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Startup CXO: A Field Guide to Scaling Up Your Company's Critical Functions and Teams (Techstars)

5 min read

Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams (Techstars)

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Highlights & Notes

My advice to entrepreneurs and leaders—build your peer network and spend time developing and nurturing these relationships. While board members and advisors are an important source of knowledge, learning from peers can be invaluable.

CXOs are first and foremost members of the company’s Executive Team. They must, must, must put that team, understanding of the different functions, and the relationships on it at the top of their agenda.

As members of the Executive Team, all CXOs are accountable to each other for the success of the business as a whole and must partner with each other to achieve that success.

Company leaders have the actual and moral authority to step outside of their departments and handle things as they need to be handled, regardless of which employees are involved.

First, master the tactics. You need to understand all of the things that happen in your department. Some, you will know well because they’re the ones you’ve done over time. Some you won’t know at all. Make sure you do a complete inventory of the functional competencies for your role and all the roles reporting to you.

Second, form your strategic approach. Every single function in a company has tactical and transactional elements to it—and every single function can be ONLY tactical if you let it.

What does it mean to be strategic vs. tactical? It’s the difference between eating what’s on your plate and planning out next week’s menu. What are the ways in which your function can produce competitive differentiation for the business? What are the frameworks that will guide your decision‐making about resource allocation or prioritization? How can you best support the other departments in the company?

Finally, look around the corner to see what’s next for you and for your team. Senior executives constantly need to be toggling between different execution and planning horizons.

the only way to scale yourself as a CXO is to understand what great looks like for your role at the next stage of the company’s life, and make sure you don’t get there after your company needs you to.

Your number one job with helping your company scale is to help people learn how to best think about the issues of investing, measuring, making data‐based decisions, and managing financial resources.

Every business will have unique processes that are critical to a strong foundation but there are a handful of areas that will be important for all businesses, like the Board minutes I mentioned and others such as: File storage and management Initial interest to closed sale (“interest to order”) Order to cash Chart of accounts HR information system (HRIS) Employee expense policy Option grant policy and budget Federal and state registrations Sales tax

The best pitch decks usually have at least the following sections in roughly this order: The Opportunity: Clearly illustrate the business idea and the core value propositions. The Business: Description of the approach and the business model. The Product: Description of the product with relevant screenshots and roadmap. Size of Opportunity: Presentation of the Total Addressable Market (TAM). Current Business Status: Current clients and partners, high‐level KPIs and any other relevant information. Financials: Overview of current financials with appropriate projections. Senior Team: A slide on the Senior Team with their roles and key experiences.

Instead, figure out the size of the total addressable market (TAM). You can arrive at this number in a couple of different ways. A top‐down approach focuses on readily available macro indicators. For example, if your business is chasing an opportunity in the real estate space, it’s easy to find macro numbers on the size of the US real estate segment you are in and you can provide some color on how fast it is growing and what percent of that segment you feel is addressable for your business.

The other approach, bottom‐up, uses individual metrics to arrive at a number if you were able to sell your solution to every single possible client. Continuing the real estate example, if your clients are commercial real estate tenants, you could use data that show there are 500,000 commercial tenants in the US (for the easy math) in your market and the average service price of your product is 2.5 billion. From there you would (probably) refine that number to something more reasonable, like reducing the TAM by region or some other factor.

Having realistic and defensible projections will require the CFO to deeply understand the business and be a great partner to the other teams like Sales, Service, and Marketing.

Customer retention rates. You will have a few rates that each tie to the key customer segments you’re targeting. Things to consider are customer size, region, or product set, or other segments that tell a different customer retention story. Net Retention Rate (sometimes called Net Revenue Rate), or NRR, is the customer retention rate, taking into account revenue net of upgrades, downgrades, termination, and cross‐sells. Gross Retention Rate (GRR) only includes downgrades and terminations. Both metrics are useful to track, and many later stage investors (and possible acquirers) will spend a lot of time on these metrics.

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