Lesson #337: The 14 Characteristics of a Fundable Startup CEO

I recently stumbled on this great article below from my good colleague, David Gardner (pictured), the founder and General Partner at Co-Founders Capital, one of the most active early-stage venture capital firms in the Southeast, based in the Raleigh-Durham area.  David was kind enough to let me share this article with all of you startup CEO readers.

What I liked about this article was it was a clear way to score your performance, which isn't easy to do as a CEO, typically with no boss to help critique you.  Whether you are doing it with the lens of what an investor is looking for, as detailed below, or whether you are doing it for yourself, just to see if you are doing a good job, everyone needs to be accountable for their actions, including the CEO!!

If you scored perfectly on the below categories, you would earn a total score of 70.  If you were average in each of these categories, you would earn a score of 42.  And, since nobody is perfect and you want to be materially better than average, I would say shooting for a score of 56 or better is where you want to end up.

So, after reading the article, score yourself, in an honest and self-reflective way, and see how you are doing.  If you are doing well, congrats, keep up the good work and you should have no problem fund raising.  But, if you are not, it's time to sharpen your skills, especially if you plan on raising venture capital.  

Thanks again, David, for sharing your wisdom with our readers.

___________________________

Being a CEO is a tough job especially the first time someone has to wear that hat.  Constructive and actionable feedback can be hard to come by.  It can also be difficult to know how well you are doing and what areas you might need to improve upon when you don’t have a boss observing you firsthand. You can only improve what you measure and CEO performance is no exception to that rule. 

To help our portfolio CEOs, we have developed the following evaluation criteria.  It covers some of the things we look for in a solid operator and leader.  This annual evaluation is meant to be completed by the CEO, their direct reports and the board members in an anonymous 360 aggregated review.  It’s purpose is honest feedback to facilitate awareness and constructive discussion. We ask each reviewer to rate the CEO being reviewed in each of the following 14 categories, on scale from 1 to 5 scale, as defined below:

1. Very deficient and detrimental to the organization
2. Needs a lot of improvement
3. Base level of competency
4. Meeting or exceeding expectations
5. An exceptional strength

1. Transparency: Our CEO is genuine and forthcoming with all information significant to the success of the business.  Bad news is delivered as is and not sugar coated.  Good news is not exaggerated.  Facts are presented dispassionately for what they are.  Our CEO shares more key metrics and data trend lines than anecdotal stories.  Board members are provided with the timely and accurate information they need to asset the business and help the CEO make informed and balanced decisions.

2. Leadership:  Our CEO is trusted by the team and other stakeholders to make the informed and necessary decisions required to keep the company moving forward.  Staff members know what is required of them at all times and how their efforts and performance metrics contribute to overall company goals and objectives.  Our CEO is demanding but fair.  Team members, investors and advisors feel listened to and that their opinions and ideas are heard and help to shape our CEO’s final decisions and policies. Team members trust their CEO to do what he or she says.  Our CEO respects the chain of command and does not circumvent his or her managers.  Our CEO is building a positive company culture that people want to be a part of.   Our CEO is always bringing organization to chaos as our venture grows.

3. Communication:  Our CEO can articulate the company’s mission, differentiations, and value props to all stakeholders and potential shareholders including employees, customers, prospects and investors.  Our CEO’s communication is clear, concise and convincing.  Our CEO can see things from an audience’s perspective and handles objections in a non-offensive manner.  Our CEO can speak in terms of value propositions that are relevant to his or her audience.  Our CEO can walk a person logically from where they are (point A) to point B when explaining complex matters.

4. Management:  Our CEO is a good manager.  Team members know what is expected of them, how they are doing and how they are evaluated.  Direct reports are never surprised when promoted or fired.  Objectives are clearly defined as are job descriptions, best practices and procedures.  Direct reports feel confident that their CEO is striving for their individual success as well as company success.  Our CEO meets regularly with the management team as a group and each direct report individually to review progress, lend assistance and address concerns.  Our CEO does not have excessive employee turnover.  Our CEO is a good trainer who takes the time required with new team members to make sure they can do all aspects of their jobs.  Our CEO holds direct reports accountable and will decisively terminate consistently poor performers.

5. Judgement:  Our CEO demonstrates good judgement.  Our CEO is calculating and practical gathering all of the information and opinions available before making important decisions. Our CEO does not make rash uninformed decisions or chase every shiny object.  Our CEO will take calculated risk using appropriate risk/reward analysis.  Our CEO always has a contingency plan in mind.  Our CEO sets reasonable timelines and goals.  Our CEO is data driven and not afraid to pivot when necessary.  Our CEO is thoughtful and dispassionate in decision making testing hypotheses and tactics before committing major resources or time to projects.

6. Time Management:   Our CEO manages his or her time wisely and efficiently.   Daily tasks and projects get appropriate amounts of time based on their importance.  Our CEO projects a consistent and contagious sense of urgency.  Our CEO does not waste time but treats it as his or her most precious resource.  Our CEO alots his or her time in a manner always mindful of the opportunity costs that may be involved.  Our CEO is not a perfectionist and knows when 80% is good enough.  Our CEO does not avoid or short-change tasks that he or she doesn’t like to do.  Our CEO keeps a written personal task list and is constantly reprioritizing it.  Our CEO knows when to go slow and when to go fast.

7. Fundraising:  Our CEO ensures that our company does not run out of money and stays well ahead of any cash shortfalls in full realization of the time it can take to raise capital.  Our CEO is the chief fundraiser for the company and always mindful of our runway, burn and cash-out date.  Our CEO keeps investors and prospective investors informed.  Our CEO understands which types of investors and fund managers are a good fit for our company based on their check size, investment thesis, expertise and geographic preferences.  Our CEO maintains and can defend a reasonable forecast and key assumptions.  Our CEO can deliver a convincing investor pitch deck and plan.  Our CEO inspires confidence.

8. Recruiting:  Our CEO is good at sourcing and recruiting the talent needed to grow our company.  Our CEO makes recruiting a regular priority each week and does not wait until the company is desperate for help before starting the recruiting process.  Our CEO conducts detailed interviews and reference checking.  Our CEO can communicate a vibrant company vision and culture where new hires want to work.  Our CEO is not afraid to hire those more talented than himself or herself in any given area.

9. Strategist:  Our CEO possesses a deep understanding of our chosen industry and market sector.  Our CEO has a full appreciation of the subtleties of our space, competitors and how to position our solution to fit into each customer type and business partner’s perspective.  Our CEO knows when to partner, when to buy and when to compete head on.  Our CEO is always looking for business development opportunities and partnerships leveraging the technology, customer  base or salesforce of others.

10. Negotiating:  Our CEO understands and utilizes basic negotiating techniques.  Our CEO is not afraid to push back on or walk away from a one-sided deal.  Our CEO takes the time to understand another’s position, constraints and goals so that he or she can propose creative solutions.   Our CEO rarely pays full price.  Our CEO is always willing to lose a battle if it means winning a war.

11. Maturity:  Our CEO is always the adult in the room.  Our CEO is not intimidated by those with skills and ideas that are not his or her own.  Our CEO is assertive but not overbearing.   Our CEO is comfortable admitting when he or she has made a mistake.  Our CEO takes into account the human element and emotions in every situation.  Our CEO is always professional.  Once a decision has been made our CEO expects full compliance and will not tolerate insubordination in any form.  Our CEO is not given to emotional outbursts or knee-jerk reactions.   Our CEO cares about more than just the success of the business.   Our CEO encourages the team to take risks and try things. Our CEO does not penalize team members who try creative things that don’t end up working out.

12. Resourcefulness:  Our CEO seeks out and utilizes available resources.  From advisors, key customers, grants, publications and reports to competitive sales collateral and market analysis, our CEO stays abreast of that which might be useful in accomplishing the mission at hand.  Our CEO is coachable.  Before starting a new initiative or implementing a key strategy, our CEO taps available contributors and data.  Our CEO avoids an echo chamber and solicits outside opinions.  Our CEO does not shoot from the hip, make decisions in a vacuum or simply buy his or her way out of a problem or into a quick solution.

13. Financial Management:  Our CEO has a complete understanding of the business model and which assumptions and key metric as most important to the business.   Our CEO can spot trend lines and how they impact the business.  Our CEO is constantly discussing key assumptions with those involved and tweaking them to produce the most accurate forecast possible.  Our CEO understands the impact of debt and increasing the burn rate and never waits too long to right-size the business.  Our CEO knows when to grow faster and when to slow down and proceed more cautiously.  Our forecast is continuously becoming more accurate.

14. Administrative:  Our CEO consistently ensures that required administrative tasks such as submitting monthly financial statements and updated forecasts are submitted to board members.  Our CEO fulfills written and legal obligations to maintain D&O and key-man insurance.  Our CEO schedules and conducts all board meetings and annual shareholder’s meetings on the required cadence.   Our CEO schedules required meetings well in advance and sends board decks, option grant proposals, legal and other documents for board member review well in advance of board meetings.

For future posts, please follow George on Twitter at @georgedeeb and follow David at @StartUpHats. 

Lesson #336: How to Find the Best Advertising Agency for Your Business

If you are investing material dollars in marketing campaigns, more often than not, you have considered engaging, or have engaged, an advertising agency to assist you with those efforts.  Those decisions whether or not to manage your marketing campaigns with in-house teams vs. third party agencies are typically not easy decisions.  And, if you decide to outsource to an agency, the selection process can be overwhelming, with the thousands of agencies out there to choose from.  This post will help make those decisions easier for you.

In-House Teams vs. Third Party Agencies

The decision to manage campaigns internally vs. externally often comes down to the following things: (1) the size of your media budgets; (2) the complexities/channels of the campaign; and (3) the skills of your team and the analytics tools you have to work with.  Over time, my leaning on this decision has changed.  I used to want to run everything internally, to save the costs vs. an agency (which can often be 15-20% higher including their fees).  And, I used to want to find disparate agencies with a specific expertise (e.g., one agency for search engines, another agency for social media).

But, has the advertising industry has evolved over time, my opinion on this topic has shifted 180 degrees.  Today, I am a proponent of outsourcing this work to an agency, and preferably one cross-channel agency that can manage all desired channels through one partner.  The reason for this are: (1) the agencies have materially evolved from being single-channel experts to multi-channel experts; (2) strategically, it is better to have all strategies and budgets managed centrally, to easily shift dollars between channels and get cross-channel attribution tracking all in one place; (3) the optimization technologies the best agencies are using, and their direct relationships with Google, Facebook, Amazon and others, are heads and shoulders better than anything your internal team would be doing; and (4) finding a team of good internal marketers is hard to find and manage, as opposed to leaning on an agency’s team and their recruiting and training processes.  Especially since the techniques that work best each year can rapidly change, and you want to benefit from the most recent learnings (not hire someone with yesterday’s playbook).  So, don’t be a penny wise and a pound foolish here, as a good agency should more than cover their additional fees, with materially higher revenue performance from their efforts than you most likely could generate with an internal team.

Step 1:  Identifying the Best Potential Agencies for Your Business

All agencies are not created equal.  Certain agencies are expert in B2C and other agencies are expert in B2B.  Certain agencies are full-service agencies handling all services, and other agencies handle certain specialty solutions (e.g., branding, creative, television, B2B lead generation).  Some agencies are set up to handle huge budgets, and other agencies are set up to handle smaller budgets.  So, the first step is to have a rough idea of your budget and needs (e.g., prepare to spend 10-30% of your revenue target on sales and marketing activities), and the next step is to identify the agencies that are best suited to support those budgets and needs.

For purposes of this post, let’s assume you are like most B2C marketers and you need a good performance marketing agency.  That is an agency that: (1) can handle most of your digital advertising needs (e.g., search, social, affiliates, commerce, display, digital video, connected TV); (2) have a suite of sophisticated technologies, reporting and tools to optimize the campaigns across channels; and (3) have an ROI first mentality, shooting to drive clearly attributable transactions from the campaign at a profitable return on ad spend (ROAS).

With that being the goal, go to Google and search for “best performance marketing agencies”, as an example.  You will stumble on a bunch of websites like Capterra, G2Crowd or other bloggers that have ranked the agencies based on customer reviews or their research on the subject.  Or, you will find research firms like Forrester that interviewed the best agencies and ranked them, as seen in this chart, as an example.  That will help get you started.  But, you should also talk to your peers at other similar companies, to see who they are working with.  Or, get recommendations from other colleagues.  And, if any agency says you are too small of an account for them, ask them who they refer business to for smaller accounts, as they will have a good idea of the best players in the space.  This process may result in a list of around 8-10 agencies to consider.

Step 2:  Create a Questionnaire and Interview The Best Targets to Ensure a Good Fit

Just because you think they are a good agency for you based on preliminary research, doesn’t mean they really are a good agency for your exact needs.  You need to ask probing questions of them, like: (1) what is your minimum media budget, are we large enough to be a material account for you; (2) what are your fees, can we afford your services (keeping the fees under 10-20% range, depending on media budget); (3) what is your industry expertise, do you have good references from similar companies like ours; and (4) are you working for any of our competitors, do you have any conflicts we need to worry about.  This part of the process will narrow down your list to around 3-5 truly best targets.

Step 3:  Invite the Best Candidates to Pitch Their Services

The pitching process will start with the agency better learning your budgets, history and needs, and most likely will involve them taking a closer look at your current campaigns in Google Ads, Microsoft Ads, Facebook, Google Analytics, etc.  After 2-4 weeks, they should be have completed their research and planning, and be ready to present their proposal.  In those presentations, pay attention to things like: (1) the quality of their team (and making sure the team on the pitch is the same team that will be on your account, to avoid “bait-and-switch”); (2) their fit with your business and team (are they nice to work with and share your common values, as you will be spending a lot of time with them); (3) the quality of their strategic-level ideas (did the presentation match your guidance of them and your desires); (4) their proposed media mix; and (5) the quality of their optimization tools and cross-channel reporting capabilities (because in today’s world, the best agencies are more technology companies than anything else).

Step 4:  Pick the Front-Runner

Once you pick your favorite agency from the presentations, it is time to take the next step with them.  That will include things like: (1) speaking to their references (to ensure what they pitched and what they delivered were in line, especially in terms of team quality and happiness with efforts); and (2) negotiating the agreement and statement of work (to make sure both parties are largely in alignment on the legalese and the plan).  This can take several weeks to complete.

Step 5:  Formally Award the Winner

Congratulations, you have formally engaged your advertising agency.  Hopefully, the above process enabled you to find a really great partner for your specific business, that can help propel it to new heights.  Now starts the busy work of transitioning services from your old agencies or team members, sharpening your pencil on the campaign strategy and media mix modeling, and setting up all the management processes (e.g., timing of weekly meetings, desired KPIs on daily/weekly/monthly reporting).  This part of the process is as important as the agency selection is, and will help tee up the campaign for maximum success.  Now comes the hard part:  executing the winning campaign that hits your desired metrics, and managing your agency on a weekly basis (which I will cover in a future post).

A Couple Useful Tips

Here are a couple things to think about.  If you can, try to get part of their fee in a pay-for-performance structure.  So, maybe half of their fee is fixed, and the other half of their fee is incentive based.  And, keep that incentive uncapped, the more success they drive for you, the more fees they can earn.  And, do your best to cap your total fees (e.g., not to exceed a certain percent of the media spend), as these contracts can be very complicated and confusing, with all kinds of fees which can add up quickly.  Especially fees around programmatic buys or the DSP platform.  If they can find high quality media in other ways, it may save you money here, so push them for direct buys with publishers or leverage their bulk buying power, where you can.

Concluding Thoughts

Hopefully, we have taken the daunting process of selecting an advertising agency and simplified it into an easy step-by-step guide—one that will result in a well-experienced agency to handle your specific needs, both in terms of team and tools.  The relationship between your business and your advertising agency is one of the most important relationships you will have; they are the team that will dictate how quickly you will scale your revenues, hopefully on a profitable basis.  And, in today’s high-tech digital world, they are as much a technology partner, as they are a media-buying partner, so pay special attention to their capabilities in this regard.  With a little luck, now you are “off to the races” toward marketing success and profitably scaling your business.

 

For future posts, please follow me on Twitter at: @georgedeeb. 

[VIDEO] George Deeb Discusses Maximizing ROI on Your Marketing Investment (on ASBN)

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about how to maximize ROI on your marketing investment.  I thought this video turned out great, and I wanted to share it with all of you, to see if it can be helpful with your own marketing efforts.  I hope you like!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Red Rocket Blog Passes 2,000,000 Reads

Well, it is only fitting, that in the same month the Red Rocket Blog hit its 10th year anniversary, the all-time blog reads passed the 2,000,000 mark!!  Thank you, thank you, thank you, for your continued readership after all these years.  We will do our best to continue to bring you useful how-to lessons and interesting small business case studies for you to learn from, in the years ahead.  And, as always, don't hesitate to reach out if there is anything we can do to help you with your growth strategy or execution needs.

For future posts, please follow us on Twitter at: @RedRocketVC.

Happy 10th Anniversary Red Rocket Blog!!

When I wrote my first blog post back in February 2011, who would have ever imagined it would have grown to over 335 how-to lessons for entrepreneurs, three published books and over 2,000,000 online reads.  For those of you that read the content to educate yourself on your own, I hope you have found them to be helpful in growing your businesses (would love to hear any success stories there).  And, for the dozens of Red Rocket clients that originated by stumbling on one of our blog posts in the search engines, it has been my pleasure working with each and every one of you, and I very much appreciate our relationships.

Generating fresh content for over 10 years was quite a feat and labor of love, as most long term bloggers can attest.  We will continue to pump them out, as long as there are new interesting lessons or case studies to share with you.  Which pretty much means there is still another ten years of content in front of us.  See you all at lesson #700 at that time!! 

Thanks again for all your continued support and readership.  We are truly humbled.

For future posts, please follow us at: @RedRocketVC or @georgedeeb.

Lesson #335: The Death of Search Engine Optimization

I have been a digital marketer for over 20 years now, which seems like an eternity at this point!  Google has always been a staple of any good digital marketing strategy, especially for search engine optimization (SEO), to attract free organic traffic based on the quality of the content on your page.  But, when we recently started to see our SEO traffic start to decline, we asked our SEO consultant to investigate what was the root cause, and he said it was due to a recent Google Search page redesign, moving the free organic links further to the bottom of the search results page.  What was more troubling, was when I asked him how best to fix the situation, he said, “start spending more money advertising with Google, to get back up to the top of the page”, which was a very strange thing for an SEO expert to say, as he isn’t needed in that scenario.  This means SEO as a strategy for ecommerce driven companies is potentially dying, and paid search marketing has become your primary way to gain an audience through the search engines, at least through industry leading Google.  Allow me to further explain.

A Quick History of Google Search

Ever since Google hit the scene in 1998, Google has been a staple of any good digital marketing strategy.  Originally, it was simply having a good SEO plan, to help you go up the free organic rankings—onto the top of the first page of the search results.  The search results were very straight forward and uncluttered, and looked similar to this example below, with only organic free results appearing on the Google page based on the content of your page, and its relevancy to the keyword being searched (in this example, a search result for the word “technology”):

Then, Google launched Google Adwords (now called Google Ads) in 2000, which was your way to “buy” your way to the top of the search results with paid text ads.  Which meant, now you needed both a good SEO strategy for free organic traffic (for the links at the bottom of the first page), and a good keyword bidding strategy for paid traffic (for the links at the top of the first page), as seen in this example search result for the keyword “text”.  

Then, in 2002, Google launched Google Shopping, which gave ecommerce companies the opportunity to “feed” their product listings to Google, also on a pay-per-click model, adding a third dimension to their mix, but largely separated into its own “Shopping” tab on Google.  At the time, it didn’t really impact the traditional search results at all.  And, finally in 2004, Google launched Google Local, which allowed businesses with multiple retail locations the abilities to advertise and promote their various locations, in addition to the corporate parent company.  This change simply localized the advertising, to the location of the user (e.g., instead of seeing a national ad, they saw an ad for a nearby local business).  Again, it really didn’t materially impact the page design.  

Google Today

But, in the last several months, Google has materially changed its page design for Google Search.  And, previous “sacred ground” rules like “stay true to our organic search roots, and don’t clutter the page with a bunch of advertising” got completely flushed down the toilet.  As you can see in this example of a keyword search result for “restaurant furniture”.

Notice what has happened to the page design—today, there is not one free organic search result anywhere to be seen on the first page, above the fold (where the computer screen breaks the page).  Every single link on this page, is now a paid advertisement—the links in the upper left coming from Google Ads, the links in the lower left map coming from Google Local and the links in the right coming from the Google Shopping product feed.  Every single one a paid placement, which is great for Google maximizing their ad revenues.  But, if you want to see an organic search result that is truly based on the quality of the content of the landing page, you need to scroll down “below the fold”, and even then, they don’t start until the bottom of that second screen view after you page down.

The Death of Search Engine Optimization

So, what does this all mean for you commerce companies selling products or services . . . it means search engine optimization as a strategy is on “life support”.  Most Google users focus on the first page of results, mostly on the links that appear “above the fold”.  If there is no way now, to get your organic search result into that position, based on the current Google page design, then why focus on doing SEO at all?  All your focus needs to be on shelling out a lot of money to Google, to make sure your business is promoted in Google Ads, Google Local and Google Shopping placements on the page.  Which is exactly what Google wants, their cash register to ring with each click on their site!!

Now that paints a pretty extreme picture.  Yes, you can still be doing traditional SEO for organic rankings, especially for sites other than Google (e.g., Bing, Yahoo).  Yes, there are still a minority of Google users that will scroll down the first page, and an even smaller amount of users that will click beyond the first page, to page two or three.    But, the amount of SEO traffic you will receive from free organic SEO efforts has become materially less than you would have received prior to the Google page redesign, especially given its dominant market share position in the search industry.  That is the point here:  yes, SEO still can play a role, but a much less impactful one if you are in the ecommerce world.

Also, worth adding, Google is using its new page design on their largest trafficked search terms (e.g., “restaurant furniture”), there may still be SEO value by focusing on “long tail” search terms that Google uses a more traditional search result page design (e.g., like this one below, for “30 x 30 table top”).  

But, I think this is only a matter of time, before Google figures out how to take over advertising on every single one of their page results, including the “long tail” keywords.  Even in the above example, Google Shopping has five paid links at the top of the page, Google Ads has one paid link in the middle of the page, and there are only two free organic results at the bottom of the first page, “above the fold”.

Concluding Thoughts

So, as you are trying to figure out how best to spend your limited marketing dollars, the 20 year “staple” of optimizing your website for free organic traffic, has become a much less effective use of your time and efforts.  It just doesn’t bring the same “bang for the buck” that it used to, which means it is much harder to drive a ROI.  Whether or not this helps or hurts Google in the long term, will be determined in the future.  But, you can bet Google’s competitors, like Duck Duck Go, are going to try to win over internet searchers with their largely free organic search results (which you can see this below example for “restaurant furniture”), promoted as protecting your privacy from the evil Google advertising empire.  

Let’s see if Google’s attempt to fleece all of its advertisers for even more money, and further clutter up its user experience, will open up a door for one of their competitors to start growing share in the search industry.  But, until then, the grim reaper is sharpening his blade for the SEO industry.  R.I.P. my dear friend.

For future posts, please follow me on Twitter at: @georgedeeb.