Booting the Founder

Google’s recent announcement that Larry Page and Sergei Brin, its two founders, are stepping back from day to day operations was not a surprise to many industry analysts and those of us who are regularly tuned into the business channels and publications.

21 years into Google, Page and Brin decided that as the organization continues to grow and mature, it is time for a change at the top.  It is not the first time that successful founders have left to pursue other interests.  It won’t be the last.

Perhaps the best example is Bill Gates who decided to dedicate his life to philanthropy and to give away most of his wealth in his post Microsoft days.

The Google announcement brings to mind the evolution of founders, their importance to their organizations and the sometimes-precarious position many founders find themselves in.

While Page and Brin are leaving on their own accord, many founders have been booted from the companies they founded.

High profile founders booted in recent years include Travis Kalanick from Uber in 2017 and Adam Neumann from We Work just a few months ago.  Neumann’s ouster, albeit with a big payout, was effectively tied in part to the company’s failed/aborted IPO.  In turn, that was based on less than overwhelming financial results.  Many more unfavorable comments have appeared in the press since.

It is common and happens more often than one might think.  It should happen more often than it does as it often permits viable organizations to continue to exist and flourish that could fail under the direction of the founder.  Sometimes it is just time for new leaders.

This can be complicated due to the controlling interest that the founder may have.

Often booting of the founder saves the company and the jobs of its employees.  It frequently preserves a portion of the founder’s equity interest, even if that person loses his/her management role.  Many booted founders lose sight of that.

Let’s not forget, though, that founders are the life blood of start ups and early stage companies.  It is their idea(s) that spawn the company in the first place.  It is often their entrepreneurial spirit, vision of and passion for the product or service and knowledge of the marketplace that drives early growth.

But as the company grows, issues in management, operations and in the organizational structure start to materialize, slowly at first, but then at an accelerating rate.

In the early days the entrepreneur wears many hats: product creation and management, marketing, administration, HR, legal and others.  Some of those functions are not within the skill set of the entrepreneur and are often a fundamental part of the founder’s undoing.

In the early days of the company, wearing many hats can be invigorating.  Work for the founder(s) is fun, especially in the exhilarating start up and fast growth days.  However, in time, the founder and the Board, if indeed there is one that provides an independent and knowledgeable perspective, must make a critical decision to hire management and to build an effective infrastructure for growth.  Failure to do so often risks the company’s long term success.

Work is supposed to be fun.  When it stops being fun, it becomes work.  That is not fun. That is the time for change.

In our advisory work, we are often asked when that decision should be made.  It is often needed sooner than later, maybe yesterday, last month or last year.

Common themes often emerge as we evaluate companies, and there are basic remedies, including:

• Founders must play to their strengths, understand their own short comings, analyze their weaknesses and make sure those gaps are filled;
• Founders should recognize the need for a regular independent point of view from advisors who can and should tell the entrepreneur what he/she needs to hear, even if it is not what they want to hear;
• The company’s finances need to be managed by:
  • Preparing regular financial statements and projections to understand the cash burn;
  • Seeking outside financing to fuel the growth;
  • Having a dedicated finance & accounting department;
  • Understanding that revenue growth often takes longer and not expect hockey stick growth;
• Marketing and sales are different functions, and both require adequate staffing;
• Implementing controls and procedures is vital for larger organizations. Many entrepreneurs have never worked in a larger organization and may not be aware of how larger companies work;
• Independent advisors can guide the decision-making process.

Even with professional management and a strong infrastructure, there may be times when the founder should step aside.  Our Management And Ownership: Facebook Faces Its Entrepreneur Quandry addresses some of these challenges in a larger organization.

The Board at Uber removed Kalanick as his demeanor created an environment in the organization that was hampering smart growth.  The culture that he and his founding team instilled in the company may have been acceptable at the start up, but was not appropriate for a larger organization, especially one that was publicly traded.

Neumann at We Work appeared to be totally self-serving.  When he was booted, Softbank had to infuse additional capital into the company and bring strong senior management, while at the same time, laying off thousands of people.

On the positive side, Larry Page and Sergei Brin have built a formidable company in Google.  They were smart early on to bring in Eric Schmidt as the CEO.  Schmidt had substantial experience in prior management roles and his guidance was an integral part of the reason Google developed as quickly as it did.  Years later, Page stepped back into the CEO role having had the advantage of a front row seat to watch and participate in the process.

Founders are important.  Sometimes the organization can’t live with them and sometimes it cannot live without them.

 

As for The Shindler Perspective

CES – In a few weeks, we’ll be off to Las Vegas and the annual CES, a show that is fundamental to the work in which we and our clients are involved.  We’ll be publishing our Strategizing CES 2020 and will post the blog on our site and on social media.

Space tourism – Enterprising the Enterprise was our blog in March 2019 and was based on the rise of the private commercial space industry.  The growth has continued as flights to/from the International Space Station and to the moon (albeit a failure) have increased in frequency.  SpaceX, Blue Origin, Virgin Galactic and ULA are the companies to watch as they send supplies to the space station and, as in the case of SpaceX, developing a sophisticated web of low earth orbit satellites to provide broadband around the world.  If you have not viewed a launch and subsequent landing of the rocket’s first stage, you are missing out.

Check out MIT Technology Review’s Airlock newsletter.

Comics reflect reality

Those who follow my Twitter and Facebook posts know that as a part of reading several newspapers, I read the comics, not just for the chuckle they often provide, but for the different insight on every day matters.

As more and more people work virtually there is a need for more conference calling, whether for in house matters or for working with our clients and customers.

Dilbert had this really good take recently on the frustration of conference calls.  Do you agree?

Smart, AI driven speakers with Alexa, Google Home et al have achieved remarkable market penetration.  In due time, we’ll get feedback to our questions that may not always be to our liking as seen in this Drabble comic.

CVS has been the butt of numerous comics and comedians for the sheer length of their receipts, even for minor purchases.  This comic from Half Full was published at Halloween, but is applicable year round.

 

Never looking back

We’ve used Never Looking Back for the many products and services that are no longer around, either because they were replaced by more current and sophisticated tech, or merely died as bad ideas or just could not gain traction.

This article from CNET presents a great summary of those products over the past decade.

 

Roberta Shindler and I wish our friends, clients and family all the best for the holiday season and for a successful and healthy 2020.

Sincerely,

 

Marty Shindler

© 2019 The Shindler Perspective, Inc.