Tag

Arianna Huffington

Boards

It’s time for Tone at the Top on Diversity – or Why Uber is Yet Another Wakeup Call for Boards and CEOs in Tech

 Uber is just the latest company caught in the act of discriminating against women in it’s workforce. Sadly for many minorities in tech this is an old story.

As Ellen Pao writes in today’s Time article it is an indication of “tech’s existential rot”. In a world that “started off seemingly harmlessly by white men funding white men with few exceptions. When only white men were given opportunities, only white men were successful. White men went on hiring only white men, because it seemed to be a common trait of successful employees. Then investors who were white men decided only white men could be successful and doubled down on white men. White men who succeeded in the system decided it worked and saw no need for change. Fifty years later investors can’t break out of that pattern.”

But it is time for the pattern to break for many reasons. There is mounting evidence that diverse teams build better products – they are more likely to understand the buying behavior of their customers if they reflect the customer. There is also growing research that companies with diverse boards and management teams produce better returns for investors -so now some investors are encouraging boards to take on diverse board members.

But more importantly it is no longer acceptable for companies to allow employee harassment to continue while HR departments stand by or worse become part of the problem, as Uber is finding out to it’s detriment. The #deleteuber campaign has been due for a while and will hurt. (note, I switched to Lyft a year ago after reading about the leadership culture at Uber.)

So if it is no longer acceptable at the board level, in the executive team, and in the engineering ranks what can we do to make change happen faster?

I have worked in the “bro” culture of tech in Silicon Valley for more than 30 years. I have repeatedly experienced unconscious bias (sometimes not so unconscious ), being underestimated, being dismissed, being propositioned etc. and I have worked hard to over come it as I became a CEO who grew my company through a successful IPO and acquisition. And as I have done so I have been open and public about my wish to be a role model to other women that you can be technical, and be in a leadership role, and have a family in the technology industry. It’s possible to do and be happy.

I was conscious of the challenge I was facing from day one when I was one of only a handful (I think 5) women majoring in math at Cambridge in my year, out of about 300. And so, to be a role model, I have always tried to hold a leadership position in any situation I am in, especially if everyone else in the room is male.

It is so clear to me now that the problem we have in tech is not a pipeline problem. Yes, we need more little girls to like computers, and more little african american boys to believe they can be Mark Zuckerberg, but we have plenty already who enter the tech world. But the women leave in droves within 10 years because the environment is hostile. Our problem is keeping women in an industry that makes life difficult for them.

It is time to set the tone at the top. To insist that boards have at least 2 or 3 women on them (not just none, or the “we have one so we’re done” you see on so many boards). There are now several recruiters who specialize in finding qualified women with the right experience for boards. For example Beth Stewart of Trewstar would tell you there is no shortage of qualified women to serve, but a shortage of boards who think this is an important issue.

It is also time for boards to insist that the CEO builds a diverse leadership team. This takes real work to find diverse, qualified executives but it can be done in most fields. Uber is just one of many examples where a mostly male leadership team is simply deaf and blind to the issues facing their female employees.

“Tone at the top” is an expression used by boards when reviewing the results of the annual audit. They discuss whether the management team is committed to honest, ethical behavior and whether they operate with integrity. The discussion is important to sign off the financials – after all what audit committee chair would want to sign off the financial filings if he did not believe the CEO and CFO had integrity with the numbers?

It’s time for companies to embrace a “tone at the top” discussion around equal opportunity for all employees. It is time for every board to pay attention to the diversity statistics within their companies. How many women are employed at every level, has the company done an audit of pay across gender to check that women are not paid less than men for the same job? Are the percentages of women in leadership growing or shrinking? It is just not hard for HR to run reports and track progress over time – but it takes a serious discussion on the importance of diversity from the board down to build a world class company in the 21st century.

I am hoping this is what Eric Holder and my friend Arianna Huffington will now do for Uber.

Boards

Today’s tech bubble: Sell or IPO your company?

If you had the chance to sell your tech company for a great price would you – or would you play the long game?

This is a decision successful entrepreneurs end up facing and is a question for some tech entrepreneurs right now as we go through what is arguably another bubble – and there are some very interesting cases to think about – and think what would you have done?

Consider the Huffington Post: A success story to most people – purchased by AOL for $315M in February at a 6.3X multiple of $50M in revenue and very small profits. The last investor, Oak Investment Partners, tripled their money in just over 2 years which is a great result for a late stage investment decision. And yet, as Jeff Bercovici of Forbes writes in his somewhat damning review of the HuffPo/AOL honeymoon, the difference in interests that can appear between investor and entrepreneur in very visible in this case.

Fred Harman, the Oak partner who made the HuffPo investment, told Forbes “Our goal was an IPO rather than building up the company to be acquired by another media company” and that he and the HuffPo CEO Eric Hippeau “were still inclined to roll forward as an independent company out of the belief that The Huffington Post could continue to rapidly scale and be the dominant social news company on the Web”. But for Arianna, AOL meant personal liquidity and a much larger stage and budget to build her dream with.

(full disclosure: my current company FirstRain is funded by Oak. They like to swing for the fences – as do I)

In contrast look at Zillow, which went public last week and, on 2010 revenue of $30.5M, now commands a valuation of greater than $1B. Is this valuation a surefire sign of a tech bubble? On Seeking Alpha screener.co writes that “The vast difference in valuation between a recent tech IPO and similar publicly traded competitors is not limited to Zillow” – Pandora’s valuation is almost as shocking as Zillow’s and outrageous in comparison to their comp RealNetworks. So long term public valuation (and so the team’s return) is at risk here.

In the enterprise social media space, Radian6 decided to sell to Salesforce instead of taking the long road. At a valuation of $326M and 10X revenue Techcrunch thinks SFDC overpaid but 10X trailing revenue is a terrific valuation for an enterprise software company and being integrated into Salesforce takes all the return risk out for the founders – plus SFDC smartly put additional options on as an earnout over 2 years (not unusual when a public company buys a private company and wants to keep the founders around). But also consider that maybe Salesforce creates a larger platform with deeper pockets for the Radian6 team to execute their vision on.

And waiting in the wings we have Groupon. They did not sell to Google last Fall for $6B and, if they can get over the questions about their business model and profitability, hope to IPO for $20B – and are lining up enough banks to make it happen.

All this leads to questions of timing – are today’s valuations fashion driven because tech IPOs are hot now? – and what would you do if it was you? I’ve been there, it’s a gut-wrenching decision.

If you sell:
+ You get secured liquidity and wealth for you and your team (especially if you are bought for cash)
+ You play on a larger stage, often with a larger budget
+ You may get access to many more customers on a larger platform
+ You create long term job security for your core tech team
– You lose final authority on strategy and budget
– Many members of your team (non tech) may lose their jobs
– You lose the essential joy of building your own venture

If you go public:
+ You get significant capital to grow your business with
+ You stay in charge (for now…)
+ Your investors get a great return in 6 months (after the lockup comes off)
+ You may get a significantly higher return over a longer time period
+ You continue to drive the strategy and M&A to execute you and your team’s vision
– Limited liquidity for you or your team for the foreseeable future
– You are running a public company (no picnic!)
– Your return is not secure, you are subject to volatile markets

… and there are many more pros and cons…

One of the best pieces of advice I got was to, in the end, focus on how my management team is successful and makes money from their hard work. Not my ego or my net worth. Not my investor’s return. My team, the ones who built the company with me. If they make money, everyone else will make enough.