NewsGator has a new CEO – JB Holston. Greg Reinacker and I are extremely excited to welcome JB to the team.
When Greg and I first started talking about Mobius investing in NewsGator, the topic of CEO came up early. I’d had a few meetings with Greg, thought he was awesome, but also felt that – given his (our) ambition for the company – it would be a misuse of his talents for him to be CEO. In the words of one of my partners, Greg is “a CTO from central casting” – fantastic vision, extremely articulate about the technology he’s into and its business impact, passionate about what he does, and an unbelievably capable software developer (one of those 100x everyone else guys).
Once I’d decided that I was serious about an investment, I broached the topic of CEO with Greg. I was direct – telling him that I wanted to invest – but wanted us to hire a CEO that could be his business partner. After describing the respective roles I felt Greg and the CEO should play, I encouraged Greg to talk to a number of other entrepreneurs – including some that are founding CTO’s and some that are founding CEO’s – to better understand the respective positions and responsibilities. In addition, I was clear that while the requirement of hiring a CEO was a condition of my investment (I was willing to make the investment in advance of identifying the person, but I wanted a commitment that we would hire a CEO), the choice of CEO was ultimately Greg’s (we’d both work on finding someone, but I gave him veto power.) After a few more conversations, Greg was willing to sign up for this and we moved forward with the investment.
One of the first “potential CEO’s” I introduced Greg to was JB Holston. I first met JB when I moved to Colorado in the mid-90’s – he was connected to the Softbank consellation through his roles as President of Ziff Davis International (owned by Softbank at the time) and his involvement in starting up Yahoo! Europe. We took an instant liking to each other and kept up over the years. JB took a role as CEO of a company called NetSage and over the next few years he pitched me a few times on investing (I turned it down each time, much to his chagrin). Eventually, I introduced him to one of my companies – Finali – as I thought there might be an interesting strategic fit between NetSage and Finali. There was and Finali ended up acquiring NetSage and incorporating the NetSage technology into its vision of a next generation call center. JB worked on the Finali executive team for a year and then left to write a book and enjoy some time with his family. A year and a half ago, he called me with an idea for a Colorado-based progressive advocacy organization. Within six months, he’d rallied funding from me, Jared Polis, and a number of other folks and created the Rocky Mountain Progressive Network. An integral part of RMPN was its blog – which was my first real exposure to the blogosphere. I also got to see JB in startup mode and was blown away.
Greg took an instant liking to JB. I reinforced that I wanted Greg to make sure he was completely comfortable with whoever we chose as CEO – and was equally clear with JB that it was ultimately Greg’s choice. The two of them came up with a two month “trial period” – where JB acted as a consultant to NewsGator. This gave them a chance to get to know each other in a work context, understand their respective styles and goals, and make sure they were in alignment. Obviously, this trial period was a success.
I’ve heard (and seen) numerous ridiculous VC / founder / CEO stories over the last decade. I learned an extremely hard lesson in my first venture funded deal (where I was the entrepreneur, not the VC). I was the founding angel investor of NetGenesis and chairman of the company. My close friend Raj Bhargava was CEO and co-founder (with three others – it started with five others, but that’s another story). Raj was 21 at the time and NetGenesis was his first company. We had great early success and were a hot young Internet company in the 1995-1996 time frame. When we went out to raise our first round of venture capital (after raising about $2m from angels, McAfee, and Tivoli), we got four term sheets – all very attractive for an early stage company. One of the firms (and VCs) did an incredible job of romancing Raj and convinced him that he’d mentor Raj and help him become a successful CEO post investment. We chose that firm to lead the financing. Two weeks after the financing closed, the VC in question asked me out to breakfast (I was still chairman post financing – and – at that moment – a pretty optimistic and happy chairman.) At breakfast – after a little chitchat (I didn’t know the VC very well – I assumed we were starting to build a relationship) – he came out and told me he wanted to replace Raj with “an experienced CEO”. He was clear that he wanted Raj to stay in the company (“there must be some logical role for him,”) but that this was too important an investment to have a young, inexperienced guy like Raj at the helm. This evolved in a predictable way – after the initial negative emotional response from me and Raj, we both accepted (Raj much faster and more gracefully than me) that the VC was calling the shots and we lined up behind helping the VC recruit an experienced CEO. Three months later an “experienced CEO” (who ultimately was fired by the board and replaced by another experienced CEO – who ended up making the company very successful) was hired and three months later Raj left the company (he had nothing to do) and I left the board (I couldn’t bear to interact with the VCs involved at that point and decided I had better things to do so I “took my marbles and went home.”)
The lesson – which as I write this still riles me up – is that it’s much more effective to be upfront about any issues prior to an investment. In my experience, about half of the VCs believe this (and it’s not firm specific). Now – I’ve fired plenty of CEO’s (and founders) after an investment – that’s a different issue. However, as a VC is deciding whether or not to make an investment, and an entrepreneur is deciding whether or not to take a VCs investment, it’s my strong belief that both sides should be direct, honest, and clear about their views and motivations as they will have to live with each other post deal. Unfortunately, in the desire to “sell the other side,” people often cut corners, aren’t upfront and direct about what they are thinking, or feel that they can finesse the situation after a deal is done. In the words of my 15 year old niece “gross, icky dude.”
I’m very happy with how Greg and I approached this issue. Interestingly, it strongly reinforced my desire to work with Greg as it increased my confidence that we could be clear and honest with each other about even the most sensitive issues. I got to see his thought process in action as he thought through my request. Hopefully, I built the same level of trust with him as a result of being completely open about what I thought we should do an why. JB and Greg now have their own relationship (independent of me) and it’s cool to watch them work together to build this company.
Welcome JB – today the the blogosphere has another extremely strong leader and Greg has a new partner.