Someone might be an expert at designing and building pools, but that doesn’t make them a great swimmer.
That was the first lesson I learned when making a major career change from VC to CEO. After several years at the top venture capital firms in the Bay Area, I had decided to cross over to the other side and become a co-founder and CEO of a cybersecurity company.
I was in the entrepreneurial deep end now, and it felt very different. I quickly realized that no matter how much I envision the role of CEO as a VC, no matter how many corporate leaders I’ve advised, living it is another matter.
In order to swim rather than sink, I had to understand and appreciate the differences between the two gigs and hone my leadership skills accordingly.
It’s hard to say how often VCs move to the corner office because such data doesn’t seem to exist. But I find it quite unusual. Ex-CEOs are becoming VCs more often, a current example is Bessemer Venture Partners’ Notice in May, former SendGrid CEO Sameer Dholakia joined the firm as a partner.
However, I suspect that potentially more investors will make the switch contest is getting hotter among VC firms at a time in the world when people in general are more inclined to seek out new experiences.
In a way, of course, the VC and CEO roles are just two sides of the same coin. Both types are driven by an innovative spirit and a passion to build and nurture companies that will transform the world, or at least markets. Venture capital offers the opportunity to work with really smart people and vice versa.
But otherwise, as I’ve learned, financing a business and starting and running a business are fundamentally different. Here are four examples anyone thinking about the transition could learn from.
VCs provide the money, but the money stays with the CEO
VCs are invaluable sources of funding and expertise, but the CEO has ultimate responsibility for every aspect of the company’s operations, from growth to communicating with board members to the company’s reputation. What a deep responsibility.
Put another way, VCs make their money by spotting great investment opportunities and helping those companies with advice, introductory leadership skills, and other added value. But it’s up to the CEO to execute the creation of a successful brand in myriad ways. You must be accountable for every decision you make.
It’s a very large hat to wear and I had to wrap my head around it. I would suggest to any other VC moving into a CEO role that they come in with their eyes open to the stark differences and be mentally prepared.
Strong CEOs often have to take risks
Venture capital works on a portfolio model, ie VCs invest in, for example, ten companies with the expectation that one or two will make significant profits and the others will miss out. This inherently puts VCs in a perpetual risk calculation mode. To optimize portfolio growth, they need to be as rigorous in determining a startup’s potential downsides as they are upsides.
However, a CEO must be a perpetual optimist, focused squarely on creating growth with every available dollar of capital. As with VCs, the equation of opportunity is weighted significantly more heavily than risk. When they take risks, CEOs can fall into analysis paralysis, constantly overthink and fall prey to the maxim that “more is lost through indecisiveness than wrong decisions.”
It’s just a different mindset, one that took me a while to fully appreciate. So I decided to seize risk-based opportunities, aggressively allocating up to 10-15 percent of our company’s capital to risks that could change our course. I believe this has helped our company to quickly identify new market opportunities while strengthening our culture. Because a risk-taking culture empowers employees to take calculated risks without fear of punishment.
The CEO job can be an emotional rollercoaster ride
You wake up one morning and marvel at the dynamics of the business; You wake up the next day convinced it’s in trouble. Startup CEOs are prone to wild emotional swings. It’s the nature of the game.
Of course, what this really means goes to the heart of entrepreneurship and the risk-based perspective I described in the second point: Business founders and leaders thrive on this thrill. If the CEO doesn’t experience these fluctuations, something is indeed wrong. You don’t have to take enough risks!
VCs, of course, also experience some of these dynamics, but not nearly as intensely as frontline CEOs who have invested their whole being in the company’s success.
CEOs have to work harder than VCs
Sales Commission Structures. Recruitment and Retention. The best way to conduct executive team meetings. These are just a few of the everyday things on the CEO’s plate that differ from what typically takes up a VC’s time. While a VC works on how to run a portfolio company from 50,000 feet, the CEO is there and making sure everything is possible.
For example, I knew early on that I wanted to foster an ethos for our corporate governance: that every point of view has value. It’s so simple in any organization that the CEO’s bias on any topic colors the discussion.
However, this “my way or the highway” attitude inhibits creative and bold thinking. That’s why I’ve made sure from the start that meetings are conducted in a way that encourages everyone to have their say on any matter at hand. I try never to make a decision without authentically considering the perspectives of others.
As these four points show, moving from VC to CEO isn’t as easy as it looks. But my journey has been wonderful, and I hope these observations will help VCs and CEOs alike better understand what drives each other.
Bipul Sinha is CEO and co-founder of Zero Trust data security company category. Before that he was apartner at Lightspeed Venture Partners, where he focused on software, mobile and internet, and at Blumberg Capital, where he was a founding investor and board member of Nutanix and Hootsuite.