The SaaS CEO Path Should Be Wider

May 10, 2021
7 Minutes
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In SaaS businesses, operating results are earned every single day; and good businesses are made, not found. Writing here about building organizations, learning from the experience, and appreciating the ride.
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Last week I had the opportunity to speak with three different SaaS execs about their careers. Each had valuable experience within high-growth software businesses. Each brought deep management and functional experience, having led critical departments within their respective companies. Each presented themselves as personable, passionate, and articulate about their work. And yet, they were all grappling with how to take the desired next step of their career journeys — to land the CEO gig at a growing SaaS business.

These folks are not alone; countless aspiring leaders struggle to make this leap. This is unsurprising: although many executives harbor the lifelong dream of leading a company, the chief executive role is uniquely challenging; and the sheer numbers are stacked against elevating to this level. Likewise, seemingly everyone wants to get in on SaaS these days, making the odds even longer for would-be tech leaders. And yet, making the jump to SaaS CEO is far harder than it should be. In fact, like many things in life (such as college admissions, securing student internships, earning a roster spot on competitive teams), the “right to enter” can be even more prohibitive than the required qualifications to succeed. Why is that?! This post aims to identify, and hopefully poke a few holes in, some of the less obvious reasons for why it is so hard to navigate the path to becoming a SaaS CEO.

The Founders Path: The surest path to becoming CEO of a SaaS business is to start one. Again, this is unsurprising: founders are the natural choice to lead the entrepreneurial endeavors they initiate. After all, who better to rear the brainchild than the person who hatched the idea in the first place? This founder-as-CEO model has been reinforced for decades in our minds by the many well-known and truly remarkable individuals who have not only started successful businesses, but also subsequently led them through extended periods of growth. Thomas Edison, Steve Jobs, Jeff Bezos, Jack MaPayal Kadakia, and countless others have made this extraordinary achievement seem almost commonplace — it’s not. It is rare and amazing, and it should be celebrated as such. And yet, founders often remain CEO of their business until either (a) the business goes belly-up (bad outcome, but statistically the likeliest), or (b) the business succeeds and grows to the point of needing a hired-gun executive (good outcome, but often an emotionally fraught one).

This whole dynamic can be cruelly ironic in a couple ways. First, a fair portion of founders end-up learning that have little appetite for many of the CEO’s duties (such as: leading people, managing a board, exec selling, or sweating the financials). Rather, founders often prefer to start things…not finish them. Conversely, many executives yearn for the top-spot in a company and have invested heavily in developing related skills…but simply don’t possess the founder-gene. Consequently, one of the most viable paths to becoming a SaaS chief executive is blocked to countless qualified leaders simply because they “don’t have a great idea for starting a business.” As a short aside, many would-be CEO’s do end up choosing to start businesses, at least in part as an entrée into the corner office. Although this absolutely can work out well, it is generally a “tail-wagging-the-dog-ish” bad idea. Anyway…where exactly does this leave the non-founder SaaS exec who has the itch to prove herself in the CEO role?

Which Came First? For non-founders, the obvious route to “CEO-dom” is to work one’s way up the ranks. Unfortunately, this is also a narrow path with many pitfalls, including the fact that climbing the corporate ladder can take years or decades (with plenty of brain-damage and no guarantees along the way). To further complicate matters, not many employers actively recruit non-founder, first-time CEO’s. Traditional VC / PE investors, who often are responsible for hiring SaaS CEO’s, rarely (if ever) actively seek out rookie CEO’s. Again, hardly surprising: these financial stakeholders have a fiduciary responsibility to maximize returns while minimizing risk. Accordingly, very few are keen to take a chance on an unproven executive in the one role that will arguably have the greatest impact on the outcome of a given investment. Likewise, self-aware founders seeking to replace themselves generally tend to prioritize a proven track-record when considering their successors — and certainly not less-experienced first time CEO candidates! All of which begs the question: if one needs to have already been a CEO to become a CEO…how does one initially break-in? That is precisely the vexing chicken-and-egg problem that the executives described above are striving to crack.

The hard truth is that — like so many things in life (e.g. skydiving, performing in a live production, asking someone out on a date) — no training can adequately prepare CEO’s for the real thing. Sure, aspiring CEO’s could / should strengthen their CV by amassing increasing levels of leadership experience and developing valuable functional expertise. Sales, marketing, finance, and product management are all proving grounds for future chief executives. General management roles, particularly ones with accompanying P&L responsibility, are also “as good as it gets” in terms of prepping future SaaS CEO’s for the stress and complexity of “sitting in the big chair.” But even with such undeniable preparation, the first-time CEO remains about as appealing as an understudy on Broadway — highly suspect unless and until he / she demonstrates the ability to handle the moment and shine when the lights come up. These and other forces combine to create a stacked deck against aspiring CEO’s. But this doesn’t have to be the case.

Contrarian ClosingWhy we like first-time CEO’s

With respect to all of the points above, we beg to differ. When it comes to early-stage SaaS businesses, we dig first-time CEO’s. While there are many undeniable benefits of prior CEO experience, there is also a lot to like about first-time CEO’s in this environment. First, they tend to be quite energized by the opportunity to “make something their own.” This typically translates into a high “want-to” factor, the importance of which simply can’t be overstated (as outlined here). This is particularly true when a leader marries that enthusiasm with a high-level of capacity / competence, which is overwhelmingly characteristic of anyone who is a legitimate CEO candidate. As another short aside, this point reminds me of this gem from Simon Sinek…so, so true). First-timers also tend to have a healthy respect for the complexity of the role / situation into which they are stepping. This encourages them to be open-minded and coachable; and it discourages them from prescribing before diagnosing. This is a crucial point; some of the biggest mistakes leaders make can result from defaulting to the assumption that they’ve already “seen this movie” (aka: fully understand a situation, before having completed exhaustive discovery). Rookies, on the other hand, rarely fall into this trap. Finally, sub-scale SaaS businesses tend to be scrappy and under-resourced; and first-time CEO’s can easily jump-in with both feet. Specifically, they are in a great position to leverage up-to-date expertise that draws on their functional background…and, in the process, to help the business punch well above its weight.

In fairness, not all departmental / functional leaders can successfully make the leap to CEO. We prioritize candidates with high-levels of humility / coachability, EQ (emotional quotient), systems-thinking, and prioritization skills; and the odds of their success are greatly improved by supporting them in an intentional, structured, and consistent way (both of which seem like topics for future posts).

In sum, though, up-and-coming execs can offer a great option as CEO’s of sub-scale SaaS businesses…much more so than is suggested by the narrow paths available for them to get there.


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