The growing up pains of being a start-up

When I met a seven year old start-up last week, the first question I posed to the senior management was " You were in an innovation phase when you launched seven years ago. Do you think you are still in the innovative phase of growth or have you plateaued into the incremental phase like other old companies?". The answer was quick and full of self-denial. We are still in the innovative phase they replied without any hesitation. As I was having this meeting, news was pouring in that Travis Kalanick who was battling a troubled company in recent weeks, had already announced his desire to take a leave of absence from Uber which itself was shocking.

Uber which became something of a case study for innovation when it first launched in 2009 and revolutionised the way the world travels, has been discovering in the recent past, how just growing in geometric progression is different from growing up. As embattled CEO Travis Kalanick resigned from the ride-sharing company he helped found in 2009, following a shareholder revolt led by some of Uber’s most prominent investors, the resignation left a vacuum at the company.

In most regular companies, it would mean that a search for a successor to Travis would need to be swift and efficient. But then Uber is not a regular company. Most founders are not just CEOs. They are the CEO, CFO, CMO and COO. Which is why replacing a founder is always a difficult task. You can't recruit someone who can be all these things at once. As the board of Uber told Tech Crunch

“Travis has always put Uber first. This is a bold decision and a sign of his devotion and love for Uber. By stepping away, he’s taking the time to heal from his personal tragedy while giving the company room to fully embrace this new chapter in Uber’s history. We look forward to continuing to serve with him on the board.”

Uber has raised more than $11 billion in funding and with its most recent raise reported a $70 billion valuation. Investors are known to typically follow a founder’s direction even in the most difficult times, but recent events seem to have proved to threaten Uber’s stability.

So how did the darling of Silicon Valley get into so much trouble as to be charged with several allegations that include sexual harassment, law enforcement evasion, a salacious story involving Uber execs, Korean escorts and karaoke, stealing a key piece of Google technology for self driving cars, and the past use of phony software to thwart regulators? The accumulation of incidents painted Uber as a win-at-all-cost place with little regard for its workers’ or investors' well-being. So why did Uber investors wait so long before firing Travis? Quite simply because firing CEOs is bad business. Firing founders is even worse business. Most investors take time to weigh in the negatives of a Founder and if they really outweigh the good he has done. So it is a difficult decision. Remember the fiasco Apple went through when it lost Steve Jobs?

Success begets success they say but success also begets hubris. The successful start up is not invulnerable to a few key weaknesses that come from being a successful start up.

Hubris that comes from Success

Hubris is defined as excessive pride which can often bring down a hero. Or an outrageous arrogance or entitlement that makes you feel you are always right, because you were always right in the past. Typically, when past accomplishment creates a sense of invulnerability and a guarantee of future success, hubris can be a danger rather than an advantage. It is the false sense of security that we can create something from nothing as may have been the case when the firm was founded or when it rose from the ashes in a past debacle, crisis or decline. 

Undisciplined pursuit of more Success

Success is heady. Once you have tasted it you want more and more of it. So when the new innovators like Tesla and Google were making rapid progress into self driven cars, I am sure Uber thought it couldn''t be left behind. The problem with innovation is that it is near impossible to innovate constantly. When Uber didn't have an answer to new innovations in the market it might have been forced to steal Google's technology for self-driven cars.

Self-Denial of Risk

Most start ups became successful by facing risk head on. But sometimes extreme success can make one lose one's poise. You start to accentuate the positives and keep discounting the negatives. Taking bets without adequate validation can lead to large blunders and failures. But founders will typically make failures look good because they can't accept that they are losing. Also they would like to keep their losses a secret. After all putting up a brave face is supposed to be the right thing to do for a hero.

The good thing is that whoever succeeds Travis Kalanick will have none of this baggage which itself might be his most endearing quality, to chart a new course for Uber's future. But if Travis Kalanick owns the majority of shares in Uber with 10.4%, this poses an interesting challenge to his successor.

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