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Power Sharing is Tougher Than You Think

Josh Linkner of Detroit Venture Partners in the Madison Building-Detroit
Josh Linkner of Detroit Venture Partners in the Madison Building-Detroit - David Lewinski Photography
Billhighway and Vincent Thomas have been practically synonymous since Thomas started the tech firm in his dorm room in Eastern Michigan University in the late 1990s. Now the two are starting the complicated process of establishing their own independent identities.
 
The Troy-based company's bread and butter is software that helps people divvy up expenses, such as dues or dinner costs. Thomas created the company to help fellow co-eds figure out who owes what for pizza. Today it is helping non-profits and other organizations deal with their finances.
 
Billhighway has also been growing exponentially during that evolution, increasing its revenue 200 percent cumulatively in the last five years. It employs about 50 people after hiring eight more over the last year. Now that the company is knocking on the door of second-stage status its newest hurdle is leadership transition. Specifically Billhighway is working on moving forward from founder leadership to more traditional executive-level management. A new CEO came on-board last summer and Thomas became the company's chairman.
 
"It shows the maturity of the company and where it is at," Thomas says. "I wanted to go from growing a company to growing a bigger organization."
 
If Thomas is a posterchild of local tech startup founder success then his replacement at the helm of Billhighway is a prime example of c-level tech talent. Doug Gregory worked for 14 years at Plex Systems, a fast-growing manufacturing software firm based in Troy, making it to COO. He jumped to Billhighway earlier this year, serving as a director helping the executive team accelerate market expansion. He became CEO in June.
 
"Building a new company with a new technology was a challenge I was excited about," Gregory says.
 
Achieving that growth is first dependent on executing a smooth transition in leadership. Startups are products of the vision of their founders. The nimbleness and ability to pivot to meet market demand of these small businesses is a credit to their founders' execution. Those skills are what's needed to get a company established. Scaling that business requires a different set of skills.
 
Where founders excel at creating a macro vision for the company and raising seed capital, traditional executives do best building executive teams and focusing on the minutia of the business. Where founders do best wearing multiple hats, traditional executives know the value of delegating.
 
"A founder-led organization is very dependent on that founder's vision," Gregory says. He adds that "when you start to grow an organization the team becomes more important than an individual person."
 
Ego and the Startup
 
Executing the transition from founder-led to executive-led is not as easy as the press releases make it sound. Chris Rizik, CEO of the Renaissance Venture Capital Fund and a 15-year veteran of Metro Detroit's investment community, has seen his fair share founder-executive transitions.
 
There are good examples of smooth transitions, such as HandyLab. In that case, the Ann Arbor-based bio-tech startup's new executive leadership helped leverage an acquisition worth about $275 million. Its founders are now running their next high-growth-potential ventures
 
Then there are the examples everyone tries to avoid, such as what happened to Ann Arbor-based cell phone recycler ReCellular. MLive's Ben Freed reports the gory details of that company's woes here.

For an executive transition to work out best for all involved hinges on getting everyone (executives, investors, employees) on the same page. The leadership team should be cognizant of their own shortcomings and be willing to do what is necessary to overcome or supplement them. The bottom line should revolve around making the company as successful as possible.
 
"The most desirable scenario is that everybody around the table, including the founder, recognizes the company needs the requisite experience to take the company forward," Rizik says.
 
Ego too often stands in the way of achieving that. Many times founders can't let others run the show. While investors also have a spotty track record of their own, startups traditionally live, die or flounder by the decisions of their founders.
 
"(Ego) can be a real stumbling block," Rizik says. "There are a number of companies that won't receive venture capital investment because that is an issue."
 
Easy transition at ePrize
 
Josh Linkner knew when he needed to let go of his startup, ePrize
 
Linkner started the Internet promotion company out of his garage in 1999. A decade later it had become an industry leader and employed a few hundred people in its eclectic headquarters (a former brewery) in Pleasant Ridge. About that time is when Linkner started to realize a change for ePrize was in order. Decisions took longer to make. More and more people needed to be consulted.
 
"It wasn't as much fun running a bigger company," Linkner says. "It also felt like I wasn't the best leader for a company of that size."
 
Linkner says he met with ePrize's board and put the gears for a transition at CEO into motion. By early 2010, ePrize had a new CEO and Linkner moved up to chairman. Two years later it was acquired by Catterton Partners, a private-equity firm. By that time Linkner had become an acclaimed author on entrepreneurship and the CEO of Detroit Venture Partners, a downtown Detroit-based venture capital firm aggressively investing in tech startups.
 
"You don't replace yourself with yourself," Linkner says. "You replace yourself with what the company needs. The company didn't need a new Josh. It needed a Matt Wise (ePrize's new CEO). The smartest leaders know when to step aside and bring in the best people for the job."
 
He adds that it's rare a founder can take a company from startup to mega corporation, like Henry Ford or Bill Gates. Even Larry Page, Google's co-founder and current CEO, stood aside and took notes as Eric Schmidt grew the company from startup to tech titan over the course of a decade.
 
"Bad entrepreneurial companies are all about the company CEO," Linkner says. "They are there to serve the king. The best leaders are servant leaders that serve the company."
 
Wise, ePrize's current CEO, credits Linkner with being a servant of the company. He says Linkner offered to leave immediately or stick around in the shadows of the firm or be an active part of the firm's management for a few months. Wise, a former CEO of Q Interactive in Chicago, has been an executive on five transition teams. He describes ePrize as the best experience.
 
"Josh would say that's not how I would do it and that's why we hired Matt. Let's do it his way," Wise says. "If you could take that quote and put it in every founder's mouth it would be excellent."
 
He adds that an executive transition needs to be quick and clean, where everyone knows who is in charge, for it to have a chance at success. In Wise's case at ePrize, he spent 30 days studying the company, 30 days bouncing suggestions off of company stakeholders and 30 more days implementing changes.
 
The idea is his objective, third-party point of view helps the company get past its bad habits and group think. Those actions open the doors to more growth and a better business. He adds it's not just founders who can fall into those sorts of ruts, which is something he tries to guard against.
 
"Any passionate leader gets emotionally involved in their business," Wise says. "As the years pass it gets harder to look at things objectively. I have to remind myself of that."

Jon Zemke is the Innovation & News Editor for Metromode, Concentrate and Model D. He is also the managing editor of SEMichiganStartup.com.

All Photos by David Lewinski Photography
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