Over the last decade, as either a CoFounder or CEO, I’ve recruited, screened, interviewed and hired hundreds of people. I find just as important as the responses to my questions are the questions they ask of me. For most roles, by the time I’m face to face with a candidate, their qualifications are vetted and my role is to ensure they are “right” for the company.
“Right” for me evolved to qualify, is this person (regardless of role/experience) inquisitive. I’ve found the best folks ask the hard questions. They aren’t satisfied by a bullshit answer and can do so in a manner that is inviting.
The majority of people ask open-ended softball questions about company vision, success metrics, company culture and perhaps funding plans. It never hurts to hear directly from the CEO their thoughts on the aforementioned topics, but it’s not what I’d be asking. These are important elements for the CEO to get right, but ultimately they don’t guarantee company success.
Depending on the stage of the business, the only things that matter are Product Market Fit (PMF) or Total Addressable Market (TAM). In earlier stage companies it’s most important to understand the product’s value to their customer stakeholders. In later stages, the TAM (how much is left and the distribution) will inform the future potential for the company.
Many candidates assume that these are totally figured out (as evidenced by logos on the website, funding, or other signals of traction) but PMF + TAM are constantly evolving and every CEO should constantly assess the company’s place.
Here are the questions I’d ask the CEO in an interview process.
On Product Market Fit:
What value does the product drive for the target stakeholder?
I would expect a clear, concise value proposition that doesn’t rely on assumptions. If it’s not clear to them, it safe to assume it’s not clear to anyone: employees, customers, investors or partners.
It’s important to understand all the marketing, sales, product, customer success touch points to get a target stakeholder to this value point.
Dig into at what point this value is commoditized (by a competitor or an adjacent platform). I would understand the contingencies in order for this product value to be realized (ex. data comes from another platform).
At what frequency is this value delivered to the stakeholder?
The CEO’s awareness on value frequency to stakeholder will inform product decisions, customer success process, customer marketing and sales.
The frequency of value received is directly correlated with retention. If the customer is getting value from the product daily, then retention is more assured. If they are getting value annually, then unless it’s an extraordinary amount of value, a lot can happen in the time in-between.
How does the stakeholder know they are receiving value?
“It’s obvious” is not good enough.
There is constant, unrelenting competition for every stakeholder’s attention + spend. Unless the product is explicitly telling them how much value they are getting at what frequency, expect product interest to wane and ultimately churn.
How this is solved is indicative of where the power lies in the company. If the CEO responds by referencing a product feature that sends a weekly email, you might expect a product led org. If they respond by explaining the Sales or CS touch point, you should expect people thrown at problems.
How does the value compare with the price paid?
Getting pricing right is what allows the company to maximize value created with PMF in a large TAM. Dig into whether pricing is figured out. Are there clear value cliffs customers are willing to pay more for. Does the pricing model leave room for upsells/upsides. Are sales reps still making it up deal by deal? If the company is successful in overcharging during a sales process, assume the customer will figure it out eventually and churn.
On Total Addressable Market
What is the product’s TAM?
Every startup CEO is conditioned through investment pitches to position their business as going after a multi-billion dollar market. Don’t settle for this boilerplate response. Get down to specifics. How much TAM will the company acquire this year? Ask how many potential stakeholders there are in the world and in the US?
If the product delivers value for a Chief Compliance Officer then they should know there are 15K of them globally, 10K in the US and 3K at companies with more than 1000 employees. Bonus points if they know how many are in their CRM or have a started a product trial (see distribution below).
Furthermore inquire how many of these customers would never buy and why. Most startup math is based on converting a small percentage of an amazingly large TAM. This is more sales pitch than strategy.
What things are out of the company’s control?
Every CEO quietly maintains a list of things outside of their control that could totally derail the business or put it on a much faster growth trajectory. Find out what those things are.
Does a downturn mean that your product is the first to get cut? If the US passes a law that mandates some compliance, will your sales skyrocket? If Apple disallows apps to do X, what’s happens?
If the company doesn’t have a self-serve product ask why?
Software nirvana is thousands of stakeholders receiving product value and paying independent of going through a sales process or any human touchpoint. This isn’t a reality for every company. The CEO should have a good response for why it isn’t for this business. If the response is they plan on building it, I’d dig hard on why they aren’t dropping everything to do this now.
What is the company’s short-term, long-term distribution strategy?
Building a great product that delivers continual stakeholder value in an abundant greenfield market isn’t enough unfortunately, you still need to have scalable distribution to inform all those potential customers.
Depending on startup stage they may still be figuring this out. I would dig into what’s working, why, and how far it will get the company. Some companies are blessed with one distribution mechanism that takes from start to the promised land, but most employ different tactics at different stages. Having a hypothesis on when certain tactics cap out shows the plan is thought through.
If the CEO points to sales efforts. I’d ask about inbound vs outbound volume, unit economics per customer acquired. Does CAC (customer acquisition cost) exceed LTV (long term value) of each customer? How many sales people are exceeding quota? How quickly? When does the current org structure max out?
There is no definitive guide to determining the likelihood of a startup’s success. A lot of it does depend on decisions the CEO makes and their understanding of current state and potential future states based on actions. Knowing how they think about product market fit, stakeholder value, pricing, total addressable market and distribution may indicate how they will navigate direction on these fronts.
Although the answers to these questions proposed may get answered by others in the organization through the interview process, I would still ask them of the CEO. You may hear a repeat response but it will confirm whether the CEO is successfully communicating and creating alignment throughout the organization.