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New York startup SimpleReach has raised new funding and replaced its CEO, founder and former CEO Edward Kim tells Term Sheet. New funding for the “content data platform” startup totals $9 million, led by Spring Mountain Capital. Hal Muchnick, formerly of DoubleClick, Kontera, AddThis, and LowerMyBills, will become CEO.
This news is notable for two reasons:
1. In the last year, investors have viewed any startups related to advertising and marketing as toxic, in part, because the category was over-capitalized and VC portfolios are over-exposed to struggling assets.
But last month’s sale of Moat, an ad verification startup, to Oracle for a reported $850 million has renewed interest in the category. Kim says after the Moat deal, “a ton of folks” that had passed on investing in SimpleReach “emailed [him] right away saying, ‘We want to catch up.'” It was too late — Kim says SimpleReach had raised “more than enough capital” and doesn’t want to take more dilution than needed.
2. Kim’s move from the CEO role is notable because it goes against the prevailing narrative among startups that says founders should avoid handing their companies over to a more professional CEO. Those that didn’t willingly step aside risked being forced by their investors.
That was the old way of doing things. Web 2.0, Mark Zuckerberg, Sean Parker, The Social Network, and the rise of founder-friendly venture firms changed that. Recall Digg CEO Jay Adelson’s anti-VC catchphrase, “F*ck the sweater vests,” from Sarah Lacy’s book on Web 2.0. Now, instead of stepping aside when the job outgrows them, founders “hire a Sheryl Sandberg.” As Businessweek noted in 2011:
Case in point: Airbnb’s Sheryl Sandberg, the Sheryl Sandberg of Instagram, the Sheryl Sandberg of Snapchat, the Sheryl Sandberg of Vice, Imgur Gets Its Sheryl. (The Sheryl’s of Instagram, Snapchat and Vice have since departed.)
But even with “a Sheryl,” successful founder-CEOs still need to learn how to become professional executives that can manage billion-dollar businesses with thousands of employees. Some of them get antsy and would prefer to get back to the scrappy days of experimenting, pivoting, and inventing.
“A lot of founders feel like it’s this big slight if they don’t hang onto the CEO title, but to me, this stuff is really hard and if you haven’t done it before, there is something to be said for bringing someone in who has scaled company after company,” Kim says. “When I think about how to maximize the value of my own equity, I think having [Muchnick] leading the day-to-day will end up with the company being most successful.” Kim will remain active as executive chairman at SimpleReach, “leading the charge on the product vision.”
This is becoming a bit more common among New York City-based startup founders — Payal Kadakia, founder of ClassPass, recently made a similar move, and Dennis Crowley, founder of Foursquare did so more than year ago.