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This may be your first time reading this newsletter – if so, welcome! If not, you already know Alex made it. And if you read last week’s issue, you know I’m taking it. This makes me comparable to a non-founder CEO, so today’s personal topic is Anna.
Deliveries and turnarounds
Earlier this week, our colleague Brian Heater wrote about Peloton’s under-expected earnings. But beyond how many bikes and subscriptions the fitness company may or may not have sold, it’s this quote that caught my eye:
“Conversion is hard work. It is intellectually challenging, emotionally exhausting, physically exhausting, and all-out strenuous. It is a full contact sport.”
This excerpt is from the letter to shareholders by Barry McCarthy, Peloton’s CEO since February. McCarthy’s predecessor, John Foley, stepped down when the company he co-founded cut 2,800 jobs worldwide – about 20% of its workforce.
McCarthy’s work has not been easy since then. The new CEO has focused on three priorities: “1. stabilizing cash flow, 2. getting the right people in the right roles, and 3. growing again.” It’s too early to say whether he will ultimately succeed, but Peloton’s position is not unique.
Peloton is one of several technology-backed companies that experienced strong tailwinds during the pandemic and are now facing a “whiplash” in the market. For example, the list also includes Netflix, Robinhood, and Zoom.
Airbnb is a related but slightly different case. The company hopes its lodging market will benefit from “the travel rebound of the century”. But it also plans to reinvent itself, CEO Brian Chesky told blog line.
Unlike Peloton, Chesky is a founder and CEO who will lead Airbnb through this transition. But not every founder 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 are replaced so often, and the technology sector can’t pretend it never happens.
The cult of the CEO takes several forms, one of which is dual-class stock. This stock structure is part of a broader myth: a founding CEO should be in charge forever. And, of course, no one wants to lose control of their company or be fired by the board. But it also forgets that founder CEOs may want to step down.
There are many reasons why lead founders leave. “Former executives leave all the time after the acquisition,” my colleague Natasha Mascarenhas commented on Twitter. (She commented on health company Ro, which has lost more staff than its share since the acquisition.)
Founders may also want to leave for an exit, even if an IPO is on the horizon. Sometimes for the sake of their company. Sometimes for themselves. And sometimes both. Such is the case of Monzo founder Tom Blomfield, who was open about the accident that led him to resign, but also praised his replacement.
No question that handing over a project you love can be bittersweet. And the prospect of having big shoes to fill can be daunting for the new person in charge. But it’s not uncommon, so let’s stop pretending it is. Let’s make the best of it, okay?
