What does a COO do at a venture capital firm? Jim Stewart of True Ventures

Ask what does a COO do and most answers describe an operating company. Jim Stewart's answer comes from the other side of the table. He is chief operating officer at True Ventures, the early stage firm behind Peloton, Fitbit, Ring, Duo Security, Automattic and Sweetgreen, which filed to go public on the New York Stock Exchange the week this episode was recorded.

Stewart joined True as CFO in 2012 and now runs operations across the firm. Before that he held operating and CFO roles at venture backed technology and biotech companies and took four of them through an IPO. He also races motorcycles and crews on a pro race team, which turns out to be relevant. His framing is that racing and finance share a common theme: take a little risk in a calculated way and you can build great things.

The back office nobody sees

The romantic version of venture capital is finding companies, cutting checks, joining boards, and riding along to an IPO. Stewart's job is the part underneath that.

Start with accounting. True is audited by Ernst & Young across every fund, which means the team is working on 18 or 20 audits at once. Stewart notes that most companies handle one and find it plenty. The recurring technical problem is valuation, because the firm has to mark its investments to market every quarter.

Then there is the data. The firm tracks portfolio performance, runs sector analysis, and studies how deals mature and what valuations are doing across financings. Stewart describes this as the support function that is most interesting and most valuable to the investing partners, because it informs what they should be thinking about on forward looking financings.

The third piece is the one he spends the most time on. Early stage companies often arrive with excellent engineers and founders and very little finance talent. True's team becomes a resource for those founders as they make their own financing decisions. In the week before the recording, Stewart had worked with eight or ten companies.

The real difference between a COO at a firm and a COO at a company

Asked to compare the two, Stewart does not reach for responsibilities. He reaches for concentration.

At an operating company, public or private, you wake up focused on that company's issues. You are on one team, with one set of problems. True has more than 200 portfolio companies, so the range of what might land on any given day is much wider, and Stewart will not go as deep on any of it as he would if he worked there full time.

That is the tradeoff. Breadth in exchange for depth. It also means the pattern recognition he brings to any single company is drawn from a much larger sample than an operator could accumulate inside one business.

What the pattern of success actually looks like

Stewart credits True's investing partners with reading this early, and the criteria he lists are unglamorous.

Can the founders build a culture. Can they build a team and attract strong talent as the company grows. Can they make the right calls on tradeoffs, growth against capital expenditure. And can they tell the story well enough to keep existing investors engaged and bring new ones in.

When those are working, he says, you are usually watching a company that knows how to grow, even if the team does not yet have a clear picture of where it ends up. He is careful about the word pivot, calling it often overused, but he does think the underlying behavior matters. Adjusting your view of what the market needs, and listening carefully to customers, is frequently the tell of a team doing a good job.

Michael's summary of the pattern is that it is easy to change ideas and much harder to change teams, which is why investors underwrite the team.

Building the C-suite around the gap

Stewart thinks about the C-suite as a complementary pool of talent solving for what a specific company needs, rather than a fixed set of boxes.

His example is supply chain. In a company with a complex one, it is common to see COO responsibilities carved out precisely because the CEO was doing that work early on and cannot keep doing it. The role exists to absorb the thing that is now too big for the founder.

That makes adapting the C-suite as the company scales one of the genuinely hard jobs of being a CEO, including knowing when to supplement the team and when to change people out. Stewart's preference is clear. If you can take advantage of the institutional knowledge of people who grew with the company, do it. It is not always possible, and approaching the public markets is often the moment when a team's strengths have to broaden to be ready for Goldman Sachs, Morgan Stanley and JP Morgan.

On the CEO and COO relationship specifically, his standard is high. In the best situations the second in command becomes the CEO's right hand partner, and in a public company that is not optional. You have to be able to finish the CEO's sentences and stand up in front of public market investors. His own path into that partnership started in a traditional CFO seat and grew outward from there.

Ten days that nearly stopped an IPO

Michael brings up the scene in Ben Horowitz's The Hard Thing About Hard Things where Horowitz runs to the bathroom to throw up during the IPO roadshow. Stewart's version is less dramatic and more instructive.

His team was loading the plane for the European leg of a road show when they discovered the company had a product in violation of US export laws. He describes it as not a small problem, a big problem, and a go or no go issue for the offering.

What followed was ten days of marshalling resources, gathering data and quantifying the exposure, over phone lines and late nights, while the European leg proceeded as a practice round. The message he had to deliver to nervous bankers was to take a breath and wait for the facts. He hired consultants including a former under secretary of commerce. By the time the roadshow reached New York, legal counsel and the accounting firm agreed the issue could be disclosed in the registration statement and was probably not a serious flaw.

The offering priced at the high end of the range. The underlying matter took roughly 18 months to resolve and produced a penalty Stewart calls completely immaterial.

Two details make the story worth more than its ending. First, it was not handled quietly. Investors, counsel and consultants all knew, because a public offering requires full disclosure, so the circle was broad by necessity.

Second, the cause was diffuse. The export rules had changed, the federal government had done a poor job of telling shippers, and the company's shipping team had not caught it. Stewart, a pilot, reaches for the aviation term: the chain of events. It is rarely one thing. It is usually five or six arriving together.

His conclusion is that in that situation the core skill was the absence of panic.

Transparency plus a plan

Stewart has watched roughly a dozen companies through hard moments, and his approach is consistent.

Employees want transparency from their leaders, so the first job is defining the scope of the problem properly and accurately, whether that is a sales miss or a customer strategy that needs revising. But transparency alone is not the point. The part he stresses hardest is having a plan of attack and being directive about it. Assess, recalibrate, execute, in whatever language the company uses.

His view is that employees are entirely capable of understanding a problem and a solution when they are given both with candor. What they also read is the tone it is delivered in, which is why a sense of calm and confidence changes how the message lands.

He is honest that it does not always work out. Not everything ends up okay. The method is about giving people an accurate picture and a direction, not a guarantee.

The 5 things I took away from this conversation

1. A COO role gets created around whatever outgrew the founder. Stewart's supply chain example is the clearest statement of this I have heard. The job is not a standard set of duties, it is the specific pile of work that has become too heavy for the CEO. If you want to understand a COO opening, find out what the CEO stopped being able to do.

2. The 90 day listening period is a discipline, not a courtesy. This was the most immediately usable thing he said. His practice is to spend the first 90 days listening, learning and taking notes, then book time with the CEO to deliver what he saw. His reasoning is that your observations before you join the team are clean data, and that clarity is gone forever afterward. Most new executives waste that window trying to look decisive.

3. Don't add drama to a complex situation. Stewart's repeated instinct in a crisis is to slow the emotional response down while speeding the fact gathering up. Ten days of quantifying an export problem beat ten days of panicking about it. The skill is not courage, it is refusing to react before the data is in.

4. Transparency without a plan just spreads anxiety. Telling people the truth about a problem is half the job. The half that determines whether the team can function is being directive about what happens next. Leaders who stop at candor think they have communicated when they have only worried people.

5. Problems almost never have one cause. The chain of events framing from aviation applies directly to operations. Changed rules, poor government communication, and a shipping team that missed it all had to line up. When something goes wrong, looking for the single point of failure usually means you fix one link and leave the chain intact.

FAQ

What does a COO do at a venture capital firm? At True Ventures the role covers fund accounting and audits across every fund, quarterly valuation of investments, portfolio data and sector analysis that informs investment decisions, and direct support to founders who often have strong engineering talent but no finance function yet. Stewart spends the largest share of his time on that last part.

What are the main chief operating officer duties in a firm versus an operating company? The duties overlap more than people expect, but the shape of the work differs. Stewart frames the difference as concentration. An operating company COO goes deep on one set of problems. A firm COO covers a much broader range across a portfolio, in this case more than 200 companies, and does not go as deep on any of them.

What is the CEO and COO relationship supposed to look like? Stewart's standard is a right hand partnership, where the COO can finish the CEO's sentences and represent the company to public market investors. He notes that getting the match right on culture and skills, against what that particular CEO actually needs, is what determines whether the partnership works.

How does a COO or CFO prepare a company for an IPO? Stewart's experience is that companies growing quickly rarely have all the systems and team in place that a public offering requires, so much of the work is catching the back office up to the rest of the business. His export controls story shows the other half of the job, which is finding and quantifying problems before the market does, then disclosing them properly.

What should a COO do in their first 90 days at a new company? Listen, learn and take notes rather than act. Stewart books a session with the CEO at the 90 day mark to share raw observations, proposed priorities, and the things he thinks need work that are not currently on the team's list. He encourages people who work for him to do the same, on the grounds that fresh eyes are a resource with a short shelf life.

Also mentioned

• True Ventures and its portfolio, including Peloton, Fitbit, Ring, Duo Security, Automattic and Sweetgreen
• Ernst & Young, auditor across True's funds
• The Hard Thing About Hard Things by Ben Horowitz, and the Loudcloud IPO roadshow story
• US export administration regulations, administered by the Department of Commerce, and the compliance failure that nearly derailed an offering
• PR1 Motorsports, the pro race team Stewart crews for
• Jim Stewart on LinkedIn

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Jim Stewart on Between Two COO's

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