EXCLUSIVE - Rosedale to step down as Linden Lab CEO
By Adam Reuters
SECOND LIFE, March 14 (Reuters) - Linden Lab Chief Executive Philip Rosedale said on Friday the company he founded has begun a search for a new CEO with more operational and management expertise.
Rosedale will become chairman of the Linden Lab board when his successor is found, replacing Mitch Kapor, who will remain a board member and the company’s largest investor. Rosedale said he will also keep a full-time role at the company working on product development and strategy.
“This is my life’s work,” he told Reuters in an interview. “I’m not going anywhere, and I’m still full-time on this, probably for the rest of my life.”
Second Life’s growth has slowed after a period of rapid expansion. Rosedale’s replacement will face the difficult task of regaining that momentum, working within Linden Lab’s idiosyncratic corporate culture and winning over Second Life’s impassioned users.
The shift from a visionary founder to an operations-focused CEO is typical for technology start-ups, with eBay and Google as prominent examples. A recent Harvard Business Review study found that 50 percent of founders were no longer CEO by year three, 40 percent remained by year four, and fewer than 25 percent led their companies’ initial public offerings. Rosedale, a former chief technology officer at RealNetworks, has been CEO since founding Linden Lab in 1999.
“It was not precipitated by a crisis,” Kapor told Reuters. “We had always anticipated that there would be a time when he’d decide he no longer wanted to be a CEO.”
Kapor added that the management change is not a prelude to a sale of the company or an initial public offering, though he acknowledged that an IPO was an option under consideration.
“We always knew this was a long-term project, operating on a different time frame from (other) venture-backed startups. At some sense it will make sense to go public but there’s no rush to that,” he said. Linden’s venture backers include Benchmark Capital and Omidyar Network.
“The company has the type of financial performance that if it wanted to it could become a public company,” said Benchmark’s Bill Gurley, who sits on the Linden Lab board. “I certainly think at some point in the future — and I’m certainly not announcing anything new here for the next 12 months — that’s on the company’s ambition plan.”
FROM HYPE TO BACKLASH, AND BEYOND
The new Linden Lab CEO will be tasked with reviving the growth that once made Second Life a pop culture phenomenon.
The virtual world’s subscriber base and user hours are still increasing but at much lower rates than in late 2006 and early 2007, when a surge of attention brought droves of new users to Second Life. Worldwide brands including Reuters and IBM set up shop within the virtual world, but many like Time Warner’s AOL have since left or radically scaled back their participation.
More than 12 million Second Life accounts have been created since the world was launched, although the vast majority of accounts are no longer active; there are thought to be roughly 500,000 hard-core users. Month-on-month registration growth, which peaked at almost 50 percent in October 2006, had fallen to 4.6 percent by January, 2008, the most recent figures available.
Aside from hype and the subsequent backlash, much of Second Life’s difficulty in retaining new users has been caused by difficulties in scaling its platform and making the software easier for novices to use, which Rosedale said would be helped by bringing in a new CEO.
“We’re looking for someone who has experience with and a passion for growing this type of company — a software platform company — from 250 people to thousands of people, which is where we think it’s going,” he said.
A UNIQUE CORPORATE CULTURE
The new Linden Lab boss will have to balance the need for more efficient management with the company’s idiosyncratic culture and decentralized structure. Employees choose which projects they want to work on, and bonuses are assigned by a system called the “Love Machine,” which lets employees praise their co-workers for completed tasks.
“Every company that starts small and grows bigger has apprehension as you layer in management and processes that young entrepreneurs aren’t excited about,” said Benchmark’s Gurley. “I don’t know there’s a magic formula there — it’s one of those dilemmas everyone faces.”
The new CEO will also have to win over Second Life’s enthusiastic and fractious user base, which has created all of the content within the virtual world and in effect serves as a massive, revenue-generating workforce.
Linden Lab is using an executive search firm to find a new CEO, a process that Kapor could take “anywhere from soonish to many months.”
“Legally, the board hires and fires CEOs,” he added. “Process-wise, this is going to have be someone Philip is incredibly enthusiastic about.”
