Archive for February 2013
Yesterday, Groupon announced lacklustre earnings, which caused the stock price to tumble by nearly 25%. This evening, the company announced that Andrew Mason is being replaced as CEO. Within minutes, Mason posted a memo admitting that he was fired, which people have described as honest, charming, humble and “a good standard in how to leave“.
People have short memories. Throughout 2010 and 2011, Groupon raised $1,098.2m from investors. More than 86% of that money ($946.8m) was distributed to the founders or earlier investors in the form of share buybacks. Andrew Mason personally received nearly $28m. (For full details, see my post from September 2011.)
It later emerged that, at the time the founders and early investors were taking money out of the company, Groupon’s liabilities exceeded its current assets (i.e. it owed more money to merchants than it had in the bank). If Groupon’s growth had slowed during 2011, it could well have gone bust. Mason and Lefkosky’s judgement in opting to enrich themselves instead of bolstering the company’s financial position was questionable, to say the least.
I originally wrote this blog post nearly two months ago. For many years now, I’ve used the Christmas break (which I normally spend away from London and with less ‘Net connectivity than usual) to reflect on the past year and lay plans for the next.
This Christmas, my reflections led me to write a blog post titled 2012: The Year Greed Reared Its Ugly Head, which I never published, but which largely forms the first half of this post.
For me, 2012 began with the memory of the Zynga stock options kerfuffle still fresh in everyone’s mind and, by May, we had seen Groupon and Zynga’s stock plunge below their IPO prices (although both sets of founders did all right). Then came the debacle of the Facebook IPO, with what Roger McNamee characterised as “self-dealing” by insiders at the board level who had “better information” than retail investors.
We also had the debate over whether acquihires were fair to investors and, in London, there were two separate instances of smooth-talking “entrepreneurs” employing staff for their startups, who then weren’t paid. To top it all, news of the LIBOR manipulation scandal broke.
Gordon Gecko famously said that “Greed is, for want of a better word, good” and, to a certain extent he’s right – the desire to earn money and accumulate wealth is a great motivator (and I doubt many founders and early startup employees would put in the hours and effort if there was no prospect of a pay-off) – but it shouldn’t be our primary motivator.
Masahiko Yamada, the President of Fujitsu’s Technical Computing Solutions Unit, once said that “the best innovators’ primary motivation isn’t money. They just want to change the world.”