The Three Qualities of a Capital Worthy CEO

What makes a great CEO?

It’s a question that has many different answers to many different people. For a CEO who is looking to raise capital or find a buyer for his business, the opinion he cares about most, however, is that of the investor.

When looking for their next greatest deal, investors aren’t just looking for a company with a great product, solid financials, and a loyal customer base. They’re looking for a company that has been built and run by a great leader — someone who can continue to grow the business with their capital and advice behind them or someone who is motivated and prepared to pass the torch to the next generation of leadership in a seamless and elegant transition.

Having a strong leader at the helm of a company makes it a more attractive investment to a debt or equity investor, or an acquirer of the business. Although each investor values management traits differently depending on their focus, there are three broad categories that investors see as critical.

Strategic Focus A CEO’s strategic focus is key to where the business has been and where it is going. Investors take interest in companies that have a vision for future growth based on a well-developed industry expertise. Investors put a high value on specialists, and a CEO’s strategy for the business should reflect their deep experience in the industry.

The CEO and company must have a proven program to manage product development, customer relationships, and intellectual property, creating appropriate barriers to current and future competition.

From an equity or debt fund’s perspective, it is not difficult to assess a CEO’s focus. An executive’s business plan is the first place to start. That plan should include a description of where the company has been and where it is headed, including products and addressable markets. It should be clear to the investor how the CEO has driven the company’s success through his/her strategy. An evaluation of the company’s historic and forecast financial performance provides the true test.

Confidence When investors first meet a CEO, they expect to hear a cohesive description of the business, its history, and its outlook — and investors want to hear this from a confident and articulate CEO. Demonstrating passion about the business and a sense of urgency around its growth opportunities are critical. Confidence can be further communicated through examples of the CEO’s historic persistence in achieving the best possible results for the company.

Many CEOs find it natural to be passionate about their business and its value. Their confidence, however, needs to extend to the persuasive when discussing their outlook for the business, innovation, product, and/or market. Investors are listening for this reasoned confidence, indicating that the business and its CEO are worthy of their time and investment. Of course, investors are also looking for financial results that support the CEO’s confidence.

Integrity Integrity involves applying a sense of what’s right in dealing with stakeholders fairly and transparently. This will include employees, customers and, broadly speaking, suppliers (including capital sources). When a CEO manages a company with integrity and demands the same from his team, the business has the ability to operate at peak efficiency under the leadership of the CEO and the culture he or she has established.

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“Investment bankers, people acquiring entrepreneurial businesses, or individuals who work for an entrepreneur — anyone who deals with an entrepreneur — would do well to heed the complex drama playing in the inner world of these people; they will profit by looking beyond the surface of things.”

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