That's exactly what happened with this piece because the norm of entrepreneurship, especially in startups, is that you're dealing with failure or near failure. You're constantly trying to thread the needle to live another day. And so you end up in these really difficult situations that almost never get shared. I was in this really unique opportunity, psychologically, where I was in a difficult situation but it wasn't of my own making. So I don't have any ego about just explaining the facts.
Hey there, I'm Larry Weekes. Welcome to the Bounce podcast. My guest today is Tony Stubblebine, CEO of Medium and former CEO of Coach.me. He has a career in technology, behavior change, and digital community. Tony was a major force on Medium before becoming CEO, running publications like Better Humans. I knew of him through his writings and programs. His recent article 'Fell into a Hole and Got Out' candidly describes Medium's near-collapse and turnaround. I reached out to have him discuss the strategic and psychological work required to turn the company around, covering negotiations, governance, cost-cutting, hiring, and personal practices.
Good. Do I sound okay? Do I look okay? My head's I can match your head size if you want.
I'm too ugly to get that close, that's for sure. Let me tell you the funniest thing I learned. I worked with people I never met in person, and they said I had more charisma in person because on Zoom, my head looked small, which they read as low gravitas. So in our new era, a big head on Zoom is the executive power move. The thing that cracked me up is that I never realized having the biggest head on screen is a Zoom power move. I'm going to start zooming in and revealing my pores, I guess.
Right out of the gate. That's so I love it.
I had James Altucher on some years back, and I told him I hated editing stuff. He said to leave as much as possible because it's early on, and people love the humanity and the fly-on-the-wall aspect. I was early in podcast development, working for the startup Odeo, which Twitter spun out of. We looked at podcast examples, like Adam Curry's well-produced shows and venture capitalists recording in their cars, which was the opposite of well-produced but exactly what James is talking about. Being a fly on the wall of something interesting is special, even if not perfectly produced.
People love you for your vulnerabilities. Maybe that's writ large in these kind of conversations.
Yeah. Go ahead. You've got to deal with my voice. I've got a face for radio and a voice for writing, which is how I ended up as CEO of a writing company. We're going to do our best with the material.
Your voice is fine. Coming at you Z 107.
So, man, what a great article. Thank you for coming on to discuss it. You got to be getting some great feedback here.
The employees think, why would I spend two years? If I come to work tomorrow, I want to be compensated tomorrow. You said about the governance structure — for a big decision, I would need to go back to our investors and get the majority approval of five different tranches of investors. And the thing is, at some point the way venture capital works is they have this chunk of money they're trying to manage for about 10 years. And once you get out of that 10-year period, they try to close their fund down. One of the ways they close it down is if there's any scraps remaining, they'll just sell those off to these scrap collectors, which are like the bottom feeders of private equity. And so I was in that moment where the investors had moved on, weren't thinking about us, but we know them. Silicon Valley is a relationship business. We can trust how they will act. If you look a year or two down the road, they're going to sell all of that stuff off to new investors who we don't understand, who we don't trust. And so approval is going to be five tranches of unknown strangers who are essentially sharks. And that actually really tipped it over for me. That doesn't sound like a fun job. And so what Ross was pointing out to me is, let's say I start to turn the business around and then I want to go big because that's why I did all this work. I think what Medium is now is just scratching the surface. I think the point of Medium is to help like a billion people write — we're in the business of helping people write and share their stories, share their experiences. There's so much I want to do with this business, but let's say I want to do that and now I have to get the approval of this whole complicated group of investors. And so Ross was making the case that you might succeed on the business side and then find you get just sabotaged behind the scenes because of this investor structure. And then the thing that really tipped it over is not only did we have all of these investors that owned a huge chunk of the company and this huge liquidation preference, we also had a bunch of loans that were about to come due and they came due. And the amount of the loans was way more than the amount of money that we had in the bank account, and that is insolvency. And so there's this opportunity when they do come due to have a discussion — hey, we can't pay the whole thing back. Here are two options: one is basically you get nothing, or we think we can give you a lot of equity. And so we used these debt holders as eventually part of the leverage to go to all the investors and say let's just restructure all of this and get healthy. We need to put a healthy investment structure in front of both management, myself and the team, because if we don't come to work tomorrow, that's a zero, and in front of these debt holders. And that's what we did. That's essentially what a recap is. And I think if you're not in the world of startups, just think of it as a bankruptcy where you renegotiate with all your creditors. It's an improvement on their position, right? On paper they have a $235 million liquidation preference, but in practice the business is worth $0. So that thing that they have on paper is worthless. And so whatever you renegotiate to, even though it's much worse than what they have on paper, it is definitely better than what they have in practice. And that's just a hard conversation because you have to be really honest about how bad things are.
Again, we're talking about profitability. You reduced the employee count fairly dramatically. Was it 200 down to 77, something?
It wasn't all me, but I did play a role in it. At our peak, we were 250 people and at our low we were 72. We're about 77 right now.
Did some of that happen under your —
There are people that have to make these decisions and I've done it. What is your take? What did you learn? I always try to tread really lightly here because it's such a serious topic for people — because it's so financially damaging and it's tough on your ego to lose your job out of the blue. It's scary and as a result people get really mad about it in the best case scenario. And then if you look at it as an industry, sometimes it seems like these layoffs are being done in a really cavalier, uncaring way and that just is even more infuriating. So the baseline anger in the public is rightfully very high. I think the public discourse from my perspective seems to put a lot of blame on the moment of the layoff. I'll say personally, I feel a lot of pressure on the things that happened before the layoff. Who did you hire? How strong was your plan on how to make money off of hiring them? And how good were your expectations? Because in some industries, it's actually completely valid to say, I'm going to hire you for this startup that might fail, so you also might lose your job. And if you set those expectations, then I think you've behaved with integrity. For me, I feel this incredible pressure every time I hire that I need to have a plan for making sure that this person that I'm taking a lot of their time, that's taking a risk on the business, that it's likely to work out. When it comes to the moment that you have to do the layoff, especially a Medium's layoff, that just feels like the responsible thing to do, because either you do this layoff or this partial layoff of the company, or the whole business goes away.
Or everybody — the whole business goes away.
Yes. And for me that's not that hard of a decision, especially because again, I'm not digging — I'm getting us out of the hole, I didn't create this hole in particular. But it's still not easy because the startup economy got really bad. So I had this whole career where basically anytime I let someone go, they were going to land somewhere — not just land, they'd get huge raises. I felt bad for not letting them go six months earlier. Not true anymore. I think right now when you let someone go, it's plausible that they're not going to work for a while. So it just makes the decision making more serious.
Were the employees so tuned in that they knew, the ship was sinking? Or if they didn't, did you have a general conversation with them to say, hey, this is where we are. Let's have a heart-to-heart? Did that ever take place, or were you too busy running with your hair on fire?
I have no hair. I do have a beard.
Well, it was on fire. That's why you don't have — go ahead.
I would be curious to interview the company for someone else too, because I'm not sure I would get the perfectly honest answer. I think probably it was less clear than it should have been, and for a couple of reasons. The prior administration did a really good job of compensating people — we pay 90th percentile, we always pay at least three-month severance, sometimes six-month severance. That part of it was always fairly good, but I don't think we did a good job of expectation setting. And so what people came to believe is, oh, this company isn't really working but we're not going to lose our jobs. And so the thing to know about a turnaround is by definition a lot of bad things happened before the new CEO gets there. So I think what the real reaction is, I show up and everyone's been trained to think I'm probably the next mistake. And so when I come in and say here's what I'm here to do, even though I think it's very logical that we're going to take this company from not profitable to profitable, we've been told other things that didn't pan out. I think that's kind of the reaction. A big part of the turnaround is figuring out who's naturally aligned with you and who can you win over and how can you help build the organization's confidence in my way of thinking. So I definitely didn't show up to a company that was like, we're dying to do the work of becoming profitable. We had to convince people of that, and not just convince them that it was the logical thing to do, but we were seriously going to do it. We weren't going to pivot to a new thing. People don't necessarily believe that a leader has that long-term focus on day one, and you have to show that through your actions, and that takes a little bit of time. So maybe they were suspect that didn't know how long you'd hang around or what have you.
