What being “entrepreneur-friendly” really means
One universally hailed virtue in Silicon Valley is to be “entrepreneur-friendly.” Indeed, this mindset is an important catalyst to create an environment that empowers entrepreneurs and supports them in taking bold, sometimes crazy, risks that occasionally result in amazing successes. To win the hearts (and term sheets) of the hot CEOs, venture capitalists, angel investors and board members often climb over each other to proclaim that they are the most entrepreneur-friendly investor.
However, we’re starting to see shocking examples where this can go too far, leaving CEOs unaccountable to their company. A small subset of CEOs have taken investor permission to be bold and brash as license to act like outright jerks. Lately we’ve seen too many examples of out-of-control CEOs that (without naming names here, but you can guess): berate employees, insult people publicly, cut corners in legal business practices, assault people, or even engage in sexual harassment and discrimination. This is reprehensible.
Eventually, evidence of this surfaces to the Board of Directors and investors, sometimes before it goes public. Certainly, people should be presumed innocent and allegations are not always true. But evidence and complaints should be investigated, and if validated and especially when a proven pattern emerges, something needs to be done.
When this happens, what is the “entrepreneur-friendly” thing to do? That depends on what you think entrepreneur-friendly means.
Sometimes, the board and investors interpret it to mean that you stick by and side with the CEO or founder no matter what. This is generally good; all companies go through ups and downs, and you want to be dogged and steadfast in your support. But when a leader’s behavior or management approach crosses a serious line, it may not be the right thing to do.
The latest allegations of bad CEO behavior crossing the line just came out in an explosive report by Bloomberg Technology on Tanium (“Tanium’s Family Empire Is in Crisis”). Tanium is called “the world’s most valuable cybersecurity startup,” and has raised over $300 million in venture capital, most recently reportedly at a post-money valuation of $3.5 billion, per the Bloomberg Technology article.
The reports surfaced by Lizette Chapman and Sarah McBride from Bloomberg Technology expose allegations of a pattern of terrible behavior by the CEO, Orion Hindawi.
“Orion berated workers in front of colleagues until they broke into tears and used all-hands meetings as a venue to taunt low-level staff, current and former employees said.”
Allegations extend to awful comments about a junior member of his company:
“Early last year, Tanium held an event at San Francisco’s Westin St. Francis hotel. With an all-male group of staff clustered near the elevator, Orion snickered when a junior female employee walked past. The CEO asked whose room she would be staying in that night, said two people present.”
A particularly disturbing allegation in this report on Tanium is that, in order to retain his family’s large percentage ownership of the company, the CEO would track and then often fire employees right before their options would vest, thus denying them some ownership in the company they helped build. Tanium denies this is the case, saying “it previously investigated the allegation and found no pattern of terminating employees based on stock option schedules” per the Bloomberg Technology article.
The difficulty of investors and board members holding a CEO accountable is much more challenging when the CEO and/or founders control a majority of the voting shares or board seats. Founder/CEO control of a company can be exercised for wonderful leadership to the benefit of the full company, as Mark Zuckerberg has done well at Facebook Inc. If they don’t have collective control, board members and investors need to think of other ways to support the right actions. In Tanium’s case, Orion Hindawi and his father David control more than 60% of the votes on Tanium’s board, per the Bloomberg Technology reporting. So, it’s not clear how much investors can do directly. In this tough situation, credit is due to good, values-based investors like Andreessen Horowitz, which has $143 million invested into Tanium and sits on the board, for reportedly flagging this bad behavior and trying to do something about it.
The recent examples of horrible behavior by a small subset of CEOs expose a tragic misinterpretation of what being “entrepreneur-friendly” means. It does not, and should not, mean a blind adherence to a CEO who crosses the line with a pattern of hurting, harassing or endangering people.
Being “entrepreneur-friendly” doesn’t just mean to the CEO or founder. It’s a statement of values, and a sacred obligation, to all of the employees of the company.
Entrepreneur-friendly means building and encouraging a culture that supports the welfare, empowerment and reward of everyone in the company. It means looking out for the multitude of great people it takes to build truly fantastic companies, from the CEO to the entry-level employee.
Truly great CEOs recognize that “entrepreneur-friendly” applies to the entire company.
I like to put our capital behind CEOs who love and are loved by their employees. Instead of the infamous “genius jerk” CEO model, I believe that “brilliantly nice” CEOs are every bit as effective, dedicated and hard-charging.
Over time and in the vast majority of cases, “brilliantly nice” CEOs will do far more to attract the best people, deeply inspire them, bring out their fullest talents, and earn their loyalty. When a company inevitably hits rough seas, people will stick with the captain they love and mutiny against the tyrant.
“Brilliantly nice” CEOs appreciate people as talent to invest behind and build up, not labor to squeeze more out of. They want to see everyone on their team rise up to do great things, and any bad behavior that gets in the way of that — berating, demeaning, harassing or discriminating — is anathema to that vision.
Entrepreneur-friendly means recognizing that, in truly great companies, everyone building it deserves to be called an entrepreneur.
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Not all acquisitions or IPOs are profitable; the positions can be acquired at a price that is greater or less than the price at which NextWorld Capital purchased its interest for client accounts. The information is being shown to reflect the firm’s ability to select investments and not to reflect any positive investment experience.
