You may believe yourself to be irreplaceable, but you are the only one who thinks so. Board members can not only replace you; at times, they may instinctively want to. In this Founders Network talk, Geoff Cook — serial entrepreneur who most recently sold The Meet Group for $500 million — discusses his top four survival moments across a 15-year career as a founder and CEO, and what early-stage founders need to know about navigating similar risks.
For any successful entrepreneur, tough battles are virtually inevitable. Sometimes, the biggest fights of your career won’t be with competitors — they may be with your own board, or your own investor base.
Take it from Geoff Cook, a serial entrepreneur and CEO who most recently sold The Meet Group, a publicly traded company that operates several social apps, for $500 million. Before selling the company to Parship Group, the parent company of eharmony, Cook dramatically expanded The Meet Group’s revenue while transitioning away from an advertising-heavy business model to one with more than 60% of revenue from user payments.
Despite this, Cook found himself under attack by short-sellers who advanced a narrative that The Meet Group was on the verge of being banned by major app platforms for safety concerns. The narrative was untrue, but it required Cook to mobilize a two-pronged counterattack: Countering the narrative in the press, and shoring up the stock price by issuing a new buyback.“In the face of negative PR, the trick is to have anticipated some of what could be negative. Don’t run a startup in fear: Be willing and able to roll with the punches.” - @geoffcook Click To Tweet
“In the face of negative PR, the trick is to have anticipated some of what could be negative,” Cook explains. “Don’t run a startup in fear: Be willing and able to roll with the punches.”
The short-seller attack was one of several make-or-break moments to arise in Cook’s 15-year career. Others came in the form of tense periods between Cook and his board of directors, who at times fell on opposing sides of prospective deals.
- How to fight harmlessly, letting go of your ego to engage rationally
- Choosing the right investor — if you can’t stand the dating, the marriage won’t be fun
- Getting at least one reliable advocate on your board
- Buying yourself time in the face of scrutiny
- Making compromises to execute against your strategy
Earlier on in his career, Cook founded myYearbook.com and raised money from U.S. Venture Partners (USVP) and First Round Capital. Its $12 million Series B round closed shortly before the collapse of Lehman Brothers in 2008, but Cook resisted pressure to fill a fifth board seat with an unfavorable candidate until 2011, when he sold the company for $100 million in cash and stock. An unfriendly fifth board member could have killed that deal.“If you can't stand the dating, the marriage won't be fun at all.” - @geoffcook Click To Tweet
“A lot of times there’s a board dynamic where you have 2 seats, investors have 2 seats, and the 5th seat is left open,” Cook adds. “It’s critical to handle that particular situation intelligently, and not just be rammed by VCs who have a wider network.”
Board seats are a complicated animal, and often determined and negotiated over the course of years by a startup’s investors. If not everyone is aligned on the company’s long-term plan, it can create fissures — or even an incentive to remove the CEO, if there is substantial disagreement over a pivotal matter. If you just don’t like an investor, it could be a warning sign that the long-term relationship won’t be great.
“If you can’t stand the dating, the marriage won’t be fun at all,” Cook says. “That paranoia you might feel as CEO is warranted: Only put on the board people who have a steady hand, and ideally someone who can be an advocate and a diplomat for you.”“Let go of your ego and engage rationally with conflict. No matter how big your market may be, the number of players in a given industry is always small, and your actions leave a wake.” - @geoffcook Click To Tweet
For founders in the process of raising money, it’s critical to think carefully and consider the risks before assembling your board. While some level of disagreement may be inevitable, entrepreneurs can avoid being railroaded by venture capitalists if they strategize and negotiate deal terms carefully.
“Above all, founders and CEOs must fight harmlessly,” Cook explains.
“Let go of your ego and engage rationally with conflict,” he says. “No matter how big your market may be, the number of players in a given industry is always small, and your actions leave a wake.”