Hootsuite Media Inc.'s founding chief executive officer, Ryan Holmes, will step down in the wake of concerns raised by the company’s board about his leadership after a failed attempt to sell the social media management company.
Mr. Holmes will leave the post when a successor is found but will become the company’s executive chairman, he wrote in a note to shareholders on Tuesday. He started Hootsuite in 2008, and it quickly became a leading platform for managing social media accounts for corporate clients.
Research firm CB Insights pegged the company’s valuation at US$1-billion earlier this decade. The Globe and Mail reported in January that Hootsuite had been seeking a buyer but struggled to find offers higher than US$700-million. The company laid off about a 10th of its approximately 1,000 employees this year.
The Vancouver-based company did not make Mr. Holmes available for an interview. Two sources familiar with the situation, who were granted confidentiality because they were not authorized to discuss the decision, said after the failed auction, the board began months of tense talks about whether Mr. Holmes was still the right leader for the company. They received feedback that prospective buyers were concerned about Hootsuite’s metrics, particularly its revenue growth and low profitability.
Sources said there was concern that much of Hootsuite’s revenue growth came from price increases, and the company lost some of its big accounts. Meanwhile, dynamics in the industry have become tougher, particularly with Twitter extracting significant payments from social media management firms, including Hootsuite. The board was particularly concerned about customer and employee churn, especially after many senior executives left the business.
“At Hootsuite, we routinely look at our entire leadership team – which includes me – to determine the best path for our future stages of growth and continued success,” Mr. Holmes wrote in an e-mailed statement to The Globe. “I am fortunate that I have an excellent board that I can have positive and candid conversations with to this end. It was through personal reflection and these candid conversations with my trusted board that I decided it was time to start looking ahead at new leadership.”
In his shareholder letter, Mr. Holmes said he hoped to spend more time with his young daughter: “It feels like it is the right point to take some time and reassess priorities.”
In the letter, Mr. Holmes said the company had surpassed US$200-million in annual recurring revenue. This, he wrote, “tells me we’ve built something at a breakneck speed that is highly valuable.” He added that the company made changes to its sales and marketing teams this year that prompted 20-per-cent-higher contract values and better retention rates.
In the third quarter of this year, the company renewed more than 650 enterprise customers, he wrote, including long-standing clients Melia Hotels, Purdue University and the Vancouver Canucks. And over the past three quarters, the company signed more than 1,100 enterprise customers.
Hootsuite is a platform that, among other things, allows companies to write and schedule posts from multiple social media accounts.
Many senior leaders left the company around the time of the attempted sale. These included senior vice-president of sales Bob Elliott; sales vice-presidents Chris Saniga and Phil Edgell; Mik Lernout, vice-president of product, and André Viljoen, vice-president of technology.
Asked about these leaders leaving in an interview this fall, Mr. Holmes said “the tech industry as a whole has one of the highest churns of employees. … Sometimes the company outgrows people and sometimes the people outgrow the company."
The layoffs, he said, were “not about [employee] performance. It was about needing to make shifts.” Those shifts, he continued, were “some tough decisions we needed to make in terms of where we wanted to invest in the business and some areas that we needed to deinvest in.” He declined to name which areas those were.
Mr. Holmes’s rating on the company review website Glassdoor has fallen to 54 per cent from nearly 80 per cent in the past several years, which he called a “lagging indicator" of his success. “We did a reorganization recently, and some people had hard feelings on that, and I think that shows up here,” he said.
An initial public offering or sale could still be possible, said one source, who also said the company was profitable.
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