In September of 2004, I was one of the first executives to join a start-up. Rainbow Rewards, later rebranded as Zoola Rewards, was a cash-back rewards program based on using credit cards at participating retailers. Like the other executives, I had a great deal of optimism about the business model and confidence in my ability to execute.
By the end of 2011, my optimism had faded and I made the difficult decision to resign. I still felt like the business model had some promise, but the reality was that the CEO and I were increasingly not on the same page about how to execute.
Over the next couple of years, the company made some changes that renewed my optimism – I was after all still a shareholder – but it didn’t last long. By the end of 2014, the company had lost investor support and was forced to close its doors.
I recently attended a party where I got to chat with some former employees, many of whom are still friends. We mostly reminisced about good times, but it was hard not to talk about what went wrong. I think it really came down to a lack of accountability between the CEO and the board.
A start-up needs accountability too
The CEO must be accountable to the Board of Directors. For most of the time I was there, the CEO was also the Chairman of the Board. He was the majority shareholder and he filled the board with family and friendly investors. It’s not unheard of in a start-up, but seasoned investors usually avoid such companies because they know they need to be able to hold the CEO accountable for his performance.
Also, someone on the board should know the business well enough to hold the CEO accountable. At various times the board had individuals with payment card or rewards experience, but they were investors or business partners with conflicts of interest. Somebody with knowledge and independence needed to ask the hard questions about projections of revenue and profit, the business case for certain partnerships, critical buy versus build decisions, and so on. The rigor simply wasn’t there.
On a more personal note, I have some accountability as well. Hindsight is always 20/20, but things might have turned out differently if we had the discipline to focus on the quality of the merchant network. I at least had the authority to run a pilot to prove my ideas and the opportunity to present those results to the board. The CEO would have voted me down because he was always very focused on the quantity of cards we had in the system, but I might have gotten support from a few members of the board.
Instead, I made my case to the CEO, he shot it down, and I moved on. He was the boss and I respected the hierarchy, end of story. Having seen the demise of the company and acquired some wisdom in the years since I left, I’d like to think that today – if confronted with similar circumstances – I would find a way to make a more compelling case.