitations (and strengths) through psychological assessment of myself and my team. It was like a light switching on and over 15 years later I still return to those lessons.

The ability to combine the five practical steps, the three less tangible skills, with awareness of self and of others is surely a critical for founders as they grow up without losing the vision, dreams, and passion that got them started.

Posted by Stephen Millard, Chief Platform Officer, Notion Capital.