I – along with just about everyone else involved in business or technology – have written about BetterPlace before, although I have done so entirely from the outside. I have had no privileged inside look or access, and have had no time as a consultant – and not a professional reporter – to go and interview people involved.
FastCompany, however, pays its people to do exactly that. To their credit, they have written a fascinating in-depth look at the rise and fall of BetterPlace, and how it managed to squander nearly $1BN in investment capital with, essentially, nothing to show for it.
The article should be required reading for anyone running a startup or established company, advising one, working at one, on the Board of one, investing in one, or even thinking about any of the above.
There are a number of really good lessons in the article.
Don’t Drink Your Own Kool-Aid
This is probably the most important one of all. Clearly, Agassi drank his own Kool-Aid. He really believed he could make everything happen by saying it is so. Well, there are things you can make happen, like wooing investors and sometimes bringing in some customers. But in the end, it is all about execution, which means actually delivering a product that customers want to buy, at a price they want to buy, at a profit margin that makes you money. Fail on any of those, and you are going out of business very quickly.
I fear this is part of the “Steve Jobs” cult. People read the books about him, see the films, and think that his famous “Steve Jobs Reality Warp Field” made things happen. It didn’t. He understood the real world – he actually worked on computers, he did calligraphy, he understood what it took to build something and what customers actually wanted. His Reality Warp Field was around pushing people beyond their comfort zone into something that was nearly impossible, rather than making it up.
Similarly, he was extraordinarily careful with what he said to outsiders – partners, customers, and especially the market. He reviewed presentations dozens of times to make sure he had it right, and had not promised something that wasn’t there. He never would have offhandedly said to General Motors that he would give a car away for free.
Which leads to…
Hire The Best
Don’t hire your brother, sister, mother, or high school / army buddy… unless you are confident they really are the best candidate to execute. Yes, it is important you hire people you can trust and fit with your culture, and so you should not be afraid of hiring those people you can trust. But always be sure that:
- You are equally willing to fire the one you hire; if you will not fire them, do not hire them.
- You are hiring the best for the job.
I worked years ago with a company called Simplewire, a great SMS message aggregation service. It was founded by CEO John Lauer… and his CTO was his brother Jim Lauer. While I was a little nervous about the company at first – what if it is just a nepotism hire – both of them proved highly competent and responsive, and I was glad I chose to do business with them.
Your family can be a good hire, but only if they are a good hire first and family second.
You need the best people who will execute. Your business will not just succeed, and you will not just bring your family along for the ride. Your business might succeed, but only if you hire the best people.
But to know all of this…
You need people with experience in each major field in the room, and especially at the executive and even more importantly at the Board level. You need people who have seen success and have seen failure, those who have seen and lived multiple industries, who know what an economic downturn is and how to weather it, both as individuals and as a company, who have seen politics and finance and all that the world has to offer, both good and bad.
In short: you need grown-ups.
But to get all of the above, you need not just a great CEO, but:
Make the Board Work
Ultimately, the Board of Directors is responsible for the company. They need to hire executives, and they need to fire them, including the CEO. They need to believe in the company and its vision, but not be starry-eyed by it.
By all accounts, BetterPlace’s Board of Directors failed at its fundamental duty. I cannot think of a single other Board I have seen that would so blithely pass by the failures and foibles as the company dug itself a hole, filled it with TNT, and jumped in holding a lit torch screaming, “we are changing the world!”
- Why did one Board member have responsibility to fire the CEO? It should have been the entire Board.
- Why were there no regular performance reviews?
- Where was the CEO’s budget?
- Where were the replacements for the CFO and COO?
- Where were the Board committees, who should have seen the spending, compensation, public statements and performance of the company?
In the end, BetterPlace was a failure of one thing: the Board in performance of it fiduciary duty to manage the company.
Could the BetterPlace vision have succeeded? Perhaps yes, perhaps no. It had no clean focus, no realistic deliverables, and a burn rate that would make the Greek government proud. But all of that is managed by the CEO, who is hired and managed by the Board, who could have used $850MM to achieve some real goals.
The CEO was in way over his head, drank the Kool-Aid, believed in himself way too much, and needed to be managed out. The Board failed.