This entire wave of the consumer Internet– call it Web 2.0, the post dot com crash, the social media revolution– has largely been predicated on three cultural shifts. The first was the dramatically lower costs of starting a company. The second was a disenchantment with taking a company public. And the third is that the best companies in the tech world are run by its founders.
Twitter– undoubtably the sexiest consumer company of this wave next to Facebook— has finally filed its S1. It’s done so utilizing the JOBS Act’s ability to stay confidential so all we know is that it’s happened– a nugget of wisdom supplied by a Tweet, naturally.
But one thing is clear amid the secrecy about its actual numbers: If this IPO performs well it will kick those last two cultural shifts squarely in the nuts, possibly ushering a cultural shift all its own.
The idea that founder CEOs are always the answer is particularly at risk given how well LinkedIn has performed next to Groupon and Zynga— the other big IPOs in recent years. Both of those founders are, after all, out of the corner office.
Costolo has long felt the only option for his reign as the third CEO of Twitter to be a success is to go public. The company has been priced too high for an acquisition by the private markets for some time. While he’s funny and comes across as unsales-y, Costolo is a no nonsense operator. He’s clear on how he wants his managers to run the company. It’s heavy on process– the weekly all hands, the office hours, the weekly 1:1s. Management at Twitter is honed to a GE-like science. He isn’t shy about firing people who don’t fit and bringing in people who do. He has painstakingly shifted the culture 180 degrees from the loosey goosey undisciplined one he inherited.
The “Make better mistakes tomorrow” artwork was not taken to the new campus. He hates that phrase. As investor Fred Wilson says, Twitter is like a “weed” of the startup world. It is the company that wouldn’t die no matter how many CEO ousters and board turn overs there were, bolstered almost totally on the uncanny appeal of its simple service which has changed little over the years. By the time it got to Costolo there was no more room for error. He’s felt the pressure to execute since he took the job and, like a throwback to consumer Internet CEOs of an earlier era, he had one priority: Going public. It looks like that moment is finally nigh.
Will he finish what LinkedIn’s Jeff Weiner started and redeem the corner office for the disciplined, experienced non-founder?
It’s worth noting that Twitter started life very in tune with the ethos I describe above. It was lean– mostly financed by Evan Williams and the first iteration of Obvious after he made investors whole from the debacle that was Odeo. It had a slavish devotion to the hacker/founder ethos. A wunderkind named Jack Dorsey came up with the idea and Williams dutifully let it be his baby. It shared the “move fast and break things” and “make better mistakes tomorrow” mentality of the day– and true enough, it’s product broke a lot during the early years.
And like so many other companies built by product-centric founders, it put off monetization for a long time, promising users that its method of making money would enhance the user experience, not detract from it. (The persistent lie that is the ad world’s equivalent of “no, honey, you don’t look fat in that dress…”)
So what happened? The founder-CEOs simply didn’t perform. Despite the swell in Dorsey’s image post-Twitter, the board members I’ve spoken to have never said they made a mistake in ousting him. They didn’t have a choice: The management team lost confidence in him. Dorsey may be a great CEO now– likely as a result of Twitter– but he wasn’t at the time.
Williams was the second chance at a founder running Twitter, and he too had problems at the helm. He’d said in interviews six months before taking over that he knew he didn’t like being a CEO, but he allowed those around him to convince him that a good COO could make the job more tolerable. That’s where Costolo came in.
When the company decided Williams wasn’t the right one for the job, the board was rightfully nervous about tapping an outsider. This company had already gone through one switch in CEO– something that has been fatal for plenty of startups. Costolo was essentially the best chance they had.
But, board members have told me, they weren’t totally sold so they initially tapped him as an interim CEO. It was Williams who made the call that if they were gonna do it, they should drop the interim and place all their chits on Costolo. It was a gamble, but the board knew the future of the company would likely rest on whoever the third CEO became. What were the odds it could survive this four times?
The gamble has more than paid off. Twitter has stabilized and is considered a great place to work. It is finally monetizing — although the fact that it is able to file secretively means it has under $1 billion in annual revenues. And the product has evolved… some. Costolo’s particular design ethos is largely to “do less.”
We have months to write about Twitter’s IPO and years to write about Twitter as a public company. But underlying all that is the truth that the media frequently forgets about startups: There is no single path to success. Costolo deserves the moment as much as any founder CEO.