Blog

By Marissa Fayer

Taking over as CEO from a founder is often a herculean task, especially when you’re succeeding founders who have invested their money, time, passion and life into the business.

Even if appointed, taking on this role comes with a set of inevitable challenges. Founders naturally have the highest percentage of ownership and sway over the business to date.

In many cases, the founder’s ownership also carries into the supporters of the business thus far, with the majority supporting the founders as they have typically developed a strong relationship with them.

In my experience, when an external CEO is brought into a company — a decision that can be driven either by shareholders and investors or by founders recognizing their limitations — there are three common threads that should be thoroughly reviewed.

Ask for a comprehensive overview of where the money came from and how much is actually available

This is crucial to set you up for success. Make sure to look at the bank account and speak to the previous investors. Understand investors’ motivation for investing in the business. It’s important to distinguish between those investing out of personal connections (friends and family) and those who make investments as part of their profession (angels, venture capitalists, etc.).

Taking time to schedule these meetings prior to accepting a CEO role should be at the top of your list. Getting a comprehensive overview of the finances to date will help you gain further insights into the opportunities and challenges ahead.

Make sure to clarify roles and responsibilities for the future, and establish clear expectations regarding exit plans, including timing and financial considerations.

Understand the founder’s stake in the business

Prior to taking over as CEO, it is imperative to predetermine what role the founder has going forward and their stake in the company. Ensure that the cap table allocates 20% for options, confirm all intellectual property is assigned to the company, and ensure that no founder holds more than 30% equity.

If one person has more than 30%, they could make decisions for the company without the CEO’s notification, threatening growth and the future. It’s also important to gain insight into the current and future-looking board roles.

Review the business and future outlook

Discuss the future company goals and what it will realistically take to achieve them based on the current state of the business. A big part of that is reviewing the envisioned direction of the company.

This means talking to founders, management and current board members to get a clear picture as to where they think the business is going versus where you might want to take it.

This can greatly differ and set you up for failure if you do not talk about this prior to taking on the role. It’s important to have an open dialogue from Day One, communicate differences and agree on a strategy moving forward before signing papers.

Discuss communication methods and styles and be clear on expectations for forward growth. It’s crucial to evaluate the company’s position in the market objectively, considering how the company and product fits in.

When you’re excited about taking on a CEO role and passionate about the company itself, it’s easy to overlook other critical focus areas.

To ensure alignment and the ability to effectively execute tasks when needed, it’s imperative to conduct thorough due diligence beforehand. This proactive approach ensures that you are adequately prepared for the next steps in your CEO journey.

Joining a company as CEO comes with many opportunities and challenges.

My best advice is to jump in with your eyes wide open, knowing the value you bring to the company and where you want to take it in the future. That is, after all, what they hired you for.

Marissa Fayer is a medtech executive, innovator, entrepreneur, investor and philanthropist. She is the CEO of DeepLook Medical and the CEO and founder of nonprofit HERhealthEQ. Fayer’s mission is to move innovation and the health of women forward throughout the world.

Illustration: Dom Guzman