“I think you have to make emotionally difficult choices all along the way to build a healthier company and to make you also, maybe avoid this fate” – Jason Cohen, CTO of WP Engine. The fate he’s referring to? Several founders who sold too early, disgruntled employees and worries about the future. Jason shares his thoughts on how a successful exit can set you up for financial success and how to avoid the pitfalls of a founder going through this transition.
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Jason Cohen – CTO & Co-Founder @ WP Engine
Oh my goodness look at that. This is not a presentation. This is a sermon.
We’re going to take as our object of study a passage from the Book of Hacker News. This post was put on Hacker News about a couple months ago anonymously. It’s titled “I don’t want to be a founder anymore.” I’m using a throwaway account because there’s a lot to lose from speaking how I feel. I found that a company several years ago. Fast forward to today and we’re profitable growing steadily debt free and are about to be acquired. The problem is I’m supremely unhappy. Each morning my first thought has been what if I didn’t work here. I explore what it’d be like to work at Wal-Mart. It seems so stress free. Then my phone starts ringing and I’d snap back to reality. This morning I lock myself in the bathroom with the shower running so my wife wouldn’t hear and cried my eyes out. So from my possibly skewed point of view. I have two options I can quit. Which effectively kills any acquisition and the company as well. I can suck it up and work on the same thing for two to five more years. I’ve been mulling over a third option which is to hire someone to do my day to day but I don’t know how to make it work. The product is too complicated for someone to come in and take over and it just isn’t that interesting. It’s just a glorified CRUD app and it’s been hard to retain developers. Is it common for a founder to go through this train of thought before an acquisition. Is there a trick to convince yourself you want to keep doing this. Maybe I’m depressed and need drugs signed a founder in pain.
So let’s answer his question is it common? So there was a study by Columbia Business School of 22 entrepreneurs who also exited their businesses and made 10 million or more personally from it. In other words success 21 out of the 22 were depressed after having that success. It’s not just common. It’s what always happens. So this is hahaha except all of you are gonna be like this except one out of 22 and that’s not OK. This is Marcus he founded Minecraft. He sold it to Microsoft that made hundreds of millions of dollars. I don’t know how much more successful you can get and he almost committed suicide and did it on Twitter. It’s not funny right. They all hate me
And this is success. Maybe you shouldn’t have sold the game. No. Even though he’s about to do that. Best thing I ever did to sell Minecraft. What are we supposed to do with this? So that’s of course we’re gonna talk about is there a trick. Nope. Of course not. But let’s start exploring what’s going on. How did they get here? How did all of us get here? Well it’s not intentional. We didn’t intend to do that. It’s frog boiling in water. That means it’s happening right now. It’s unfolding right now for you unintentionally. And so the right question is what should you be doing differently now in order to prevent this. In order to build a company that’s more healthy and prosperous. Of course. And also avoid this balloon payment of emotional toil at the end. And so the thesis that I’m going to talk about today is I think you have to make emotionally difficult choices and I’ll be very specific. All along the way to build a healthier company and to make you also maybe avoid this fate which kind of puts in question why we’re all doing this at all. I did this wrong in my previous startups I’ve sold companies for millions of dollars and our current startup which we are now at 100 million in ARR which is always the magical SaaStr number. So in other words and I’m still here after eight years and not upset. So you see I’ve done it wrong and right. So hopefully this will be useful to you too. So let me zoom in on this part. The product is complex and boring too. So the product is now these sound like good reasons. But they’re not the real reasons. I can’t get someone to help because the product is too complex. Really. Because I know a lot of developers that work on really complex stuff. That sounds like a good reason why it’s too hard to get help. But that’s not true is it.
But it does sound like someone who’s very self-important. It’s so complex only I could possibly understand. Maybe that’s more of the real problem and also the product is boring. Okay so that’s so complex. No one can figure it out but you and also it’s so boring no one wants to work on it. And that’s why you can’t retain developers. Probably not. So I want to prove that you are making exactly this error now. The same error that this guy is making. So raise your hand if you have ever fired someone too late taking too much time and finally did. So that’s most hands. OK. Now raise your hand if you’ve ever find anybody too soon. One two three. OK so about 1/100. Do you think the pattern is clear. This is very predictable. We all. We make this failure of judgment all the time. We all do it. We’re all guilty. But what’s going on. Same thing. There’s good reasons not to fire someone. You know that team before I get some replacement in that team. It’s too hard for the team to continue. I need to wait. That sounds like a good reason that’s the excuses we tell ourselves why we are not doing it right.
We all know that’s not true. We’ve all been on teams with something that shouldn’t be on the team and be much better if they were just gone rather than the team having to make up for them clean up after them. Right. It’s not the real reason. Another reason we tell ourselves especially as new founders is I’m a bad manager. I haven’t set expectations. It’s not their fault it’s probably mine. I need to set better expectations to give them more time we say. Sounds like a good reason except what about the other seven people in a team that are thriving. You probably are a terrible manager. That’s probably true. But we need to we need to operate now and everyone else is operating now. Have time for this actually. So even if that’s true doesn’t mean that person’s a bad person or something like this it just they’re not a fit here now. That’s the truth. So these are only good reasons but they’re not the real reason is simple. It’s scary. You are scared. Can you accept that?
You just accept you’re scared and that’s why you’re not doing and that’s the whole argument. And it’s not a good very good argument of course. And of course it’s scary. It’s a hard conversation to have. What if they cry? What if you cry? What if they get upset and do something? What if other employees get upset and do stuff? What if they get violent? You have to take out a restraining order. I’ve had to do that. What if they get depressed afterwards and kill themselves and you have to explain to everybody that has happened to me. There’s a reason to be scared about it. It is scary. It is scary. OK fine. Also you’ve got to do it. That’s the truth. Making the emotionally difficult choice is better. So what are what are what’s a more general framework for thinking that these kinds of things not just this. Well there’s things you want to do. And things you don’t want to do things that need to be done in the business and things that don’t really need to be done of course. And the problem is you you do the things you want to do and you’re the founder the CEO or whatever and so you don’t have a boss telling you you can’t. And we just establish your shitty boss too. So this is a problem. No one stopping you from doing this stuff that you say doesn’t really need to be done. But you know you can. It’s very tempting but it’s a failure mode because you’re not spending the time on the things you should be doing.
Like maybe working on sales or dealing with a difficult person you should be doing the stuff on the right. So how do you know you’re in this bottom right position where you’re delaying something that needs to be done and you need to fix it quickly how do you know that. And the one way that I know is you can’t stop thinking about it. When you wake up at 2:00 in the morning and look like that. That simple thing not a deep analysis just that simple thing of I can’t stop thinking about how this person’s here and they shouldn’t be. That indicates you do need to take action. Why. Because. When there’s an emotionally difficult choice like having to fire somebody and one that’s not as difficult and you can’t decide you can’t decide only because you don’t want to. Otherwise it would be no question. If the easy one was clearly the better one you wouldn’t be stuck. The reason you’re stuck is that you have to make the hard choice. So that’s how you do it. And then how do you do things that are difficult. How do you do it well do it quickly. Delaying only hurts everybody. Everybody you the team the person be decisive our CEO Heather Bruner has a terrific phrase about this which is General Patton on the decision. Mother Teresa on the exit. Be decisive and then be kind. That’s the right way to do it.
Let’s dig into another part of our object of study here. If I quit I kill the company and the acquisition. Wow you must be so important. That’s what that person is thinking right. Except what’s really happened is the person has built a brittle organization one where if anything happens to the founder the whole thing is going to melt I guess and imagine the stress that that puts on that person. I guess this person has not hired anyone who can actually run the company and run their functions. So that it’s not true. Or maybe the person hasn’t earned allowing allowing to do that. Either way it’s a failure. Right. So let’s dig into this too because you do this kind of thing too and I want to show you.
So this is the obvious fallacy we all know this. This is the smartest person in the room. So that’s wrong. So. So Steve Jobs actually was the one who did this thing that we all also know a player’s hiring. We all know this and you can tell Apple’s full of eight players does just look at them or maybe that’s KISS without their makeup. I’m not sure.
Anyway so this is what we think we’re doing but we’re not. Let me show you. Here’s why. You actually don’t hire a players you ask a why a player so let’s say you’re an engineer. And you say I know how to hire engineers and you do you know how to interview and manage them later and so you hire other a player engineers and product people whatever. OK good. And then of course there’s the majority of things that happen in the business that whoever you are you’re not an A player about. So what do we do. We say OK we’ve got to learn and we got to do AdWords for sure. I don’t know AdWords so I’ll do it. I the founder I will figure it out I’ll spend some months and figure it out and then I’ll know the lingo and I’ll know what’s important and all these kind of things. And then I’ll be able to hire that a player because I’ll know what to ask him what to do and how to manage that person. That’s what we all think. And this is the fallacy. The idea that you can become an expert in something important something that’s an entire career for someone else in a few months and then hiring a player. That’s of course not true. So you’re actually a C player at best. And then of course you’re gonna hire only the things that you know after part time couple of months of of work on it which is bad.
And so you end up building this organization where some people are a players but most aren’t. And then guess what. Those functions don’t work very well because you haven’t hired very well and so you’re like screw that we’ll just hire more engineers and insurers can just like magically do marketing and sales and stuff like this. So as engineers say this is why.
So Steve Jobs also said I hate quoting Steve Jobs really because everyone does. At least I’m not quoting Musk No Musk quotes anyway. So. You hire smart people and so that they tell you what to do. They buoy you up. So how. That’s weird because Steve Jobs is the one who tells everyone what to do right. But no. What jobs did is he hired the best designers in the world. And then held them to a very high standard which is what an editor does not a writer. Not a maker an editor. And he wasn’t the best technologist but he had great technologists or mostly if you remember the old Mac OS stuff they misspelled the word dispose. Sometimes. I think they were high anyway. Being editor he hired the best COO the best operating officer Tim Cook that there is and hold him to a higher standard. That’s actually what he did. So that’s part of the trick. Is to do that. So here’s how you do this here’s how you hire people who are better than you and know more than you about a thing and then manage them. That’s weird. And yet that is the definition of how to build a great organization. So the first thing is when you’re in the interview process you’re looking for someone who’s enlightening you. In other words you feel like you’re learning a lot just by being in here and you come away thinking man even we don’t hire this person we need to do like half the things they just said.
That’s how it should feel. Zuckerberg said another person to quote all the time Zuckerberg said hire someone that you feel like in if the circumstances were a little different you would work for that person. But the second thing I think is more interesting which is results orientation and here’s what I mean there is action oriented people and results oriented people. Let’s say I’m hiring an event planner. Here’s where an action oriented event planner says when you ask Tell me about the last great event that you put on I say Oh man we had these great curtains with up lights that look really cool and the food is really good as able to get a deal on the shrimp and everyone said the shrimp was good. And you know people seem to really like it action oriented talking about stuff that you did it’s probably good stuff. Here’s a results oriented answer. Well the goal was to have a hundred and fifty people come. We had two hundred resort reservations and actually one hundred and sixty eight came which we’re super proud about. Now we were actually sure how many sales these we got but we got 12 leads to have already closed two more look pretty good. I’m not sure about the rest anyway were successful enough that we’ve decided to put on three more of these next year and do him in different countries and see how that goes.
Results oriented. Now why do you need to hire results oriented people in order to solve for this problem of management. It’s because you that by definition you can’t tell them how to do their job. By definition you don’t know how to put on a great event. So you you have you can’t tell them or manage what they’re doing. You have to manage the results of it and hold them to that bar. So by hiring for people who are already think that way already like to be measured by the results that they make instead of what they do then that’s how you’re going to manage them and that’s all going to be nice because that’s how the person already likes to operate. So you hold accountable to results and edit. Also this is the right way any way to manage everybody including the folks that you are expert in that stuff. Why. Well taking the engineering example. Is the fun part about engineering is inventing something new and architecting it and then all the labor is improving that you’re right and bug fixing bugs and stuff. That’s that’s the annoying part. So if you’re the architect and everybody else has to do the scut work you’ve taken away the only fun part. That’s thinks that’s bad. So I think this is the right way to manage everybody period regardless of of how.
So if you can agree. That the best thing is to have everyone in the organization be better than you. Then you can create a resilient organization where instead of feeling like this person. Crushed. The only person that can do everything it’s just the reverse should feel like the people in your organization are booing you up that they’re doing a lot of the work that they’re inventing things you wouldn’t even have thought of. That’s what a strong organization looks like. And that’s part of what prevents not only the mental health problems but also is a stronger organization almost by definition right. So there are some tricks but I want to talk about this this thing about success. And kind of dwell on that for a bit. I want to go back to this because you said I have two options. And then he lists three options which really should be a fourth option which is just don’t do any of that just keep running the company. But that’s not really an option for this person there obviously so upset and sad that even that’s not an option. They’re stuck. They have they really have zero options. So we’ve got to figure this out. So maybe you shouldn’t sell. Maybe that’s the answer. And you have this phrase you sold your baby is that true. Is that what it’s like.
Well there was a study where they put founders in MRI machines so that’s mapping the brain seeing what the brain is doing. Then they showed these neutral nothing pictures like landscape in the brain just sitting there in neutral and then they show those folks pictures of their own kids. That’s my daughter. And of course the brains like to write like kids good bad everything right.
Just stuff. So. Then they go back to the landscapes and the brain goes back to neutral and then they show pictures of the founders logo brain goes right back into kid mode. Same pattern. It is a baby that actually is. So it makes sense why this is kind of a I don’t know emotional stressful whatever. Same thing.
Nevertheless it’s not true that you should just never sell. Just like Marcus here it’s not true it’s not true for me either so this is my previous company smart bear and it was sold just last year to Frisco partners for four hundred and fifty million dollars. That’s awesome except that I sold it to incite partners in 2007. So…
Why did everyone laugh and clap! You’re just to go “Oh..” so maybe I shouldn’t have sold except this this trajectory wasn’t happening when I was the CEO was it? It was this that was the trajectory we’re on. So that’s not necessarily good. Plus I was burnt out. I’ll tell you this story. So I was
So I got this offer from insight which was good just financially speaking multiple on this and that it was good. So I come home and tell my wife I don’t know what to do. Like we’re profitable growing everything’s good. Also this offer is actually good. I don’t know what to do. And my wife goes well you have to sell. I said Why do I have to. She says “Well, don’t you realize how unhappy you are?” No I didn’t. I’d gotten in that place.
But I didn’t. I fixed this at WP Engine I’ve been at WP Engine longer and I didn’t have this problem by the way had I stay there’s another option which is maybe it did. You know this is look at the timeframe here. This is a seven. This is a 15 year timeframe. The company software companies don’t necessarily last that long. There are other people in our same space that were also bootstrapped and profitable and that green curve is what happened to them. That’s not true that I should’ve stayed. Having left. I got to be a stay at home dad because that’s when I left in 2009 and my wife was pregnant. I was a stay at home dad for a year and I wouldn’t give that back for anything. And then I founded WP Engine in 2010. And like I said we now we’ve passed 100 million annual revenue. We just got a 250 million dollar investment from SilverLake and we’re worth more than smart bear.
Right now let’s say that’s always how it happens of course not. Thank you very much. That’s not always how it happens. The point is it’s not true in retrospect that it’s you should never sell. Not true. So here’s the issue. Startups always change always. Or you change even though you think you won’t. Maybe it goes well and your job changes. And as the CEO it’s a very different job at one hundred or we’re now at five hundred people it’s a very different job at these break points than it was early. Maybe you’ll be unhappy there OK. Maybe you give up the CEO position but then you’re not in control. Maybe that doesn’t make you happy or maybe the start of the story goes sideways. You just get bored after 10 years or maybe it craters of course and feels like it’s going to change. That’s the deal. And it’s hard. That’s the deal. So you have to build it in. So here’s how I’ve been successful this time around. So this is our CEO Heather Bruner and me winning the entrepreneur of the Year award from ENY actually last year in Austin and. Heather joined our company four years after it was founded. And yet we’re both winning the Entrepreneur Award.
Together. Is that weird. Someone joining that late gets to be Entrepreneur Award winner. If you’re thinking that way then you’re not paying any attention. Yes of course. Oh you’re so blessed and awesome as a founder that no one could possibly impact the business as much as you will. Then you’re not hiring impactful people and that’s your problem. Heather is amazing. And as our CEO a lot of the success we have today is due directly directly to the things Heather did and building the executive team and the strategy and so on and so on all the things that are necessary and that wouldn’t have happened if I was a CEO. I know because I’ve done it before. You saw that trajectory right. Argues that our executive team is majority female. For example we have diversity in many areas in the business. Half of our engineering management are women for example. So we by asking what are all the people that could bring power to the business and getting those people in. Whether you’re the founder and CEO or anybody else. That is how we got strong and that explains our success.
I want to give you this story because this helped me emotionally get over this moment because a lot of people ask well what was it like to decide to not be the CEO anymore. Of course that’s a big decision. And sometimes it goes wrong. I mean there’s a lot of things around that right. So it’s not. Of course it’s not always true that you should just replace yourself. That’s not true.
But this this was useful to me emotionally some will tell you the story in case it’s helpful to you as well. So I was at this bar in Austin. And talking to one of our board members and kind of getting through it.
Intellectually I knew I shouldn’t be the CEO. We’re about 80 people and I like I’m not a good CEO at 80 people that’s that’s not my sweet spot. But emotionally you know it’s hard. Of course it’s your baby and all that of course it’s hard. That’s OK. And so he says Jason I know. I know what you’re thinking. I said what. He says you want the credit. I said What do you mean. He goes Because someday like what if you ring the bell on the Nasdaq you want the credit. And you know it’s the whole team effort add it up but you want the credit. And they said you’re right like a shallow and selfish as that is true I do. I mean I think founders generally do. And he says a. You’re the founder you’ll always get the credit
And that’s it’s so obvious in retrospect. Right. This is not a deep observation but I just needed to hear that he had some in the hopes that maybe you need to hear that. Yeah you always get the credit you don’t have to hold onto these things like CEO or C whatever blah blah blah for ego because you’ll still get the credit your ego going to be fine. You’re going to get the ego stuff anyway which is cool it’s not a bad thing to want to stoke the ego I wanted so vague of course but you can still do that. OK. So here’s the framework that I used to make this decision and I encourage everybody at WP Engine forevermore to use this framework to figure out what should I do. And what should my career be and all that so I should show to you. And you’ve seen some of this kind of stuff before I bet. But but maybe hopefully there’s different context now that you can that you can evaluate it.
So of course there’s things you like to do and things that you’re good at Venn diagrams you know it’s coming. And so this stuff I know this stuff is a learning right you’re not good at it but you like it learns good you should do some of that is cool. And then this is toil like stuff you’re good at it so you do it but you don’t enjoy it like maybe accounting or whatever.
And then this is the sweet spot where you’re happy because you’re good at it you’re doing OK. We all know about these things right. So the next layer though is. What does the company need? Again this is going to tie it together all the things that we just talked about. What does the company actually needs to do. Because these are various failure modes that we’re in all the time. And again I think if you address these modes the company will be stronger and you’ll be healthier too. So that flow is a trap that happy flow is a trap. If that’s not what the company needs you to be doing. The typical example is the engineer who implements the feature which of course you can do in two days and of course will be good and three customers will like it. But actually what you need to do is double sales and that one features you’re going to do it. Right. That’s not what the company needs. So that’s a trap that we’ve seen. This is a trap too. But the company needs it to be done. And I like it. Well if it needs to be done and needs be done well. You’ve got to focus. Start ups always constrained by time even more than money. So you have to focus so doing things that you like that the company needs is wrong because the company needs it and it’s one of the few things that you really do need to focus on that needs to be done well. Another failure mode is. This which is burnout. In other words the company needs to be done. I’m even good at it for real but I don’t like it. We always put ourselves in this positions as leaders and founders this crappy word servant leadership. It leads to stuff like this. This is the scut work that needs to be done and I can do it so I’ll do it. The team doesn’t need doesn’t have to do it. That sounds altruistic and what it does is burn you out because you’re doing all the shit you don’t like to do
Is that really the promise of entrepreneurship that you get to do all this stuff that you don’t like doing. Like what the hell’s the point of that. It’s true it needs to be done. You’re even good at it. You need to of course is find someone who also is good at it. Who likes it. Right. Because they’ll be thrilled because that’s fulfillment. Again you know that’s coming you have to go in the center of the Venn diagram. It’s never like the bottom left corner is it someday. That’s what I’m going to do. And you want to be like in the bottom left anyway. So of course that’s the place and it’s an idealization you can’t be in there all the time blah blah blah. No but the more that you are in here this is how you do it. That’s what I did. This is why wasn’t the CEO. Because what the company needed and what I liked not to mention what I was good at did not mix. I like product and engineering so I went and became the CTO and did product and engineering for a couple of years. Then the engineering team got to be 100 people and I don’t like managing people remember I maybe don’t remember but I’m a shitty manager just like all of you. I don’t like doing that. So and they deserve a good manager right.
Since then I just ran product and now I have zero direct reports just like Dharmesh at Hubspot and so that’s good because I’m not a good manager and I end and so I can if I continue to demonstrate to the whole company that even I can just change jobs at night at will but I can we can talk about what is it what is the right place for me at the company. And it’s possible for any given person including me that one day the answer is there’s nothing here for you because there’s no intersection that’s OK if that happens because you’re having this nice conversation and person maybe who’s had this conversation can be armed with figuring out what that is their next position so they can be happy fulfilled maybe happy is the wrong word. Have it fulfilled. So this is what everyone’s doing and if everybody’s doing this in the business it’s magical. I say it’s idealization I know but it’s a magical thing when everyone on the executive team is in there is in their star slot. And in fact everybody everywhere in that team it is a magical beautiful thing and you’ve built an organization it’s not just a great business but that people want to work out and they’re fulfilled. And that’s more important than they are. And I’m sorry to say that it’s faster with eight hours everything but it’s more important that you’re building lives with people doing something important that everyone’s fulfilled that that’s that is fulfilling a real job as entrepreneurs. That is that is incredible.
So I want to close with one more reading.
This is from twenty five hundred years ago just to prove that none of these ideas are new. These are just what humans do. This is just what leadership and building organizations is. So this is from the Dow charging. An old text
And it really summarizes everything that we just talked about. The best leaders the people do not know they have them. The lesser leaders are loved and praised. Even lesser are feared in the least are despised. Those leaders who show no trust. Will not be trusted. Those leaders who are quiet their words are valued. With the best leaders when the people’s task is completed the people will say we did it ourselves. So I say unto you to close the sermon. Hire the right people and let them do it themselves. Be a shepherd not an emperor. Be an editor. Not a tyrant.
Do the hard things that are the right things and set your ego aside because remember no matter what, you will still get the credit.