Marshall Cooper

Marshall Cooper
9 POSTS 0 COMMENTS
Marshall Cooper is the CEO of the Chief Executive Group.

As WeWork Pulls Its IPO, Capitalists Should Rejoice

[caption id="attachment_69329" align="aligncenter" width="696"]WeWork's Adam Neumann WeWork's Adam Neumann[/caption] For true fans of free-market capitalism, Monday, Sept. 30, 2019, is a day to celebrate. That was when reality finally caught up with WeWork. After a string of petty, self-dealing episodes by CEO Adam Neumann, which resulted in his stepping aside, the company pulled its S1 filing, effectively ending its chances at going public, at least for now.  A worrisome sign for the tech market? For the economy? Hardly. The stalled IPO is actually a huge win for American business in an era that has become increasingly out of touch with reality. While there is much to admire and like about America’s startup culture—It identifies new needs or better ways of doing things, takes risks and makes things happen, often in unexpected ways—it has also strayed far from its roots.  Powerful, self-interested players—venture capitalists chief among them—have bastardized the startup world, turning it into something often not-so-beautiful and threatening our free market system along the way. By twisting the rules to their advantage, they have become the purveyors of modern-day snake oil, and in so doing they tarnish the honest business people who take care of their customers, employees, investors and communities every day. Too many young entrepreneurs, for instance, now judge success not by dusty old-school measures like profitability — but rather by the amount of capital they’ve raised. Startup CEOs use “dollars raised” and private money “valuations” as their KPIs. “Secondaries,” “Bridge financing,” and “Rounds A, B, and C” have become the nomenclature of the startup crowd, signaling false sophistication, when they should be focused on “Value,” “Customers,” and “Profit.” WeWork was the ultimate example of this effect. Softbank’s latest $2 billion investment in the company pumped the valuation to $47 billion. That’s for a company with no profits and a business model that has yet to be tested in anything but a boom economy.  The VCs are hardly alone. They are supported by a network of self-interested lending institutions, business schools and professional service firms looking to make a few bucks, as well as mainstream media outlets who see these young, photogenic CEOs as “heroes of capitalism” who can pop magazine sales and clicks that drive ad dollars (see Holmes, Elizabeth). This “Venture Capital Industrial Complex” has become a self-perpetuating monster. Venture capital too often resembles a “pump and dump” stock brokerage scam: each investor buys in, hypes the investment and sells out to the next investor in line at ever-increasing valuations. The ultimate kill, of course, remains an IPO, where valuations can be obscene. The regulatory environment, unfortunately, has created a world in which a growing retail investor base has ever fewer stocks to choose from. According to the St. Louis Federal Reserve Bank, the number of U.S. publicly listed companies per million people stood at 30.0 in 1996 and dropped to just 13.4 in 2016. It’s a situation ripe for abuse. Crunchbase, which tracks venture capital investments, currently counts 498 “unicorns,” private companies with valuations exceeding $1 billion (September 2019). They roam a universe in which only 1,667 public companies in the U.S. have valuations exceeding $1 billion, suggesting serious unicorn inflation.   A 2016 survey of 889 venture capitalists found that 91% of these insiders believe unicorns are overvalued. There was no difference in the response between the 40% of VCs who claimed to have themselves invested in a unicorn versus the 60% who had not had such good fortune. Take, for example, the case of Blue Apron. Founded in 2011 by then-28 year old Matt Salzman, who felt the itch to start his own company while working as an associate at, wait for it….venture capital firm Bessemer Venture Partners. He and partner Ilia Papas were classmates at Harvard Business School, and initially raised money for a startup crowdfunding platform for scientists.  They pivoted and settled on meal delivery kits, but neither had food industry experience (Papas was a techie). So they recruited a third friend, Matthew Wadiak, who had done catering for his mother in law. Salzman’s former employer, Bessemer, led funding rounds totalling $135 million. Salzman was triumphant and eager to dispense wisdom. “A lot of people who found companies go out and do it with their closest friend who does exactly what they do and has the exact same background that they have," he modestly told Inc. magazine in 2015, which added fuel to the fire with its feature, “How Blue Apron Became a $2 Billion Startup in 3 Years.” “We were very deliberate in assembling a team that we thought was complementary.” Things started going south even before the 2017 IPO, when the stock was valued at $10 a share.  It now trades at a split adjusted price of around $0.63 (the company needed to do a 1:15 reverse split this past summer to avoid being delisted by the NYSE).   This story almost ended, as these stories usually do, with the venture capitalists making out like bandits. At the IPO, they sat on hundreds of millions of dollars in gains. But this time they missed their window and mostly rode the stock down with retail investors.  Don’t get me wrong: starting new businesses is hard and high risk. I don’t fault anyone for trying to build something new, even when the effort results in failure. But we can’t allow the Venture Capital Industrial Complex to keep distorting free markets, leaving behind a wake of destruction in its path, redefining capitalism to our detriment. Thankfully, the market seems to be catching on. It usually does. 

Remembering President Bush, My First Boss

Chief Executive Group CEO Marshall Cooper reflects on his time as an aide in George H.W. Bush’s White House.

Amazon CEO Jeff Bezos Talks Space, Scheduling And The Importance Of...

Highlights from a recent speech by Jeff Bezos at an event hosted The Economic Club of Washington DC. In the speech, Bezos hit on a variety of topics, including telling the audience that he’d soon announce the location of Amazon’s second headquarters.

In Washington, Bezos Talks Space, Scheduling And The Importance Of Good...

Highlights from a recent speech by Jeff Bezos at an event hosted The Economic Club of Washington DC. In the speech, Bezos hit on a variety of topics, including telling the audience that he’d soon announce the location of Amazon’s second headquarters.

5 Reasons Why Your Tech Company Should Target Sales to CEOs

Tech companies almost always target the CIO or other top IT executive in their sales efforts. It’s the way things have been done for many years—and it’s largely ineffective. The main problem with this approach is that CIOs and other IT executives usually have the authority to do what was done last year: budget constraints give them very little room to spend on newly-identified solutions that you provide. They also are bombarded by your competitors and every other tech vendor, so it’s easy to let vendor calls go to voicemail and to ignore those emails. But there is a better way: target the CEO. Here are 5 reasons why this is a good strategy. 1. Targeting the CEO Provides Access to Funding “No budget” is the easy way for potential clients to get rid of vendors, and every corporate executive is constrained by budget realities. Everyone, that is, except for the CEO. You read that right. While the CEO is responsible for delivering results, only the CEO can decide—at any time—to reallocate funds from one department to another. No other executive can decide to take funds from one place and give it to another.
“When the priority of a company is all about growth, you can find the money to make that happen.”
Getting new funds is no slam dunk: CEOs will do this only for initiatives that are strategically important and align with their top priorities. But if you know the CEO’s agenda and can get access, you have the keys to the kingdom. “IT organizations always have budgets. They typically range between 1% and 2% of the company's revenues. But what we’ve been able to tap into beyond those budgets are the line-of-business executives’ budgets, also the CEO agenda,” says Salesforce President Kevin Block. “When the priority of a company is all about growth, you can find the money to make that happen.” By getting on the CEO agenda, Block says Salesforce is able to access pools of funding beyond regular IT budgets. 2. Targeting the CEO Beats the Competition It’s unlikely your competitors know how to effectively engage CEOs—yet. Doing so requires both access and a collaborative approach that’s hard to pull off without senior-most executive involvement. Let’s face it: most CEOs don’t get involved in sales in any meaningful way unless they have to. But when CEOs do get involved, the impact is powerful. “I can probably rattle off dozens of CEOs that [the President and I] are having to constantly interact with and collaborate with and creating these transactions,” says Salesforce.com CEO Marc Benioff, whose company is successfully targeting CEOs in its sales efforts. “I think it’s really unusual and that’s why we are really selling more enterprise software than Oracle or SAP in the applications area.” 3. Targeting the CEO Bypasses the Naysayers Enterprise technology purchases involve, on average, 15.5 people in a purchasing organization, according to IDG Research. Half those individuals are within the IT department and the other half are within individual lines of business. Good luck trying to merely identify all the players, much less getting them all to agree. Typically, if any one of these 15.5 people has an objection to your product/service, you’re sunk. On top of this, in the typical large enterprise, corporate survival demands that managers be more concerned with not making mistakes than with innovating. With the risks of new technology implementations so well documented and widespread, corporate bureaucracies hunker down and reject intruders. After all, the downside to any individual is worse than the potential upside. There is only one person who can wrangle all the necessary players to consensus—and is responsible for innovation—and that person is the CEO. In short, what the CEO wants done, gets done. 4. Targeting the CEO Accelerates the Purchase Decision Enterprise sales seem to stretch on forever. It’s no wonder, with those 15.5 corporate people each needing to vet and approve any new idea. Each of them has their own priorities and politics, and the chance for your proposal to keep moving along those 15.5 desks is slim. It’s best to have a champion who can nurture your proposal through the layers and decision-making process, or simply have the authority to complete the deal on their own. Of course, the quality of your champion determines the success of your pitch. Is there anyone you would rather have champion your proposal than the CEO? 5. Targeting the CEO Gets you Past the Gatekeepers Sometimes, you know that a company would be a perfect fit and truly benefit from your solution, but you simply can’t get in the front door. It’s incredibly frustrating, but completely common. From your potential customer’s view, it’s a necessary evil: without effective gatekeepers, they would collapse from the weight of all the people trying to gain access to decision makers. But for those few who bypass the gatekeepers and effectively align their solutions to CEO priorities, they will find the gatekeepers falling in line behind the CEO. If you start at the top and get buy-in from the boss, everything falls quickly into line. In my own company’s experience, we frequently target Chief Marketing Officers. But in a few cases when we couldn’t get a call back and had a specific, compelling case for their company, we took our case directly to the CEO. That happened this week with one of the world’s largest shipping companies. I just received a faxed back order form from the CEO for $14,000 with no questions asked, bypassing everyone else in his company.

So you Want to Serve CEOs? 5 Critical Questions to Ask...

Thoughtful preparation, including answering these five questions, will help you develop into a trusted advisor, provide real value for the CEOs you serve and get results for your own organization.

Salesforce.com Has a Secret that’s Fueling its Blistering Growth

It has long been accepted wisdom that technology purchases are controlled by CIOs and their IT departments. Not any more, says one of the world’s best-performing technology companies, backed by the latest research. In their Q4 2016 earnings call, top Salesforce.com executives credited their blockbuster growth and best-ever performance to a shift in sales efforts that target CEOs. “There is definitely a transformation going on at Salesforce…. I was at Oracle 13 years, I never made a sales call on a CEO,” said Salesforce founder and CEO Mark Benioff. “Never [was the] CEO buying product, being that chief digital officer himself or herself.” But today, everything has changed. Salesforce recognizes that CEOs are central to buying decisions.
“CEO’s are all about transformation, and in many ways have become the chief transformation officers for [their] companies.”
“The world has turned,” explains Keith Bloch, Salesforce vice chairman, president, COO and former Oracle executive. “CEO’s are all about transformation, and in many ways they have become the chief transformation officers for [their] companies. They are personally involved, they are personally engaged, and they want to talk to us and they are very interested in us playing the role of trusted advisor. They’re interested in our thought leadership.” “In the last three weeks, I’ve had more conversations with CEOs around transformation than in my entire career over 30-plus years,” adds Block. “I look at the large transactions we did with the largest banks in the world, the largest insurance companies in the world, the largest media companies in the world, the largest technology companies in the world,” says Benioff. “Every single transaction was done with the Chief Executive Officer.” Independent research confirms the increasing importance of CEOs in tech decisions. In the IDG study, Role & Influence of the Technology Decision-Maker, large enterprise IT pros (11,639 average employees) say that no one in their organization surpasses the CEO when it comes to authorizing and approving IT purchases, with 55% involvement. Further, 44% agree that CEOs determine the business need for IT purchases, statistically tied with CIO/top IT executives and line-of-business management.

September 2015 CEO Confidence Index: CEOs Are Angry at Washington; but...

CEOs’ outlook on the future diverges significantly by industry, with Pharmaceutical/Medical Device leaders having the most confident outlook on future prospects. while energy/utility companies, not surprisingly, have the least positive outlook, and feel that economic conditions, for them, will get worse by next year.

Understanding the McDonald’s Leadership “Special Sauce”

McDonald’s has a well-deserved reputation for consistency. Wherever in the world you go, you know what you’re getting when you walk underneath their golden arches.
- Advertisement -

CEO1000

CEO1000 Tracker

From the schools they went to to the types of companies they run, CEO1000 is tracking the trends among the CEOs of the 1,000 largest U.S. companies.

CEO CONFIDENCE INDEX

Washington Politics Cramps CEO Confidence In October Poll

Chief Executive’s October polling of CEOs found confidence in both the current and future business environment stagnating...
- Advertisement -

BEST & WORST STATES FOR BUSINESS

Best and Worst States For Business

Are you looking to relocate or expand? Evaluate each state's strengths with Chief Executive's 2019 Best & Worst States for Business.

CEO OF THE YEAR

CEO of the Year

Once a year, we celebrate the achievements of a CEO, honored for his or her success in and dedication to business, shareholders and customers.

SUBSCRIBE TO CHIEF EXECUTIVE

Sign Up to Receive Chief Executive’s Magazine and e-Newsletters

Chief Executive’s publications are designed to help CEOs do their jobs better and run their businesses more effectively. Subscribe here.