Hackernoon logoThe Problem With Adam Neumann: When A King Wants To Be Rich by@masonpelt

The Problem With Adam Neumann: When A King Wants To Be Rich

Author profile picture

@masonpeltMason Pelt

Founder of Push ROI, and somewhat sporadically a writer, mostly on tech blogs.

If you're raising venture capital funding, expect to be asked the question, "Do you want to be rich, or do you want to be king?" Some VC's use those exact words, others will ask questions to find the answer, but nearly every VC wants to know if a founder is driven more by profit or control.
Some people hoard equity (or board seats) like Gollum from Lord Of The Rings and his "precious." As Noam Wasserman put it
"Founders are usually convinced that only they can lead their startups to success. 'I'm the one with the vision and the desire to build a great company. I have to be the one running it,' several entrepreneurs have told me. There's a great deal of truth to that view. At the start, the enterprise is only an idea in the mind of its founder, who possesses all the insights about the opportunity; about the innovative product, service, or business model that will capitalize on that opportunity; and about who the potential customers are."
There is a balance between relinquishing control to grow a firm, and maintaining enough power to be able to steer the ship. Sometimes, – perhaps more often than VC's want to believe – a founder maintaining more control may help the bottom line. People often point out Bill Gates or Steve Jobs. But few founders will be Gates or Jobs, and many founders will hold onto control of companies even when that control is detrimental to long term success. 
In business, those wanting to be kings tend to behave shortsightedly, while people wanting to be rich, often behave selfishly. Even if board control is out of the equation, someone running a startup, who sounds like the boss from The Lonely Island's song, will likely be an ineffective leader.

A sane investor is out to make money, meaning a founder who wants to be rich is a good thing. Furthermore, with rare exceptions, VC's aren't handing down task lists for day to day startup operations. 
At the start, Term sheets and board seats align founder and investor interests. Most of the time, a founder cannot gain massive wealth without creating a return for investors. And while founders run (at least initially) the company, if need be a board vote could replace them. 
But someone already crowned king aspiring to wealth is a dangerous prospect for investors, employees, and vendors. Adam Neumann's behavior as the founder, CEO, board member, (and seemingly unstable god) of WeWork demonstrates a negative outcome of a king aspiring to wealth. 
Neumann clearly wanted to be rich, but he also maintained king-like control of his firm. His seemingly unchecked authority over WeWork's operations and aspirations for wealth allowed a long list of conflicts of interest, and other mismanagement to drive WeWork into the ground. Yet, he left with a $1.7 Billion golden parachute. Neumann reportedly ended up selling $1 Billion of stock, plus a $185 million "consulting fee", and a $500 million credit line from SoftBank. He also somehow kept the right to name a board seat. 
I'm not too fond of the old school VC idea that founders should be replaced as CEOs as soon as possible, but clearly, Neumann had too much power. SoftBank messed up with WeWork, in a way that would have been a concern if I were interviewing for a job. It's not fun to be in a car driven by someone who perceives no consequences for driving recklessly, and no reward from being safe. One person having so much power within a way overfunded (and overvalued) company, means they have no external pressure to behave rationally. 
Even as a service provider, I ask a variation of the rich king question. I've had several hellacious experiences when part of my income was tied to a single person, with no outside pressure to be rational, who wasn't. Sure VC's are not always logic brained Vulcans, but the tension of mutual parties having a vote in how a company should function, reduces the risk of a temper tantrum destroying a business. 
I can't speak for VC's, but I can work with people who want to be rich. I can also work with people who want to be kings. I cannot, however, effectively work with someone having both unchecked power, and an aspiration to wealth. In a nutshell, I can deal with shortsightedness or selfishness, but I cannot deal with both. 
- I'm Mason Pelt, my company is Push ROI, and I write somewhat sporadically for several tech blogs

Tags

The Noonification banner

Subscribe to get your daily round-up of top tech stories!