What Makes a CEO ‘Fundable’ to Investors? – George Deeb

Welcome to another edition of the Atlanta Small Business Show. Today, we’re pleased to welcome back George Deeb, Managing Partner at Red Rocket Ventures, Forbes Contributor, and author, to discuss characteristics venture capitalists look for in fundable CEOs. Since starting at Red Rocket in 2010, Deeb has advised or mentored over 750 B2C and B2B businesses. He has a large network of contacts in the startup, digital, and venture capital communities and specializes in business planning, growth strategy, corporate development, fundraising, sales, and marketing.

incubators and acceleratorsTranscription:

Jim Fitzpatrick:
We are so happy to have with us, Mr. George Deeb. I know you know this gentleman because he’s been on our show so many times providing us with such great content to help us run our small businesses better and also find some money out there, which is what we’re going to talk to him about today.

George Deeb:
Yeah, awesome. Happy to be back, Jim. To me, there’s kind of two parts to this answer. One, you need to know what the role is of the CEO to make sure you’re clear on what your job is to be successful. Then the second is what are the traits that you need to have? Some of the softer traits that you need, the skill sets you need to be successful in that role. We’ll talk about both sides of that as we go through this together.

Jim Fitzpatrick:
Okay, sure. Talk to us about some of the characteristics that investors are looking for and the investment communities looking forward to make that big check that we all as small business owners want. Let’s start there.

George Deeb:
All right, let’s start with the role because there’s a few things that you need to know what you need to do. The first thing you need to know is you need to be a good strategist. You need to understand your industry. You got to know who your competitors are. We got to know whether or not you’re going to build a solution or buy it through mergers and acquisitions or seek good partners or whatever it is. You got to understand just the core level strategy skill sets are important to be succeeding here.

George Deeb:
The second is leadership. You got to be trusted by your team. There’s got to be clear roles and responsibilities and everybody’s clear on what their jobs are and stay in their swimming lanes and do their jobs well. You got to build a really strong culture and respect the chain of command and more importantly, be a good cheerleader in the business. Those leadership skills is the second category.

George Deeb:
The third category are things like being a good manager. You’re running a business, so you got to know what is the team expected to do? What are their KPIs? What are they be managed against? How are they progressing against those goals? Are you mentoring your junior team members? Are you having one on one meetings with your direct reports and your peers as a management team and that kind of stuff. Good management skills would be the third category.

George Deeb:
The fourth category are things like fundraising. You got to have the ability to raise capital for your business. You got to make sure the business doesn’t run out of money and you know how to network with venture capitals is a very important part of being a startup.

Jim Fitzpatrick:
Let me just interject a question here. We’ve talked to a lot of CEOs and founders of small businesses that are looking for money. I said, what percentage of your time, I asked this one founder, I said, what percentage of your day is spent on looking for money? Looking for new capital, whether it be on the loan side or whether it be on an investment side. He said, currently it’s a hundred percent of my day. That’s crazy to me that a CEO has got this company that they have to run, he or she’s got to run, and yet they need the capital because that’s the fuel that’s going to make it run and yet so many CEOs have said that they spend 50% to 100% percent of their day looking for that money. To me, who’s running the shop?

George Deeb:
Yeah, it’s not too far from reality. I’ve built several venture capital backed startups and there are periods of time where a hundred percent of your time is being invested in the fundraise. The reason it’s so high is you might have to make a hundred phone calls to get the one investor to bite. You’re putting a lot of energy and effort into working your network and pitching your story over and over again until you can find that lead investor that’s going to get the deal done. It is, it could be torturous for sure.

Jim Fitzpatrick:
It’s okay then that if somebody does find themselves spending so much of their time looking for money, they’re not an outlier. They are pretty much in the running with the other CEOs looking for money.

George Deeb:
Sometimes you can take that work and share it with your fellow colleagues around the management team, your CFO or whoever and maybe they can do the initial legwork to open up some relationships, but ultimately the investor wants to see you as the CEO and wants to have a relationship with you and hear your pitch and hear your story and back you. I wish there was a way to make the process simpler, but unless venture capitalists are throwing money around without requiring to talk to the CEO, there’s nowhere to do that.

Jim Fitzpatrick:
That’s right. That’s known as the stock market.

George Deeb:
That’s true.

Jim Fitzpatrick:
Okay, go on with your list there.

George Deeb:
All right. A couple more things about the role. You got to be a good recruiter. You got to know where good talent is and how to inspire them and hire people that are smarter than yourselves because if a company’s being successfully grown as a startup, you might go from five employees to 10, to 20, to 40, to 100. You’re constantly going to be in recruitment mode, finding that right talent.

George Deeb:
You need to be a really good negotiator. That’s another skillset here is you got to know how to get a good deal done. Don’t lead with your best offer, walk away from bad deals. Don’t pay full price ever so negotiations is a key part of this.

George Deeb:
The last part of the role is being a good financial manager. Know your business model, know your metrics, identify trends, know what those key driving assumptions are in your business, keep your burnt rate really low, and make sure you’re holding the right meeting frequency with your board of directors to keep everybody abreast of how you’re progressing.

Jim Fitzpatrick:
Yeah, that’s right. That sounds like a full day right there, that’s for sure. That’s going to fill up any CEO’s calendar, but it’s all great stuff for sure. In fact, while you’re going through them, I’m got a mental checklist going on, going do I do that? Do I do that? Do I do that? I think I’ve got most of the check marks, but there were a couple things you mentioned that I’m like, okay, I got to really focus on this going around. Talk to us, what advice do you have for a fundable CEO that may be lacking in these traits?

George Deeb:
Well, it’s a couple things. One, you got to make sure you’re constantly educating yourself and making yourself better and improving and where you think you’re falling short, make sure you seek out the mentorship or the tutelage or the education or the networking benefits of learning what you don’t know. Yeah. That’s a key part of it.

George Deeb:
The other is just making sure you’re surrounding yourself by terrific talent around the table so that somebody in the organization has the skill sets that you don’t have, that you can lean on to get those skill sets. That’s why an investor is so much looking at the value of the team. How does that team work together and what different skill sets do they bring and how are they going to work together and gel together as a group, because the team can fill in the holes the CEO doesn’t have for sure.

Jim Fitzpatrick:
Yeah, that’s right. It should be said that we always talk about putting together a great management team or leadership team, but it’s hard to do if you’re not a strong leader yourself because that C-suite so to speak, they’re looking at you deciding whether or not they’re going to come to work for the company and come work for you as a leader. If that level of confidence isn’t there, then you’re not going to get that top tier talent, right?

George Deeb:
Yeah, for sure. That leadership was one of those six or seven roles of the job that we talked about. It’s absolutely critical that you’re setting the north star for the business and everybody’s clear on we’re heading in this direction and we’re not going to get distracted and we’re going to stay focused and we’re not going to build different variations on a theme. We’re going to focus on what we’re doing well and point them in the right direction and make sure they stay marching in that clear direction.

Jim Fitzpatrick:
That’s right. Just to change gears a little bit, still a good time for business owners or I should say for entrepreneurs to open up businesses with all the craziness that’s going on out there? We got wars and interest rates and now inflation just hit 8% and all that’s going on out there. This entrepreneur that was thinking about launching a company gave me a call the other day knowing that we run the Atlanta Small Business Show and my advice to him was now is the best time to do that. Would you agree with that?

George Deeb:
Well, we’ve been living in such a bull market for the last several years that I think the world has forgotten what a bear market looks like.

Jim Fitzpatrick:
That’s right.

George Deeb:
The reality is I’m nervous about the markets. I mean, I’m nervous with everybody else out there. I feel like it’s super frothy and the inflation is making me really nervous. The price of things keep going up and up and up, but at some point people are going to stop buying the products because they’re just too expensive.

George Deeb:
My advice to an entrepreneur that’s trying to launch a business now, if you get the capital raised now, do it while the ducks are still quacking because when it dries up, it will become like arid desert dry. You want to make sure you got the capital, not only to fund what you think your proof of concept is, but enough to fund you the next round. Instead of just raising enough for your series A, raise your series A and series B if you can, because you don’t know if that series B is going to be waiting for you.

George Deeb:
When September 11th happens, my travel business that I explore, that last round of capital just didn’t happen. You thought it was going to be there. We fully negotiated the deal, we’re ready to close. I still got the paperwork says we’re supposed to close on September 15th.

Jim Fitzpatrick:
Oh my gosh.

George Deeb:
September 11th happened and that deal fell apart. At some point there’ll be a change in psychology and the investors will not be throwing money around or it’ll be evaluations that are nowhere near the crazy valuations that are being discussed now so prepare yourself, protect yourself.

Jim Fitzpatrick:
Yeah, and if that closing was just five days sooner, you would’ve been in the safe zone.

George Deeb:
Exactly. It changed the whole trajectory of the business.

Jim Fitzpatrick:
That’s right. George Deeb, managing partner, Red Rocket Ventures. We love when you come in here to the show because you share such great knowledge and you’ve helped so many of our subscribers and viewers take their business to the next level and I know that’s what you’re all about. Thank you so much for joining us.

George Deeb:
It was great being here, Jim.

Jim Fitzpatrick:
Great, thanks.


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