“A revenue engine works well when you run it as a revenue engine, as opposed to a series of departments with handoffs.” This is how entrepreneur and author Matt Blumberg looks to align sales and marketing teams. We caught up with the New York-based serial entrepreneur to discuss his latest book Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams. We spoke to Matt about his new startup Bolster; his journey as an entrepreneur; his exit with his previous startup email marketing company Return Path and we quizzed him about how to hire the right CXO and the functions of the different CXO’s essential to scale an organization.
Q. Talk to us about your early career and your ‘a-ha’ moment that led you to found your latest venture, Bolster?
Matt: I have been working in the internet space since 1995. I worked with Moviefone until 1999 when I started my first company Return Path, an email marketing company. We grew Return Path to a $100 mn+ revenue company, and in 2019, I sold the business to Validity.
I started Bolster in 2020, along with some of my colleagues from Return Path. Bolster is a marketplace for on-demand executive talent focused on startups, scale-ups and private venture-backed companies. We decided to start Bolster because we realised a disconnect between what startups need in leadership and the traditional ways of hiring executives. Startup needs are dynamic, and they have time and budget constraints. In contrast, the conventional process of hiring executives is heavy, expensive and time-consuming.
Q. What was your experience of exiting a startup like? What are some of the things a founder should keep in mind when exiting?
Matt: A saying that’s popular among venture capitalists is that “great companies are bought, they’re not sold”. As an entrepreneur, it’s essential to focus on creating value and a differentiated product. And then, over time, you will attract people who are interested in acquiring your company.
It’s an emotional time for any founder. The acquiring party is going to be intelligent and efficient during the sales process. They will come prepared with advisors and bankers who have more experience selling a company than any CEO. As a founder, it’s essential to consider what is most important to the relevant stakeholders in the business, i.e. the founding team, employees, investors and other stakeholders during the sale. And take care of your employees and customers as best as you can.
Q. As a startup is starting to scale, which should be the first CXO that a CEO should look to hire?
Matt: The first CXO that a CEO should hire should be someone in the business that’s furthest away from the CEO’s area of expertise. A technical founder should look to hire a CXO from the go-to-market side. And a CEO with sales and marketing experience should look to hire someone from the product side. Ideally, the first CXO should be someone with a complementary skill set.
Q. How should you go about hiring your first CXO?
Matt: Hiring your first senior executive can be daunting, especially if you’ve never been a CEO before. There are two things you need to keep in mind. One of them is to go slow. Take a deep breath, be slow and methodical about it. Don’t feel that pressure to hire the next best person you see.
The second thing is that after you’ve gone through the traditional interview process and checked references see how you can observe these people and their working style before you bring them on board. If you’re hiring a CRO, you could ask them to pitch you the product with a pitch deck to see how much they’ve understood about the product and their attention to detail. When I hire board members, the last step is always having the finalists attend a board meeting, participate in a conversation, and see how well they fit into the group and speak their minds.
Q. When should a startup look to hire their first CFO?
Matt: There are three signs when it’s the right time to hire an industrial-strength CFO. One is when you wake up in the middle of the night, and you’re worried about cash. You’re not clear about how much you have and how fast you’re spending it. Cash management and cash forecasting are critical for a startup.
The second is when you, as the founder find that you’re spending too much of your own time managing fundraising, debt, investors, cap table questions, option pool, option plan and so on. While you certainly have to be spending time with your shareholders and raising money, you also have to keep driving the business forward. As a founder and CEO, you should be spending time doing the things that only you are uniquely qualified to do.
The third sign is when you can no longer answer the questions you get from your board or your investors about customer acquisition costs, customer profitability, return on investments, etc.
Q. What are some of the functions of a CFO?
Matt: The first one would be accounting. Maintaining cash in, cash out and keeping books and records. The second would be finance, which ensures enough cash in the bag that you’re managing the cap table, the balance sheet and investors strategically and thoroughly.
The third is information for business decisions. A good CFO has to have the correct information and numbers to make their own decisions and make sure that all the other executives also have the right information to drive their departments.
The fourth function is a catch-all administrative area with a mix of facilities, IT, legal, compliance, and other forms of the back office.
Q. How do you align your go-to-market and your product teams?
Matt: Executives have to commit first and foremost to being senior executives and not just heads of their department. A good executive feels accountable to all the other executives in the business at delivering the common vision. That mindset is essential.
One of the heads of my product teams had this acronym NIHITO (nothing interesting happens in the office). What he meant by this is that if you’re a product person, whether you’re a product manager or a software developer. You need to understand what’s going on with customers. Be on sales calls to see what’s happening when a prospect engages with your team and product. You need to be on customer calls, customer success meetings, at user groups, you need to be at customer advisory boards, doing ethnographic work in the field with your customers because that’s the principle that creates customer empathy, which is what ultimately aligns your go-to-market engine with your product engine.
Q. When should a founder look to hire a CHRO, and what makes a great CHRO?
Matt: The CHRO is an incredibly important function and one which most companies should hire earlier than they do. Companies make the mistake of not hiring a senior HR person until they’re 100-200 people when they can get a lot out of a strong CHRO when they’re a lot smaller than that.
The HR department has a lot of transactional activities. People have to get paid. Their health care has to work. They have to get expenses, etc. A great CHRO first masters these transactional tasks and then goes two layers above them.
First, with hiring the right people. Ensure they fit well into the culture, build the right teams, and be aware of the company context before they’re set loose.
The second layer above the transactional is making sure the onboarded people are doing their jobs well. The best HR departments are the ones that also run the company’s OKR and goal processes and have a deep understanding of what people are supposed to be doing, and have an effective process to measure employee performance.
Q. What are the three types of COO?
Matt: The COO is a funny role. There are three types of COO. There are inside people who is someone that manages operations, product, fulfilment and manufacturing. They might also act as a CFO.
Then there are the outside people who are running the revenue engine. They’re in charge of sales, marketing, customer success and partnerships.
Then there are the COO’s that have broad control of the organisation and are almost functioning as a CEO and report directly to the founder or CEO.
There isn’t a standard type of COO, and those three different types of COO’s require three different types of people.