John Zimmer and Logan Green, co-founders of Lyft, have determined that they will run their company by keeping a close reign on all of its inner-workings.

When Lyft goes public this year, the founders will maintain a near-majority voting control of the company despite, between them, owning a stake of less than 10%.  The practice of maintaining control by the entrepreneurs of the start-up that they have founded is becoming more commonplace these days.  Thus, Zimmer and Green are working with their underwriters and lawyers to create a class of shares which they will hold, that contain extra votes.  The intent is for the founders to retain major decision-making power over most of what goes on at the company, including selection of the board of directors and, of course, whether to sell should that time come.  According to a piece in the WSJ, the founders’ move to consolidate and maintain their control at Lyft is the “latest illustration of the nearly unchecked power held by the founders of many of the fastest growing technology startups”  — well, how dare the fellows who worked hard to bring the company to fruition and who have continued to run it until it now has a valuation in excess of $15.1 billion determine that they should continue to run the company!  It is ever-more obvious that many writers in the WSJ have never started a company and maintain no little amount of jealousy of those who have.  Regardless, maintaining founder control is not an unprecedented move – Facebook, Alphabet (Google), and Snap all have super-voting structures that give their founders control.  There have been times in the past when, after growing the company to size, the founders realized that they were little-able to manage a large bureaucratic organization, which is typically very different (regrettably) from the entrepreneurship that they began.  In those instances, the founder(s) have opted to step aside and let a seasoned corporate manager take over as the CEO.  However, in the instances which we’ve mentioned, it appears that the founders are doing well at maintaining the larger company – with the possible exception of Facebook, where a number of organizational issues have arisen recently.  One additional advantage of the super-voting status of the founders (other than the ability to maintain control of the company, of course) is that public companies at which their founders have maintained super voting status are practically immune to the attacks from activist investors that have attempted to derail much of corporate America, or, in the activists’ view, to “discipline” them.  The Journal’s take on why it’s now possible for companies going public to insist on super voting privileges is that there have been few initial public offerings of late and the deal-hungry investors are willing to grant privileges that have not been traditionally available in the past.  Definitely a scenario that we will be following – good luck to Zimmer and Green.

ALL THE MOVING PARTS – one of the five elements of company success is its management structure – getting that right is often the ultimate make-or-break for a company.

Leave a Reply