The founder and CEO of AlleyCorp, Kevin Ryan is one of the leading internet entrepreneurs in New York. Endowed with a seemingly endless source of ideas, Ryan created and launched several billion-dollar tech companies from Business Insider—a pioneering financial and business news website—to Zola—one of the first mobile gift registry sites. In this conversation with Shikhar Ghosh, Ryan shares the process he follows when building a business, including the choice of hiring an outside CEO or head of product. Hear more about Ryan’s insights on hiring and his expectations for CEOs and what factors he considers crucial when hiring CEOs or other key leadership positions. The two discuss team-building, how to evaluate teams as you scale, having difficult conversations, the importance of company culture, and more. An unedited transcript follows the video.
Kevin Ryan interviewed by Shikhar Ghosh on October 7, 2019, at Klarman Studios, Harvard Business School.
Insights on Hiring, CEOs & Company Culture
SHIKHAR GHOSH: Hi, I’m Shikhar Ghosh. I’m a professor at Harvard Business School. I’m sitting here with Kevin Ryan, one of the distinguished entrepreneurs, who’s been in the whole tech scene since ’95 or so, starting with DoubleClick, but now going through probably, a dozen companies that he started and another dozen that he’s invested in and is deeply involved in. And right now has several companies that are incredibly successful, but equally importantly that he has done this in many, many different sectors. And so, what we’re going to be talking about is some of his perspectives on entrepreneurship and on growing companies and on creating culture.
KEVIN RYAN: Thank you for having me.
SHIKHAR GHOSH: Great, thanks. So Kevin, you’ve done how many companies now?
KEVIN RYAN: I probably started eight or ten, and then invested in about fifteen.
SHIKHAR GHOSH: And how many do you have in the portfolio right now?
KEVIN RYAN: About 25.
SHIKHAR GHOSH: So, a critical part of having all of these companies for you to be the founder of 10, 12 companies simultaneously, you have to get great people to be co-founders and to become CEOs. What is it you’re looking for when you hire a CEO as an AlleyCorp founder?
KEVIN RYAN: So once I have an idea for a company and I’ve decided I want to do it, then I try to look for two things. One is that someone whose background fits the most important aspect of this company, which is generally going to be product, probably defined, because the first two years you’re not monetizing that much, you’re not even marketing that much. You are actually from the start creating a product and getting part of market fit. If you don’t have that, nothing else matters. So if it’s an editorial, a content company, I’m going to want someone who can do that. If it’s a technology company, often they have a technology background, and if it’s more of an internet e-commerce type company, then it’s going to be a traditional product background. So I want them to have the expertise of the most important thing, the most critical aspect of that company.
The second thing is in a competitive environment where everyone can work at 20 other places, this has to be a CEO people want to work for. And so the people who want to work for them are going to do reference checks and I’m going to do reference checks and find out, “Did people like this person? Did they respect this person? Did they want to work for them?”
SHIKHAR GHOSH: But you traditionally haven’t hired people from the industry that you’re targeting the company at.
KEVIN RYAN: So I traditionally hired someone who’s from the internet startup world, but may not be from that specific sub-vertical. So sometimes it is. At Zola, my two co-founders were people that worked at Gilt, which was very similar, but in many of the other ones, not necessarily, but they have worked for startups and I think that skill is interchangeable, even if it doesn’t come from that exact domain.
SHIKHAR GHOSH: And when you look at somebody who’s worked for a startup but not in that industry, you don’t usually look for somebody from one of the big companies or an established player or any of those things?
KEVIN RYAN: Generally not. I almost never have I hired someone from Google or Facebook or Amazon-
SHIKHAR GHOSH: Or Proctor & Gamble-
KEVIN RYAN: Definitely not. Definitely not Proctor & Gamble or Ford or something like that. That, I would have a bias against. It was just it’s very, these are smart people, but they have been trained for three to five or eight or 10 years in making decisions in a way that’s very different. They have all kinds of support. They have no idea how the option program was created. They had nothing to do with that. They had committees, they took a long time to make decisions. There’s just a lot of support on everything. CEOs got to make all those decisions and he’s got to make them fast and faster than you would like.
SHIKHAR GHOSH: So, if you don’t get it from there, if you don’t get people from there, you’re taking a chance on somebody.
KEVIN RYAN: Yes.
SHIKHAR GHOSH: Typically they’re taking some kind of step up in their responsibilities.
KEVIN RYAN: Yes. The typical candidate for me would be someone who’s, let’s say was a VP of product or marketing or technology at, you know, it could be a Blue Apron, it could be a Gilt, it could be a Casper, it could be some internet company in New York. That would be the most traditional type of person I would hire.
SHIKHAR GHOSH: And when you get them in, is there any kind of training, support? What’s the scaffolding you put around them to make sure they’re successful?
KEVIN RYAN: So there’s less than you would think. I mean, that person and I are going to spend time together, but they’ve got to be able to figure out the industry. They’re going to be the product X. So the first thing they’re going to do, if this is very early on, is they’re going to interview a hundred customers.
KEVIN RYAN: So at Zola for example, Shan and Nobu my two co-founders, they didn’t do a thing until they had interviewed 50 or 100 brides. They needed to understand before we built anything, what were the pain points, what did people like, what do they not like, and just be in the head of that customer. Then they hired a CTO, engineers and started building that product.
SHIKHAR GHOSH: So if you go back then, the process of hiring, you’ve talked in an article that you wrote a while ago, about the reference checks being really critical.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: In most places, the reference check is almost a check the box kind of thing, because someone gives you a list of people, you call them up, they say generally good things about the person and then you move on. For you, that’s really the central step of the process.
KEVIN RYAN: It’s more important than the actual interview process.
SHIKHAR GHOSH: And how do you go about doing it?
KEVIN RYAN: So part of it is just spending a lot of time, so that if we have to spend hours getting to people who know this person. So hopefully they’ve had worked for a couple different companies, maybe they went to college or business school somewhere. So at each level, we’re trying to get to someone who knows them, and ideally, some people we know or have a relationship with or who know them, so that the loyalty is transferred to us, so we can have as objective a conversation as possible. It’s never a precise process, but if I asked six people about you or someone else, I will start to see some commonalities. A couple of things will show up over and over, and then once I start to hear that two to three times, then you can start to dive in. I can start saying, “Well, so a lot of people are mentioning that, this person can have attention to detail, but is it too much? And delve there to see.” You’re not trying to disqualify people, you’re just trying to understand what you’re getting.
SHIKHAR GHOSH: In the real world, and they’ve actually been working with other people.
KEVIN RYAN: Exactly. Yes.
SHIKHAR GHOSH: How do you measure the followership? Because one of the critical things you said was, “Can they attract people to come in?”
KEVIN RYAN: Yeah. So not that you can measure it, but a question I would always ask is, “Would you work for this person again and do you think other people would follow? Are you worried that people will leave your company and go follow this person?” So you’re just getting a sense, but if you just say, “Oh my God, this is one of the best people I’ve ever worked for,” in a way, you’re answering the question.
SHIKHAR GHOSH: Right.
KEVIN RYAN: I doubt you’re going to go work for someone you think is a terrible person, but sometimes you’re just saying, “You know, he did a good job and really no problems there at all.” That’s different than saying, “Probably the best boss I’ve had out of my last five bosses.” Or, “One of the best bosses here.” Or, the person I think, if that CEO got hit by a bus tomorrow, I think this person would become the CEO. That’d be my vote.
KEVIN RYAN: Now you really say that, you generally wouldn’t make that up. You can say perfectly nice things about people, but you wouldn’t go out of your way, and if I hear that multiple times, I know this is a winner.
SHIKHAR GHOSH: So, a lot of reference checks I’ve seen just sort of go through what did the person do on this job? What did they do on this job? You’re looking much more at what the qualitative side.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: How did people feel about being with this person?
KEVIN RYAN: Absolutely, absolutely. And I also need to know how we staff around that person, because no CEO is an expert in marketing, sales, technology, HR and finance. That’s just not possible, they came up one route. So they’re going to need other things, but I just need to get a sense, are they … I have one CEO who’s not as strong with numbers, so we need to have a strong numbers person as a number two. I have another one that’s not as strong in technology, so we just need to make sure that we get a good technology person there. Sometimes they need a chief of staff because their executive functioning skills are not quite as good as you’d like. They’re brilliant and creative but don’t have that, so a lot of it is just understanding.
KEVIN RYAN: I think of it as like we’re hiring a quarterback. No one in a million years thinks that a quarterback can play wide receiver or frankly any other position on the team, but they’re still extremely valuable, possibly the most valuable, but we need to surround them with everyone else.
SHIKHAR GHOSH: And so part of the reference check is to understand how to best make this person succeed as opposed to just find out what their weaknesses are and decide yes or no.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: It’s much more comprehensive, the process, than that.
KEVIN RYAN: Yeah. You know, no one’s ever perfect, no one has everything. We just want to make sure we understand what we’re getting, but still the other thing is I know that other employees that we try and hire to come work for this person are also going to call around and find out, “Did someone like working for them?” So I need to get there first and understand whether that’s going to go well.
We all know companies that complain every quarter. We’ve had trouble hiring people, it’s a competitive market and then other companies don’t have that problem. Why is that? Because the CEO or the senior people are more charismatic, more persuasive, have a better track record, have real proponents.
SHIKHAR GHOSH: At DoubleClick, which was a while ago, you had a pretty good record of sort of future success with the people from DoubleClick. Can you tell us a little bit about that?
KEVIN RYAN: Sure. I mean 34 people who worked at DoubleClick later on became CEOs of companies, many of them, very, very large companies and smaller companies as well. We had the future of six or seven people became publicly traded CFOs or came up the finance side. So that makes me feel very good that we were getting people who could scale. So, when I would ask people today, “When you’re hiring a mid-level person, do you think this person could be CEO 10 years from now?”
In the ideal world you say, “Yeah.” “No, he’s not experienced enough yet,” but I often like having people that are up and comers. So I’m okay having them do the job for the first time as long as they were very successful in the job before. I think a worse scenario is someone who’s done this job for three separate companies, keeps doing Director of Marketing. He sounds super qualified, but in my book, if he or she were really good, they would have been VP of Marketing or they’d be CEO by now.
SHIKHAR GHOSH: So at the time that you’re hiring, you’re willing to take a risk that they have to learn the job for the benefit that they could grow, that they’re not going to stop at that job. They’re going to continue to grow.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: And if the company is successful, you now have a team that’s also moving with it.
KEVIN RYAN: Yes.
SHIKHAR GHOSH: How far ahead do you look for that? Are you hiring for a year? For five years?
KEVIN RYAN: Two years max.
SHIKHAR GHOSH: Okay.
KEVIN RYAN: I don’t worry about it after that. One is that sometimes very smart, talented people scale away those two years, and so they learn how to adapt and figure it out and so it’s all good. Sometimes the company never gets there and so it was not worth worrying about. Sometimes the person doesn’t get there, the company scales too quickly and we need to make a change. That can be a difficult conversation. When we say to people, “We’re going to have to split your division or we’re going to have to hire someone above you.” And I’ve lost some people who ego wise don’t feel good, but I say to them, “Look, I don’t think other people are going to hire you for VP of Marketing for 300 person companies either. So think about it. If someone will, I understand that, but I think you’re really a director level right now. I think you’re going to get to VP sometime, but just not yet.” And sometimes you agree and sometimes you don’t. And while you go away and you don’t get that VP job, it was ego that made you leave.
SHIKHAR GHOSH: For a CEO, one of the hardest things is people who’ve done a lot in a job and feel entitled in some ways to get the next job in that chain, to tell them, “No, I don’t think you’re ready,” because there’s always some fuzziness around that decision. It’s never a clear cut.
KEVIN RYAN: Absolutely.
SHIKHAR GHOSH: Not a pleasant encounter. How do you approach that?
KEVIN RYAN: Hopefully if I’m going to you and either not promoting you or eliminating or changing you or demoting you, it’s not the first conversation. So if we’ve talked in the last several months about what’s not going right. I can’t just make this up. I have to say, “Look, we’re not filling the senior spots. You’re not getting good quality people. Is your senior team turning over too quickly? Like if you hired six people and three of them are gone six months later, someone didn’t do a good job. You picked the wrong people or they don’t like working for you. We had goals for the company. Did you make them or not make them? We all agreed to them at the beginning of the year.” So hopefully there’s some things I can point to that are as concrete as possible that are clearer and you may agree or disagree that we’re not getting done what we need to get done.
SHIKHAR GHOSH: Then the rest of the conversation becomes much easier.
KEVIN RYAN: Yes.
SHIKHAR GHOSH: And despite having so many companies and therefore so many people who’ve come through the system, you still have a really loyal group of people who stayed with you through this whole process, and you’ve seen other CEOs that have the same quality.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: What do you think makes for a CEO who can attract great talent and agendas the loyalty of those people?
KEVIN RYAN: I think a lot of it is just treating people fairly, setting an example for them. I mean, look, I think people want to work for someone who is working hard, is ethical, cares for them. So are they sitting there and thinking, “You know what? I care about you and how you do personally,” and so that matters a lot. We found that even in tough times when DoubleClick had to go through layoffs, industry was going badly, that when people left it was because of their manager. If they thought their manager liked them and thought they were great and working with him, they would hang in there a long time. But once they lost the manager, then it was all over with.
SHIKHAR GHOSH: That was the manager and not the two levels above, not the CEO.
KEVIN RYAN: No, it’s the manager. It’s the manager. The CEO plays a role too, but day to day, you know they’re getting their compensation, their encouragement, their criticism. It’s all coming from their manager. And so we could see the differences. One thing that I track, if I have a turnover in one area, I don’t wait very long. I have a manager problem.
SHIKHAR GHOSH: So one of your key metrics of people is what’s the turnover?
KEVIN RYAN: Absolutely. We monitor that everywhere. In every one of my companies, when they get to a certain size, I chair the compensation committee and the thing that we go over every time is, why every single person left and where were they? Is it regrettable? Non regrettable? What happened there? Trying to see patterns, because that’s like the canary in the coal mine. Zola is a great example of a company that has had almost no turnover in six years of senior people. Whereas the other companies are like, “Oh, it’s so competitive. I don’t know. Lots of people leave,” and it doesn’t happen. It’s all off.
SHIKHAR GHOSH: So, often people will say, “I left because there was this better offer. They were offering me 6% of the company and I had only 2% here.” Your experience seems to be that, that’s not the real reason people-
KEVIN RYAN: It’s not the real reason, but at the same time, you need to look at your team all the time and say, “How much would I pay if I had to go out and find a new person here?”
SHIKHAR GHOSH: Including the CEO?
KEVIN RYAN: Including the CEO, absolutely.
SHIKHAR GHOSH: Okay.
KEVIN RYAN: So some companies just think, “Oh, we hired you. You agreed to take whatever, 1% three years ago. So that’s it. But if you are now worth 2% in the market, I need to offer you 2% or eventually you’re going to leave.” So it’s not the only factor, but I need to adjust to market pretty carefully. So sometimes I have battles with VCs on the board and they’re like, “You know, this person didn’t ask for anything else.” I’m like, “Yeah, but I need to get in the right … I need to feel …” When you walk in one day and say, “I got a much higher offer.” It should be that I say, “You know what? That doesn’t work for us. We’re not going to match that because we don’t think you’re worth that.” Not, “Oh my God, I should’ve paid you that all along. Let me match that right now.”
I think that’s almost insulting to you, if I’m paying you $100,000 and then all of a sudden you get another offer, I’m willing to pay 250, but why didn’t I pay you that before? At least 200 right. So I think about that all the time.
SHIKHAR GHOSH: And do you do that on a formal employee survey kind of thing? Or is it just by the managers knowing each of their employees and having a sense of the market?
KEVIN RYAN: I’m going to get only involved with the CEO and his direct reports. The CEO needs to be thinking about for the whole company, but my major responsibility is to make sure that team stays, is coherent, is fairly paid and we spend a lot of time on that. And sometimes you don’t get it right, but I’ve had very, very little turnover in that team for any one of our companies.
SHIKHAR GHOSH: So let’s go back to the ideation process. You’ve got companies in very different sectors, B2B, B2C, hardware, software.
KEVIN RYAN: No focus.
SHIKHAR GHOSH: Yeah, absolutely, no, no, no. And yet, one of the things people talk a lot about is that you need to know an industry or you need to have passion for a particular problem. How do you square that circle? How do you think about that?
KEVIN RYAN: I think there’s the ability with experience to look at slightly new areas and understand a problem. I think most business problems are not that complicated. You know, I’ve used a wedding registry before as all of us have. I can come through that process and think, “You know what? This is not the product I want.” I wasn’t able to buy the things I wanted. I want to give you cash, I want to give you a honeymoon. I want to give you yoga classes, I want to give you Knicks tickets. I want give you a bottle of wine. I just named five things that are perfectly good presents, not a single one, I had to think, “Can I buy on the Bloomingdale’s wedding registry?” So does that make sense? That’s not a genius point, although no one else had done it. And so I started a company Zola and we do that, and we’ll do $250 million in revenue next year and we’re becoming the dominant player in that space.
So it’s not a genius work. It’s just execution and seeing one opportunity where the market for whatever reason was not offering the right product.
SHIKHAR GHOSH: Right, but you’ve looked at MongoDB on Nomadhealth, they’re completely different. The one is sort of backend database stuff, the other is healthcare. How do you bridge those things?
KEVIN RYAN: Yeah, so it’s talking to other people. If you talk to doctors and ask them about how the process of temporary doctors work, so someone just started talking to me about that and I thought, “Oh my God, that is crazy that you pay a $50,000 fee to find a temporary doctor for your hospital in South Dakota who’s only going to be there for three months. You pay him a lot of money or her, but you have to pay a $50,000 search fee.” And I’m thinking we can put a database together. To me, the leap, the parallel was a dating site. What if you could only use a matchmaker and had to pay a $25,000 fee. Some people do that to find someone they want a date, but someone twenty years ago said, “What about a dating site that’s basically a big database so that you can put in, I like someone who speaks French and likes classical music and likes to travel or whatever, and that’s just more efficient.” We all know that then going to a random bar and going person to person.
So I just applied that logic to a different field and now we’re doing hundreds and hundreds of searches and this will be a $35 million runway in placing doctors and nurses. It’s just a better way of doing it.
SHIKHAR GHOSH: And something like MongoDB, which took a while to get going, but it’s now worth—what’s it seven billion?
KEVIN RYAN: Seven billion.
SHIKHAR GHOSH: That’s a tick.
KEVIN RYAN: Yes, completely, and I couldn’t have done that without two co-founders who I’d worked with at DoubleClick and we had started another company called ShopWiki that did okay, but we sold it and then what we knew very high level, and I’m the least technical of the three of us, that the Oracle product was very expensive, and we weren’t that very happy. We didn’t think it scaled very well. We didn’t think it was the right database structure for data going forward. So we’d have some technical knowledge for that, and then the question is, could we build it? I had two remarkably brilliant technical co-founders who could do that. Very few people could do that, I couldn’t have done it without them.
SHIKHAR GHOSH: So you start this company up, it’s going along and nothing is happening for a while. So how do you know to keep going?
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: It’s been many years, right?
KEVIN RYAN: First, there was almost two years to build the product and our product vision even changed a little bit along the way. Then we had to give it away for two years, but at least during that period we could see lots of very small sites using it, every single month that was growing. So the customers loved the product, they just weren’t paying for it yet. Meanwhile, the product was getting better. So we’re continued to work on it, solving little problems that people are pointing out, and then we can start charging for it. So it was a very slow build and that often happens in enterprise tools, but we can see that fundamentally, it was a great product and people liked it.
KEVIN RYAN: That continues today, it’s still growing at 50% a year and it’s a very, very valuable company. It has 1,600 employees and I think somewhere within 4 and 10 years from now, I think that’ll be a $30 billion market cap company.
SHIKHAR GHOSH: So when you look at companies, even companies that have started, at what point can you tell this one’s going to be a winner and this one looks like it’s not going anywhere?
KEVIN RYAN: Generally within a year and a half. You know, the product has to get out the door and then you need about 12 months because your initial product is not that great. So rarely is it a home run, but hopefully, it’s like a single that you see what you can do to turn it into a double or triple, and you’re working on that, and then at that point you generally know, generally know. Gilt turned out to be a little bit less valuable than I thought. The growth really slowed down. Business Insider just continued to grow. MongoDB continued to grow for a decade, and so we just got better and better. But what I still didn’t know in the beginning was I knew it was working, but things stop at some point, nothing grows forever and you don’t know that. It turns out that they both grew for a long, long time.
SHIKHAR GHOSH: So in the early stages, you see some really high evaluations in the market right now for a company, if you take any kind of multiple on revenues or orders or something. So if somebody’s betting this company five years from now is going to be huge, what’s your sense of how much data you need to make that bet?
KEVIN RYAN: Yeah. So what we’ve learned actually will be, what I’m going to say is the opposite of what people would think. It turns out that when companies get to be unicorn level, they almost always work, and actually unicorns are fundamentally, historically been fundamentally undervalued. If you bought a share as a test, if you bought a share of every single unicorn, it cost a billion-dollar evaluation, how are you doing today? You know, WeWork are up forty times. Airbnb are up forty times. Pinterest are up fifteen times. Mongo are up eight times, and you have a couple that didn’t work. But overall that portfolio is worth much more, because what it turns out is that if you and I have our competitive companies and you are twice as big as I am, you raise three times as much money, you hire three times as many engineers, and the distance between us generally separates. It’s hard for me to catch up.
SHIKHAR GHOSH: So it becomes a scale game in each of these.
KEVIN RYAN: A scale game, and these are big markets and so we had underestimated that. So there’ll be exceptions, you know, WeWork as not worth 50 billion, but it is worth billions, so there’s real value being created out there. Some prices will come down over time, there’ll be a correction in some form, but this is not a bubble. There’s zero chances is a bubble. A bubble is when the entire sector goes down by 80% in value. Google currently trades it like 18 times PE. I don’t know what you think is good out of four PE. I mean, I doubt it. You think you’re going to stop using Google? I don’t see any indication of that. So I think there’s a lot of protection. Facebook’s trading at the same thing. These are not crazy evaluations. I can always point to one or two that seem very high.
SHIKHAR GHOSH: Right.
KEVIN RYAN: People pointed out Mongo and we had 40 million in revenue. It was valued at 1.2 billion, so a lot of people were like, “That’s insane.” But guess what? Five years later, we have 400 million in revenue, growing at 50% here. So now, 1.2 billion doesn’t seem really crazy. It was just-
SHIKHAR GHOSH: Anyone who invested at that point did pretty well.
KEVIN RYAN: Did incredibly well and I think will continue to do well.
SHIKHAR GHOSH: So you know, when you get to scale, when you get the leadership, your thesis is that scale matters a lot in these sectors and therefore. What’s the stage before that? When do you know that you’re still fighting to get past the past?
KEVIN RYAN: Yeah, and that depends on the business and the enterprise software space. It really takes five, six years to know that your product is really getting to the place where it’s going to be sort of unassailable. Consumer is different. Consumer can be more competitive, someone else can come up with something and it can be more faddish. Databases are not fads as much, there’s a deep technical reason you’re using a product. It has to satisfy a whole bunch of things, you’re measuring the speed. It’s a nontrivial thing with a lot of data behind it. Now, why you decide to buy this shirt versus another shirt that can change, that can change, so those are less … You know, Yahoo is an example of a company that has sort of gone out of favor. The execution wasn’t as good, they lost their way and the value is much, much smaller.
SHIKHAR GHOSH: So, you were pretty successful by any measure ten years ago. And so once you hit certain marks in terms of position in society, the amount of money you’ve made, a bunch of other things, you could choose then to do anything.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: And a lot of people after they’ve sold their first or their second company for a substantial amount, then go off and do very different things, or just relax or join boards. You’ve chosen to be an active founder and investor.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: Why do you make that choice?
KEVIN RYAN: Yeah, so for me it’s no different than if you asked every successful sports’ person. If you ask, you know, LeBron James, why is he still working? Why doesn’t he just stay home? And if you asked him, he’s like, “You’re crazy.”
SHIKHAR GHOSH: That’s what I do.
KEVIN RYAN: But I love what I do. I’m sure he would rather play basketball even if it paid nothing then become a plumber or do whatever else he could be doing, because he’s actually loving it. He can’t even believe that people pay him this amount of money, to do something that is incredibly fun. I feel the same way. This is just intellectually so interesting. It turns out it actually pays a lot too, but that’s not my big driver. I do this because I love mentoring executives. I love the challenge of starting something new that’s going after existing players. I love building up teams, so I love tackling different problems. So this is fantastic. You know, I get to spend a fair amount of time on nonprofit and other issues, but over time, when I’m 65 I can spend all my time on nonprofit.
When I’m 65 I probably can’t do what I’m doing today. You know, it’s hard to keep doing it forever. It’s hard to be close to the market. I’m lucky that even at 55 I’m still doing it. I’m already very old, but look, it’s going well and I’m enjoying it. So as long as that’s the case, I’m going to keep doing it.
SHIKHAR GHOSH: So for someone who is pretty early in their career, who just finished graduate school, have been out of school for a year or two… When I talk to students who are considering becoming entrepreneurs they’re always afraid of the risk. They’re afraid of the uncertainty. They’re afraid of what’s going on. How do you advise someone who’s starting on a career, as to what the right time is to going through entrepreneurship, whether they should or not do it, the pluses and minuses of it?
KEVIN RYAN: Yeah. So first of all, I’m obviously biased, but I think that anyone, let’s say, coming out of Harvard Business School today should consider joining a fast-growing company, somewhere between 40 or 50 employees to 500 employees, something in that range. I think that’s where a lot of the most interesting work is happening. I think that’s where a lot of the most fulfilling jobs are occurring, more responsibility is being given. The truth is you get more responsibility there that if you go work for Clorox or Anheuser-Busch or something, and it’s probably more relevant for what you want to do.
SHIKHAR GHOSH: Even compared to a Google or an Amazon?
KEVIN RYAN: I think so, I think so. And those are very good companies, but they’re very, very, very big. You’re going to have a micro part. You’re not going to ever know the CEO. You’re not going to see how a company is operating. So if you like that sort of big safe, good cash, that’s a choice, but if you told me, “I do eventually want to run a startup”—for running a company, that’s not the right training. You’re not going to end up running Amazon. You’re probably going to end up running a 30, 50, 100, 200 person company, and the best way to do that is to go close to that as you can. I mean, if you want to be a successful soccer player, you need to go play on a soccer team, the best soccer team you can find.
SHIKHAR GHOSH: Right, not in the back office of some big soccer team.
KEVIN RYAN: Yeah, exactly. You got to be out on the field, that’s how you get better. And so, turns out that there is, either way, no risk. I mean, when you’re 30 coming out of business school, yeah, you still make a little bit less salary by doing this. That’s what you’re paying for the experience, and in return, you’re getting upside. Your company may not be successful, so it may not work out for you, but I think you’re going to have more fun, enjoy it more or less. But if you do that for three years, you know what? Amazon will hire you in a second. No one looks at you and says, “Oh my God, what was he thinking? He went to join a promising startup in some area and manage a 20% team and then the company didn’t do well.” That was true, in other countries—50 years ago—they looked down upon that failure. No one in United States does. People actually respect it more.
So right now there’s very little downside as long as you can manage student debts and manage some of those practicalities, but I know some people will either do a couple of years at McKenzie or somewhere else and sometimes they want to pay that off. And I understand that and then go do it, but it’s a better time now than waiting until you have two kids at home and you’re trying to buy a new house and things like that. I think earlier is better.
SHIKHAR GHOSH: So I’m trying to think about a way to capture how a culture gets set and what are things that create great cultures and bad cultures? So maybe I’ll just ask that. Maybe you could talk about it.
KEVIN RYAN: Sure.
SHIKHAR GHOSH: One of the things that a lot of startups talk about is that when you walk into Amazon or you walk into Facebook or you walk into Google, these are different companies. Even though they’ve become something huge, you can almost sense the Amazon-ness or the Facebook-ness of each of the companies and that that culture gets set really early. What have you seen CEOs actually do to make the culture of positive culture versus a negative culture of productive culture versus an unproductive culture?
KEVIN RYAN: I think it’s, in a way, there’s almost nothing you can do because the culture is going to reflect the CEO and the senior team and how they interact. So if we are junior employees in a company and we’re saying, “Oh my God, there’s political battles all the time. Don’t give him information cause he’s trying to stab him in the back.”
You know, I’ve worked at large companies early in my career where we had those conversations all the time. If we sense that this team is united, they’re competent, they’re working together, they’re having fun. So there’s a little bit of that, that we don’t need to be having naked pillow party fights all the time. But if we’re getting together, there’s a soccer team, there’s whatever that you sense that these are normal human beings that are ethical, having a good time, working hard, playing hard, then that’s a fun culture.
If there’s a fair amount of transparency, these are things you can’t just force and say, “Okay, we’re now going to be transparent.” You actually have to naturally do it. When the CEO gets up and talks to everyone, you’re going to feel like, “You know what? He’s mostly telling us the truth, maybe something he can’t tell us and we understand that, but …” By the way, Mark Zuckerberg does an incredible job at that. They still have weekly stand-ups where he answers questions for everyone and everyone is struck by the fact that it’s pretty open. They feel like they got the real story and he trusts people to not talk about that.
SHIKHAR GHOSH: So, essentially the culture is a reflection of the values in some way that people actually execute.
KEVIN RYAN: Yes.
SHIKHAR GHOSH: And so all of the statements of values and all those things at best as supporting things to it.
KEVIN RYAN: Yeah. Look, there are companies you can name, their employees know that the senior execs are actually dating all kinds of employees within the company. That makes people feel bad. They could feel like they’re not transparent and giving bonuses that there’s bias, things like that. That undercuts everyone’s feeling, and so if they just feel like, these are people trying to do the right thing and caring about the customer and trying to build a culture and trying to promote people, and striking that balance between internal promotions and external, that I should feel like I can build a career here, then I’ll feel good about that culture.
SHIKHAR GHOSH: What about, in traditional companies? There are a lot of trappings of seniority. Parking space, corner office, all these kinds of things, which a lot of the tech companies in particular have sort of done away with.
KEVIN RYAN: Absolutely.
SHIKHAR GHOSH: What’s your sense of how formality in the structure or rigidity in the structure affects?
KEVIN RYAN: I think it’s one of the many reasons that people prefer working at startup companies, because the fact that my cubicle is the same as everyone else’s cubicle. You know, people understand that your time is more valuable, so junior people have to repair things for the senior people, but everyone I think understands that. But you don’t need to have superficial demonstrations of why I am more senior than someone else. It just feels unnecessary.
And so that is a great example of “why do they need a premium parking lot where it’s going to be 20-feet away from the non-premium parking lot?” It’s just putting it in my face every day. So I think tech companies—that is one of the many things that tech companies have done that is fundamentally better. And most of them are trying to change that now. Dress codes are one of those things as well.
SHIKHAR GHOSH: So all of the little trappings of that, in your mind, create the distance from between people?
KEVIN RYAN: I’ll give you an example. I don’t like to have a vacation policy. So why is it that I get tracked for my exact 20 days vacation even though I worked all weekend? So how does that factor into my vacation policy? So I was like, “Look, the people that work for you, I would say, they shouldn’t be taking 60 days vacation and they shouldn’t be taking five.
Both are unhealthy, so you manage it. You’re an exec, it’s judgment. We trust you to make business decisions, sometimes involving hundreds of thousands of dollars. So you can make decisions on this too. By the way, if you make terrible decisions, we’ll tell you. At a certain point, we’ll let you go. If you come in and say, “Look, I told all my people they can’t take any vacation,” you’re the problem.
SHIKHAR GHOSH: Right.
KEVIN RYAN: So we’ll change that.
SHIKHAR GHOSH: So would that same thought apply to expenses and expense policy?
KEVIN RYAN: No expense policy. I think expense policies are insulting. To go to you and say, “You need to spend $50 on food. It can’t be more.” That’s just treating you like a person that can’t make any decisions yourself. But if you come in and say, “Yeah, I had dinner with a client and I had bought $1,000 bottle of wine,” we’re going to have a conversation because I think you use our resources badly. Now, there could be a circumstance, conceivably, where you bought an expensive bottle of wine. It mattered a lot to the client. It was really great. We signed a $100,000 deal. I’m like, “You know what? I’m good with that. I’m good with that.”
SHIKHAR GHOSH: We screwed up really badly. We affected their business.
KEVIN RYAN: Absolutely.
SHIKHAR GHOSH: I wanted to make up.
KEVIN RYAN: I want to make up. I’m like, “Yeah, that was a good judgment call.” These are generally small amounts of money.
SHIKHAR GHOSH: Yeah.
KEVIN RYAN: I’m not going to sit there and go, “You spent $18 on this?” I trust you to make good decisions. So hopefully you feel that I’m being respectful of you as an executive. You’re not a fifth grader.
SHIKHAR GHOSH: Right. In many ways, it’s treating people like adults and with respect, in the whole system.
KEVIN RYAN: Yeah.
SHIKHAR GHOSH: And that’s what the big bureaucratic companies, universities get wrong all the time.
KEVIN RYAN: Absolutely, absolutely, and they’re trying to solve, because there was that one guy who did something wrong. If they have to have policies on everything, if you come in and say, “Yeah, I expensed a strip club.” I’m like, “We didn’t have to have this conversation. That’s a dumb thing. Of course, we’re not going to approve that.”
SHIKHAR GHOSH: Right.
KEVIN RYAN: But I’m questioning your judgment that you would even think for a second that that’s a good idea. I don’t need to put that in policy. That’s just a bad idea.