Do co-CEOs make sense? | Equity Podcast

This episode is presented by invest Puerto Rico if you believe your business Can go anywhere Puerto Rico is the [Music] Place hello and welcome back to equity Tech Run's Flagship podcast about the Business of startups I'm haa camps and This is our Wednesday episode where we Hone in on a trend in the startup world And dive deep and I'm not alone as Always I'm joined by my co-host maryan ASO marann how are you doing today I am Good haa it's been a hectic start to the Week but it's good Lots going on happy To be doing this today with you ah it's Always good to see your face we've got a Lot to get into today last week brex Announced that they would be ditching Its co-ceo model and that got us Wondering about co-ceo teams in general And the effectiveness of the structure Overall so to start Maran can you kick Us off with what happened at brex and What's new and what's different yeah so Brex started in 2017 and from the Beginning they've operated under this Co-ceo model and for the unacquainted Rex is a rather large fintech last Valued at about $ 12.3 billion a couple Of years ago it was started by a pair of Young Brazilians who actually were Friends as teenagers and started a Different company prior to brex that Ended up getting AC AC ired and with

That company they were also co-ceos so Interestingly I talked to the two Founders Pedro franceski and Enrique Duoss they were telling me about how it Came about in general the point is that They were both coders they both coded But they realized that Pedro was the Better coder and also so he kind of just Led the development of the company's Core Financial infrastructure from Scratch Pedro also LED what they Describe it as the entire organization Over the last 6 years it's grown to over 30,000 customers larger product suite And Enrique was more of the face of brex Whenever I conducted interviews I was Usually talking to Enrique he was the One that I think spent most of his time Talking to investors trying to win over The larger customers brex had raised Over $1.5 billion in both primary and Secondary transactions over the years so That's just kind of How It's been They've both been co-ceos but one was Kind of more internal leading the other Was more external leading if that makes Sense so what Enrique had told me that They each had their own responsibilities They made many decisions together that Worked extremely well when the company Was smaller but naturally became harder As it grew so they announced last week They told us in an exclusive interview That theyve decided to ditch the co-ceo

Model Pedro is now the sole CEO of the Company and Enrique will be chairman of The board awesome so thank you for the Summary I'm always super kind of Skeptical to co-ceo roles I mean it Doesn't make sense for two people to do Exactly the same job right and so it for Me it becomes one of those things where You're like okay why why do you have two People with the same job title when Externally it's actually really Important right what the CEO says is Kind of the official spokesperson for The company and per definition one of The strengths of being co-ceos is that You get two angles into thing two voices To everything but that kind of goes Against the purpose of having a single Flagship leader for a company to begin With can you make sense of this Maran Yeah I mean I think that's part of the Reason why they're doing this they were Saying that they feel like this new Structure will help the company be able To move faster enable better and faster Decision-making because like if there Was a large major decision to be made You know they had to confer they had to Discuss which of course Executives would Anyway but I think it was starting to Slow them down and this is a very Competitive heated space spend Management expens management lots of Players in it we've got ramp we've got

Mercury now trying to get in on it air Bas I mean just a long list of other Companies doing what brex is doing so They need to move faster to keep up and So I think they realize okay we're Slowing ourselves down and that's what Enrique said is that they they're at a Skill they're starting to see some of The cracks and that co-ceo model and They want to help enable faster Decision-making help them continue to to Grow quicker also they're planning to go Public and that could potentially be I Mean maybe next year they said their Goal is to become I think cash flow Positive first then they want to go Public so they also believe that they Would be more attractive to investors With a sole CEO model because I think Public markets don't necessarily favor This kind of leadership structure so I Think that's part of their thinking as Well yeah I mean the the only company I Can think of that was very very Successful that had this structure for a Long time was Netflix right they for a While ran COI CEOs and you know you Essentially didn't hear from one of the CEOs in public and so I think it's kind Of a similar structure where they're Kind of standing back to back one is Outward facing one is inward facing but If you look at company structure often The person inward facing is actually the

CEO the chief operating officer right They're the ones who kind of make sure That trolley stays on the tracks as it Were and I I yeah I continue to be Pretty skeptical there have been some Really good examples of company who've Done it well though and as we were Researching for this episode we found a Whole bunch of Articles and opinion Pieces and stuff that argue that you Know co-ceos is a really good model did You find some of that as well yeah I did I was curious about it because it's not Something I had truthfully honestly paid That much attention to because it Doesn't come up very often that I see You know co-ceos and yeah so there have Been companies out there that have had Co-ceos and grown still to be very Successful notably though none of them Are really in the Tech World they were JM smucker Amway Whole Foods Market Chipotle Mexican Grill so I mean it can Be done and it can be done well but it's Not something you see very often and Again especially not in the tech world Yeah no and I think it's so interesting I work with a bunch of startups at the Earliest stages right and quite a lot of The time I see Pitch decks where it's Like oh we have two CEOs we do Everything together and it takes one or Two questions to realize that honestly They're just too nervous to have a a

Conversation among themselves about who Should be steering the ship where Realistically one of them is the CTO is More technically focused or one of them Has a lot more legal experience and Should be kind of the legal driver of a Legal Tech startup that kind of thing But it becomes interesting when you have Companies that are growing rapidly and Especially in the public markets right Like people want one person to take Responsibility which on the one hand I'm Like that feels like a really outdated Kind of patriarchical kind of system Almost but on the other hand I'm also Like well that's kind of how this works One person speaks for the entire company And whether or not they're accurate or Not that's kind of an internal issue so I totally get it there's been some Notable splits though in addition to Brecks where the company started out as A set of co-ceos but then kind of split Up and went to single CEO do you have a List of those do you know some of those Are yeah let's see Brett Taylor stepped Down from his co-o role at Salesforce That was I think in 2022 workday founder Became an executive chair leaving Carl Esmach as the sole CEO and then Alberts They were co-ceos Tim Brown and Joey Swillinger but Tim Brown stepped down And this has been in 2016 but it's just Another example of where companies had a

COO model and then realized you know What this isn't really working and then Shifted yeah the one time where I've Seen that this works successfully is if There is a shift like if you're moving From one CEO to another it's actually Helpful to have a little bit of overlap And then you know there can be like a Handover in a way and so if somebody Gets brought in as a co-ceo or an Interim CEO and then takes over as full CEO I mean famously Steve Jobs came back As interim CEO after building Pixar and All that kind of stuff while he was kind Of ousted from Apple for a while he came Back as interim CEO and then eventually Became the full CEO again and then that Was the beginning of all the good things Happening at So there are good examples of this but I Don't think a lot of the companies are Doing this purely as a matter of course Well no I don't think so either another Kind of more recent example though that I guess it's a co-ceo but it's one that I haven't heard a lot of this model but In late April Bob beckish or beckish was Replaced as president CEO of Paramount Pictures by three people not two three And they're forming what they are Calling an office of the CEO so that was A new one for me but um I we were Reading about as we were researching This a couple of reports and there's

Some conflicting data out there right And there's some studies that say hey Co-ceo Ed companies do better than Soul CEOs and then others that say no no no The ones with the soul CEOs do better so I mean there's conflicting information But one of the studies found and this is It's a little bit old but of 2200 Companies listed in the S&P 1200 and Russell 1000 from 1996 to 2020 fewer Than Out of the 2200 were led by co-ceos so That's interesting it's I can't do that Vanishingly small number yeah but that's Really small yeah well and I think There's just so many reasons not to do It right and so this is why I was so Attracted to the stories of the people Who are giving it a world and I mean I'm A massive company structure nerd I love All the kind of Self-organizing companies hocy and all Those kind of things that people try out And even then even in kind of Self-organizing company structures you Do kind of need a unified voice to the Outside world where having a single CEO Seems to make a lot of sense and so you Know in terms of division of labor it Makes sense that people have different Parts of the role right but the same job Titles I don't know and that's of course Different at different levels of the orc I mean we're both reporters it makes

Perfect sense for Tech crunch to have Two reporters right because our roles or Our beats don't overlap but like it Would be very confusing if we had two CEOs of tech rench for example yeah I Think for employees it can be and I Think also again when you're at of scale I mean Brooks has about a thousand Employees so they're not they're not Huge but you know for in the startup World that's a decent size and maybe it Was getting confusing to employees and I Know they've had they've had a lot of Internal shuffling with regards to their Management in the past few months as Well so I I think maybe they just sat Back and were like okay you know this is A bottleneck to our growth keeping us From moving faster let's change it up Now internally how much will be Different I'm not sure Enrique says He'll still brex is still his main and Only thing right now and he's there as Much as he has needed to be and he'll Still be doing the things that he was Doing but not in that you know top Leadership capacity yeah well and the Interesting thing about the chairman of The board role tends to be a much more Strategic job right it may turn out to Be full-time but often a chairman of the Board isn't but they're the person who Is kind of working on the bigger Strategic picture side of things while

The CEO does the day-to-day kind of Large Vision leadership kind of thing so It's like the CEO has a 30,000 foot View And the chairman of the board has a 60,000 foot View and that division of Labor actually makes a lot of sense to Me and then if you have like somebody Who has like the 5,000 foot view that's The CE oh who's kind of making sure that Everything keeps rolling in the right Direction what's next in Tech that's not The right question it's where Puerto Rico where an entrepreneurial ecosystem Pulses with connectivity capability and Possibility where the most competitive Tax incentives in the US FastTrack Success and hard work is rewarded with Sunsets and turquoise Waters if you Believe your business can go anywhere Puerto Rico is the place invest pr.org SLC Crunch I another company that came up Was peir eyewear yeah that had a co-o Model that seemed to work yeah Nathan And sopia I know pretty well and they Together have been co-ceos of this Company for a long time since it was Founded actually and I think the Interesting thing about that is that They just seem to be an incredibly Closely knit unit who make a lot of Decisions together now if they Eventually become a public company I Don't know if that structure survives

But I think we should try and invite Them onto the show and talk with them See how works out yeah what how it's Worked well for them and and yeah it it Is unusual and I also know that Throughout their Journey they had a lot Of people telling them that hey maybe Don't do it this way right have Different job titles but they were just What's it called Stand halfly continue Down this path now over the years I mean You've worked with a lot of startups haa I mean how often would you say you've Seen this I reckon about 10% of people Or so that come to me have co-ceo roles And then by the time they leave none of Them are co-ceos I just again I Obviously have a very strong opinion Here but in my mind the CEO has a very Specific job they only have three jobs In fact one make sure you don't run out Of money two set the culture for the Company and three hire the right people And being kind of the person running Those things I feel like those are Really hard things to do as a team the Office of the CEO type situation Actually makes a lot of sense to me Companies like Autodesk for example have Had an office of the CTO for a long time Where they have a single CTO but then They have an whole office built around That but that makes sense for something Like Autodesk right they have God knows

How many business units they make Software in everything you can possibly Imagine from film making to CAD cam to Manufacturing to everything and so Having a single CTO that keep track of All of that is a little bit absurd so it Makes sense to have an all office Working on that for overall company Direction though which is more the CEO Role I would love to learn about the People who make that decision and make It work for them because I I rarely see It work out well yeah I think also in The case of brex I mean the COO model Made sense for them when they were Younger the company was younger but Again they're trying to present a more Mature a mature company right to Investors to the public and having the Two CEOs almost seems I I don't want to Say amateur but you know it it just has A different level of kind of I think Credibility or professionalism as a Company as you grow and and I think Maybe they kind of started to realize That it doesn't look like they've had Any kind of internal Discord they seem To still get along very well and Enrique Actually said it himself I was like you Know what I this was mostly my decision I was like you know it's just time for Me step back just be chairman of the Board it's just that some point it Seemed they were like buddies they were

Great friends starting these companies Together and they realized we've grown Up you know we've grown up it's time to Grow up as a company as well yeah Totally well and it's rare enough that I Imagine it gets a little boring that the First conversation you have with any Wouldbe investor or any wouldbe analyst Is like why do you have two CEOs right It's like after you've answered that Same question 10,000 times in a row You're like well actually why do we have Two CEOs maybe it is so unusual that it Actually becomes something that draws Unwanted attention right that too and Again like we said this is a competitive Space they want to present themselves as Looking like they've got their act Together there have been questions about Their cash burn over the past year and a Half or so which they've been trying to Reduce they had layoffs earlier this Year they said they've managed to reduce Cash Burn by 50% but I think it's just Again part of the evolution of the Company like we're growing we're Maturing we like each other a lot still And we trust each other a lot but hey I Trust my co-founder enough to give him The full range so here you go and you Know that might be able to boost Confidence internally too because There's been a lot of shuffling in the Executive team there there's been

Layoffs there's been all this worry About oh burning so much cash or you Know what's going on so maybe this is Also going to instill confidence Internally I think that could be part of It there so in general it's sending a Message to employees as well as Potential investors one day hey look We've got our act together we like each Other and respect each other enough that We're able to still do this with just One CEO so they're trying to send that Positive confident message out there Yeah I love that before we go though haa I know you're a very opinionated person Which I love about you what are your Thoughts on this do you think having Co-ceos is a turnoff you know I short Answer yes long answer is I just cannot See a single good reason to have co-ceos If I'm thinking about the role of the CEO it's like as an investor you want to Be able to call the company and have a Quick conversation and that is typically A conversation with the CEO just a Simple Logistics of having to get two People on the phone if you want to talk To the company that feels weird right And similarly like who's running point On investor updates who's running point On customer complaints or Evolution who Is doing the internal communication and All that sort of thing I feel like There's a very well formulated set of

Roles like for internal communication You often have a chief of staff who Basically you know there's different Varieties of like how official a chief Of staff is but a lot of the time this Person could have pretty serious clout Within the company and they you know for Operations you have the CEO for internal Like projects and things like that you Might have a director of Special Projects or you might have a head of Skunk Works or you might have a chief of Staff or whatever that job role is it's Just in all my years of working with Startups I've never really I've never Seen a good reason to have co- CEOs yeah I mean it's hard to say and going back To one of the data points that we'd Found about some of the companies led by Coos performing notably worse than their Peers and of course that's not all of Them but but again I do think it does go Back to the Speed and Agility like to Make decisions if every time something Big comes up you know you have to kind Of stop confer with your co-ceo and go Back and forth well how much time does That does that take and then does it Become really confusing so even just From that perspective alone I can see Where this just wouldn't necessarily be The best way to scale yeah totally yeah I mean if I wanted to play Massive Devil's Advocate I would be like okay

What if you have CEO who's like a 10x Engineer who works incredibly fast and Who just needs to be reigned in they Like make decisions too fast they are Like running at a th000 miles an hour And they make bad decisions because They're a little impulsive maybe in that Very specific set of circumstances it Would be helpful to have somebody who Can balance them out yeah I think so too And I think it's almost kind of sweet That these two at BRS you know liked Each other enough and respected each Other enough to say hey let's be co-ceos And and let's do this together but You're trying to present a certain image To your internal team to the world Externally and eventually this just kind Of gets old and that's what they Indicated so now that we've had this Conversation I'm going to be definitely Paying a lot more attention out there to See if there are more companies with This model or not and if we find a bunch More maybe we can talk more about this Awesome well I think we'll leave it There for equity for today but we're Back on Friday with our weekly news Roundup Maran thanks you so much for Hanging out with me today always a blast And until Friday you can find us under The handle at Equity pod on X and Threads and don't forget to check out Our sister show found which Dives deep

Into the stories behind startups with The founders who built them thanks for Listening bye Jerry Out Equity is produced by Teresa Lo Conso with editing by Kell Bryce Durban Is our illustrator and we'd like to give A big thanks to our audience development Team and Henry pet who manages TechCrunch audio products thanks so much For listening and we'll talk to you next Time