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Post-Startup, Video CEOs Step Back

Sep 16, 2007  •  Post A Comment

Dmitry Shapiro, founder of video startup Veoh Networks, doesn’t like staff meetings. He doesn’t like to manage big groups of people. He’d rather work in a cramped office with phone wires hanging down and talk to a small cadre of employees directly every day.

That’s why he stepped down in July from his job as CEO of Veoh, which has grown to nearly 3 million monthly unique visitors, more than four times its traffic from a year ago, according to Nielsen//NetRatings.

He’s not the only high-profile online video CEO to jettison the top spot in recent months. Steven Starr built Revver from the ground up and handed the reins over to his chief operating officer in June.

Both Mr. Starr and Mr. Shapiro have stayed on at their respective companies in strategic positions. As chairman now, Mr. Starr is focused on business development and relationships with content producers, while Mr. Shapiro concentrates his energies on product development in his post as founder and chief innovation officer.

That two high-profile online video CEOs have stepped down into supporting roles this summer says something about both the online video business and the role of an entrepreneurial CEO.

While online video has matured in the last two years to become a viable business, the future of stand-alone video sites is clouded by the dominance of Google’s YouTube and the networks’ online offerings.

The evolution of the Web video industry seems to be calling for executives whose resumes are less visionary and more bottom-line-oriented.

All the companies are gunning for an online video advertising market that is projected to grow 89 percent this year to $775 million, up from $410 million last year, according to market research firm eMarketer.

Both Mr. Shapiro and Mr. Starr had grown their respective companies through their tender beta years into commercial ventures, luring both big-name advertisers and content providers to their sites.

Veoh has partnered with content providers including CBS, Elle magazine, TV Guide Broadband, United Talent Agency and Michael Eisner’s production shop Vuguru, as well as advertisers Verizon and Lionsgate.

Revver has struck deals with content providers Barely Political (home of ObamaGirl,) iJustine and Happy Slip as well as advertisers Old Spice, Verizon and Nokia. The company announced last week that in one year it had paid content providers more than $1 million in ad revenue.

Revver’s Nielsen numbers have remained constant over the last 12 months, hovering in the range of 300,000 to 400,000 unique visitors per month. That does not include the syndication of Revver’s video on other sites.

According to ComScore numbers provided by Revver, Revver attracted 2.3 million unique viewers in June, up from 1.8 million in January. Meanwhile, Veoh lured 3.4 million uniques in June, up from 460,000 in January.

But that sort of expansion can provoke among entrepreneurs an ennui and the recognition that one’s skills are better suited to growing a company than to managing it.

“People who start companies are not always the best people to scale companies,” Mr. Shapiro said.

“To start a company you are starting something from nothing, which requires being a visionary, motivating people to work in a subpar environment with poor benefits,” he explained. “It requires a very different set of skills than that of building a growing company.”

Veoh now has 90 employees, a size that requires more focus on systems, processes and management, he said.

“I just don’t like to do it,” Mr. Shapiro said. “It’s a tough, unglamorous job and it requires a lot of focus on things I personally am not good at. Those are not my areas of interest. My areas of interest are innovating on the product side, on the consumer experience side, and looking for the next big opportunity.”

The time to move over is often the time when the company shifts from a startup to a going concern, Mr. Starr said.

“That includes meetings with HR to meetings with banks,” he said.

Those essential business practices can detract from developing products and forging new partnerships.

So Revver brought Kevin Wells on as chief operating officer in September 2006 to groom him to eventually take over as CEO. That was also when Revver launched its service commercially. Because the technology was stable, Mr. Starr said that was the moment to put in place plans to change roles, he said.

Divided Attention

Before Mr. Starr shed his CEO title in June, he spent about 90 percent of his time on operations.

“That means dealing with all the aspects of running a business, such as how many pencils are in the pencil holder to large goals and operating skill sets and all new hires and technology development,” he said.

Now, he’s in the office several times a week and spends the bulk of his Revver energy on relationships with content producers and advertisers.

“I am not involved on a day-to-day basis in the mechanics of the business,” Mr. Starr said, which means he has more time for bike rides with his 5-year-old daughter.

The trick to a successful transition is to bring a new CEO on board before you need to, said Todd Dagres, founder and general partner with Spark Capital, a Veoh investor. In fact, the discussion about a new CEO often happens before a venture firm even plunks its cash into a startup.

“Before I put my money in Veoh, we agreed that when it looked like the right time, we would bring in a CEO, and the only question was when it was the right time,” Mr. Dagres said.

Because egos can be big in the startup world, the discussion of succession usually starts several months before it happen.

Mr. Dagres said Mr. Shapiro, though a “fantastic entrepreneur,” knew he wasn’t the best person to expand Veoh. That made the transition easier, allowing Veoh and Mr. Shapiro to map out a succession strategy months in advance. In July, Veoh brought Steve Mitgang on board as the new CEO after he had served as a senior VP at Yahoo.

“Putting policies and processes in place is not interesting to the creative type because by definition they are breaking out of procedures and policies to start this,” said Len Ostroff, the CEO of online video advertising technology firm Rovion. He previously led venture-backed investments for Sinclair Broadcasting. “To be an entrepreneur you have to have absolute faith in your idea and the ability to bring that to market as well as the belief of the other team members around you. An entrepreneur is not going to go out and hire 100 people.”

The inflection points for leadership change usually comes at around 15 employees and then again around 50 employees. That’s when a business needs additional layers of management, Mr. Ostroff said.

A CEO should know what he or she is good at, said Geoff Allen, who ran technology firm Anystream for six years until he stepped back into the chairman/founder post in 2004.

“I am good at building and managing companies up to a certain size to, say, $10 million in revenue and 50 to 60 people,” he said. “The main thing that happens for me is the pace of innovation has to slow down at that point, because as you get bigger every single decision has more implications. There is just a certain class of people much better suited to managing that organization’s direction and growth, and I have no talent for it. I know what I want to do, and I do it and damn the torpedoes.”

One Comment

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    Charles F Rieth
    CEO/ President
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