Being Hit By A Bus

I’ve said it a thousand times if I’ve said it once, "what if you get hit by a bus?"

I have no idea why I chose being hit by a bus as the way I express the fear that the "key man" is lost.

But death isn’t the only way you can lose a key man (or woman).  Moving on, being poached, losing interest, reaching retirement age are all much more common ways to lose someone than death.

That said, I did once lose a CEO to death.  He had a massive stroke and died within a month of our closing on a new investment. It was a terrible tragedy and had a huge impact on me. I wasn’t able to focus on things clearly for weeks, if not months.

Yesterday I said to one of my CEOs that we need to develop some additional leadership in the company because he might get "hit by a bus".  He laughed – hard. 

I wasn’t joking.  He couldn’t imagine being hit by a bus.  I could.

I’ll tell you a story.  It’s a true story.  And the CEO in this story, like the CEO who laughed, will recognize themselves in this post.  That’s the way it is.  You can’t tell true stories without talking about real people.  Jerry stopped blogging for a couple months and one of the reasons was he struggled with the issues around talking about real people.

I have enormous respect for both CEOs.  One can’t imagine being hit by a bus.  The other didn’t plan very well for succession.  Neither issue takes anything away from what they did, which was to build two incredibly great companies.

Now on to the story.

A guy near the end of an amazing career starts a new company in an emerging area of technology, a technology that is now transforming huge industries overnight.

He was a pioneer.  Few had the vision that this technology could work.  He did.

He built a very large company very quickly.  One of his VCs, not me, kept harping on the fact that he had no logical successor in the company.  That VC wanted a strong number two. 

The CEO did hire a "number two" guy but he didn’t work out.  After that failure, the CEO pointed out that any person who would make a good replacement for him would want the CEO job right away and that is why it was so hard to find a good "number 2" person.

In the meantime, the CEO was worried about other things, getting new services launched, revenues ramping, big deals.  He had a good team that he felt he could groom over time.  And his team was good.  But there was no logical successor.

The Company went public, traded for a lot of money.  Then the market broke.  And while the Company’s stock went down, the Company continued to grow.

The stock became seriously undervalued.

The CEO came to realize that running a large company wasn’t his skill set nor was  it as exciting as the rapid growth phase.  He wanted to to retire and turn the business over to a team better suited to the task at hand.

The board and the CEO discussed the issue and decided to initiate a search for a new CEO.

The Company announced the search because it was publicly traded.

A hostile tender offer came within a month from a mercenary competitor.

After months of working on various deals, the Company was sold to a "white knight".

And that’s the story.

Would it have turned out different if there was a logical succesor in place when the CEO decided it was time to retire.  I think so.  I am not saying the investors would have been better off. That’s way too speculative.  But the story would have played out differently for sure.

And that’s why "being hit by a bus" is such a concern.  Key men and women make great companies.  But they are often blinded by the risks that result when companies become too dependent on them.  And they don’t see it because they are acheiving great things and everything is going well. 

And like the CEO in my story, they don’t think they will be able to recruit a really strong successor into the "number 2" role.

I wrote this for the CEO who laughed.  Because this isn’t a laughing matter. 

And to all of you CEOs out there who read this, take it seriously when someone worries about you being "hit by a bus".  You may think it won’t matter to you, but it will someday and then it will be too late to address it.

#VC & Technology