This may be your first time reading this newsletter — if so, welcome! If not, you already know that Alex created it. And if you’ve read last week’s issue, you also know that I am taking over. This makes me something akin to a non-founder CEO, so today’s topic is also personal — Anna.
Handovers and turnarounds
Our colleague Brian Heater wrote about Peloton’s below-expectation earnings earlier this week. But beyond how many bikes and subscriptions the fitness company did or didn’t sell, it’s this quote that caught my attention:
“Turnarounds are hard work. It’s intellectually challenging, emotionally draining, physically exhausting, and all consuming. It’s a full-contact sport.”
This is an excerpt from the letter to shareholders penned by Barry McCarthy, Peloton’s CEO since February. McCarthy’s predecessor, John Foley, stepped down as the company he co-founded cut 2,800 jobs globally — around 20% of its head count.
McCarthy’s job since then hasn’t been easy. The new CEO has focused on three priorities, he said: “1. stabilizing the cash flow 2. getting the right people in the right roles and 3. growing again.” It is too early to tell whether he will eventually succeed, but Peloton’s position isn’t unique.
Peloton is one of several tech-enabled businesses that enjoyed strong tailwinds during the pandemic and are now facing “market whiplash.” The list also includes Netflix, Robinhood and Zoom, for instance.
Airbnb is a related but slightly different case. The company hopes that its accommodation marketplace will benefit from “the travel rebound of the century.” But it also plans to reinvent itself, CEO Brian Chesky told BlueHillco.
Unlike the case with Peloton, Chesky is a founder CEO who’s going to lead Airbnb through this transition. But not every founder still has the stamina or the right combination of skills to do this after several years at the helm. This is one of the reasons why CEOs so often get replaced, and the tech sector can’t act like it never happens.
The cult of the CEO takes several forms, and one of these is dual-class shares. This share structure is part of a wider myth: That a founding CEO should be in control forever. And sure, nobody wants to lose control of their company or get fired by the board. But it is also forgetting that founder CEOs might want to step down.
There are many reasons why lead founders leave. “Former executives leave post-acquisition all the time,” my co-worker Natasha Mascarenhas noted on Twitter. (She was commenting on health company Ro, which has lost more staffers than its fair share since getting acquired.)
Founders may also want to leave before an exit, even when an IPO seems in the cards. Sometimes for the sake of their company. Sometimes for their own. And sometimes both. That’s the case of Monzo founder Tom Blomfield, who has been open about the unhappiness that led him to step down, while also full of praise for his replacement.
There’s no doubt about it: Handing over a project you love can be bittersweet. And the perspective of having big shoes to fill can be daunting for the new person in charge. But it is not uncommon, so let’s stop pretending it is. Let’s just make the best of it, shall we?