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This may be your first time reading this newsletter — if so, welcome! If not, you already know alexander created it. And if you read last week’s issue, you also know that I’m picking up the slack. That makes me something akin to a non-founding CEO, so today’s topic is also personal – Anne.
Discounts and rotations
Our colleague Brian Heater wrote about Peloton’s below-expected earnings earlier this week. But beyond the number of bikes and subscriptions that the fitness company has sold or not, it was this quote that caught my attention:
“Turnarounds are hard work. It’s intellectually challenging, emotionally exhausting, physically exhausting and all-consuming. It is a full contact sport.
This is an excerpt from the letter to shareholders written by Barry McCarthy, CEO of Peloton since February. McCarthy’s predecessor, John Foley, quit as the company he co-founded cut 2,800 jobs worldwide, or around 20% of its workforce.
McCarthy’s job since then has not been easy. The new CEO has focused on three priorities, he said: “1. stabilize cash flow 2. put the right people in the right roles and 3. grow again. It’s too early to tell if he’ll end up succeeding, but Peloton’s position isn’t unique.
Peloton is one of many tech-focused companies that have seen strong tailwinds during the pandemic and are now facing the “market whiplash.” The list also includes Netflix, Robinhood and Zoom, for example.
Airbnb is a related but slightly different case. The company hopes its accommodation market will benefit from the “travel of the century bounce”. But it also plans to reinvent itself, CEO Brian Chesky told TechCrunch.
Unlike Peloton, Chesky is a founding CEO who will lead Airbnb through this transition. But not all founders yet have the stamina or the right mix of skills to do so after several years at the helm. It’s one of the reasons CEOs get replaced so often, and the tech industry can’t act like it never happens.
The cult of the CEO takes many forms, and one of them is that of dual-class shares. This ownership structure is part of a larger myth: that a founding CEO should be in charge forever. And of course, no one wants to lose control of their company or get fired by the board. But it’s also forgetting that the founding CEOs might want to step down.
There are many reasons why core founders leave. “Old executives leave all the time after acquisition,” my colleague Natasha Mascarenhas noted. on Twitter. (She was talking about healthcare company Ro, which has lost more employees than its fair share since its acquisition.)
Founders may also want to leave before an exit, even when an IPO looks in the cards. Sometimes for their company. Sometimes for their own account. And sometimes both. This is the case of Monzo founder Tom Blomfield, who has been open about the dissatisfaction that led him to resign, while he praised his replacement.
There’s no doubt: handing over a project you love can be bittersweet. And the prospect of having big shoes to fill can be daunting for the new manager. But that’s not uncommon, so let’s stop pretending. Let’s make the most of it, shall we?