Fight, Flight, or the Courage to do What's Right

While stepping down as CEO of a small startup bears little resemblance to the leader of the free world stepping down as the Presidential candidate for a political party, I empathize and understand what President Biden “had to do” and ultimately “did.”

In 2007, Sean Knapp, Belsasar Lepe and I co-founded a video platform company called Ooyala. And while in 2007, the cracks in financial institutions had started to show, we were successful in raising our seed round in June of that year and a large series A in January of 2008. The company was in the nascent industry of video streaming and we were getting some traction. 

The Summer of 2008, we were in talks with a large Private Equity fund that was considering investing $50M at a $500M valuation. We also held a board meeting on a luxury sailboat motoring around the Newport RI bay discussing the fundraise and company traction. (In hindsight, the boat was probably akin to fiddling while Rome burned…) During the closed session of the meeting, I asked the board, how was I doing? They were relatively effusive and since there was an investor in the wings considering investing at a $500M valuation, the $6M valuation they paid 14 months earlier seemed like a good investment. 

Then… the world fell apart. In 2008, the major indexes fell by almost 50%, and Sequoia Capital published the RIP Good Times deck for their portfolio companies. Even VCs who had commitments from big institutional investors couldn’t do capital calls. So VCs had to decide which companies would survive and which would die.

At this point, our biggest investors called us in and said that what we were experiencing hadn’t been seen since 1929, and we needed a CEO with “been there - done that” experience. They were the knowledgeable ones, so I said OK. But after a few weeks of interviewing candidates, it became obvious that the people we could attract to take the job were not the best - nobody good was willing to leave a great job with the financial backdrop to take a risk on a small startup. 

So I went back to the investors and told them that I was going to stop the search. The investors tried to convince my cofounders  to push for it, but we stayed aligned and pushed back. For a few months, the investors gave me the cold shoulder, but the early traction started to turn into real momentum. Month over month, our revenue grew significantly. To put things in perspective, in 2008, we did $300k in revenue, and in 2009, we did $3M.

But… the company was not yet profitable and by February of 2009, with seven months of runway, we knew we needed to start fundraising. When seven months earlier, we thought we were getting close to a $50M term sheet at a $500M valuation, now, we could barely get investors to call us back - even with the positive traction we were seeing. And when we would get the opportunity to pitch a VC, one after another, they turned us down. At about the 75th rejection, I knew that there was very little we could do to change the pitch or the business - the only thing I could change was the CEO. 

So I approached the board and I said that it made sense to restart the CEO search, but that I wanted to lead it. And since I wasn’t going to be the CEO, I wanted to get what I pictured a CEO to be - tall, good looking, full head of hair, all American and experience leading public companies. Not quite the 6-5, blue eyed, trust-fund guy from the song, but close. After many candidates, we found a great fit in Jay Fulcher, an executive who had experience working at startups and large enterprises. He had been a senior executive at large software companies, and most recently was the CEO for five years at a public company that he sold to Oracle. It was perfect. But by the time he joined, we had received No(s) from 150 funds and we had two months of runway left.

From his first day, the focus was to raise “survival” capital. We pitched another 25 VCs, and finally one said yes. And funds landed in our account literally three days before we wouldn’t be able to make payroll. While the new CEO didn’t say much in those pitches, the steady hand of an experienced operator gave at least one VC the confidence to invest in us.

So once the funds were raised - what was next for me… I had been the CEO, and I was no longer? For the next six months, I continued to run all functions except for engineering and sales, and every year I let go of a role to another executive until I finally left the company in 2013. 

Stepping down as CEO was difficult. Acknowledging that we needed someone/something different in order to raise capital was hard. But in the end, we had employees, their families, investors who had bet on me to make Ooyala successful. And while in the early days of the company, I did this by coming up with the idea, putting together the team, getting the early customers… in 2009, it was securing funding by stepping down. In theory, I could’ve stayed the course, been stubborn and maybe we would’ve been able to raise the needed capital. But I think like the assessment President Biden made, the odds were stacked against me/us. 

President Biden had every right to remain the candidate for the Democrats. However, he decided that the only way to minimize the risk of his party losing the presidency was to step aside and not run. Difficult and painful decision, but he secured his legacy and in his mind, this action will help preserve Democracy. 7 days on from the announcement, and Kamala has raised over $200M for her election campaign. Only time will tell, but at least in Ooyala’s case, that funding round was an important part in the eventual growth and sale of the company.