What Succession Misses

HBO's succession is a great show about a fictional media business and there are some really interesting scenes in season one that relate to common real world situations. All of these clips come from season one, so if you haven't watched the full season, there will be some spoilers in this video. You should go and watch it though. It's a really fun show and it's super well produced. I'm John Coogan and here's my reaction to HBO's Succession. Now, to be clear, I've never been on the board of a public company, but I have attended board meetings every quarter for about the last decade. I've also never been involved in a family business like Waystar Royco in Succession. So I'm going to focus on clips that I think generalize well to my personal experience in startups. First up is a scene from The Pilot Season 1, Episode 1, Celebration. In this scene, Kendall Roy is trying to make a name for himself at the company by acquiring a small digital media startup. Let's take a look at how he acts during the deal. Hey, hey.

Hey, buddy.

Good to see you.

So we ready to or what?

Yeah. Okay, look, I'm really sorry, but it looks like there's an issue.

Come on, I came all the way up here, dude.

Yeah, I'm sorry, dude.

Okay, listen, you know I love what you do, right? I mean, I'd love to keep you and your team in place. Lawrence, I think Valter is the shiz.

We're the shiz.

Yeah. What's it gonna take? You want me to. You want me to send a vintage Jaguar over to your house today? I'll do it.

So first up, he's very unprofessional and super casual here. It's not uncommon for people to try and be friendly during a negotiation, especially if the lawyers aren't around and you're talking about a deal, just founder to found founder. But this clearly backfires. You should always try and act as professional as possible when you're early in a deal process. Selling a company can be very emotional. So having empathy for what the founder is going through goes a long way. Kendall is all about putting pressure on the deal and he takes it a step further later in the episode.

The number is 140. Cash with a stock alternative. You're on our board. Take the stock, you'll own a nice piece of us.

Well, that is an appealing package.

It is, yeah. It's appealing easy.

You still need me to recommend this?

No, I don't. This is a deal. So good you have to take it or we'll see you in court, dude.

Raising the acquisition price is a great way to get a deal done if you are struggling to find a shared vision. At this point, it looks like Kendall has offered a high enough price that the investors basically can't say no. Now, there is one oddity here. He says, if you don't take the deal, we'll see you in court. Generally, if a founder blocks a deal that would benefit the shareholders, they can't really be sued by the company that's trying to acquire them. They could get sued by the shareholders since all board members, including founders, have a fiduciary duty to shareholders. But if Waystar Royco doesn't own any shares in the target company, they can't really sue them for turning down the deal. Applying pressure to close an acquisition does happen, though. Usually it just takes the form of threatening to launch a competing product. This is what happened when Facebook acquired Instagram. Kevin Systrom, the founder of Instagram, asked a friend who knew Mark Zuckerberg personally what would happen if Instagram turned down Facebook's acquisition offer. Systrom's friend said that Zuckerberg would go into destroy mode. Direct competition like that can be really scary for an early stage startup, so that's usually where the pressure gets applied. The second scene I want to cover is from episode six. Which side are you on? Kendall is trying to mount a coup and get the board to issue a vote of no confidence. Boardroom conflicts are already extremely dramatic, but the writers heighten everything by making Kendall run late for the meeting. One of his allies tries to stall for time. Let's take a look.

It's 12 noon and I'd like to call the meeting of Waystar Royko to order. Roll call. Yeah, you're here.

Never done Roll call.

What is roll call?

We're doing it today.

Why are we doing roll call today?

Because that's how we do it. Right, Noah? So Logan. Roy is here.

Frank.

Vernon.

Present.

Kendall.

Roy.

Absent. Roman. Roy.

Yo.

A formal roll call like this is basically unheard of. And it's a pretty blatant attempt to stall for time. Usually the lawyers who are taking minutes at the meeting would just look around the room and make a note in the minutes of who is in attendance. If your lawyers are formally calling roll, they're probably just trying to pad out their timesheets and bill you more. Just don't do it. Every company usually has a set of rules that govern who can call a board meeting and under what circumstances. Special meetings can be called. So this Vote of no confidence doesn't necessarily have to take place at this particular meeting, but there are some restrictions. Usually you would need the majority of the board to agree to a meeting and schedule it a few days in advance. Each meeting requires a quorum for any decisions to be legally valid. This prevents a situation where a board waits until a particular board member is traveling internationally without cell phone service and then calls a meeting instantly and makes decisions without them. This is kind of a spoiler. But the coup fails and Kendall is immediately fired.

I'm chairman. Casting vote. I win. It's fucking over. What's the vote, my son? That was your best shot. You lost.

I think there's some doubt as to whether he lost one or.

And Kendall, Frank Asher Alona off the board.

Fired with immediate effect.

I don't think you're able to do security.

I'm in the middle of turning a tanker in house.

You don't need to call security.

I have some doubt.

I'm in the middle of turning a tanker. Yeah.

Now, as CEO, Logan Roy can fire any members of the management team. So it's very realistic that he would fire Kendall on the spot for leading the coup. What's a little odd is that he also fires several other board members at the same time. Typically, board members earn their seats through investments, and the investment firm they represent is actually legally entitled to a seat. A good example of this in practice took place during the Uber controversy of 2017. After facing a number of MeToo related culture issues, Uber held a company wide meeting where the board presented their thinking about a way forward. At the meeting, David Bonderman, an Uber board member and a partner at the private equity firm tpg, made some impolite remarks about women and was quickly pressured to resign. But TPG still had rights to the board seat, so they installed David Trujillo as Bonderman's replacement. Replacing a board member who represents a financial firm will not likely change the way that seat votes on important issues. And if you're an independent director who can be removed by the chairman at any time, it would be extremely difficult to vote against that chairman. So this scenario is a little odd to me. The last clip I want to talk about is from episode 8, Prague. In this scene, Kendall is trying to rebound from his firing at Waystar by getting into startup investing. He's clearly out of his element and it really shows when he goes to pitch an art dealing startup called Dust.

Frank Handle. This is Dust.

Hey, man.

Hey. Great to connect. Love the name, by the way.

Very funky.

Sorry, please excuse Captain Beep up here. Hey, how's it going?

How's it going?

Cool earrings. Very Bauhaus. Big fan of what you guys do. Sweet chili sauce.

Thanks.

Likewise.

Angela, you want to spin us through the pitch deck?

Sure. So that's okay.

I don't need to hear the pitch. I've been through the deck and I get it. Basically, you buy a painting from some art student in a basement, jack up the price, sell it to some Morgan Stanley sex pest, and you, me and the student all get rich.

Right?

We're interested in increasing the reach of young artists and the democratization of art.

No, absolutely, I get it. You're providing a platform to marginalize talent, the next generation of artists.

I'm just telling you how it works. From the outside to the sharks.

Most founders tend to really believe in their missions. So coldly describing how you could hollow that mission out and focus purely on profits is never a good strategy for an early stage investor. It's fine to talk about how the business model will evolve. After all, most founders of for profit companies want to build companies that fulfill their missions while making money. But ignoring the real world impact that a startup can have is a big mistake. The bigger issue here to me is that Kendall is clearly trying to self actualize through his startup investing, and that's never a good sign. Jeff Lewis, the founder of Bedrock Capital, has a great YouTube clip describing why this is so important.

You want to work with a VC who is not trying to self actualize through investing in you, and this is basically the number one vector on which you want to optimize for when you're selecting a venture capital partner. It's not firm brand, it's not value add, it's not track record. It is someone who seems as if they are self actualized and does not need their investment in your company to be a mechanism for them to self actualize. Why is that? Because it's basically impossible to self actualize to making an investment. Okay, so there are lots of ways to self actualize in the world. But core to self actualizing means being in control of whatever the vector of self actualization is. So if you're an entrepreneur, you can self actualize through building your company. If you're a VC who's founded your own VC firm, you can self actualize through that, but you can't self actualize through writing someone a check and giving them advice.

Investors who haven't built anything for themselves can wind up exerting too much control because they want your company to be the thing that they are. Personally known for. And that's never good. Later in the episode, the founder of Dust explains why she is turning down Kendall's investment offer.

What happened?

You told me. I'm sorry.

It's nothing personal.

I shouldn't be telling you this, but I'm about to land a chunk of seed capital the size of, like, Idaho. So, I mean, whatever it is you need, I can make it happen.

Okay.

Yeah.

Okay.

Okay.

So we good?

You know, it's just not about that.

Then, like, help me out here because there's something I'm not seeing.

It's the name which.

You mean Dust.

Roy. Kendall. Roy.

It'd be like I was marrying Hitler and then I'd get to be what, Mrs. Hitler?

Okay, that's not really fair. I mean, look, that's. That's not me. I'm not a Roy.

While I would personally avoid working with Kendall in this situation because he doesn't seem like a self actualized VC and would probably be overbearing, the founder cites the business practices and controversial political leanings of Waystar as the determining factor. Political alignment is increasingly becoming a reason why founders choose to work with specific VC firms. Shortly after the storming of the United States Capitol, I saw a tweet by Hunter Walk, who runs the seed stage firm Homebrew, advising entrepreneurs to not take money from Jared Kushner, who serves as a senior advisor to President Trump, who is his father in law. Not all founders will have the luxury of turning investors away based on their political beliefs. But it's not unreasonable to try and find venture capitalists who see eye to eye with you on how the future should unfold. Politics continues to dominate every aspect of public life, and you don't want your board meetings to turn into political debates that just won't be productive. But what do you think? Did you enjoy Succession? Let me know in the comments if you've seen the show and what you liked about it. And if you enjoyed the video, please consider subscribing to the channel. Thanks for watching.