January 20th, 2016
(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: email@example.com
We see certain patterns repeating over and over again, especially in Silicon Valley. Phillip Greenspun was promised that he would be allowed to run his business his own way? And then, as soon as sales began to fall, he was kicked out? And that was back in 2000. So we see it again, with Twitter:
VCs like Bill Gurley can talk about the “big leagues,” “The World Series,” “The Superbowl” or any other sports metaphors all they want when they describe why entrepreneurs should want to go public. There’s a very real reason creator-CEOs do not: Once you go public, it doesn’t matter what rock-solid assurances you might have been given, you are replaceable for the flimsiest of reasons. Every time an entrepreneur thinks he’s “hacked” that system, we see their company stumble and their worst fears come to pass.
It doesn’t matter that you have the mantle of the founder. It doesn’t matter if you have dual classes of shares that give you “a moat” against a proxy war. It doesn’t matter if your board is behind you “100 percent.” It doesn’t matter if you are the only reason the company ever got to an IPO, and you made the same people trying to oust you rich. It doesn’t matter if you are doing the right things by the product, the core users, and the team. It doesn’t matter that the gargantuan lesson of the last 10 years of Yahoo’s life — which has been swapping out a CEO to appease activist shareholders — solves nothing.
Two things matter: Growth and expectations. And in the very short term, both are largely outside any human being’s control.
Dick Costolo made one big mistake: He ran Twitter during the era of Facebook. Nearly every hedge fund manager I’ve spoken to over the last year this drama played out has said they like Costolo as a CEO and like Twitter as a business. It’s just not close to worth the price it’s trading at.
From the initial pricing on, the multiple of Twitter was always inflated so that it could be an alternative to Facebook. After all– both are social media platforms right? Both started around the same time? Both are ad supported? Both are massive, integral parts of pop culture? Twitter’s greatest curse was that it was never gonna come close to being Facebook.