Continuing its webinar series aiming to support its network in navigating through the crisis caused by the Coronavirus outbreak, Endeavor invited Kevin Ryan, an Endeavor Ambassador, mentor, and founder of several companies that have gone on to become household names such as DoubleClick, Business Insider, MongoDB and Zola.com, to discuss how to lead through crisis.
Kevin, one of the leading Internet entrepreneurs in New York and the co-founder of Alley Corp, shared with the Endeavor network his deep experience as a founder, operator, and investor in some of the most well-recognized brands on the planet. At first, Kevin talked about the beginning of his career, back in 1994, when he started a website called Dilbert. Kevin was one of the first people to see that this “internet thing was going to be big someday” and he invested on the website on his own.
Soon, Dilbert became Double Click and in 4 years they had 2000 employees in 25 countries. Eventually the company was sold to Google for $ 3M. After that, Kevin started a lot of different companies including Mongo, Business Insider and Guilt. Since then, he has been mostly building from scratch but also investing in early stage companies. As Linda pointed out, Kevin has also invested in two Endeavor companies, including Endeavor Greece company Blueground.
Kevin described how he dealt with a big crisis in the past, when he had to layoff many people and even ended up losing 70% of his clients. According to Kevin, the crisis he went through when he was leading Double Click was even worse than the one that we are dealing with today. “It was super ugly and it was actually worse than this period here, because everything was smaller, so money just dried up for two years. We did round after round after round of layoffs and the sector went down by 80-85%. My stock price was 130 at the pick and went down to 5. It was pretty bad, everyone gave up, no one had hope.” he explained.
However, according to the investor, “the most interesting thing was that the underline fundamentals of our business were still always great, something that gave me confidence that what we were doing was not going away. This was a financial crisis, not a fundamental business crisis.” He also admitted that one thing he did wrong was that he did one round of layoffs and then wrongly reassured all remaining employees that that was it. “We just thought that that was it but we were very wrong. It kept getting worse.”
When asked about what he would do differently today as a CEO facing these uncertain times, Kevin said that he would have been 80% the same. What he admitted that he would have done differently was that he would not have reassured his employees that ‘This was it’. “I would tell them instead that I don’t know when this is going to end. I would share what I knew at the time and I would explain that I have no idea when we are going back to work, I read the paper like everyone else and I do not know more about the coronavirus than them.” He explained. “I would suggest that we take three months at a time and adapt. Αnd if I had to do layoffs, I would remind everyone that we are doing that in the same way that a surgeon sometimes says ‘I am going to have to cut off your arm so you live. And I don’t like cutting off your arm, but it’s the right thing to do in that particular situation so that I can save the body.’” he added.
According to Kevin, a CEO needs to come across to an organization as fundamentally optimistic about the future, at all times. “I remember once an employee said ‘Does Kevin realize how bad things are right now? Because he still seems to think that we are going to build a very successful company here.’ They think you know more than anyone else so even If you come in the office looking kind of down just because you didn’t sleep well, people are like ‘We’re in trouble, this is bad.’” He explained.
When a company is proceeding to layoffs, Kevin suggested that the CEO must explain to the remaining team that while realizing that the next few months will be bad and that although the ones that were fired are going to be missed, in order to get people back to the overall mission, everyone must understand that what is happening is eventually going to be beneficial.
Kevin explained that he is almost never CEO anymore. He also insisted that “you can’t be CEO of multiple companies or, in my definition, you are not really CEO.” Regarding the role of the Chairman, he explained that it is not very well defined. A Chairman is one of the board members, and he generally has not any legal rights that don’t exist for other people. “It’s more about being the organizer, about kicking off the meeting. If I were CEO of a company that I had founded, I wouldn’t necessarily feel the need to have a different Chairman but I would want to have great board members that are able to give me advice.” he said.
Kevin added that “A good Chairman is someone who is the CEO’s manager. Secondly, a good Chairman advises and helps the CEO be successful. You don’t want to replace someone unless you really need to but you want to bring your advice as a board and use the skills of the people there to help the CEO and the managing team be more effective.” He also explained that the one thing a CEO cannot do is to have distance from his own staff. Therefore, a Chairman can be more objective about who is productive and who isn’t.
According to Kevin, “Hiring is never a precise process. No one gets it right all the time. But it’s the most important thing we do and once you’ve done it well – we’ve all seen it, you almost don’t have to do anything else, because you have the leaders of every department making all the important decisions in their area.”
He also insisted in the fact that gender or university degrees don’t matter. “The one bias I would have, the only group I would not hire from is really large companies.” He explained. “It’s not that they are terrible people, it’s that if you’ve been running a big company your instincts are just wrong. In the same way, I don’t think I would have the right instincts to go run a company of 5k people like INTEL – my reactions would be wrong. I want someone who might have started off in a bigger company but has definitely worked and has been trained at a smaller company.” He stated.
The investor also focused on the importance of reference checks. According to Kevin, “People do not spend enough time on reference checks. They will spend 20 hours interviewing candidates and 1 hour doing reference checks. But reference checks are just everything. I think that most people would be better off if they never met the candidate.” He explained.
Kevin insisted that there are many things that throw you off when meeting someone, like the fact they may present well, or seem to have confidence. “But what matters at the job is attention to detail, how they interact with other people and none of that comes across truly in the interview. The interview is like talking to LeBron James about basketball, which is fine, but watching LeBron James play basketball is what tells me whether he is a good player.” he explained. “I can’t watch you in a corporate environment but all of your coworkers did and once I hear what they have to say, I’m going to get a full picture of who you are.” He added.
When asked about whether he is investing right now, Kevin said that during the first 6 months of this year he has been investing more than ever. “I am seeing incredible opportunities that are out there and prices are down. Most VCs are lying. They are saying that they are investing, but they are not.” He stated. “Right now, they are thinking about the good of their companies and they are not willing to take risk. They are very cautious, I see it every single time. However, it will get better eventually, things will start to change.”
According to Kevin, right now for many companies the valuation has come down, “as we say ‘the flat round is the now up round’ but the market price is the market price. You want to raise as little money as you can still do what you need to do to and get to some point next year. I think you are going to be in a better place at the second quarter next year than you are right now so you just have to get there. Some of this is survival: you need money and the number one responsibility of the CEO is not to run out of money. But there are times when there is just no money.” he explained.
“I have companies that are making compromises and accept lower valuations and slightly worse terms, but as long as they are raising 10%, it’s not the end of the world. However, weaker companies are the ones that are going to get cold from the hurt.” Kevin also explained that he is not investing in things that are Corona related. “The company I am going to get involved with is not going to be big for 4-5 years. And in 4-5 years I am assuming that we are out of this and we are back to whatever the normal is. There are still opportunities in every single sector that are interesting.” He added.
Kevin also suggested that successful founders and business leaders are the ones that are able to attract good people who want to work for them, who trust them and want to be part of their team. “One of the most important things I look for when I am about to invest in a company is to know if this person will be able to attract good people. In high tech there are so many choices so people will want to work for someone who is nice and will help their career.” He explained.
Kevin pointed out that one does not need to start a company in a vertical that already knows well. “If we look at a pattern of many of the largest companies that have been founded successfully, there are people that worked at other startups in a different vertical. For example, when we were raising money for Business Insider, neither I or the CEO had a media background, but we could see something that most media people couldn’t. Innovative ideas come from slightly outside.”
“I am always thinking of problems before founding a company. In the case of Mongo for example, we knew that the product that Oracle was offering was expensive and it wasn’t the right technology infrastructure and so we created a better product. There are problems out there all the time that you know about.” He added.
According to the investor, in general, women have raised less money. “There are fewer women who tried to raise money and then are fewer ones who got it. Also, technology business is harder to attract women. At Double Click we only had 24% percent women. Because fewer women have computer science degrees and there are less women as role models in that area. However, it’s on the right path, we have started seeing good examples everywhere.” He said.
Kevin also pointed out that when women are raising money, they tend to be less aggressive. And although he admitted this sounds stereotypic, “men often overreact, therefore sound more confident, something that VCs like and expect. VCs want to see confidence.” He continued.
Kevin insisted that we don’t know what the future will be. “People have to be cautious because we really have no idea what the future is going to look like. If we go back to lockdown in fall or if the stock market crashes, the dynamic of financing is going to change”. Therefore, he advised entrepreneurs to:
As he pointed out, “We don’t win because we have better financing or accounting, we win because we offer a better product than our competitors”.
In addition, according to the investor, in the near future, we are going to watch supply and demand regulate. “Many of my companies have done 20% pay cuts but not a single person has left. Because people understand why leaders have to do that and they understand that without these cuts, they would have to let some people go. The number one responsibility of business leaders is to save the company and make sure they have enough cash” he explained.
Overall, Kevin stated that he feels concerned about the economic impact of the coronavirus. He insisted that the economic impact is going to be much greater than the health one. “I think that it’s going to go horribly wrong. We’re going to have 25-30% unemployment, hundreds of thousands of bankruptcies and entire sectors wiped out. It’s going to be devastating and we are going to pay the price for that for a long time – way longer than what people think.” He explained. He also said that he is worried by the lack of global leadership. “US is absent, China has its own self-interest and Europe has a complicated decision-making structure.”
Despite his concerns, Kevin wrapped up on a positive note. “Humans are incredibly entrepreneurial and so they are going to figure out answers to most of things over time. I am a big believer and I take a longer-term perspective. The world has become better in the last 25 years, as we are in a better place now in dealing with international issues. The world may not be perfect yet, but it is undoubtedly much better than in the past.”