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The cult of the silicon valley founder is fading

Once celebrated, charismatic founders are hurting the brands they built. What can Indian founders learn from the meteoric rise and fall of their Western counterparts?

ETBrandEquity|
Nov 16, 2019, 11.09 AM IST
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There are some important lessons for Indian founders, many of whom run Unicorns with as much if not more freedom than Messrs Neumann and Kalanick.
By Lloyd Mathias

Silicon Valley has long been the iconic inspiration for the world of entrepreneurship. Starting with Bill Hewett and Dave Packard in the thirties to Steve Jobs and Larry Ellison in the seventies, the Valley has thrown up a stream of entrepreneurs who have transformed and reimagined businesses world over.

The aura of the Valley has risen exponentially over the past two decades with some of the brightest, young, and eccentric but razor sharp founders who have changed the world by the power of their ideas, unfettered ambition and sheer audacity. Think, Mark Zuckerberg of Facebook, Larry Page and Sergey Brin of Google, Elon Musk of Tesla, Brian Chesky of Airbnb, and Jack Dorsey of Twitter. Growing venture capital and the creation of unicorn start-ups, in record times, have turned successful founders into mythical heroes.

Sadly though a few recent developments have severely dimmed the halo of the Silicon Valley founder and highlighted the fact that blind adulation of startup founders, can go horribly wrong.

Adam Neumann co-founder and until recently CEO of WeWork had built it into one of the world’s most valuable startups which at its peak was valued at $47 billion and had operations in 111 cities in 29 countries. But, in August, when WeWork filed for an IPO, questions were raised about the inner workings of the company, the disproportionate control Neumann wielded, and the $900 million the company lost in the first half of 2019. This led to additional probes leading to a series of troubling details, indicating conflict of interest. Neumann, owned several properties that he leased back to the company, received personal loans and credit secured by his WeWork stock, and had sold the trade mark “We” to the company for $5.9 million.

Even more embarrassing were personal details that emerged. The fact that he smoked marijuana on a transatlantic private jet flight, handed out tequila shots after mass layoffs and inexplicable decisions like a companywide ban on meat. In a matter of weeks, WeWork’s valuation plunged dramatically to less than a fourth of its $47 billion earlier in the year forcing the company to shelve its IPO plans. This led to Neumann being fired as CEO and ceding majority control to Softbank, WeWork’s dominant shareholder.

Neumann’s fall from grace has many parallels with Travis Kalanick's 2017 ouster from Uber, which he had built and controlled. Uber’s board turned on him after issues surfaced about a culture of sexual harassment, gender discrimination, retaliation and bullying that he'd overseen. In both cases unbridled ambition, arrogance, a blatant disregard for the rules and a sense of infallibility resulted in their downfall. But who is to say, whether the same sense of self-belief often bordering on megalomania was behind the creation of seemingly unworkable ideas – ride sharing and co-working?

There are some important lessons for Indian founders, many of whom run Unicorns with as much if not more freedom than Messrs Neumann and Kalanick. Venture capitalists, who fund these start-ups with the hope of them turning into unicorns talk about investing in people not ideas. They sometimes place too much faith in founders, not questioning their temperament or judgement, often in the belief that their primary job is to fund, not run these companies – to ensure success and a better and faster return on capital.

In this growth-at-all-costs environment, money flows into successful start-ups, in bigger rounds and even greater valuations. The clout of the founders grow, so much so that a business valued at a few thousand crores is controlled by a couple of founders often unrestrained by an internal team who can speak truth to power; or external stakeholders whose primary objective is to boost evaluation ensuring a profitable exit. No pretensions of corporate governance or ‘building an institution’, here.

Some learnings for Indian founders from these episodes:

1. Entrepreneurial drive may not necessarily translate into true leadership, especially when a company has to answer to a larger audience of stakeholders, when going public. Important to have an internal check and balance – someone to critique your decisions, management style and challenge you.

2. Being an effective CEO requires a range of skills and empathy that may not necessarily be the same as during the start-up phase. Many start up founders that enjoy complete and absolute control, often tend to be reckless and difficult to hold accountable. Here often getting outside help works.

3. While skyrocketing evaluations and growing social media followings are great, let it not fool you. When the chips are down all the cheerleaders turn to blood hounds. Discount the glowing adulation much like your investors did to your enterprise in the early stages.

The writer is an angel investor and business strategist; earlier senior executive at HP, Motorola and PepsiCo. Views expressed are personal.
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