

Sean Rad Out as Tinder CEO - dreamweapon
http://www.forbes.com/sites/stevenbertoni/2014/11/04/exclusive-sean-rad-out-as-tinder-ceo-inside-the-crazy-saga

======
softdev12
This is eerily similar to what happened at Twitter. I just finished reading
the book Hatching Twitter by Nick Bilton and the parallels are frightening.
Now I'm not sure how much of that book is true or fabricated, but the book
claims that first Jack Dorsey was kicked out as CEO and replaced by Ev
Williams. Then Williams was kicked out as CEO and replaced by Dick Costolo.
Just like with Tinder, Twitter was a giant success (by any measure) when the
CEOs were pushed out against their volition.

According to the book, the fatal flaw is board control. Even though Ev
Williams was the largest shareholder (an assumption), he didn't have board
control. He only had 3 out of 7 seats. And so he was forced out against his
will.

Now Zuckerberg (at Facebook) never lost board control and hence was not pushed
out by the VC board. The major conclusion seems to be it's imperative to
maintain board control or you'll most likely be vulnerable to being replaced
by professional management - even if you create a successful company.

The other interesting parallel is Benchmark. According to the book, Benchmark
was one of the vcs to push out Ev Williams. It's been reported that Benchmark
is now on Tinder's board.

~~~
coralreef
Not sure how similar this is, since the majority of Tinder is owned and
controlled by IAC. The founders never really had a chance to control it since
it was an incubated project.

~~~
geofft
The IAC thing makes me wonder whether these stories can even be read normally.
Given that this is a very large company that is closely managing the creation
of a startup-shaped thing, do things like "founder" and "CEO" and "investment"
mean what we usually think they mean? And if not, is there at all a meaningful
parallel in the story of Twitter or any other actually-independent startup?

[http://www.businessweek.com/articles/2014-07-02/tinders-
forg...](http://www.businessweek.com/articles/2014-07-02/tinders-forgotten-
woman-whitney-wolfe-sexism-and-startup-creation-myths)

"""I spent a short and intense two weeks last summer reporting out a Tinder
feature for Bloomberg Businessweek. What I found was a meteoric startup that
wasn’t really a startup, owing to the fact that Tinder was born in an IAC
incubator, and IAC owned and controlled the company. Rad and [former Chief
Marketing Officer Justin] Mateen seemed to be playing make-believe in a lot of
ways. They were keen to hide the IAC arrangement (“They’re sort of our partner
in this”) and pretend that they were living the dream of being wined and dined
by Silicon Valley moneymen (“We are being bombarded by venture capitalists …
it’s very overwhelming”). When I talked to their minders at IAC and the
incubator, executives were often dismissive of the two youngsters—happy to let
them spin grand visions and soak up founder acclaim, while telling grownups,
i.e. Wall Street analysts and investors, that Tinder was simply a lure to get
millennials to pay later in life for IAC’s profitable dating service
Match.com."""

------
DanBlake
Its very telling of IAC what they are pulling. I have spoken to Sean a few
times (way in the past) and its insulting what they are doing. Hes created a
great company (and has done so several times- orgoo, adly, etc.) He has proven
his worth and IAC is getting greedy. Yes, there appears to have been slight
mistakes lately, but this is a guy who has created a company worth over a
billion- Give him some slack. The fact they are pulling this shit is
ridiculous, when tinder likely has more value than IAC itself if it wasnt for
the public market. If tinder was private, its valuation would likely trump
that of IAC. I only wish him the best- Honestly my advice to him would be to
drop it and move on. Hes a talented dude (obviously) who should focus on
creating his next big win. I am rooting for him.

~~~
mbesto
> _Hes created a great company_

Tinder has made 0 revenue since it's inception in 2012. That's not a company,
that's a product. (a great product mind you)

> _If tinder was private, its valuation would likely trump that of IAC._

IAC makes a lot of money ($3bil) and has a high market cap ($6bil). Given it's
ownership of every large dating site, it's it conceivable that IAC has set the
precedence for the total addressable market for online dating. Or at the very
least, has an indication of such. I'm curious as to the rationale that would
make Tinder worth more than IAC given that (1) Tinder hasn't made a single
dime (2) the sites that do make money already have a large market share and
continue to grow despite a free contender like Tinder existing and (3) a
company "worth over a billion" needs to theoretically have a trajectory to not
only bring in $150mil in revenue but exceed that in the foreseeable future in
order for a billion dollar price tag to be realistic (on that same note -
"billion dollar" valuations only make sense when their is a buyer who can foot
that bill or the company has a trajectory to make those kind of profits. to my
knowledge IAC would be the only company in existence to do such a thing).

Lastly, I'm genuinely curious about the history and terms setup between IAC
and Tinder. If Tinder is such a darly of the tech world and is a "billion
dollar business" then why did it chose to be so restricted by IAC when it's
valuation "would likely trump that of IAC"? I curiously ask not because I have
any sort of knowledge of their history, but rather the current arrangement
suggests a story entirely different than the prescribed narrative that you
suggest.

~~~
jaksmit
no. it's a company. It's valued on future potential. Same as Whatsapp can be
valued at $19billion, despite only having $10 million in revenue. Many
examples; there is future monetization potential, that they're already
discussing.

~~~
k-mcgrady
A product can have a valuation. A company is 'a commercial business' and
Tinder isn't making any money therefore not engaged in commerce.

~~~
georgespencer
> Tinder isn't making any money therefore not engaged in commerce

This would probably have been true in 1914. In 2014 it seems like a semantic
quibble.

~~~
tluyben2
Oh how remarks like this make me think it's 1999 again. The valuation per
registered user is also starting to get to that level (I had friends with
business plans calling out values of $500 per user at that time). See what
happens this time.

~~~
georgespencer
Even a Groupon-style series of accounting fuck ups would not be enough to make
Tinder an unattractive business with a $value on users.

It's not true for everyone, but the fact remains that you can monetise people
without them paying you a dime directly.

------
ghshephard
Honest question - was Sean Rad ever the "CEO?" That is, given that Tinder was
an IAC unit, does the concept of a "singular" chief executive have any
meaning? Or was his position more akin to that of a vice president of a
business unit of a larger corporation, subject to the whims and direction of
the IAC CEO, Gregory Blatt?

~~~
for_i_in_range
The article brought up the point that he's an employee.

You're right. And it's funny people fight over the title "Founder" when that
word doesn't mean anything on paper. Articles of Incorporation don't contain
any mention of "Founder". Only CEO, Manager, etc. Founder seems to be an ego
thing.

In reality Rad is not a Founder/CEO but was a General Manager or something.

Did he take risk? No. It was funded by IAC. Did he innovate with the product?
Yes. He was a great employee and tool for Diller. And Diller got rewarded for
his risk.

Sucks for Rad in that he didn't want to believe he was just an employee on
paper. On paper he was like a General Manager of Quiznos. But look, he gets to
drive his $115k mercedes around with Justin, retain equity and still cling to
the notion that he was the Founder/CEO of Tinder. Whatever that means.

~~~
cbsmith
>> Honest question - was Sean Rad ever the "CEO?"

> The article brought up the point that he's an employee.

Wow. Are we under such a reality distortion field that the idea of being CEO &
being an employee are in conflict?

~~~
ghshephard
It's a big difference. A CEO answers to the board, and the board only.

Sean Rad sounds something more like a President in this scenario.

~~~
cbsmith
> It's a big difference. A CEO answers to the board, and the board only. > >
> Sean Rad sounds something more like a President in this scenario.

Let's think this through. The board represents the owners of the company. A
President is different from a CEO how? Because there are other employees of
the company who can fire them? Okay, what employees of Tinder can fire Sean
Rad? None. Who can fire him? Hatch Labs, because with 100% ownership they
completely control the board of Tinder...

Which all goes to show that in many, many ways, a CEO who doesn't have an
ownership stake in a company is very much an employee.

~~~
ghshephard
A better analogy would be the CEO working for a company in which a single
shareholder had majority stock ownership.

------
rayiner
The moral of this story is that you don't support a high-level executive that
calls your users "sluts" and still keep your job as CEO. It was immensely bad
judgment that made Rad a bigger liability for the company than whatever value
he could provide going forward.

~~~
selmnoo
> The moral of this story is that you don't support a high-level executive
> that calls your users "sluts" and still keep your job as CEO.

That's an interesting conclusion to draw from this.

Because, as others have pointed out, he still _would_ have had his job if he
had control of enough seats on the board, like Zuckerberg did. Indeed
Zuckerberg still has a job after calling FB users "dumb fucks" and offering
his friend private information of anyone at Harvard (including private photos,
private messages, etc. etc.) [http://www.businessinsider.com/well-these-new-
zuckerberg-ims...](http://www.businessinsider.com/well-these-new-zuckerberg-
ims-wont-help-facebooks-privacy-problems-2010-5?IR=T)

~~~
cbsmith
I can't get over how often Zuckerberg is being used as a reference here.

Sure, if you still control the company, it's hard for you to be fired. That's
s tautology.

~~~
selmnoo
Right, I only brought it up in light of rayiner's comment -- that saying
misogynistic, shitty things makes you lose your job as CEO. It doesn't, at
least not when you control the board.

~~~
cbsmith
There seem to be a preponderance of founders under the illusion that a) this
is practical in their circumstance and b) that this is desirable in their
circumstance. While it was true for Zuckerberg, it is hardly true for most.

~~~
selmnoo
Can you expand upon why you think it would not be desirable?

~~~
cbsmith
Particularly if you are an inexperienced founder, there comes a point where
you and everyone else is better off with some checks and balances on your
judgement. Having to hold yourself accounting to some other parties, assuming
they the best interests of the company at heart, is a good thing.

------
sillysaurus3
Once Rad is out, will he end up with 10% equity? I'm asking to figure out
whether he'll get rich from Tinder's meteoric success, assuming the company
continues to do well.

(Is it even possible for Rad or any other founder to cash out their shares
before a liquidity event like IPO or acquisition? I know the answer used to be
"no," but Airbnb seems to have changed that in recent years, and I'm quite
unsure how it works now.)

~~~
SeoxyS
There's many ways for private stockholders to liquidate shares:

\- Founders can often sell shares during fundraising events, either through a
pre-allocated block of shares called Series FF, or by having the company use a
portion of the raised capital to buy back some of their shares at the same
price.

\- Any private stockholder can simply sell shares on the secondary market.
However, most often, the company has the "right of first refusal." That means
that the sale must be presented to the company before going through, and the
company has the option to buy back those shares at the same price instead of
letting the sale happen.

\- Stockholders can also cash out by building derivative contracts where they
"sell the upside" on their shares at a specific price. Think of it kind of
like selling a stock option. ESO & Equidate are examples of companies / funds
that facilitate this.

~~~
zaroth
As a shareholder who would very much like to liquidate some shares in 3
different private companies, I'll say this has not been my experience. Maybe
if your company is 99th percentile you can pull these tricks, but for the
remaining 99% unregistered shares are completely illiquid due to a combination
of SEC regulations and lack of ability to obtain/share the key data any
potential buyer would require.

One of the biggest problems with bootstrapping startups is even after there's
revenue, growth, and value, there's just no liquidity.

~~~
SeoxyS
Email me (find it in my profile), I'd love to chat about your situation. I'm
pretty involved in the field, so I'm curious if I could hook you up with any
avenues to liquidate.

~~~
zaroth
How common are mid-stage small software companies with co-founders looking to
sell some shares? I'm not talking about anything near large enough to warrant
registration. It doesn't seem like a lot written about this topic, because the
focus is always on acquisition.

Obviously there's strong pressure from many directions to keep the cap table
simple, keep the shares closely held, etc. But after many years of
bootstrapping it can't be that uncommon to want to capture some of that value.

------
thrownitaway
Matt Cohler was brought in to fire Sean. Keep this in mind when you hear the
next VC sound bite about "standing behind the entrepreneur."

~~~
caleelkj
Is this true

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jasonwilk
How does one monetize a 10% ownership of an entity that is majority owned by a
public company? Unless there is a spinoff, or the public company sells that
particular asset, I don't see how Sean makes his money on this. IAC can just
continue to use Tinder to grow their own market cap, which in turn helps IAC
shareholders but not Tinder shareholders or 'founders'

This could be the worst cap table of all time.

~~~
onewaystreet
A spinoff is in the works.

------
bryanthompson
Apparently the board swiped left.

------
mathattack
_Occupying a keynote slot at the Forbes 30 Under 30 Summit_

That in and of itself may highlight part of the problem. I've known a handful
of people on those lists, and it rarely ends well. I don't know if reversion
to the mean, or a shift in focus, but the success hasn't lasted for them.

------
genericacct
Downvote me at will, but frankly i'd be more interested if it was the CEO of
the local liquor store. Since when are dating sites relevant to the technology
sector?

~~~
unfunco
They've been relevant in the technology sector ever since they became "sites"
and stopped being mnemonics in the back of tabloid and local newspapers. Like
it or not, Tinder is more relevant than your local liquor store.

