How can I get hired as a CEO of a startup?

I will be interviewing for a CEO position in a start-up company.

Jan 1st, 2010
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MILTON CHANG

Q: I will be interviewing for a CEO position in a start-up company. How do I convince the board to hire me, even though I have never held a top position or worked for a startup but have been a successful mid-level manager?

A: Accentuate the positive aspects of your experience. Be yourself. They probably already know a lot about you from your resume and the dossier they have gathered if they are professionals. Stay relaxed and carry on a one-on-one discussion as equals that will convey the confidence to stay cool under pressure that would be expected of a senior individual.

Most companies look for CEOs to "fix" the company. For me, it is even more important to establish strategic leadership that makes a big difference rather than incremental gains from fixing. So, be well prepared. Study up on the company and carry on a meaningful discussion on strategy and fixes, without taking a firm position—you don't know enough to argue specifics. You need to impress them with your ability to think strategically. Doing your homework will help them see you are thoughtful person.

Aside from that, make them feel they can work with you by addressing their questions with self-confidence rather than trying to hide your weaknesses. I can go on, but I must confess my track record in that department has been spotty. I won't mention the misses, but I can brag about my success as chair of the search committee that hired the Uniphase CEO. I also recommend that, if you have to keep looking, you use an executive recruiter who specializes in hiring CEOs in your industry. Most high-level searches are done in secrecy to avoid disrupting the organization. Established recruiters would have an extensive database of clients to draw from and would likely know about openings that are not advertised. They can also present you in a positive light that helps get the job and gain acceptance into the organization.

Q: Should I incorporate my business before I raise money? If so, what ownership percentage should each of the three partners get?

A: Yes. When you incorporate you convey to investors that you are serious, not just talking or contemplating. First, visualize what you want the company to become and the role each of you will play when the business is established. Then decide on the corporate structure and the ratio of ownership.

You have three options: C Corporation, S Corporation, and LLC (Limited Liability Corporation). They differ mostly in how profits are taxed, both for the company and the individual owners. My recommendation is C Corporation, which shows you intend to make it a real business. As an investor, I rarely see S Corp or LLC business plans, and usually those are rejected out of hand because it is an indication that the people are not serious or are amateurs.

You will have to make a tough call on the ownership, and you might as well let this be the starting point that tests your leadership. The specific percentage for each executive position varies depending on local convention. No doubt a local law firm would be happy to provide that information as a way to get a client. It is easier to deal with the tough ownership issues now when the company isn't worth as much. Years ago I provided seed capital to two young men who were very good friends. The split was "obviously" 50:50. As the business became established, one was the CEO, quite competent, and one was VP manufacturing, struggling to learn professional management skills. When the company was further along, the arrangement created significant complications and a loss of friendship when VCs demanded a significant shift in ownership using a convoluted scheme, which resulted in the VP departing the company in disgust.


MILTON CHANG is managing director of Incubic Venture Fund, which invests in photonics applications. He was CEO/president of Newport and New Focus, and currently sits on the board of Precision Photonics. He holds a B.S. degree from the U. of Illinois and a Ph.D. from Caltech. He is a Fellow of IEEE, OSA, and LIA, a former president of LEOS and LIA, recipient of Distinguished Alumni Awards from both universities, serves on the board of trustees of Caltech, and is a member of the Committee of 100. Visit www.incubic.com for other articles he has written.

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