Book review, Nick Bilton, Twitter

Start up roulette : Why do so many founders get fired?

I’ve just read Hatching Twitter by Nick Bilton 2013

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It’s a good book, quite interesting as he managed to talk to all of the key players, and has tried to show each of them in a rounded way. It’s good, and it’s crazy. Founders Noah, Jack, Ev, Biz, all eventually get sucked in, chewed up and spat out the other side, no longer part of the organisation.

The following sentence  I never thought I get to write, and maybe I shouldn’t but …

Steve Jobs, all the founders of Twitter and myself (there you go, I only went and did it) have all had the bitter experience of being displaced from a company they founded. It’s a difficult, strange and unpleasant experience. Reading this book, with the almost Shakespearean grimly logical progression of each Twitter CEO getting axed, it makes you wonder if it was avoidable. When it happens to you, you look at what happened. Retrace events, and try to see if you could have played it different. It seems similar to the way that Stalin came to power too. Trotsky was the brightest and the best of a talented group of individuals, the glamorous, successful leader in battle. Stalin the mere bureaucrat in the background, dealing with the paper work. However gradually, insidiously, he out manoeuvred the other lesser lights. Eventually reaching a point where he had enough of his own yes men in place, to finally take on and oust Trotsky. Trotsky finally meeting his grim end in the beautiful neighbourhood of Coyocan, Mexico DF. A lover of Fridha Karlo, but not safe from the henchmen of the KGB. The room where he died left untouched from that day and now a museum. At no point here should we advocate Stalin’s approach, but it does seem to be an early illustration of the transition from storming, to forming to norming, and how some are suited more to one than the other.

Is this always how it plays out?

With each step you believe you are doing the right thing, but you don’t want to be a complete bastard to those that you work with. You’re not that sort of person. Trouble is, in doing so, each time around, with Twitter, with Steve Jobs, with us, by acting in a humane and reasonable way, it leaves you open for being brought down by others more devious and less bothered by such principles. Jack Dorsey was able to usurp Ev Williams because they left him on the board in a silent partner role. Trouble was, he didn’t stay silent. Instead he plotted, planned, and connived until, against all the odds, he reached a point where he had enough momentum to successfully undermined the majority shareholder of the company, Ev Williams.

The thing is, while each member of the team had enough leverage to undermine and overthrow the previous CEO, none of the original founders had enough of the skills to successfully discharge the role themselves. Which does suggest that things might have run smoother if they were more able to work as a team, together, for longer. In Dublin at least, and Sillicon Valley too it seems, start ups suffer from role confetti. Team members rush to call themselves CEO, COO, CTO, and whatever the next evolving Chief of something position will be.

It’s clear from the experiences of Twitter and other companies it can be a massive challenge to remain the right person for the role when your company suddenly goes through the roof in terms of the numbers it is dealing with. Some companies ride it out, by managing the growth carefully, if they can, though sometimes that is like trying to stay on the back of a bolting horse. It may look like you know where the horse is going, but that’s only because you haven’t fallen off yet. When turmoil came to our company it seemed like the new investors felt that the original founders were too off the wall, too out there. While this difference had been what initially caused the company to come into life and flower. Subsequently it was felt that there had been enough innovation and blue sky thinking. Now it was time to knuckle down and focus on kpi’s, quarterly targets and all the other things, which, while useful, can also leave the original founders looking out of their depth or isolated.

This seemed to happen to many many people involved in Twitter and other companies too. The challenge for us on the ground is to try and keep learning from our own lessons and the experiences of others. I don’t have any simple answers to this question yet and I would be really interested to hear the thoughts of others!

 

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6 thoughts on “Start up roulette : Why do so many founders get fired?

  1. Its quite simple. Founders who lose control of the company i.e. are diluted below 50% or who never had control are vulnerable. In the case of Steve Jobs for instance, after the IPO he was a minority shareholder. Then he invited Scully in and we know what happened next ,,,

    Liked by 1 person

    • Simon Cocking says:

      It’s a good point, and you’re not the first person to suggest this to me. It’s useful to be a benign dictator at times, it does mean you can make decisions more quickly for one thing! Thanks

      Like

    • Founders of companies that grow at that speed are going to end up with <30% equity as there is no way to grow that fast raising back to back super A rounds ($100m+) and holding on to the majority equity. (Founders that go slower can hold on to equity e.g. O'Reilly Media, but twitter is not that.)

      So if one assumes there is no avoiding the equity dillution, there are two ways to dilute – Peter Druckers 'Killing The King' from Kaufman Foundation report and in opposition Andressen Horowitz's 'Why The founder should be CEO.' from recent book 'Hard Thing about Hard Things' and their blog. Both assume the decision to 'kill the king' is made by the investors you choose to partner with, but those investors are not the same. In the Drucker camp, the investors primary choice will always be to replace the founders with an executive when the time comes. In the Andressen Horowitz camp, they will never choose to replace the founder until the founder can't cope with the growth, constantly training and mentoring the founder hoping that point never comes. When you look at the investors of facebook for example, not surprising to see Andressen Horowitz as an early stage investor.

      The vast majority of investors are in the Drucker camp, which is great for Andressen Horowitz and investors like them as great founders flock to them first leaving the second-tier for the others. Given most investors are in the Drucker camp, you see early stage term sheets contain parts that in a later stage allow that investor to replace CEO.

      Also just to note, equity is not control. Board seats are control.

      Like

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