The WeWork IPO train wreck is being blamed on Adam Neumann.
Neumann is the "visionary" founder and CEO who apparently has a taste for expensive tequila and blowing millions of venture capital dollars on company ragers and on himself, all while giddily running a company devoid of profits or even basic business fundamentals.
Now some members of Neumann's board of directors want to fire him because it might be the only way to save the company's IPO. Billions are at stake.
According to The New York Times' Michael de la Merced, Andrew Ross Sorkin and David Gelles, the motivating factor behind the conspiracy to dethrone Neumann is that major money managers refuse to invest in a WeWork IPO unless a different, more experienced operator is brought in.
If he doesn't go willingly, getting rid of Neumann won't be easy. He has been allowed to accumulate a lot of power. Even though his 20X voting shares have been knocked down to 10X following public backlash, Neumann still has enough control to fire his entire board if he wants to.
Perhaps more significantly, WeWork's board needs to take a hard look in the mirror. Each member has failed miserably at their job. And that's because startup boardrooms are broken.
A public company's board of directors is supposed to look out for shareholder interest.
But the job of a startup's board is less clear-cut and more problematic. These boards are often clubby groups of VC insiders. Their unspoken primary objective is to look out for their own self-interest and to protect their returns.
From the earliest stages of a startup, investors back founders, not companies.
That's because ideas alone are worthless. It takes a founder with grit, vision and the ability to execute to transform a good idea into a billion-dollar business.
VCs know that without someone like Adam Neumann at the helm, someone who is said to be one heck of a salesman, WeWork's valuation would be worth nowhere near $47 billion.
The visionary founder is considered so integral to the ultimate success of a startup that the board lets them get away with a lot. Business metrics get ignored, while the founder's power grows. Investors are not incentivized to push back while a startup is on the rise. If they do, they're viewed as being anti-founder — a bad reputation to have in the startup world. And after all, this is their cash cow. With no Neumann, there's no $47 billion pot of gold.
So there go all the checks and balances. Neumann, for all his excesses, is just the culmination of a trend that's been going on for years. The all-powerful startup founder has free reign to do almost anything they want, short of murder.
Until a startup gets so big that the public starts paying attention.
Keep in mind that by the time today's startups IPO, they have grown into giant entities — like WeWork, Uber or Airbnb — whose business practices and operations affect entire industries. At that point the public, whether it be Wall Street investors or other stakeholders, starts doing the board of directors' job for them — questioning the sustainability of the business, and the practices of the CEO.
And suddenly, the board is in a tight spot. Now billions are on the line if they don't turn against the founder who made the company what it is.
There's only been one recent example of a board successfully overthrowing a powerful visionary founder: Uber's Travis Kalanick. That ouster was driven largely by Bill Gurley, a partner at venture capital firm Benchmark who felt billions were on the line for himself and his LPs if he didn't make a drastic leadership change at Uber.
Benchmark is also on the board of WeWork.
Kalanick's ouster took six months and a ferocious mental chess game before Kalanick willingly gave up his CEO role. It was ugly.
With Neumann, the WeWork board is already apparently contemplating digging into things like alleged drug use and mismanagement of company funds to force his hand, if he doesn't step aside.
Maybe Neumann should fire his entire board.
It's either them or him, and it's debatable which is worse.