Silicon Valley: Silicon Valley’s young presidents are on their way out

Silicon Valley’s little kings are kicking unicorns.

They write sentimental blog posts outlining their legacy. They express hope for their company’s prospects. They quit their jobs leading the startups they founded.

In recent weeks, Ben Silberman, co-founder of the digital pinboard service Pinterest, has resigned as CEO (CEO); Joe Gebbia, co-founder of home rental company Airbnb, has announced his departure from leadership of the company; Apurva Mehta, founder of grocery delivery app Instacart, said he will end his career as CEO when the company goes public, as soon as this year.

The resignations mark the end of an era at these companies, which are among the most valuable and well-known to have emerged in Silicon Valley in the past decade, and the era they represent. In recent years, investors have dumped increasingly large sums of money into a group of high-net-worth startups known as Unicorns, worth $1 billion or more, and their founders have been treated as visionary champions. These founders fought for the private equity that kept them in control of their companies—a change from the past, when entrepreneurs were often replaced by more experienced CEOs or pressured to sell.

But when the stock market plunged dramatically this year, hitting money-losing tech companies hard, that approach began to change. Venture capitalists are backing off their deals and urging young companies in Silicon Valley to cut costs and proceed with caution. The industry is starting to talk about “wartime CEOs” who can do more with less, while bragging about lessons from previous downturns.

Wear the patience of the dreamers tender. Founder-led companies are starting to look like liabilities, not assets.

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“All that has changed in the last 90 days, and it’s not going back any time soon,” said Will Schrotter, founder of Startups.com, an accelerator program for startups. He added that the “we’ll find out later” story is no longer attractive to investors.

In addition to Silbermann, Gebbia, and Mehta, the founders of Twitter, Peloton, Medium and MicroStrategy all resigned this year.

They don’t leave on a high note. Pinterest shares are down 60% from last year. Elliott Management, an active shareholder known for pressuring companies to make big changes, recently acquired a stake in the company. Airbnb shares are down 25% from a year ago. Instacart cut its internal valuation by nearly 40% in March, as it prepares to go public in a hostile market.

“Being a CEO is definitely less fun when markets are down, the economy is trending negatively and regulation is increasing,” said Kevin Werbach, a professor of business administration at the University of Pennsylvania’s Wharton School. “If you are already as rich, famous, and successful as these people are, there usually comes a point where staying in the saddle is less attractive than setting off in the sunset.”

In the startup tradition, Mark Zuckerberg was a pioneer in managing the modern boy. He held business cards that read, “I’m the CEO, you bitch” and slashed Wall Street’s feathers with his “disrespectful” hood, and pleaded with investors to let him keep a controlling interest in Facebook as it grew, ushering in today’s era of “friendly founder” making deals.

Ambitious young men like Zuckerberg received similar protections and leeway as venture capital firms scrambled to appear as convenient as possible, inundating entrepreneurs with perks (dinners, planes, celebrities) and services (recruitment, PR, design).

One corporation even publicly pledged never to vote against its founder in corporate affairs.

“I inspired our entire generation to believe it was impossible that they could start businesses,” said Trace Cohen, 34, an investor in very young startups.

The founders used their upper hand. They remained in senior positions, even as companies grew their skills as managers. They kept their companies private for as long as possible, and avoided annoying business realities like taking profits. They benefited from skepticism—something that founders rarely had.

As the tech sector has become a dominant force in our economy, the cult of the startup founder has made its way into popular culture via celebrities like Ashton Kutcher and TV shows like HBO’s satirical “Silicon Valley.”

Some founders of this era took it too far. Adam Newman’s spending and partying prompted him to exit WeWork in 2018, even though he held a controlling stake in the company. Travis Kalanick’s aggressive tactics at Uber led to his ouster in 2017, despite superior voting stakes.

The rest was mostly retained through initial public offerings of companies. But it turns out that running a publicly traded company, with its attendant fiduciary duties, analyst calls, and quarterly earnings squeeze, is a far cry from the hustle and bustle of startup life. Now, as problems mount amid the market crash, they are giving up the power and control they once fought for.

In his announcement, Silberman said running Pinterest was the “gift of a lifetime.” Gebbia, who will become an Airbnb consultant, has posted immersive memories of the company’s early days, along with photos and aliases of its co-founders (Brian “Jet Fuel” Chesky and “Indiana Net” Blitcharczyk) and lessons on the good of humanity. (Chesky remains its CEO.) Mehta tweeted that he “cares deeply” about Instacart — “the one thing I’ve thought about in every waking minute of the past decade.”

After quitting their job as billionaires, they unleashed the relentless positivity of Silicon Valley. The founders wrote that Pinterest is “just getting started,” Airbnb is “in better hands than ever” and Instacart has a “tremendous opportunity ahead.” Mehta and Jabeya said they have plans for new projects.

Investors say they expect more of these layoffs from founders who realize they now have to work harder for (relatively) less. “Now, they can let some CEOs step in, take ownership and grow it with different incentives,” Cohen said.

Last week, Brad Hargreaves, founder of Common, a startup that runs shared living spaces, announced that he was stepping down as CEO, to become the creative director. The company’s director of real estate, Carlin Holloman, a veteran of the hotel industry, will take over as CEO.

The market downturn put a factor in Hargreaves’ decision. In times of flow, he said, it’s good to have a founder at the helm who can sell to investors, employees, and clients with great vision. “Operations don’t really matter much,” he said. “No one is really watching the end result.”

He said that today’s environment requires someone with Holloman’s extensive experience and operational skills. “In a tight time, when operations matter so much and no one is buying any great insights, you want a factor in that seat,” he said.

“A lot of founders and CEOs stay for a very long time,” he added.

Founders who have survived the economic downturn — and there are many, including at Stripe, Coinbase and Discord — can expect greater demands and more pressure. Stock trading app Robinhood has laid off more than 1,000 employees this year because it is losing active clients.

Dan Dolev, an analyst at Mizuho Securities, said several investors privately suggested Robinhood to bring in a more experienced CEO to help co-founder Vlad Tenev. Tenev cannot be forced to resign, because he and his co-founder, Baiju Bhatt, together own a controlling stake in the company.

“They are typical founders where they are good at creative ideas and things, but they can use help with processes,” Dolev said.

A Robinhood spokesperson said the company had recently undergone a reorganization and noted executive appointments from TD Ameritrade and the Securities and Exchange Commission.

To make matters worse, startup founders have lost their aura of positive culture — a trend that began during the 2017 tech backlash that grew with the release of disruptive books and TV shows about WeWork, Uber, and other tech darlings.

“Once you earn a certain amount of money, you play for the position, and the situation is not there,” Hargreaves said.

With that said, there is always a back story. If the market gets worse and companies start to crash in earnest, we could see a reverse dynamic for founders getting back on track, said Werbach, the business professor.

This would be a throwback to the original cult founder hero, who was admired long before unicorns roamed the valley and who inspired even Zuckerberg’s cheerful business cards. He may have been the original boss: Steve Jobs.

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