The Kiwi startups making the co-CEO model pay dividends

When Sonar6 founder Michael Cardin was hatching plans with his brother Philip for their new startup Joyous, he already knew one thing - he didn’t want to be the sole leader of the company.

“Having done a startup before, I wanted it to be slightly less relentless. That was the only driver, and a selfish driver probably,” says Carden, who sold his human resources software company in 2012 to Nasdaq-listed Cornerstone OnDemand, before becoming a board chair and director for the likes of Ask Nicely, vWork, and Flossie.

By 2018 when they founded Joyous, which makes employee listening and feedback software used by large companies here and around the world, the two brothers hadn’t lived in the same city since they were 17. They initially rotated the chief executive officer role every three months. As Michael explained in a 2020 LinkedIn post, the arrangement took “some explaining to investors”, but had “real benefits”.

“We realised early on it was adding something special to the business, particularly in that early phase when you're trying to be super creative and challenge lots of norms in the market,” he told Caffeine Daily. 

“Having a kind of a singular vision is maybe detrimental.”

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The visionary founder narrative

That’s seemingly at odds with conventional wisdom in the corporate world, and even in the startup ecosystem, where visionary founders, usually male, steal the limelight. Mark Zuckerberg may have had a close confidante and capable 2IC in Sheryl Sandberg for years,. but he established himself early on as Meta’s singular leader. 

The same goes for headline-hogging billionaire Elon Musk, who heads SpaceX and Tesla, and OpenAI cofounder and CEO Sam Altman, who dramatically regained control of the ChatGPT creator late last month after being ousted by his board of directors.

According to Harvard Business Review, of 2,200 companies ranked in the S&P 1200 and Russell 1000 indexes between 1996 and 2020, fewer than 100 featured co-CEOs. High profile co-CEO partnerships in the tech world haven’t always gone smoothly. Bret Taylor resigned from customer relationship management software Salesforce last November, breaking a co-CEO arrangement with flamboyant co-founder Marc Benioff who has resumed his role as sole CEO and chairman.

German enterprise software giant SAP ended its co-CEO set-up in 2020 in the midst of Covid lockdowns, when Jennifer Morgan quit the company “to ensure strong, unambiguous steering in times of an unprecedented crisis”, according to SAP. Christian Klein carried on as CEO alone.

But the co-CEO approach is growing in popularity for early-stage companies.

“Those maverick leaders who can handle anything, take on the world and work 120 hour weeks, they exist but they are not the norm,” says Joe Slater, general manager, startups at Wellington innovation hub and accelerator Creative HQ.

“There’s now a wider understanding of what the CEO role is. It's not just visionary leadership and shooting for the moon. There's a lot of operational stuff as well, so getting CEOs with varied skill sets and interests is beneficial.”

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The stress of going it alone

Of the current cohort of ten companies in Creative HQ’s accelerator, two are exploring co-CEO leadership made up of founders, says Slater.

Founder mental health and wellbeing in the startup world has also become a major area of focus. The desire to share the stresses and huge workload of establishing a company makes sharing the CEO role an attractive proposition. Investors drawn to strong leaders are coming around to founders sharing leadership responsibility.

“I wouldn't say that we are uniquely ahead of the curve on it in New Zealand, but the investor perspective is changing alongside the expectations of founders,” says Slater. 

“There are really good examples of co-CEOs who have raised large amounts of money and been really successful, so investors are more open to it.”

The startup sector’s best known co-CEO leadership team is the “3EO” combo of Leighton Roberts, Brooke Roberts, and Sonya Williams, the co-founders heading share trading and investment platform Sharesies.

The startup took shape in 2017 when the team participated in the KiwiBank FinTech Accelerator hosted by Creative HQ. There are six co-founders of Sharesies - Ben Crotty, Martyn Smith and Richard Clark being the other three. But a leadership structure emerged quickly.

“We started as three ‘directors’, because the startup investor world really didn’t like the co-CEO idea,” says Leighton, who is married to Brooke.

“When we raised our first capital, Brooke was sort of like the CEO, while Sonya and I were directors. It was this weird relationship, like, who's the boss?” Leighton remembers.

Brooke went on maternity leave in Sharesie’s second year and by the time she returned, the team was talking to new prospective investors who embraced the co-CEO model. 

“They didn't really give a shit as long as the business was going okay.”

While the three co-CEOs have a natural affinity with parts of the business, Roberts says they don’t separate out their responsibilities. 

“We have passion projects that we’re driving at any given time and we take turns running teams and being on point for the board,” he says. 

“Like a lot of things at Sharesies, it happened organically.” 

After nearly eight years running Sharesies through rapid growth, expansion to the Australian market, and several rounds of fundraising, Roberts says the arrangement is still fit for purpose.

“We are occasionally on different pages, but we do support each other really well. Sometimes we are asked for more consistency in what we say. Well, you could just have one CEO. But we consider it valuable that there are three views and it's fine that sometimes they are different.”

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Compressing hierarchy

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In 2021, the Joyous leadership structure also morphed into a “3EO” arrangement. Head of product, Ruby Kolesky, joined the Carden brothers as co-CEO. They ditched the 3 monthly rotation.  

“It was an incredibly and unusual opportunity to learn to be the CEO of a business with the safety of two experience people on either side of you,” says Kolesky, who continues to focus on product development, while Michael has a bent for marketing and sales, and Philip, now based in Amsterdam, has a technical focus and drives strategic sales in the US, the key market for Joyous.

Given that the Joyous value proposition revolves around improving employee engagement and satisfaction, it's no surprise that the team has literally written the book on organisational leadership. 

The freely available ebook Joyfully, co-authored by Kolesky, outlines the company’s desire to “compress hierarchy”. 

“Can we make Joyous a billion dollar business with less than 100 people?” Kolesky says. That’s still the company’s goal, while the co-CEOs have greater flexibility 

“Mike is an eternal adventurer. He doesn’t have to sacrifice that part of his life. I get to take long breaks over Christmas with my kids,” says Kolesky.

But the Joyous leadership team has found that there are limits to compressed hierarchy. They experimented with other shared leadership roles in the organisation, but found they didn’t gel as effectively. 

“That’s been an interesting learning for us,” says Kolesky, who was also the point person to lead a recent restructure of Joyous. 

“In peacetime, it's a great arrangement, more horsepower at the top of the organisation,” Michael reflects. 

“In what I’d call wartime there may be a need for more singular leadership.” 

For Joyous and Sharesies investor Mark Hurley, watching co-CEO startup teams thrive has run parallel to his own co-leadership story. 

“I met the Sharesies team a week after I sold my first company Little Giant,” says Hurley, who with co-CEO Ollie Shaw runs Caruso, which provides software to help fund managers run investment portfolios.

Personal chemistry is key

“It was the chemistry between the Sharesies founders that appealed. It was the same with Joyous. I knew Mike and that he was a really good operator. It was a pretty simple option for me to back these entrepreneurs to build something of value.”

As an investor, Hurley is most interested in the people involved in the startup, particularly at pre-seed and seed investment stage.

“I enjoy watching smart, ambitious people become entrepreneurs,” he says. 

But personal chemistry is integral to his own experience leading startups too. He co-founded and ran property management startup Jasper in tandem with Mark Campbell. 

“I’ve known him since I was in kindergarten,” says Hurley.

“Ollie left university to join me and my company Little Giant back in the day. He’s a really rare talent and I wanted to give him the opportunity to really lead a company and grow into that CEO role.”

“Your business partner is probably the most important relationship outside of your family in terms of how it can impact your quality of life if it goes badly.”

If there are lingering reservations among investors and board directors about co-CEO arrangements, Hurley doubts they have anything to do with concerns around paying two or three CEO salarie as they’re typically not paid much in an early-stage company anyway in a CEO or CTO role. 

“In most companies, my experience has been that the founders are usually not the highest paid in the company even though they're doing a lot of the work across the board,” he says.

Roberts says the shareholding a founder or key employee is allocated in the start-up, and which are typically diluted as more funding is raised, is the real motivator for leadership teams rather than the salary their board agrees to pay them. 

Numerous studies published in the last decade suggest that companies with diverse leadership are more innovative, and perform better financially. That’s ultimately why boards and investors are increasingly open to backing non-traditional leadership models, says Slater.

“Co-CEOs can give you different skills, they might be different genders. They might be of different ethnicity. They might have different life experiences that bring different things to the roles as well.”

The bulk in investment stills gravitates to the solo, male, cofounder. But I think people are reconsidering that, and taking a more holistic view.”

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Three tips for founders on leadership structure

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1. Be deliberate about how the arrangement will work

“Have that hard conversation upfront on what your roles are going to be if you're going to be co-CEOs. Who is going to look after what? Document it and hold each other to account. If there's going be one CEO and everyone else is going to be working under that person, make that clear from the get go.” - Mark Hurley 

“The six co-founders talked about what the sort of business we would want to work in looks like, and what a business we wouldn't want to work in looks like. We agreed on that and wrote it down. Then it became our shared language.” - Leighton Roberts.  

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2. Take advice from other founder co-CEOs

“No disrespect to business advisors and all that, but in my opinion, the best people to get advice from are people who are founders and reasonably fresh. I've always found it very, very useful catching up with people who are only a year or two ahead of us in the process.” - Leighton Roberts

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3. Think about what leadership role you want to play as the company grows

“What we tell founders is to think about what this company might look like when it has 20, 50 or 100 people and what do you want your role in it to be? Start developing that understanding early so that you don't get in a situation where a year down the track you suddenly decide you want to be the CEO.” - Joe Slater

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