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Ric’s recipe for highest velocity – choose the right CEO…

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My American mate Craig Etchegoyen will disagree with me but I stick to my view that the single biggest factor for success in any new business is finding the right CEO for a business execution.

Sure a great idea needs to be in place, and a good business plan needs to be put together by the founders (if for no other reason that to make sure the right CEO with the right target market/ exit is chosen) but the right CEO remains in my mind the single biggest factor to success after a good idea has been produced.

What about money? Money will come if you have a proven CEO… and the best money to have is the money that comes from people who have already had success with your chosen CEO.

Sure money can solve lots of problems but in the end the only way to reduce risk is to find a guy that has sold something like your product or idea before, can verify that it can be sold, and has experience in using the same customer base and marketing to get you there.

Why can’t a founder be the CEO? Because no one wants to spend two or three times the money they wouldn’t have to anyway to allow a new or inexperienced CEO to learn his job and to pay for his mistakes.

Here are some tips:

  • Link CEO equity to performance
  • Hire the CEO at least 40% on his ability to raise capital based on his own business plan and 60% on his proven ability to sell the product to your target market or exit (ie large Corporation).
  • Make sure you raise enough Angel funds to keep your CEO and a small team on salary for at least 9-12 months or enough time for them to do their own equity raise.

So how do you do it? Find someone hungry… someone who recently sold their company to a big corporation and didn't get enough to retire on, someone who initiated and built and sold a business not dissimilar to yours or a product not dissimilar to yours.

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