The Why, When and Who of hiring a (modern) COO for your startup.
By Marc Rougier & Elnaz Giboulot.
Recruiting is arguably the single most challenging task for any entrepreneur.
Our mission at Elaia is to invest early in promising startups; because we come in early, we are here when the team grows and therefore when the founding team faces the hiring challenge.
All founders will face the challenge of hiring a great team to take their product or service off the ground, and while the hiring of some roles are easily identified, others can sometimes be overlooked. Typical immediate hires are Developers and Data Scientists who are in continuous high demand as they build the product; and for a tech startup, they are at the core and might even be considered the heart of the startup. Then come Marketing and Sales positions: they are understood to be key levers of success because they fuel the growth. But, in this competition for talent, one role is underrated and often overlooked; a role that becomes critical when it comes time to scale: the COO, Chief Operating Officer. If we consider the Developers and Data Scientists as the heart of the product, other roles like COO are the body and soul, the vehicle that protects and supports the heart to beat stronger.
Nearly every startup in our portfolio has looked for a COO. Here is why and how.
(PS: and yes, they are hiring!!! Check out job offers from our portfolio companies here.)
What will a COO do for a startup?
COO, as a concept, is this set of talents and experiences that might not be required to start a Company, but that are critically required to scale it up. It is the firepower for the Company to mutate into a well oiled machine that executes at scale, under new pressure, with new objectives and new functions.
There are many ways to fulfil this COO “conceptual mission”: for example, founders can spread, little by little, the many tasks amongst themselves and other early employees and hire new staff to fill the remaining gaps. But, we’ve found that, when the time comes, the most effective way is to hire an experienced COO who can join the leadership of the Company and take responsibility for all tasks involved. So why’s that?
👉 This rapidly adds gap-filling skills and experience to the operations.
👉 This strengthens and enriches the leadership process.
👉 It releases immense energy for the founders to focus and excel in other aspects.
There is not a single job description for the COO’s mission: it varies according to existing strengths and weaknesses within the organization, to the available resources, most urgent goals and every other parameter that makes the Company unique. It can cover a long list of tasks (Finance, Admin, HR, Procurement, Logistic, Delivery, Customer Success, etc.) to be adapted to the current state and future goals of the Company, with the dual objective of making the Company solid enough for the upcoming acceleration; and the founders confident enough to continue doing what they are best at and giving them the time and energy to focus on that.
As the body and soul of the product and startup, the COO provides a layer of protection and functionality. This allows all the other parts to work without interference while it takes over other miscellaneous but necessary activities, so that everything runs smoothly.
Essentially, while the COO’s mission was not to give birth to the Company, it helps it become a fully functioning, successful adult.
However, it’s not always easy to hire an experienced COO:
⚠️ “Operations” are not perceived as strategic at the early stage of a Company.
⚠️ Seasoned leaders can also be perceived as threats by the founders, as they will get their share of power and contribute to transforming the Company.
⚠️ Experienced COOs (at least today in Europe) quite often come from larger Companies and, however skilled and motivated they can be, can be incompatible with the startup culture — they can even be a risk!
⚠️ It is often expensive!
As with all C-suites, there must be a mutual understanding that their respective roles are different, but their mission is the same. The CEO and CTO should not believe the COO will magically solve the fundamental flaws of their product and business, and reciprocally COOs need to believe in the Company’s vision, people and culture before considering jumping in.
Our investment thesis at Elaia focuses on tech and deep tech, early stage, B2B startups. As a result, there is rarely a COO on the management team when we first meet the founders. Our typical founding team consists of:
- A tech person: CTO (or CPO or CSO); this founder, with deep and rare skills, creates most of the initial intellectual property of the Company and develops the MVP, more or less single-handedly.
- A business person: CEO; this founder knows the addressed pain point, understands the value offered by the MVP and can sell it; and while CTO can have leadership too, the CEO is expected to embody and communicate the vision of the Company.
We like it when a third founder enhances the team with some additional operational skills, but as we target tech, deep tech and early stage ventures, this is rarely the case.
As a fund, what do we typically see?
The CEO and CTO together endeavor to demonstrate product market fit during the early phase of their startup: they build an initial team of half a dozen or so, they release a decent MVP, they capture a handful of PoC. Upon which they add some fuel in the engine (here comes some VC money), beef-up the dev team, hire their head of marketing (we’ll talk about this elusive CMO another time), their first sales person (after all, revenues matter!), a customer success intern and here we are, all geared up toward demonstrating that, indeed, there is a Business Model for the Product. And a few clients later, then comes the next phase, the next round of funding (in most cases) and the next ambition.
And then, the Company scales.
To demonstrate that the Company is indeed a startup, i.e. a business with a model that can, at some point, scale in a non-linear manner. This implies designing, deploying and running a skilled operation that will execute challenging missions under tremendous pressure. And this demanding and sometimes intense transition adds a lot of pressure on the Company’s organization. Teams and processes need to grow fast and well, particularly in these areas:
👉 Marketing and Sales
These are the first functions that will face brutal growth. From almost non-existent (often no product to sell or the CEO is the first and only salesperson of the startup) to being in the spotlight with the challenge to generate and convert leads, in a likely highly competitive market (if there is value to be created) with a product that has just passed MVP status and next to no brand power to build upon — yet.
This has to scale too! The pressure on feature completeness, performance, SLA, UX, API, support will grow dramatically; and clients will add lots of expectations to your already ambitious roadmap. And if your product is not pure software, top this list with logistics, procurement, integration, service and other sources of stress. All of this while keeping an eye on your COGS (Cost Of Goods Sold), otherwise you might take off on a non-sustainable path.
👉 Human Resources
Consequently, you will have more staff, and sometimes a real challenge. Processes need to be adapted (if not created) and the Company culture, vision and onboarding must be clear, communicated, and shared with future talents.
👉 Finance & Legal
With incoming revenue, more capital to manage, a much more complex P&L structure and a (in)decent pressure on cash, Finance and Admin become a serious necessity too.
You will find that at the end of this transition, it is no longer quite the same Company. What was basically a two-genius game is morphing into a fully functioning organization.
And, while founders may be brilliant, they’re still only human. So despite their talents, experience and capabilities, the founders must build a team around them to help tackle this transition to help the company elevate and manage growth.
Hence, the need for a COO.
All these functions need to be properly planned, organized and seamlessly connected to each other with no silo; they need to scale gracefully without creating adverse friction as the business scales. Their efficiency needs to be measured, so they can be objectively and continuously improved (yes, data and processes matter within a startup organization too). This is what a seasoned COO can bring to a growing startup. Making sure the company executes as a well controlled, efficient, powerful adult organization, while the tech founders can keep pushing their product to new excellence and the business founders can drive the successful conquest of their market.
An experienced COO empowers the organization while providing freedom of mind and a confidence booster to the founding team, their vision and their capability to execute.
We love it when our portfolio companies hire experienced COO. It’s in no way an easy decision, and when the decision is made, it’s no easy task either. But when it happens, it sends two signals:
✓ The Company is ready to play in the big leagues.
✓ It is appealing enough for talented people to take the bet and get on board.
Fast growing startups: when the time comes, think big, think COO!
And finally, talented leaders searching for rewarding challenges, please do contact us, we know of several awesome startups who are thinking big! Are you a C-level candidate looking for new opportunities? Fill out our Typeform here and be a part of the C-Level Elaia database.