Less Drama, Greater Returns

By Matthew Milner, on Friday, January 31, 2014

Today I’m going to bring you behind the scenes of an amazing company.

At one point, it was coming apart at the seams – ground zero for backstabbing, bitter rivalries and high-stakes power struggles.

Amazingly, it turned into one of the great start-up success stories of our time.

In the next few minutes, I’ll show you how they pulled off this turnaround – and how it can teach you to become a better investor.

Just Another Day At a Start-up

The company?


Here are the four “friends” who started it:

• “Ev” Williams (hard-driving country boy from Nebraska)

• Jack Dorsey (tattooed media-hungry visionary)

• Noah Glass (smart geek who’s since been “deleted” from Twitter’s history)

• “Biz” Stone (gentle diplomat who smoothed out conflict)

And here’s a typical conversation that took place at their office:

Ev told Jack he had to “chill out” with the deluge of media he was doing. “It’s bad for the company,” Ev said. “It’s sending the wrong message.” Biz sat between them, watching like a spectator at a tennis match.

“But I invented Twitter,” Jack said.

“No, you didn’t invent Twitter,” Ev replied. “I didn’t invent Twitter either. Neither did Biz. People don’t invent things on the Internet. They simply expand on an idea that already exists.”

So much at stake. So much passion.

And so much unnecessary drama!

Beyond The Numbers

We spend a lot of time at Crowdability thinking and writing about numbers: Market size, M&A, growth rates, etc.

But start-ups are about a lot more than charts and graphs…

They’re about the passionate entrepreneurs who run them.

Sometimes passion can be a motivating force that creates the next Fortune 500 company…

Other times, it can lead to distracting politics and destructive behavior.

In Twitter’s case, as the company skyrocketed to fortune and fame, the founders festered in soap opera madness.

They fought about everything and they fought for everything – from money and ownership to direction and control.

And as they fought, the whole thing started to fall apart.

Someone had to take the reins and stop the war so they could get back to business.

But who would it be?

And The Winner Is…

Based on the brief founder bios above, can you guess who won the power struggle?

Was it Ev, Jack, Noah or Biz?

In fact, it was none of them.

They all lost.

Twitter’s Board of Directors had the infinite wisdom to bring in an “outside” CEO to run the insane asylum.

And while there were some bruised egos among the founders, the new CEO eventually pulled Twitter back together and pulled off a successful IPO.

Today, the company is worth north of $30 billion.

Adult Supervision

For a fast-growing start-up, one of the main jobs of the Board of Directors is to help manage the managers.

Board members help soothe battered egos and resolve differences between founders.

Essentially, they perform “corporate couples’ therapy.”

They also help make tough calls – like who should be running the show.

Leaning On The Board

In our articles for Crowdability, we often talk about the wisdom of “following” professional investors into early-stage equity crowdfunding deals – i.e., investing alongside them.

In part, we advise this approach because it’s smart to have the pros handle the research and negotiate good deal terms…

But we also advise it because we like the comfort of having an “adult” join the board and look after our interests – whether that means helping with a start-up’s long-term strategy, or ensuring that a “school yard” brawl between a company’s founders gets contained and dealt with quickly.

To minimize drama (and maximize profits) in your start-up investments, be a “follower.”

Be on the lookout for investment opportunities that have smart investors already attached. They can help confirm that you’re picking a potential winner – and if they have a board seat, they can help look after your investment.

A Great Read

The above office scene I quoted from Twitter comes courtesy of a new book …

“Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal”

The Wall Street Journal calls it "Unputdownable."

And as seen on Twitter itself, here’s The New York Times’ verdict:

“#Backstabbing, power struggles and profanity laid bare…”

Interested in checking it out?

Click here to get it on Amazon:

Happy Reading – and Happy Investing!

Best Regards,
Matthew Milner
Matthew Milner


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Tags: Equity Crowdfunding Crowdfunding Venture Capitalists Angellist Twitter

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