You’ve heard it all before. A young company – an internet start-up, for example, or a computer maker – roars out of the gate like gangbusters, customers waving checkbooks and Wall Street financiers waving stock options in tow. ‘Sure,’ say the young upstarts. ‘We’ll take your investment and we’ll go public, but we don’t want to ever lose the corporate identity we’ve taken great pains to create and we want to emphasize social responsibility as much as the company’s profits.’
Knee-deep in cash and weighing offers from Wall Street, the young company rationalizes that more money means more opportunities to contribute to charities, promote more environmentally correct corporate practices, and play a greater civic role in its community. The young guns hold their noses and climb aboard the IPO express. Soon riches follow and BMWs and Hum-Vees begin to dominate the corporate parking lot. Eyeballs focus on stock option levels and stock market performance instead of on sales or on that campaign to save the spotted owl.
Company strategy begins to change as well. No longer making decisions in a vacuum, young executives find themselves in bed with once unlikely partners. Suddenly shareholders, analysts, and (gasp) risk arbitrageurs are leaving their two cents worth on your voicemail or bugging you for information via e-mail.
Before you know it, the company they started as idealistic entrepreneurs has taken on the pallor of (uh-oh) an actual corporation. You know, the ones with management structures, matrixes, mission statements and loud shareholder meetings. The new reality hits like a sledgehammer, shaking them right down to the very core. ‘This isn’t the company we started!’ they stammer to themselves. ‘What have we done?’
Sound farfetched? Not to some of the young companies facing the challenges of maturing – or even aging – gracefully and keeping their idealism intact. Companies like Spyglass Inc, Ben & Jerry’s, The Body Shop and TheGlobe.com have all experienced blinding success in recent years but not without a raft of problems that have wrapped themselves around their prospective necks like a 200-lb albatross. Some say that things remain manageable, some say that life isn’t as simple anymore, and some say the hell with it and get out altogether.
Stock option check, please
Take Tim Krauskopf, the 30 year-old founder of Spyglass Inc, developer of Mosaic software, the original World Wide Web browser. Krauskopf founded the Illinois-based company in 1991 and guided it to a hugely successful IPO that padded his personal bank account by about $14 mn. But if you look for Krauskopf these days at the company’s Downers Grove headquarters, you probably won’t find him. While Krauskopf pops in as a consultant now and then, his days at Spyglass are over. Instead, he cashed in his IPO lottery ticket for a new job as a help desk technician at Chicago’s world-famous Field Museum.
‘I’m financially independent and I’m really glad that I made the move that I did,’ says Krauskopf. ‘Spyglass is fine and the managers there do a great job. But I’d been with the company for seven years – a lifetime for me – and it was time to hand the reins to someone else.’
Krauskopf says a lot changed on the day back in June 1995 when his company went public. Some of it was good, some of it was bad. ‘Don’t get me wrong,’ he adds. ‘The IPO day was a great one. It was a good thing. But going public changes the face of a company and brings a whole new set of responsibilities with it. One thing led to another after the new issue and suddenly I decided it was time to go.’
So is working under the mammoth shadows of a 65-foot Bracheosaurus and under the watchful eye of a 3,000-year-old mummy where Krauskopf expected to find himself several years ago? ‘No, not really,’ he laughs. ‘But companies change and people change. Being young and relatively well off, I had options. And I exercised them.’
Typical of the problems that Krauskopf is leaving behind is that Spyglass is right now ‘vigorously’ contesting a class-action shareholder lawsuit filed against the company and seven of its top officers in April 1999. The suit charges that top Spyglass officials misled investors into believing the company would turn a profit in its fiscal 1999 first quarter and then sold their shares into an unsuspecting marketplace.
These Spyglass officers knew the company was headed for a loss for the period, the suit alleges, because at least four major contracts hadn’t closed as scheduled.
The suit also charges that certain Spyglass officers and directors engaged in insider trading by selling company shares in the open market – generating about $9.1 mn in profits – before Spyglass said on January 4 that it would post a loss in the first quarter. Spyglass’s shares fell 32 percent to $15 on that day.
Think globally, act locally
More inclined to stick around and see things through are the founders of TheGlobe.com, the wildly successful internet services provider based in New York. There, Todd Krizelman, 25, and Stephan Paternot, 24, are still wrestling with their fledgling company’s new-found success and wondering if they can maintain their entrepreneurial identity.
‘When we first started we knew that we never wanted to be a big corporate titan,’ says Krizelman. ‘But when you go from five employees to 225 employees, it just sort of happens to you and you’re powerless to stop it.’
These are heady days for TheGlobe.com. The company’s IPO rose a staggering 606 percent on its first day of trading last November, making many of the four year-old firm’s employees instant millionaires. ‘Hey, don’t get us wrong,’ says Krizelman. ‘We were very happy to go public. In fact we didn’t even know we were going public to the day we went public, if that makes any sense. We were shocked to see the stock price run up so high but I don’t think it changed us that much. I mean, I just went out and bought my first home computer the other day.’
Paternot looks back fondly on the early days, when IPOs and nosy risk arbitrage guys were the last thing on his mind. ‘When you have only five people working for you, it’s easy to grasp the workplace culture and understand what is going on. You’re working late, ordering pizzas, and generally behaving like a tight-knit family. But now, it’s hard to get to know our employees anymore. We’re spending so much time dealing with buy-side and sell-side analysts and with investment bankers that we’re finding it hard to keep the culture we started with. The growth process has matured us.’
Both Krizelman and Paternot vow to keep the entrepreneurial attitude they adopted when they launched the company as Cornell University graduates in 1994. They just say it won’t be easy. ‘We’ve put a system in place to help us deal with growth, and that includes a big effort to provide investor relations services to our shareholders and to the public,’ says Paternot. ‘But you’ve got to draw a line somewhere. While we have no problem talking to analysts, for example, I don’t think we’ll spend too much time gawking at our stock price or talking to traders. We want to continue to grow our business and that is going to take up the vast majority of our time.’
We all scream for ice cream
When the conversation turns to corporate acts of social responsibility, it doesn’t take long before the name Ben & Jerry’s comes up. The South Burlington, Vermont ice cream giant is the darling of the community service set, constantly exploring new ways of using company resources to aid popular causes like cleaning the environment and helping non-profits get and stay on their feet.
Just this February, the $210 mn company announced an effort to use unbleached paperboard with an exterior clay coating for printing the famous Ben & Jerry’s logo. Standard cardboard boxes, say company officials, emit harmful dioxins and other potentially dangerous chemicals into the environment.
The move demonstrates the company’s long-time commitment to all things ecological. But, company officials say, it’s getting harder and harder to do the right thing. ‘The paperboard project took us nearly two-and-a-half years to complete,’ says Liz Bankowski, the senior director for social mission development at Ben & Jerry’s. ‘But that’s the way it goes when you have to balance company performance and community objectives. Things take a lot longer than they used to, because our company has a lot on its plate.’
Bankowski, a long-time Vermont political activist, says that if culturally idealistic companies are to maintain their identities, it is essential that they reinforce the company mission time and time again – especially after they have gone public and people start making money. ‘I think the issue is how you institutionalize those kinds of objectives,’ adds Bankowski. ‘All companies start with the vision and passion of their founders and we’re no exception. The key is figuring out a way to create a hand-off as your company grows bigger. That means dealing with more sites and more outlets and more people who started their careers elsewhere. The only answer I have for this is to do what we do and work very hard at it.’
Another kind of value
Bankowski says that a company like Ben & Jerry’s benefits from that hard work and from their single-mindedness about being a socially responsible company. ‘What’s distinctive about us is that we have already made the successful business case about doing good by doing good. When shareholders buy a piece of Ben & Jerry’s, they know exactly what kind of company they’re buying into. If anything, our shareholders are more idealistic than we are.’
Bankowski says that symbiotic relationship between the company and its shareholders is as strong today as it was when the company started. ‘We’ve been able to maintain our commitment to certain values,’ says Bankowski. ‘Things like giving 7.5 percent of our revenues to charity and putting Greenpeace member advertisements on our ice cream containers provides us with a unique marketplace distinction. Our social responsibility has become as famous as our ice cream.’
The story is much the same at Littlehampton, England, where The Body Shop is based. There, the company is touting its ethical business practices louder than ever, even as the beleaguered company undergoes a mammoth restructuring and fends off multiple lawsuits from franchisers. A new chief executive officer, Patrick Gournay, was also brought in to replace outgoing CEO and company founder Anita Roddick.
Does that, as Bankowski wonders, threaten the ‘vision and passion’ of the now departed Roddick? ‘I don’t think so,’ says Body Shop spokesperson Simon Horne. ‘We’ve always benefited from Anita Roddick’s passionate commitment to ethical business and I think that the values of the company have even grown stronger.’
Horne also scoffs at the notion that as companies grow larger and, potentially, more unwieldy, business as usual becomes harder for idealistic companies to conduct. ‘There’s always another way to do business, no matter what anyone else says. What makes The Body Shop unique is our ability to do things differently.’
Well said. As The Body Shop and others are finding out, doing things differently is no longer a luxury these days for young companies that grow into large companies. It’s a necessity.
