304 ENTREPRENEURSHIP
Toppling the Top Dog
In 1997 David Handawi had the skills needed
to create a security software company: He
had a Ph.D. in Operations Research from the
University of California at Berkeley, and he
had already held several executive positions
in software development companies.
Handawi had entrepreneurial vision too. He
could see a need in the marketplace for soft-
ware that could make enterprise desktops,
laptops, and servers run more securely and
efficiently.
When the company he founded began to
grow, Handawi did not appear to have the
necessary management skills to serve as
CEO—even though he had previously been
CEO of a telecommunication software com-
pany. After a group of outsiders invested $8
million in BigFix, Inc., in 2002, they hired an
experienced start-up executive to assist
Handawi. When sales still fell short of expec-
tations, they replaced Handawi as CEO with
that new hire.
“The last thing somebody wants to do is
confront somebody and say, ‘You’re doing a
bad job,’” says Pascal Levensohn, founder of
a venture capital firm called Levensohn
Venture Partners. But according to
Levensohn, almost two-thirds of venture-
backed start-ups replace their founding
CEOs. Signs that a CEO is in trouble include
ignoring input from board members, shirking
responsibility when problems arise, and/or
making desperate deals. Some floundering
CEOs simply start spending more time out-
side the office, getting involved in political
campaigns or charitable projects instead of
dealing with issues inside the company.
Despite the awkwardness of confrontation,
some investors get burned because of their
reluctance to speak up. Levensohn says his
firm lost its $1.5-million investment when
SingleSourceIT, an Internet start-up company,failed five years ago. Yogen Dalal, a manag-
ing director of fellow investor MayField Fund,
says, “The CEO change should have been
made sooner.” Even Randy Wilcox, founder
and CEO of SingleSourceIT, admits that
allowing him to continue as CEO “in retro-
spect, was a mistake.”
Some start-up founders, of course, have
been very successful CEOs: Bill Gates and
Michael Dell are two legendary examples.
Replacing a CEO isn’t always a magic solu-
tion. Apple Computer, Inc., floundered after
removing cofounder Steve Jobs as CEO in
1985, but has soared since he resumed the
position in 1997.
Keith Benjamin, a BigFix board member
who was involved in replacing Handawi as
CEO, calls the transition “a great example of
how to do it the right way.” Still, he notes that
the founder “was not happy about it.”
Handawi gave up his office and worked from
home for some time after his ouster. But
when BigFix refocused its marketing strategy,
the company found a new role for Handawi.
His technical skills enabled him to deal
knowledgeably with the tech buyers at big
companies, and the company’s software-con-
tract bookings grew more than 75 percent as
a result of his involvement. Today BigFix
(www.bigfix.com) provides comprehensive
and innovative security software to over 350
companies, government agencies, and public
sector institutions, and its security software—
including products developed and patented
by Handawi—has won numerous industry
awards.
SOURCE:Adapted from Rebecca Buckman, “When
Founders Flounder,” The Wall Street Journal, January 23,- Retrieved from the Web January 23, 2006.
http://online.wsj.com/article_print/SB1 13797392552153168
.htmland http://www.bigfix.com.
STREET STORY 8.1