In consulting with investors, I am often witness to the postmortem examinations of failed startups. Many times, the focus invariably turns to the CEO to see his or her role in the demise.

In one case, the CEO’s role was quite clear. The CEO lied to customers about product development times in an attempt to land deals, and then lied to the board about revenue projections using these unsigned deals. It was
a case where one lie led to another lie, snowballing into one giant catastrophe.

Sometimes, the company can survive after a bad CEO is ousted. This one could not. By the time it was clear that there were no deals forthcoming and that the product was way behind schedule, the company had burned through millions and the investors were ready to write it off.

This was definitely one of those cases where the right CEO could have made a difference and made this company a success.

In another case, a newly-appointed CEO came in and fired the accountant to “save money” by doing the books himself. He then proceeded to go and hire employees out of state — spending MORE on administrative costs, payroll processing, state unemployment insurance coverage, and tax filings.

The company eventually folded for a number of different reasons, but the actions of the CEO clearly should have merited a review by the board. While the CEO may not have done anything wrong besides being inept in the area of financial controls, his firing of the accountant should have been a red flag. It is NEVER a good sign when the CEO says he wants to do the books himself.

How well do you know your CEO?

If you are a technology entrepreneur seeking a business-minded CEO to take your company to the next level, make sure you know your prospective CEO. Competence and experience are absolute requirements for the job, but so should integrity.

Dig deep when doing your reference calls to see what this person is really like. Know your CEO.

© Eye on Startups & The Startup Guidebook