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Comment by thesausageking | Hacker News Reader

For those wondering about the allusion to Hatching Twitter, it describes in detail how, when Ev was CEO, Fred and the board told him he was doing a fantastic job and while secretly meeting with Jack and coming up with a plan to push Ev out and bring in Dick Costolo as CEO (with Jack under him).

Here's a quote from the book after Ev was told he was out with a vicious quote from Fred:

Williams, stunned, picked up the phone and began dialing. Bijan Sabet was apologetic and insisted that they wanted to keep him on in a product-advisory role. According to several people at the company, Fred Wilson, however, said he thought Williams had always been a terrible C.E.O. “I never considered you a founder,” he said. “Jack founded Twitter.”

Other portfolio investments of Fred's have followed a similar pattern of having the original CEO pushed out once they get to a certain level of success.

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This is a great example of how a company was undone by greedy VCs. A little history lesson. The founders of Twitter really believed in a vibrant ecosystem for Twitter. They gave the developer community a slew of APIs, gracious quotas, and support.

The ecosystem thrived and created dozens of major companies that made Twitter truly useful. The user numbers grew as well because those very same companies marketed their new and innovative solutions. Then Ev was fired. Dick was brought in and month of after month they lay waste to the ecosystem. Dozens of companies died and hundreds of millions of dollars in VC money was lost.

Why? Fred wanted to cash out with a lot of other VCs. They wanted to turn Twitter into a media company. Run up the revenue and go IPO to dump their shares. Sure, if Twitter went along with their founders vision it could have been much bigger over time but going that route didn't help Fred cash out his 100x return and report back to his LPs.

The reality is founders spend years even getting off the ground. The "board", represented by VCs, rarely add value to the operation and vision of the company. They invest because they believe in the vision. Make sure that reality is in writing so people like Fred don't stab you in the back so they can cash out early.

I know that's a very comforting line of thought but it rings a bit false. Without the funds from the LPs backing the VCs there would have been no Twitter and no ecosystem of apps to begin with.

I agree it sucks that Twitter shafted its developers, but the LPs wanted to get paid. They don't get into VC to back charities. The VCs are just repping their LPs when they do this stuff.

Not really how VCs work. Each VC is made up of funds. When EV was CEO and Twitter was the size it was, a lot of your fund's success might hinge on one or two companies in your portfolio. Without them exiting, it is hard to raise the next fund. If you can cash out your companies, show a huge return, it gets easier to raise your next fund at favorable terms.

You seem to be backing up what I was saying. The VC's LPs want huge returns. The VCs also want huge returns. The Twitter board chose the path it did to create those returns.

I am not backing up what you are saying. VCs want huge returns in a compressed timeline.

This comes at the cost of what is good for the company. Using Facebook as an example, you would sell Facebook when Viacom wanted to buy it for 75MM. Great huge return for investors for such a young company. Can turn around and show your fund had a huge exit. Especially great for a seed fund but terrible for the founder and the employees. Luckily, Zuckerberg had control and could thwart investors desire for a quick sale. [1]

I am totally not against VCs making a return but what I am against is VCs forcing premature exits. We may never know what Twitter could have been if the ecosystem stayed in-tact and they figured out how to monetize the whole thing and kept the user growth trajectory in place.

[1] http://www.businessinsider.com/all-the-companies-that-ever-t...

The "ecosystem" was on the path to destroying the company. The 3rd party Twitter clients had huge chunks of the Twitter userbase - back in 2010-2011, 20% of Twitter users used EchoFon, 11% used TweetDeck, etc.

If they had let the system continue, one of the clients could have gotten enough market share that they could have simply changed the backend to their own app, and none of the users would have batted an eye. Or Facebook could have bought up 2-3 of them quietly then forced Twitter to sell on the cheap.

It's easy to romanticize the wild-west period of Twitter's API being completely open for all use cases. However, it was, from a strategic perspective, extremely dangerous to the company's future - there's a reason why companies now know to build walled gardens.

It seems hard to argue that we outsiders know better that the "twitter-as-a-developer-platform" vision would have turned into a business much larger than what Twitter is now vs. the people on the actual board reviewing the finances. That seems to be what you're arguing. It seems that the people with all the numbers in front of them decided the returns would be better if they ditched the devs and sold brand ads. I'm just saying that's likely logical from the POV of VCs and their LPs.

>This is a great example of how a company was undone [...] , if Twitter went along with their founders vision it could have been much bigger over time

For anyone wondering why parent uses "undone", "could have been much bigger", at a time that Twitter is a household name, the President tweets, people hold public conversations over Twitter, and list Twitter handles instead of their emails.[1]

It's because Twitter is "only" an $11.9 billion company by market cap, whereas Facebook is at $492B or 44 times bigger. I can't think of any other metric by which Twitter isn't a resounding success story.

[1] https://levels.io/hoodmaps/ - Very bottom "I don't use email so tweet me your questions."

As a metric, popularity can be misleading.

Take Hollywood, for example: few things nowadays are as ever-present as motion pictures, but the total box office revenue for 2016 was around $11bn [1]. That's about 19 days worth of revenue for Apple, going by their last quarter [2].

Just because you see it everywhere, or everyone talks about it, doesn't necessarily mean that it's a huge moneymaker.

[1] http://www.hollywoodreporter.com/news/2016-box-office-record...

[2] https://www.apple.com/newsroom/2017/05/apple-reports-second-...

I'm shocked you consider a tiny little $0.8t company like Apple to be a "huge moneymaker". Last year alone, which "hasn't been kind", just the top 25 oil companies made $2.6t in revenue¹: so what you call 19 days of revenue they made every 36 hours; in the year they made enough to buy Apple at its current market cap with its staggeringly high P/E multiple of 17.91, in its entirety 3.2 times. Just because everyone talks about them doesn't make Apple a moneymaker. Get some perspective. /s

Seriously though, I think you're being totally unreasonable. :) $11 billion is huge revenue for movies. That's not chump change.

¹ https://www.forbes.com/sites/laurengensler/2016/05/26/global...

If we get to lump all of big oil into one pool do we do the same for all of tech? The largest oil company, ExxonMobile, had only $3.5b more in revenue last year than Apple. Then again, you don't get to buy things with revenue, you need profit to pay for expensive baubles. Apple made as much profit in their "weak" (Q3) quarter of 2016 as Exxon made all year.

Don't you think you're comparing Apples to Exxons?

The point was that popularity can be a misleading metric.

Twitter might be ubiquitous (a household name, as you said), but just like Iron Man, its popularity is not proportional to its financial success.

Fair enough.

Paul Graham - Founder Control (2010)

http://www.paulgraham.com/control.html

Create a board that reflects the ownership of the company (2007)

http://venturehacks.com/articles/board-structure

> Other portfolio investments of Fred's have followed a similar pattern of having the original CEO pushed out once they get to a certain level of success.

And honestly, they should. Managing a company through 50, 100, 150, 500 and 1,000+ employee milestones requires very different leadership skillsets. There are very few founders who (1) understand this (2) are willing to party ways with their company (3) can navigate through each stage without help and (4) would pull a Zuck and surround themselves with more established/senior people (e.g. Sandberg) as they hit those milestones.

I'm all for young entrepreneurs challenging the status quo by thwarting an old guard of seemingly "old people" (a la Jack Barker), but this is one area that traditionally has a lot of "old people" simply because experience is incredible valuable to scaling companies.

I haven't read "The Hard Thing About Hard Things", but my understanding is that it basically touches upon all of the intricacies of how to navigate business challenges that typically more experienced senior individuals possess.

Zuck was about to be fired as well. The board realized they could not fire him because he had a very iron clad founder friendly legal construct. That's when Sandberg came into the picture. Also, Zuck made Sandberg promise she would never go after his position before she came on.

Citations?

> Zuck was about to be fired as well. The board realized they could not fire him

Your statement contradicts itself. He was not about to be fired, his legal standing guaranteed that could not occur. The investors and board fully understood the context the entire time, they invested knowing that it was Zuckerberg's kingdom. Besides, he was the board legally.

More than accelerated vesting, what did he have or could he have gotten and still raised money at that stage (2007?).

> (4) would pull a Zuck and surround themselves with more established/senior people (e.g. Sandberg) as they hit those milestones.

Please recall the entire context:

Thiel stated early and often (as Facebook's earliest investor) that he would stand behind Zuck retaining majority control. Based on this support there was no other option than to provide Zuck with all the support, mentorship and education he would need to scale along with FB.

Zuck had unflinching VC support :)

>original CEO pushed out... honestly, they should...

I'm not convinced. If you look at the big ones like Amazon, Facebook, Apple and Microsoft, they kept their founder until big except Apple where they kicked him out, went pretty much broke and then got him back and then recovered.

There are also many examples where the founder was kicked out and the company tanked but it would be hard to distinguish cause and effect there - maybe they were fired because the company was doomed. I find it hard to think of any where they achieved great success by firing the founder(s).

Managing a large company is a skillset but you can hire for or learn that.

Having the vision and drive to start and build a company is also a skillset, and one that's much harder to hire a replacement for.

By the way The Hard Thing suggests hiring experienced people to help the CEO, not replace them.

He's there to make the business work. It's not a charity.

Fred didn't have to write the post.

& who can say for sure if what was written in Hatching Twitter is correct?

Everyone on HN is SO sceptical of everything, & then as soon as something negative is written about a VC you jump on them like a pack of hyenas.

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