After months of planning, I demoted myself today from chief executive to a role where no one will report to me. I’m giving up my corner office and moving next to a young engineer who just graduated from college. My demotion will probably come as a surprise to the 54 people who worked for me: I have merged my company with another company, and its CEO is their new boss.
I couldn’t be happier, and it’s not about the money. In fact, I didn’t get a payout.
Before you roll your eyes, travel back in time with me to understand my motivation. At 20, I had my first job as a computer programmer implementing signal processing algorithms for a military contractor. It turned out that I was a very good programmer—creative, systematic, determined. This was odd to me, because I knew that my true calling was teaching. In 2001, after working at NeXT and Apple (AAPL) for three years, I started Big Nerd Ranch, a software development training and consulting firm in Atlanta.
Until today, I presided, Yoda-like, over a 54-employee hive of experts on mobile application development for smartphones and other devices from Apple, Google (GOOG), and Microsoft (MSFT). A significant slice of the Fortune 100, including AT&T (T) and Procter & Gamble (PG), hire us to write apps for them or to train their engineers how to write apps. Getting us here meant behaving like a good parent. I had to be consistent, act with integrity, and know when to say no.
Being the boss was a satisfying gig, but in the past year I found myself envying the jobs that I was giving to other people. I wanted to get back to coding, teaching, and writing. A lot has been written about the “flow experience,” where one loses himself in his work. The job of an engineer is loaded with flow experiences and small victories. The job of a CEO is mostly interruptions and putting out fires. There is no flow, and it takes months for your efforts to become victories. In short, I had a conspicuously great job, but I didn’t like going to work anymore.
I approached three big consulting companies about selling out to them. I would stay on as a teacher and programmer, and someone further up the org chart would take on the tedious tasks. As a side effect, I would become very wealthy. The conversations I had, however, were disappointing. Some dork with an MBA would tell me how he would fold my people into the larger organization, they would travel constantly, and spend a lot on dry cleaning. Most of the programming would actually be done in India or Romania.
I didn’t want to betray my employees and customers like that. I gave up on being purchased and started looking for someone with the skills and vision to take over for me. I found CBQ.
“Found” isn’t quite the right word. I had known Charles Brian Quinn for several years. He is a programmer with a passion for business and strategy. He’s only 31, but I respect the way he conducts himself and runs his company. I couldn’t hire him because he was already the owner and CEO of Highgroove Studios, a 24-employee firm that develops Web services for large companies.
So I proposed merging the two companies and making him CEO. He saw the beauty of my idea: We would be able to offer our clients one-stop shopping for mobile apps, exponentially increasing our value to them.
To understand the elegance of the merger, you need to know something about mobile development. For nearly all mobile applications, there are two pieces: the client and the Web service. The client is the app that runs on your mobile device; it can be written for iOS, Android, Windows 8, or HTML5. Big Nerd Ranch is an expert at writing clients. The Web service is a process that runs in the cloud. A mobile client talking to a Web service in the cloud is the cornerstone of what pundits call “the Post-PC Era.”
CBQ’s first question: “But what will you do?” I’ve created the company that I want to work for, so I’m not quitting. I’m going back to coding, teaching, mentoring, and writing (I made time for four books along the way). As chief learning officer (I suspect that I’ll be known as “the oldest nerd” around the office), I’m responsible for ensuring that every engineer in the company is an expert and that every chief technology officer in the world respects our combined expertise.
We transferred the assets of both companies to a new entity of which we are the only shareholders. We funded our companies without ever bringing in outside investors, and we aim to keep it that way to maintain control. Thus, we’ve crafted a set of agreements that lay out how we’ll work together. I am the majority shareholder of the new entity, and CBQ has an option to buy enough of my shares at a later date to become the majority shareholder. There are a dozen things, like issuing new shares or doing distributions, that require approval from both of us.
The most interesting part of the deal is what it doesn’t include. There is no guarantee of employment or a golden parachute for me. There are no clauses that punish CBQ for poor performance. I think CBQ will be a great leader, but I also expect him to make a few bad decisions and suffer through a few bad years. As long as the value of my stock is tied to the value of his, I think I’ll do fine in the long run. Thus, the terms in the agreement are nearly all “I get the same deal as you” clauses.
Our story is part of a trend that should scare venture capitalists: Smart entrepreneurs can build very competitive companies today with zero outside investment. The venture capital market is feeling the results of this trend right now. A lot of money is chasing a small amount of equity in promising companies. Why were the owners of Instagram able to ask Facebook (FB) for $1 billion? Because they didn’t really need the money.
I hope my experience is instructive to fellow entrepreneurs. And I hope my new boss enjoys manning the corner office.