A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.

There’s a bit of a Meme going around the internet the past few days about what a CEO does.  Mark Suster, Fred Wilson and Howard Linzon have all had there say, and while I enjoyed them, I think they miss one overall theme.  Fred started the whole thing by posting the quote above.  I totally agree with the quote, but I think the first one sounds so wishy washy that it gets overlooked.  I want to take a minute to refine it by way of an analogy, the CEO’s primary role is as an investor.  At the end of the day, she has the power to allocate her company’s resources in the way she thinks will have the highest returns.  This investment comes in two forms.

First, the CEO will be required to select internal projects to develop.  Startups have scarce resources and, consequently, have to make extremely critical decisions.  Is SaaS the way of the future?  Will our customers prefer to have downloadable or SaaS software in a year when we debut?  In 10 years?  This decision is much the same as deciding to invest in large enterprise hardware/software companies because they tend to do well as we exit a recession.  In either case the CEO/investor must select the next big thing before it happens.

Second, the CEO will be required to make partnerships.  Once the CEO has decided how she wants to move her company, she will need to find the right partners to do it.  Ok, she’s going to build an SaaS solution using some sort of PaaS platform.  Should she pick Salesforce’s Force.com or Google’s App Engine / Web Toolkit?  This question is different from the previous one, she now need to be able to evaluate a supplier’s management structure and strategy.  The last thing a CEO would want to do is build a Force.com app and have them stop offering the service in 2 years.  She also doesn’t want to over pay for the media darling that’s sure to last 10 years, but charges so much that she can’t be profitable.  This decision is very similar to the investor selecting a particular enterprise hardware/software company to invest in.  Even if the sector is going to be hot, you don’t want a company with a poor management team or one that’s not dedicated to its products.  You also don’t want to buy one that’s overpriced because while the rest of the sector shoots through the roof, your investment will stay level as the market corrects its over valuation.  Both the CEO and the investor need to be able to take a thesis about what is right for the company/portfolio and find the perfect fit.

Don’t get me wrong, I’m not saying that this is in lieu of all of the things that Howard and Mark called out.  Being a good stock picker doesn’t make you a great investor.  The things Howard and Mark called out (such as building a team, keeping the team organized, making sure the team is motivated) are just as crucial.  A CEO that can’t do those things is like an investor that knows exactly which stock to pick, but fails to put money in a brokerage account.  All I’m saying is that even with a motivated, organized, talented team the strategy has to be right.