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In less than 24 hours, CEOs of three star ventures, including WeWork, eBay and Juul, have resigned, indicating that Silicon Valley entrepreneurs are facing a more severe reality.

Editor’s note: This article is from “ Artesyn Technologies Silicon Valley cover “, Author: Deer. Authorized to reprint.

Centering

• In less than 24 hours, CEOs of three star ventures, including WeWork, eBay and Juul, have resigned, indicating that Silicon Valley entrepreneurs are facing a more severe reality.

• The data of the human resources company Challenger, Gray & Christmas showed that the CEO turnover rate of US companies reached a record high in August, with 159 CEOs leaving. As of August this year, a total of 1,009 US CEOs left in 2019.

• The companies like Uber and Lyft, which are listed on the Internet, are listed on the market without a clear profit tendency. Investors are worried that it is really the best idea to bet on a growth company that has led the bull market in the past 10 years. Especially in the face of the economic downturn.

• Technical company CEOs may have experienced the so-called “founder curse” when they leave, and they often lack a clear understanding of their shortcomings.

(This article is about 8500 words, it takes about 10 minutes to read the full text)

[Editor’s note] It is well known that successful companies are inseparable from the extraordinary CEOs who have unusual and inspiring powers that make it easy to admire and even admire, and inspire others to awe and obey. However, in the study of CEOs of American companies, this widespread worship of charismatic leaders seems to cause many problems, including personal worship exaggerating the CEO’s influence on the company, and the idea that “the CEO must be charming” leads the company to ignore many more suitable. Candidates, and such leaders will undermine corporate stability in a variety of dangerous ways. The three CEOs of WeWork, eBay and Juul have resigned, seeming to confirm the phenomenon of Silicon Valley’s “founder curse”.

The following is the body of the article:

In recent days, three CEOs of Silicon Valley Star Technology have resigned, including Adam Neumann, the shared office space giant WeWork, and Devon, the online auction and shopping site eBay. Devin Venig and Kevin Burns of the e-cigarette giant Juul show that Silicon Valley entrepreneurs are facing a severe test. Although the timing of their resignation may be coincidental, the three companies are indeed experiencing some form of turmoil.

WeWork CEO Neumann

Shared office space giant WeWork co-founder and CEO Adam Neumann

Since the resignation of Uber co-founder Travis Kalanick, the company has left the company he founded 10 years ago to become the most striking slam. Neumann’s position was replaced by two co-CEOs, WeWork Chief Financial Officer Artie Minson and former Amazon executive Sebastian Gunningham. Neumann will continue to serve as the non-executive chairman of the company’s board of directors.

In recent weeks, the suspicious commercial transaction of the former CEO has hampered the company’s public listing process, prompting the company’s valuation to plummet, so that even the main investor SoftBank has urged it to abandon its IPO. The media and the public are always paying close attention to relevant details, including Neuemann’s quirky parties and bizarre remarks. Perhaps as the letter that Neumann wrote to the WeWork staff: “Too much attention is on me.”

For Neumann’s successor, the current risks are actually manageable. Columbia Broadcasting Corporation (CBS) columnist Stephen Gandel described Neumann as “a capricious and controversial figure”: his entrepreneurial vision and source of inspiration are amazing, he started to make WeWork a star from scratch The experience of creating a company is legendary. But he violated various norms around corporate compliance and fair dealing.

Finally, Neumann’s behavior failed at WeWork (Or at least delayed) the IPO played an important role and investors had to drive him out. Of course, there are still many unresolved issues about whether the company is really a high-tech growth technology company or a real estate company with a much lower P/E ratio. There are also some short-term cash shortages. But as long as new leaders and employees, investors rebuild trust, attract more money, and manage risk, WeWork still has hope for success.

Juul CEO Burns

Kevin Burns, CEO of e-cigarette giant Jull

Almost at the same time, Juul announced the departure of its CEO, Kevin Burns, confirming that he would be replaced by K.C. Crosthwaite. It is said that Crossway is an executive of Altria, a large tobacco company that owns a 35% stake in Juul. Burns used to be the president and chief operating officer of Yobba’s Chobani, and he seems to be a “scapegoat” to a series of e-cigarette-related regulations this month.

Ronn Torossian, chief executive of 5WPR, a public relations firm specializing in crisis management, said that the introduction of Burns could have a counterproductive effect on Juul. Toroxin pointed out: “In recent weeks, Juul has faced a disaster one after another. In my opinion, the removal of the CEO is a company mistake. Burns himself recently asked non-smokers to avoid using electronic cigarettes. This indicates that he is more concerned about the potential health risks of this product, not whether the company makes money.”

Although Burns was ousted, Juul still faces greater obstacles, including domestic and international officials banned their products. Toroxin concluded: “Removing Burns does not help to re-establish public trust, and shows that Juul does not actually know how to get out of this dilemma.”

The successor of Burns faces an insurmountable risk. As Erin Brodwin, a mainstream online media BI journalist in the United States, described, Juul “is facing various challenges, including warnings from national regulators, congressional investigations, state and nationwide bans, And about the long-term health effects of its products.” More frankly, Juul’s products are killing users, which is a very bad product, so the company’s fate is worrying.

eBay CEO PoohGrid

Online auction and shopping site eBay CEO Devin Vigne

The gradual decline of eBay may not be as closely watched as the technology unicorns WeWork and Juul, but the company’s internal turmoil is still worth noting. The eBay board has appointed Scott Schenkel as interim CEO to replace Vigne in fulfilling his duties before finding the right person. As the media pointed out earlier, eBay has been evaluating its business model in this year’s fierce market competition, which makes it unsurprising for Venig to leave the company after four years of work.

Vinig released a tweet saying: “In the past few weeks, it has become apparent that I have a disagreement with my new board of directors. When this happens, it is best for everyone to compromise each other. In the past It’s a great honour for me to lead one of the world’s greatest companies in eight years!” In the past year, eBay has been unable to maintain its position as a major competitor to Amazon. For example, earlier this month, Canadian e-commerce startup Shopify surpassed the Silicon Valley company in terms of quarterly sales.

For Venig’s successor, what he needs to face is the risk of mission incompleteness. That is, no matter what he does, the risk that cannot be overcome will lead to ultimate failure. Bloomberg commented on Venig’s resignation: “eBay has made a thoughtful and pragmatic choice not to chase hot e-commerce trends or low-margin areas such as groceries, but to focus on its strengths, namely loyal customers, global reach, ratio Many online retailers have better economics and lower risk business models. This is sensible, but eBay is always missing opportunities because online shopping has reshaped the global $20 trillion in retail space each year, investors Lost confidence in the company’s practices.”

Unless Vinig’s successor can find a way for eBay to take a slice of the growing cake of online shopping, he may not regain the trust of investors.

American companies set off the departure of executives

In less than 24 hours, the CEOs of Silicon Valley star technology startups WeWork, eBay and Juul have resigned, which is a continuation of the record-breaking phenomenon of the turnover of US corporate leaders this year.

According to data from Human Resources Inc. Challenger, Gray & Christmas, US companies had 159 CEO positions changed in August,The number of 124 CEOs who left in July was 28% higher, the highest monthly number in a single month. At the same time, as of August, there were 1,009 US CEOs leaving in 2019, more than the number of people in the 2008 financial crisis.

Experts say that companies have turned to the “accountability system” because of concerns about the slowest economic growth in US history. Jeffrey Sonnenfeld, senior vice president of Yale School of Management, said: “CEOs are now more and more bound. When their words and deeds do not match reality, the board will put pressure on the CEO. The official is responsible.”

The departure of US corporate CEOs over the past decade

2008 was the second highest rate of corporate CEO turnover in the United States. As of August of that year, a total of 992 CEOs had left, down 2% from the performance so far this year. Challenger, Gray & Christmas’s vice president Andrew Andrew said: “As the uncertainty surrounding the strength of global companies and markets continues to increase, it is no coincidence that so many companies choose to find new leaders at this moment.

In addition to Neumann, Burns and Vigne resigning in less than 24 hours, veteran car owners Volkswagen, Nissan and global Internet information service provider Comscore lost their CEOs in September.

The latest survey shows that the uncertainty of international trade and the slowdown in global growth have led the CEO of large US companies to cut their outlook on the US economy. The Business Roundtable, a group of nearly 200 of the most famous American companies, said its members now expect this year’s economic growth to reach 2.3%, down from the 2.6% estimate in the previous quarter.

Sonanfield said: “People want to leave happily, especially when everything is going well, but the most important trend that leads to the CEO’s departure is that the company’s board of directors has changed the overall tolerance of the leader.” This year, companies such as Uber and Lyft, which are about to go public, have no clear profitability. Investors are worried that it is really the best idea to bet on the growth companies that have led the bull market in the past 10 years, especially in the face of When the economy is in a downturn.

At the moment, people are worried that CEOs will distort value indicators. Sonanfeld said:“CEOs who have begun to believe in making their own myths are being held accountable.”

There is another factor at work, that is, CEOs are getting older. The baby boomer generation, who was born between 1952 and 1956, is now nearly 70 years old, which has led to a large number of executives who have withdrawn from the labor market. Sonanfeld believes: “The intergenerational changes between the old and the new are taking place. Therefore, when the baby boomer generation reaches an absolute peak, it will have a major impact.”

But not every CEO follows the same standards. Sonnfeld said that contrary to the trend of accountability, CEOs like electric car manufacturer Tesla’s Elon Musk and Facebook founder Mark Zuckerberg In the eyes of board members and shareholders, it seems that they will never go wrong, no matter what they do. Sonanfeld pointed out: “Muske is a typical representative of a CEO who can’t be bound by the board of directors. The board has yet to put a spell on these outstanding innovators.”

The Silicon Valley Unicorn Bubble bursts?

The founder knows the situation best and should be dominant in the company in order to decide to take the company to whatever direction he or she thinks appropriate. This concept is not uncommon in the technology industry. But this is also a new trend. In family businesses such as the New York Times Company and Ford Motor Company, the use of such governance models is widespread. But this situation changed when Google went public in 2004, when Google introduced a dual-equity structure.

After that, other technology companies such as Facebook, Zynga and Snap have followed suit. Zuckerberg has never been challenged despite his recent major setbacks. But Amy Borrus, the shareholder’s equity organization, the deputy director of the Investor Committee, said: “No founder is always absolutely correct. This is a problem with the dual ownership structure. This left the founder too More control, so that public shareholders and even the board of directors are in a weak position, can not promote the amendments when necessary.”

Shareholders and the board of directors were fortunate enough to let Neumann resign from his leadership position. Since they do not have the power to remove him, they can only let him understand that it is in the best interests of the company to step down and best suit his personal economic interests. WeWork has not yet achieved profitability, needs cash injection to drive growth, and the potential investors are hesitant, and the IPO becomes uncertain, which undoubtedly makes Neumann’s control vulnerable.

If there is no help from Softbank, it is difficult for Neumann to raise the funds needed. Even so, given the large bets of poor performance such as WeWork and Uber, Softbank is under pressure from its own investors, and it may not be able to continue to increase pressure on Neumann. John Weinberg Corporate Governance Center, University of DelawareDirector Charles Elson said: “If you think about it, you will find that this is more of a complaint about the dual shareholding structure, not for Neumann. Investors have greater economic benefits. And the biggest loss may be, this is the problem of ownership structure.”

Forcing the founder and CEO with super voting rights to step down is not unprecedented. Uber provides templates. In 2017, after several months of riots, including a number of allegations of sexual harassment, and a video of CEO Karanic and Uber drivers quarreling on fares, major shareholders including Benchmark Capital sent a letter asking Karan Nick resigned, otherwise they would open the letter. Benchmark Capital is also a major investor in WeWork.

Travis Karanic, co-founder and CEO of Uber, the international car giant

Kalanic retained his super voting rights when he compromised. He said at the time: “I love Uber over anything in the world. I have accepted investors in this difficult time in my personal life. Uber’s request to exit, so Uber can get back on track, rather than being distracted by other things.” Later that year, Softbank agreed to acquire a portion of Uber’s equity, a one-vote corporate governance model.

Public pressure and investor anger allowed Neumann and the company to modify many suspicious corporate governance structures, which also played a good role in forcing him to resign. But this model should not be an example of the future. Looking ahead, the board should not let themselves fall into such a dilemma because they may not be able to find a way out of trouble. Nell Minow, vice president of ValueEdge Advisors, a management consultancy, said: “Don’t be a board of directors. You must stick to independence to ensure that you have the ability to implement the supervisory role you should assume. You are not a device.” /p>

In fact, Neumann lost not only the CEO’s title, he will also give up most of the control of WeWork, voting rights reduced from 10 votes per share to 3 votes per share. He has lost support for WeWork’s largest investor, Softbank, which also called for him to step down. He may even have lost a $500 million line of credit, which was provided by a bank that underwrote the WeWork IPO and now needs to be guaranteed by his own stock.

Neuman’s shocking rise andThe fall is similar to Karanic’s trajectory, which created a multi-billion dollar company from scratch and was ousted by the board in 2017. Once the full details of Uber and WeWork’s mismanagement become clear, investors and the public will soon oppose Karanic and Neumann. But before these scandals, self-dealing, and misconduct were exposed, investors appreciated the vision and boldness of the founders.

The arrogance, ambitiousness, open disregard of the rules, and the hobby of “annoying people” caused Karanic to lose his job. However, these factors also make Uber great. Bold, combing grand goals, passion and near arrogance, persuaded many to invest in Neumann’s WeWork.

Risk capitalists are successful “gatekeepers” in Silicon Valley, and they often talk about investing in people rather than creativity. In recent years, as funds have increasingly flowed to select start-ups with increasingly high valuations, the worship of founders has grown. More power, more money, and more unshakable status have prompted them to take full control of their company.

WeWork seems to be the logical end of this trend: the Silicon Valley Unicorn bubble is welcoming the moment of rupture. Neumann’s ambition helped him to attract the attention of Softbank’s chief executive, Masayoshi Son, who provided him with a lot of cash and helped him to push WeWork to “give ten times larger than originally planned”. Neumann became inseparable from WeWork. He once said: “WeWork is me, I am WeWork.” WeWork has also made the same statement in the filing of the IPO application, although the wording is more euphemistic.

No matter how you look at Neumann’s behavior, this is of extraordinary significance in the world of “WeWork is me, I am WeWork.” In the system established in Silicon Valley and strengthened by the most powerful investors, Neumann and WeWork finally played a synergistic role, mysteriously increasing the value of each other. Neumann set the vision, received a check, and preached the gospel. He spares no effort to arrange things that are good for him. Why not? His behavior was not bound by any restrictions, and he was not interested in setting these obstacles. As long as the company grows and its valuation rises, he is the winner.

“Soft Silver Syndrome” blame

When the famous venture capital firm Benchmark pushed to dismiss the CEO of Karanick Uber, the founders of the startup felt “tight” in dealing with Benchmark. This is an unprecedented move for companies that advertise themselves as “friendly to the founders.” How will Uber’s conflict affect more transactions? Will the founder accept Benchmark funding? Can Benchmark be trusted again? !

Unexpectedly, before WeWork went public, Softbank also helped replace its founder.The difference is that no one seems to have questioned the Japanese technology giant. Why is this? The reason may be that the founders and their investors already know that the price of accepting Softbank investment will be high. Softbank has a $100 billion investment capital with a minimum investment of $100 million. The fund’s overall strategy is to identify market leaders, then invest hundreds of millions of dollars and lift capital restrictions. After identifying the transaction, several of the 80 investment professionals will sit down with the company’s management team to discuss, “rewriting their business plans in essence.”

Sun Zhengyi, CEO of Softbank Group, Japan

Softbank is indeed trying to win, but it does not do this in a particularly “friendly” way. Many people have accused that the founders of Softbank’s investment companies compete with each other and need to comply with strict negotiating terms, giving them greater control over the company’s key decisions while cutting the value of other investors’ stocks. However, we see Softbank repeating this strategy and continue to invest hundreds of millions of dollars in the founders, who are likely to suffer the same fate as Neumann.

Duncan Davidson, a general partner at early venture capital firm Bulpen Capital, called Softbank’s radical strategy “Softbank Syndrome”, claiming that the company made “founders and venture capitalists” their money. hostage”. Davidson is one of the investors in the dog-making Wag, which absorbed $300 million from the Softbank Vision Fund last year. The company initially hoped to raise $100 million in financing, but after Softbank expressed interest, the financing line quickly jumped to $300 million. Wag’s competitor Rover has also been negotiating with Softbank.

Davidson claims that in the post-Neumann era, the resistance to Softbank funding will increase, but other VC firms in Silicon Valley are less certain. Patricia Nakache, general partner of Trinity Ventures, said: “According to my conversation with the founders, I think that Neumann’s stepping down will not change the desire of the founders to accept Softbank funds.” p>

Davis explained that WeWork’s experience was seen as an extreme example in many ways, beyond the norm of the founder’s friendly investment. “Like Uber/Benchmark, WeWork’s situation is a serious reminder of the importance of private companies accepting responsible governance. This again shows that a lax governance structure is not only bad for investors, but ultimately not for the founders themselves. .”

Tusk Ventures founder Bradley Tusk was one of Uber’s first investors, and he witnessed Kalanick being driven out of his company. Tusk is also an investor in insurance technology startup Lemonade, which raised 300 million in a round of financing led by Softbank earlier this year.Dollar. He said: “There are enough examples of problem behaviors to justify the removal of Neumann. I think that if the conditions are right and the valuation is correct, most founders will not hesitate to accept Softbank funds.” p>

But the problem is still faintly visible: What should the founder do when the biggest investor wants to exit because of their financial and reputational risks? In the case of Uber and WeWork, they will leave. But it is not always in the best interest of the company to drive them away. Tusk believes that Softbank has not learned some of the lessons that Silicon Valley VCs have experienced personally. The lesson that Softbank should learn from Uber/Benchmark is that you can’t replace an innovator with just one really good manager.

The rhetoric and omnipotent CEOs have become the darlings of the investment community. However, recent events have shown that their era may have ended, or at least is entering a new stage of skepticism, as evidenced by Neumann, Kalanick, Burns and others. Among them, Neumann’s example seems to be the most representative, indicating that investors are tired of CEOs who brag about but can’t fulfill their promises.

Neumann and WeWork claim to be more than just an office space leasing company, but a carrier with a mission to “enhance the world”. Neumann has absolute control over shareholder voting. He regards the company as a personal piggy bank and is destined not to be supported by public shareholders. When internal investors realized that Neumann was dragging down the upcoming IPO, he was relieved of his position. If the boss of a company can convincingly prove that the loss is an investment in growth and will generate huge profits, then losses of this size may be ignored by retail investors. But Neumann likes to trade with his own company, such as authorizing trademarks and leasing personally owned properties, which has made him lose credibility.

Before the IPO, WeWork gradually reduced or lifted some transactions, such as depriving its wife of the qualification to participate in the search for a successor. Aunt is not enough to save WeWork’s listing plan. The company’s biggest venture investor, Softbank, is also behind the scenes that prompted him to step down. The collapse of WeWork also marks a new phase in Softbank, which has set WeWork’s valuation at $47 billion, and its chief executive, Masayoshi Son, is said to appreciate Neumann’s rhetoric.

It is now too early to say that these departures indicate a change in the deep-rooted attitudes of venture capitalists and open markets to CEOs, especially those CEOs who have a loss-making business plan and promise to make a profit in the distant future. For example, there is no indication that Facebook’s founder and CEO Zuckerberg’s status has been compromised, and despite a series of user privacy violations, the company’s role in disseminating politically false information has been increasingly questioned. Zuckerberg’s absolute majority stake makes it almost impossible for him to be replaced, and in any case, FaceThe book still maintains an amazing profit.

Tesla’s CEO, Elon Musk, still retains a large number of loyal followers in the investment community, although his electric car company has not been profitable, even though he has attracted the SEC in his own style. Regulatory enforcement.

Is there a curse of the founder?

About Neumann, we need to know a few things: he used to smoke marijuana when a private jet crossed the international border. He banned meat in the WeWork rental office, but some people saw him eating meat. He had a pessimistic speech at the staff meeting on the layoffs, but later turned the event into a tequila feast. Now, with WeWork delayed listing, valuations plummeted and Neumann is unemployed.

For WeWork, the resignation of Neumann is a big problem. Over the past decade, this fascinating founder has created a fast-growing, lucrative real estate giant from scratch and has proven that it is actually a technology company with unlimited market potential. Under his leadership, WeWork has opened more than 520 stores in dozens of countries, and its valuation soared to nearly $50 billion. In recent regulatory filings, WeWork listed Neumann’s departure as a very serious risk factor.

The document states: “WeWork’s future success depends to a large extent on Neumann’s ongoing service, which is the key to developing our vision, strategic direction and execution priorities. If Neumann does not continue Being our CEO may have a significant adverse impact on our business.”

But WeWork investors now have to abandon Neumann. He is not as described by Eliot Brown’s recent article in The Wall Street Journal, but shows a seemingly inappropriate behavior. He caused a series of serious conflicts of interest, mismanaged WeWork’s financial management, and made mistakes in the listing process. The company may have to lay off one-third of its staff and its valuation has plummeted by more than half.

This situation is often referred to as the “founder curse.” In the San Francisco Bay Area, talented, arrogant and fearless founders subvert existing industries, attract hundreds of billions of dollars in investment, and change the way people (at least rich people) interact with the world. But these smart, arrogant founders may also waste investors’ money, defy laws and regulations, and put employees at risk.

In the tech world, the genius founder and CEO will of course also create genius companies: Facebook’s Zuckerberg, Tesla’s, Uber’s Karanic, Amazon’s Jeff Bezos (Jeff Bezos), Microsoft’s Bill Gates, Google’s Larry Page and Sergey Brin, and Apple’s Steve Jobs (Steve)Jobs) and so on. Such founders often have a unique vision, unlimited creativity, and ignoring deep-rooted business practices. They are subversives, and their businesses have changed the way people work and live.

The study found that this subversive, persistent and creative spirit often provides investors with meaningful excess returns. In terms of patent holdings, companies whose founders continue to be CEOs tend to be more innovative and more valuable. Once traded on the open market, they also tend to have higher stock market returns. In fact, according to data handled by consulting firm Bain & Company, the founder’s CEO is three times more rewarding than a company without a founder. At the same time, the corporate culture factor is indeed the rise and fall of the company.

However, it is very tricky to prove the value of the founders as CEOs and to gauge whether they are more beneficial to the company. As the relevant research points out, dozens of confusing variables and selection biases are at work. Companies led by founders are often just-started start-ups, often technology companies that tend to accept venture capital, all of which can explain their performance rather than revealing their management structure.

In contrast, research shows that founders are often poor managers, causing companies to perform worse. An extensive study shows that the company management score of the founder as CEO is lower than any other type of leadership structure, such as a company run by a private equity firm, family or a dispersed shareholder. They are not very good at monitoring what is happening inside the company, nor are they good at setting goals for “continuous improvement”. They are also not good at “promoting and rewarding employees based on performance.” As a result, they often lack a “clear understanding” of their shortcomings.

In the case of Neumann, both the supporters and the founders’ camps have enough evidence to support their views. The founder and CEO convincingly stated that WeWork is more than just a re-leaser of office space: it is a company that can change the way people live, work and play, and how urban spaces work. Investors accepted this statement and gave it billions of dollars in investment. After rapid expansion, WeWork brought in more than $1.5 billion in revenue in the first half of 2019.

However, WeWork lost nearly $700 million in the first half of 2019, and Neumann seems to have created a series of bizarre self-transactions that he thought he would profit. Many reports claim that his profit may be as high as $500 million.

WeWork faces a daunting profit path, and no Neumann may be better than having him. However, there are legal documents showing that after the company’s IPO, Neumann will continue to “control the company’s voting shares.” Therefore, he will continue to have the ability to control important corporate activities, including the election and removal of the board. Neumann may not be a great founder and CEO, but still veryMany people worship him.