Since cofounding WeWork in 2010, Adam Neumann has led the office coworking company, under the umbrella The We Company, to a valuation of $47 billion with 466,000 members across 28 countries.
And now he’s about to take his company public.
The We Company released its S-1 prospectus on Wednesday ahead of an upcoming IPO. Not only will analysts and investors be poring over the firm’s financials, they’ll be assessing Neumann as the leader of a public company.
To get some insight into how the CEO role changes for chief executives taking their company public, we spoke with renowned CEO coach and former venture capitalist Jerry Colonna. Over his long career, Colonna helped develop the startup scene in New York City in the late 1990s alongside investor Fred Wilson, worked in JPMorgan’s private equity branch, and has coached an estimated 500 CEOs.
Colonna did not want to specifically analyze Neumann, but his broad insights into taking companies public offer a glimpse into what Neumann will be up against. “Every single stage in a company’s life requires a different skill set,” Colonna told Business Insider. He said that as any company scales, its leadership must also evolve. Regardless of sector or age, going public presents own unique challenges that must be overcome if CEOs want to keep their job.
Here are three things Colonna said all CEOs must do after taking their company public.
They need to build a senior leadership team that delivers consistent results.
The CEO of a company going public needs to build a support structure that provides stability, Colonna said. Shareholders of a public company need predictability, and the volatility that could be acceptable for a scaling startup won’t fly.
When growing a startup, CEOs need to learn to delegate tasks to executives who are better suited to a specific function of the business. When that company goes public, each of these functions needs to have clear goals that the CEO can trust will be met.
This doesn’t mean the company has to become boring, Colonna said, but the people in charge can’t be loose cannons. For example, when Facebook’s founding CEO Mark Zuckerberg prepared to scale Facebook, putting it on a path to its eventual IPO, he hired Sheryl Sandberg as his COO. Sandberg immediately became the staid operator who could deliver regular results to match Zuckerberg’s ambition.
They need to adjust the way they speak with investors.
In some ways, investor pitches remain the same from the birth of a company through its maturation, Colonna said. Founders of companies need to convince people with capital that their money is worth giving up because it’s going to pay off for both of them. But startup investors are much more in the market for drama and “moonshot” ideas.
“Early on, you want to communicate big dreams — but for public investors you want to give real goals and stick to them,” Colonna said.
Tech is known for eccentric founders with penchants for flowery words and unusual ideas, to the point that some of the language in We Company’s S-1 has been described as “cultish.” Even if public investors roll their eyes at this behavior, the theatrics don’t matter as much as the concrete plans that deliver actual results. Colonna stressed the importance of being transparent with investors about these plans, and used Amazon’s Jeff Bezos as a founder-CEO who masterfully managed expectations through its years of non-profitability. His annual letters to shareholders are known for their thoroughness, and Bezos was able to assure investors that Amazon’s ambitious growth would lead to tremendous rewards.
Importantly, going public means placing yourself under the eye of the SEC. Some of that eccentric behavior and outrageous claims that were once acceptable (and maybe even inspirational to staff) can actually be illegal when performed or said by the CEO of a public company.
They need to develop a temperament able to withstand a constant barrage of attention and criticism.
When you take your company public, you’re giving investors a look under the hood of your company. That’s when the CEO becomes the figurehead for all that is good and bad. This brings with it a level of constant scrutiny of the CEO, “where every misstep is checked,” Colonna said. It’s crucial that those in the role understand this.
He noted that while he did not know either of them personally, if you judge Bezos and Tesla’s Elon Musk on this trait solely from the headlines they garner, Bezos is far less prone to engaging emotionally to criticism than Musk is. Once again, a CEO prone to lashing out in public brings unpredictability, which in turn brings volatility — two things most public investors don’t want.
“I would argue if I were an investor in a public company, I would want in a public CEO the ability to not rise to the bait and respond,” Colonna said.