No Country for Old Men

Sarah Lacy just wrote a fascinating TechCrunch post about the excess of candidates for Digg’s CEO position, which she attributed to new secondary markets for execs at companies like Zynga and Facebook to sell their stock, become those companies have gone public.

That makes a little sense to me, but not a lot. What keeps an executive working at a startup is a vesting schedule, not liquidity: when you get your stock is more important than when you can sell it. If anything, a secondary market should persuade most executives to stay at a startup, because they know what the stock they’re vesting is worth.

And, regardless, most of the executives are coming from publicly traded companies. The two companies on Sarah’s mind yesterday, Digg and Grockit, hired executives from Amazon and Google.

Something else is going on. First there are fewer companies that need executives. The 1990’s presumption that every founder would be replaced has given way to the founder-king, with investors eagerly positioning themselves as founder-friendly.

For evidence of this, look no further than the names of the new breed of investors: Peter Thiel’s Founders Fund, Andy Sack’s Founders Co-Op, Chris Dixon’s Founder Collective. Or look at the founders who came back to run their companies. Steve Jobs and even Jerry Yang turned out to be much better executives than their predecessors.

The entrepreneur-CEO is a good trend. An entrepreneur’s ideas, and the passion and ability to build them into products, are what matter.

But it’s not just that founders are the only executives a company needs. It’s also true that many startups never need executives at all. Fewer companies are being built into operationally intensive businesses. You don’t need a financial wizard if you aren’t trying to generate large-scale profits, and you don’t need a management expert if you aren’t hiring many people.

Meanwhile, the supply of executives has increased even as demand has decreased. Silicon Valley is getting older. When I first started out, Silicon Valley had just begun importing tens of thousands of college graduates every year; San Francisco became a giant college dorm. Nobody was over 30 in 1997 because so few 20 year-olds had been working in software in 1987.

The 1990’s VC was considered a visionary for recruiting executives from sclerotic utilities, like telephone companies, or dysfunctional Hollywood studios. In fact he was just desperate.

Now that giant class of 1997 college recruits is approaching middle age, which explains why so many are having children, why so many want to become angel investors, and why so many feel ready to run companies. Many would-be second-time entrepreneurs are trying to come up with the new, new thing. Google, Microsoft and Yahoo are full of people who think they know how to run a startup because they ran a division.

Sometimes this is true, sometimes this isn’t. But I think the reason there are so many CEO candidates lies in the demographics of supply and demand, not secondary markets.

Discussion

  • http://sheynkman.tumblr.com Kirill Sheynkman

    Every mistake I've made in hiring for startups was because of paying way too much attention to embellished positions of responsibility padding the resume. It always seemed as a hedge against youthful exuberance that I knew I (and my co-founders) always had way too much of — a hedge VCs (most with a “division manager” or finance background themselves) were way too eager to embrace. Looking back at three companies now, the inexperienced, hungry recruits are the ones that are running their own companies, managing big divisions, or investing their own hard-won cash. The experienced professionals are doing exactly what they did before, having moved up just a couple of rungs on the 100-step ladder they were climbing before our paths crossed.

    • http://blog.redfin.com GlennKelman

      This is probably the best comment I've read in a long time; I couldn't agree more. I'll try to stay exuberant…

  • JGreenough

    People forget that the can grow as the company grows. Training techy founders to be leaders is one model. We are all watching Zuckerberg grow up as a speaker & leader. Look at a video interview from the early days to now, yeah he still has a long way to go but it is getting better. I wonder how much time he is working on the soft skills vs. the tech details.

    When I advise founders I always ask what they are doing to be a better leader. If you stagnate and stop working at being a better manager you will be replaced by the investors at some point.

    To the previous comment there have been hits and misses with “seasoned professionals” who were brought into companies. I agree that being a rung on somebody's career ladder isn't usually very helpful to the company. The good news is that these people only last about 2 years if you haven't dealt with them before that because they find the next step up the ladder.

  • http://blog.redfin.com/ GlennKelman

    Great point… If I hadn’t grown as a company grew, I’d be the world’s tallest dwarf…

  • http://blog.redfin.com/ GlennKelman

    Great point… If I hadn’t grown as a company grew, I’d be the world’s tallest dwarf…

  • Marce

    Youthful exuberance might certainly be a key ingredient to getting a fledgeling company off the ground. Once it's airborne though, if you don't know know how to fly, or haven't hired some experienced pilots, you're just making educated guesses, at least some of the time (although arguably, that's all anyone can ever do). After that initial “holy crap, this sucker is FLYING… holy #$(&*” moment, I bet finding and listening to the Ken Lowe's of your industry is just as important as that initial catalytic push to launch. Experience doesn't have to mean stagnation, either. It might mean “This ain't my first rodeo, and I know what my blood number is. Do you know yours?”

    • http://blog.redfin.com GlennKelman

      I just am not sure you can step into the same river twice Marce… every startup is so different. So the more experienced I get, the more I value talent as well as experience. But no doubt you need a bit of both…

  • http://blog.redfin.com GlennKelman

    Great point… If I hadn't grown as a company grew, I'd be the world's tallest dwarf…

  • http://blog.redfin.com GlennKelman

    Great point… If I hadn't grown as a company grew, I'd be the world's tallest dwarf…

  • http://blog.redfin.com GlennKelman

    I love the advice to keep growing. If I hadn't been given a chance to do that, I'd be the world's tallest dwarf…

  • http://www.findire.com For Sale Properties

    I admit, I have not been on this real estate blog in a long time… however it was another joy to see it is such an important topic and ignored by so many, even professionals. I thank you to help making people more aware of possible issues. Great stuff as usual….

  • http://profiles.yahoo.com/u/3G3SLXNQMTXFUGPML2V32NVXDU Baron

    The perfect planned-obsolescence scheme started with the PC.

    Soylent Green is on the Horizon folks.