strategic consultant to:  

~ serial CEOs & CTOs in software, Internet, technology & digital media
~ experienced consultants in all fields to maximize their practices

Keeping control of your Company’s vision and its execution is essential if you are to create wealth – even after you relinquish the CEO seat.

I learned a lot from two CEOs I knew well, who each let go of control of their companies to new management at the height of success, after an IPO, but without keeping a close eye on developments from their Board positions.

“I didn’t know that the CEO I hired would lie to me, now that I was on the Board. Well, not lie exactly, but position the condition of the company in a good light and cover up the dangers, come Board meeting time, just like every CEO does. I didn’t realize I had become the Other. I lost $50M by sticking by the stock as it nose-dived, and not watching more closely. After it tanked, my founding partner had to go back in as CEO to turn the company around.”

The other founding CxO insisted on holding on to his stock, after he and his founding team had left Management following the IPO. He was not active on the Board. He lost $30M he could have had from the sale of the stock when it was strong, because he resisted all advice to diversify his stock portfolio, and held on to the company stock all the way down from hundreds of dollars per share to pennies per share.

Both of these CEOs were very intelligent and savvy, and had put more than 5 years into the development of their successful companies. So don’t think this cannot happen to you.

Another story is of lost opportunity based on mistaken early capital strategy, not an uncommon tale. The founding CEO took on more capital than he needed from top venture firms during his Series A. This cost him a great deal of his equity, as it was early-stage funding. The collaboration went well, and the company succeeded nicely. But when they reached the growth stage, the investors and the founder had different opinions on how to maximize that growth. But by then, the CEO did not control enough votes on the board to see his vision through. Market forces changed, and the Board’s strategy for growth maintained but stalled the company. Eventually, the CEO had an observer’s seat on the Board, and nearly 10 years from the start of the company, the exit by sale of the Company brought him around half a million dollars, but not the $5M or $50M he had envisioned from the beginning.

There are some lessons here in distance and objectivity:

  • Understand how your position changes when you occupy a new role, and how human nature (new Management) behaves towards you in that role.
  • Watch closely from your Board or shareholders’ position that new Management is making the decisions that are best for the success of the Company and its (your) shareholders’ value.
  • If you are not watching closely, diversify away from extensive holdings in any company you do not control or influence, even if you started it.
  • If you are not in control of the company you have founded, become objective about it, no matter your personal or emotional attachment to its original Ideal.

Wealth creation is not only achieved by an excellent idea executed deftly… the end game is as important as the beginning.