Shareholder Representative Services’ latest Q&A features Anthony Rodio. Just three months after taking the helm as CEO, Rodio led Redbeacon, an online platform that allows consumers to interact with local businesses and professionals, to an acquisition by The Home Depot. Prior to Redbeacon, Rodio held leadership positions at Support.com, StubHub, SideStep, Microsoft, Amazon and Proctor & Gamble. Rodio discusses translating experience from a Fortune 50 company to running a startup, creating products that address unmet needs in the market, and the dynamics of arriving at a valuation when contemplating an exit.
Q: What lessons did you learn from prior companies that paved the way for success at Redbeacon?
I left P&G in the late 90’s to work at Amazon in the third-party business, where we let third-party sellers use our platform. After leaving Amazon, I joined StubHub as its 25th employee and ran marketing operations. I worked on scaling their business, which served as a marketplace between people looking to buy tickets and people trying to sell tickets. I love these business models–there’s no inventory risk, because you don’t have to own the inventory before you sell it. After experiencing the online marketplace model four or five times before joining Redbeacon last year, I had a good idea of how to go about scaling this type of opportunity.
At P&G I learned the 3-E model of leadership: Envision, Empower and Energize. First, you set the vision for your company or your department. Next, you empower the people who work for you, and then you energize your organization. You need to be a cheerleader, be positive and show that you believe in the ability of your team. You stretch and push your team, and in the end, they achieve more than they thought was possible, even though they always knew they had it in them.
In a well-run organization, even the people in lower level positions understand how they fit in the overall plan. If everyone acts like an owner, you have a chance to achieve your plan. If your employees don’t have that mindset, then you’re not going to achieve your goal. I believe in building cascading objectives–establishing clear goals every month and reviewing them every week. I’m a hypercompetitive guy, but that is directed externally, rather than inside the company. If it’s not focused externally, the competitive approach can be destructive.
Q: What do you view as your most important responsibility as a startup CEO?
A CEO’s main responsibility is to the shareholders, but you also have a responsibility to your employees, community and customers. The general rule is to focus on growing your business. If you build a good business, execute well, clearly articulate how your product or service is differentiated in the market and demonstrate that you’re profitable, or that you have a path to profitability, then eventually you will interest potential acquirers. But, first you have to be successful in running your business.
A good coach will say that it’s not about how well the other team is doing–it’s about how well your team is doing. I believe in that philosophy. You have to execute your plan and deliver your business, and if you do, a lot of other things take care of themselves. If you start doing short-term things instead of focusing on the long term, it will catch up with you. Good management is good management. It takes discipline to actually do it well and succeed.
Q: Given your breadth of marketing experience, what advice can you share with other startup CEOs who want to increase their brand awareness in a short period of time?
A fundamental problem among most startup or tech companies is jumping to build brand awareness before they’ve taken other necessary steps. I follow a very simple three-step framework that I learned at P&G. The first step is to identify an unmet need in the B-to-B or consumer market. The second is to introduce a product that fills that need better than anything else in the market. The third is to drive trial and awareness of the offering in the market through marketing and PR tactics.
Too often, people in the Valley work on cool products, but they haven’t figured out if the product is actually addressing an unmet need that exists in their market. Once you know the need your filling, you’ll know who you’re trying to talk to, and the more narrow you can be, the better, because you can be more efficient in your marketing.
At StubHub we sold tickets to sporting events, concerts and theater, but what really mattered was the sports. There are a finite number of men in America who are willing to spend $200-300 to go to a sporting event. They’re not that hard to find. They listen to sports radio and play fantasy sports. Those were the people who helped build StubHub’s business. We knew that the New York Mets’ best seats were owned by season ticket holders, and we knew that there was a group of people out there who were willing to pay money to see the Mets, but who didn’t want to be season ticket-holders. So, the question was: how do you communicate with them to get them motivated to come to your site?
Brokers were viewed as a negative thing. In the consumer’s mind, if they’re buying from a ticket broker, they think they will be gouged on price. So, we positioned StubHub to be by fans, for fans, where the fans are the ones who are selling the tickets. You have to identify what that need is, who has that need, how your product fills that need, and then you market directly to those people.
Q: How do you manage surprise?
My view is that you can’t be great unless you’re taking chances, and if you’re taking chances, you’re going to fail some of the time. At some level, being surprised is okay. It’s not okay if the reason that you’re surprised is because someone is not communicating or knew something before you but didn’t say anything about it. As long as the failure is because you were attempting to do something transformational, it’s a good thing.
I would say that everywhere I’ve been there have been surprises and failures, and I think there are two roles that you have to play as a leader. You have to be positive and reassuring to the more junior people in your organization, because they have fears that surprises or failure will mean the end of their careers. The other thing you have to do as a leader is know why something happened. Why did you get surprised? You can’t make the same mistake more than once. You need to make sure that you correct your course in such a way that unexpected surprises or failures don’t become systematic in the way you manage your organization.
Q: What have you learned from being on both sell and buy sides of acquisitions?
When you buy technology companies, what you’re really buying is intellectual capital. I worked hard to figure out how to keep the right people in place when we acquired companies for Support.com. So, I had an idea on a much smaller scale what would be going on in the minds of Home Depot’s executives, and the importance of the founders’ and my commitment to staying on and becoming part of Home Depot.
Going through some acquisitions on both sides as an acquirer and target helped me to understand the way the other side thinks. I was in a unique situation when I started the job at Redbeacon. I didn’t take it to sell the company. It was a great opportunity to build value for a good product in a huge, fragmented market. But, if you get an offer above what your shareholders say the right price is, you’ve got to look at that.
Through the deal with Home Depot, I learned more about how big companies approach corporate development, which is different than how a company like Support.com would do it. While it was a really small deal for Home Depot, it was the first acquisition they had done in a few years and their first technology acquisition, so we had a lot of senior management visibility on us. Because an acquisition is something that gets everybody’s attention, no matter how big the company or how small the deal, you have to be prepared to meet some of the biggest people in the business world, like the CEO and CFO of Home Depot, who I might add were both phenomenal. We were sitting in their offices early on in the process. That was something that not a lot of executives of companies our size are prepared for or used to doing.
Q: How did you reconcile Home Depot’s valuation with the selling shareholders’ valuation when negotiating the deal?
At Redbeacon, the biggest challenge was to figure out a valuation that we felt comfortable with ourselves. It didn’t really matter at some level whether Home Depot agreed with the valuation or not. We were dealing more with options, rather than with true numbers. There were five key constituents–the two venture funds, Mayfield and Venrock, the two founders and myself–and definitely some disparity between us as to what number we would do a deal at. We were fortunately able to get to the same place at the end of the day.
If Home Depot had been hard and fast on a price that was below our range, then there wouldn’t have been a deal. We would have been happy to go it alone, so I think we had some leverage. We also had the Angie’s List IPO occur during our conversations with Home Depot. I considered the Angie’s List valuation to be pretty generous, and I think that Home Depot, Redbeacon and our shareholders felt that if Angie’s List could raise a valuation of $1 billion, then we should be able to raise more money to grow our business in relatively positive terms. That, I think, helped us get a deal done.
There were also a few other things that worked to our advantage. We were realistic about where we were and excited to be part of Home Depot. We felt that Home Depot was a great company, and they were the perfect partner. If you’re the founder of a company, at the end of the day, you want to see your business become huge and change the game. Being part of Home Depot was the best way for us to change the game in the category that we operate in. We felt confident that they were the right acquirer for Redbeacon as we went through the process, and that mattered to us as much as the money. It was meaningful to me because we were going to spend years of our lives as part of Home Depot after the acquisition.
Q: Given how much you relied on the lessons you learned from your time at P&G, would you advise young people to start their careers at big companies or is there an opportunity for people to be entrepreneurs right out of the gate?
I’ve had the good fortune to work for and with some brilliant people. The founders at Redbeacon are phenomenally gifted; Jeff Fluhr, the CEO of StubHub, really understood the way raising capital and creating value in Silicon Valley worked. I worked for a guy named Stig Leschly, who was at Amazon early on and whose company was bought by Jeff Bezos. I learned a ton from them, and they were great at what they did, but would they fit into a large company over time? I don’t know.
Every person’s risk-reward tradeoff differs, and you have to figure that out for yourself. I’m not going to tell Jeff Bezos, Mark Zuckerberg, Michael Dell or Bill Gates that they made the wrong career choice. For me personally, I spent seven years at P&G, first in corporate finance and then in brand management and running a business line, and that was invaluable experience. There’s really no business function that I hadn’t touched and understood before I moved into technology, and I think that the reason that my career trajectory has at least been somewhat upwards is because I understand the way businesses work, and that came from when I worked at P&G. My boss at P&G told me that there’s a lot of value in being the first P&G guy to join a new company because you will seem brilliant. I’ve found that to be true. You can take some key things you’ve learned and apply them in a startup or smaller company, make the company run better, and everyone will think you’re an amazing manager.
If you’re going to start a company and if you’re truly an entrepreneur, you should go start your business. America needs more entrepreneurs starting businesses. If you’re not going to start your own company, you’re better off working in a great company and learning the way a business works than you are going into consulting or investment banking. I don’t think those skills translate well to running a company. I really believe that if you want to run a company, you have to learn how to do that at some point.
Q: Who have you looked at for inspiration in your career?
I was really lucky that when I left P&G to work at Amazon, I met Jeff Bezos. He was the kind of person who sets the vision and empowers his employees. I was a very mid-level, junior guy when I went to Amazon. After seven months at Amazon, I went from being a group product manager to becoming General Manager and running the store, so to speak. I went to the Sunday morning leadership meetings that Jeff held at his house with all of the senior VPs, where we would argue about what our core competency was as a company. That was unsettling to me, having been just a few years out of business school. What I wanted to do was what Jeff wanted to do, and I felt like we weren’t going to be able to get it done because I couldn’t sell some of my ideas, and that was frustrating to me at that point in my career. What I learned from that experience was if the guy who owns and runs the company has a vision, that’s the way the company is going to go. What I learned from Jeff Bezos definitely shaped my career.
Image Credit: Redbeacon
Find new deal opportunities, super-charge your fundraising efforts and track top managers with VCJ. Get your FREE trial! Or subscribe now!
Take your pick!
- Buyouts delivers exclusive news and analysis about private equity deals, fundraising, top-quartile managers and more. Get your FREE trial or subscribe now.
- VC Journal provides exclusive news and analysis about venture capital deals, fundraising, top-quartile investors and more. Get your FREE trial or subscribe now.