Which should take priority with the startup CEO: The team or the cash? In various discussions and blogs and forums, I see two different answers. I can see arguments for either or both. However, if you are a startup CEO, you have to choose daily – maybe even hourly – which to prioritize. They don’t always complement each other, and one can often substitute for the other. Here’s what I mean.
Money, money, money, money!
Early on in any startup, cash is king. Until you are big enough to have a CFO, it is the CEO’s job to make sure there is enough cash in the bank to pay the bills and get new customers. If you have lots of cash, you can hire more people and/or outsource non-core tasks. Cash comes from customers or investors. If you’re going to raise money, then you’re job as the CEO is to create lots of relationships with investors before, during, and after the time you need to raise funds.
After you raise money (each round) your job is to communicate to the investors how well (or poorly) you are using their money to get new customers in the short or long run. Raising cash is an event, whereas gaining customers is ongoing and forever. If you can’t figure out how to repeatably get money from customers, you don’t have a business model, no matter how much money you raise from investors.
There is No “I” in Team
You can’t do it alone. We’re talking about starting up a business here, not building a freelance practice. Huge difference. Nothing wrong with either one, but for this context, we’re focusing on building a company. Early on, you can get to a certain stage alone, but at some point, your needs are greater than your abilities, and you have to hire or bring on co-founders. You can’t hire without money in the bank, but you can’t scale without a team, and very few investors, if any, will invest in a one-man show.
Once you’ve created a repeatable way to obtain customers (revenue), then you must have a team to scale that model. You can attract co-founders with great vision and great communication, if your co-founders are in a financial position and life position to work for free for some amount of time. Again, unless you have money from customers or investors, working for sweat equity is a requirement of a startup. You can build a team without money, if…if…if.
“Culture Eats Strategy for Breakfast”
So which is it: team or money? Drucker didn’t say those words in answer to this question, but it still applies, and provides the basis for my answer. What is the startup CEO’s highest priority? For the following reasons, my personal belief is that it is the team.
- You cannot do it all alone, no matter how good you are. Time is limited.
- “If you want to go fast, go alone. If you want to go far, go together”
- You can build a team without money. Without a team, you cannot raise money.
- If the solo CEO gets hit by a beer truck, the company dies right there.
Am I right? I’m guessing 50% of people will vehemently agree, and the other half will violently disagree. What do you think?