Larry Page and Sergey Brin brought in a new age of founder control over companies in Silicon Valley. Is their departure a symbol for the end of an era? (GOOGL)

[ad_1]

Larry Page and Sergey Brin in 2003

  • Alphabet CEO Larry Page and President Sergey Brin announced that they were stepping back from managing Google’s parent company on Tuesday, ending a 21-year stretch of founding Google, growing its ecosystem of products, and later managing its parent company. 
  • Among other things, Page and Brin are widely credited for kickstarting a new age of corporate strategy in Silicon Valley, by ensuring that they always held voting control within the company that they founded. 
  • Other founders drew inspiration from Google’s dual-class share structure. Facebook’s Mark Zuckerberg, Snap’s Evan Spiegl, Uber’s Travis Kalanick, and WeWork’s Adam Neumann all made sure they had ‘high-voting’ shares, so that they would not be accountable to their company’s shareholders. In some cases, that decision has almost driven their companies into the ground. 
  • Page and Brin’s decision to step back from the company as ‘proud parents’ comes at a time when Wall Street has grown disillusioned with companies fueled by the leadership and vision of their founders.
  • It could be more evidence of the end of the ‘founder’ era in Silicon Valley: Here’s a look at other founders’ less graceful exits from their companies. 
  • Visit Business Insider’s homepage for more stories.

Alphabet CEO Larry Page and President Sergey Brin’s surprise announcement to give up their titles and step away from managing Google’s parent company ended their 21-year-long stretch shaping Google’s path in Silicon Valley. 

It also added evidence to suggest the end of the ‘founder culture’ era in Silicon Valley.

Larry Page and Sergey Brin’s leadership of Google didn’t just shape the technology industry but it also shaped the way in which tech companies were run. Companies drew inspiration from Google’s freewheeling corporate culture, to which they credited its ability to take moonshot bets and innovate. 

Startup founders looked to Google’s dual-class share structure, as a lesson in how to maintain control over their companies. Page and Brin’s determination to hold on to voting control within their companies even after it debuted on the stock market, was seen as a model for other firms to follow, allowing their founder’s vision to take precedence over investor or shareholder wishes. (The company would later create a third class of stock, as Page worried that he would lose voting control over the company). 

Facebook’s Mark Zuckerberg held on to the majority of the company’s voting power. Snap’s Evan Spiegl and Robert Murphy issued their company shares on the market, but shareholders hold no voting rights at all.  

Page and Brin’s announcement comes at a time when Wall Street is far more wary of startup founders leading their companies. 

Although tech giant is a far cry from younger unicorns, and its cofounders have been famously absent from the company’s more mundane management responsibilities for years, they still remain the face of the company, according to Andrew Frank, an analyst at Gartner.  

“Even though Google is such a huge company, it’s always been identified with its founders,” Frank said. Page and Brin’s departure from Alphabet is “a rite of passage where the company is no longer really influenced by the culture of the founders.”

Page and Brin seemed to embrace that role in their letter announcing that they were stepping down, writing that “we believe it’s time to assume the role of proud parents — offering advice and love, but not daily nagging!”

To Wall Street, that’s a good thing. Facebook’s string of scandals and Snap’s continued financial and operational struggles have raised concerns about founder culture in Silicon Valley. 

Founder culture also allowed startup founders to lead their companies unchecked, leading to often-disastrous mismanagement of company finances and strategy. Uber’s Travis Kalanick, WeWork’s Adam Neumann, and Theranos’s Elizabeth Holmes are perhaps the most infamous examples of this scenario. 

Analysts seems to have largely embraced that perspective. 

Ivan Feinseth of Tigress Financial Partners called the announcement a “natural progression for the company’s evolution,” and said that Google CEO Sundar Pichai, slated to be Alphabet’s next CEO, had “done a great job so far.” 

Dave Heger, a senior analyst at Edward Jones said the two founders “likely felt the time was right to step down gracefully and let him take over.”

Here’s a look at the founders who first shook Wall Street’s faith in the founder culture, and whose exits have been far less graceful: 

Adam Neumann, WeWork

Neumann’s S-1 filing for WeWork’s IPO drew attention to not just the company’s losses but also his own extravagant lifestyle.

His web of loans, real-estate deals, and family involvement with the company initially drew scrutiny. His bizarre management style and reported alcohol and drug use at the company also weakened investor confidence. 

Neumann stepped down from his position as CEO in September and said intense scrutiny had become a distraction in running the company. He left with an exit package worth over $1 billion.

Meanwhile he left the company in shambles. WeWork’s valuation has plummeted by more than 80% in the last fiscal quarter. 

 

Travis Kalanick, Uber

A series of scandals rocked Uber in 2017, centering around the leadership of the company’s cofounder and CEO, Travis Kalanick

Uber faced a federal criminal probe into whether it used software to illegally evade regulators, widespread allegations of workplace harassment of women and people of color on staff, and a pricey lawsuit from Google over self-driving car technology. 

Many of Uber’s board members saw Kalanick’s leadership as a reason for the conflicts.

He was ultimately ousted by a host of the company’s shareholders, including respected venture capital firms like Benchmark, First Round Capital, Lowercase Capital, and Menlo Ventures, The New York Times reported.

 

 

 

Elizabeth Holmes, Theranos

Elizabeth Holmes founded blood-testing company Theranos in 2003. 

Red flags were raised about her management of the company early on. When two would-be whistleblowers told the board that she exaggerated revenue projections, they considered replacing her with a more experienced manager, according to reporter John Carreyrou, who wrote about the incident in his book “Bad Blood.”

But Holmes convinced the board to keep her, and then multiplied her shares to give herself 99% of the company’s total voting rights. 

Carreyrou investigated Theranos in October 2015 and exposed how the startup, valued at $9 billion, had systematically lied about its technology to both its investors and clients. It had also lied to its employees developing the technology and fired workers who raised their voices in disagreement.  

Holmes only stepped down as CEO last summer, and the former CEO faces fraud charges from the Department of Justice. The company dissolved by September 2018. 

 

 

 



[ad_2]