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Leadin’ Ain’t Easy… Ben Horowitz Reveals What It Takes

He was in New York City laying the groundwork for an IPO when he got the call. His wife, Felicia—the mother of his three children—had recently undergone surgery for a hernia. And now his father-in-law was on the phone telling him that she had an allergic reaction to her medication.

“She stopped breathing,” he said.

“What?”

At any other time Ben Horowitz would have stopped what he was doing and rushed home to California. But these were extraordinary circumstances. Horowitz was the CEO of Loudcloud, a computing services provider that was fighting for its life. He had only enough cash to remain in business for three more weeks.

Felicia was stable. Loudcloud was in critical condition. If he couldn’t convince investors to give him money, Horowitz would soon be out of a job. And so he got his wife on the phone and explained the situation. “I’ll come home if I need to,” he said. “But I just want to be clear—it will be the end of the company.”

“No,” she replied. “Stay and finish the road show.”

Even now, 13 years later, Horowitz marvels at the exchange. “Any normal person would say, ‘If your wife’s in the hospital, you go home,’ right?” he says. “You don’t stay on the road for another 2½ weeks. But that’s what happened.”

Felicia survived. And so did Loudcloud. (Its ensuing IPO raised $162.5 million.) But Horowitz’s ordeal was far from over. As the tech industry continued to struggle with the fallout from the dot-com crash of 2000, Loudcloud’s customers were going bankrupt in droves. There was no private money to be had. In what he calls the best decision of his life, Horowitz opted to sell the company’s profit center—a nascent cloud service business, complete with customers and staff—for $63.5 million and start over again as a software company named Opsware. The stock market greeted this news with open hostility, lowering the firm’s stock to 35 cents a share.

In his book, The Hard Thing About Hard Things, released earlier this year, Horowitz relives the whole painful saga in gory detail. Instead of painting himself as the conquering hero, a brilliant tactician like Richard Branson or Tony Hsieh, he shares every pivotal misstep. Today Horowitz is the co-founder—with Netscape legend Marc Andreessen—of one of Silicon Valley’s hottest venture capital firms. Back then, though, he was just a rookie CEO, feeling his way through the darkness.

He recalls an encounter with a journalist who asked him why he didn’t just give up and walk away when things got bleak. “If I thought I could quit, I would have quit,” he says. “But I made all the promises. I hired everybody. I raised all the money. Even my mom was an investor. How could I walk away?”

Remarkable in its candor, Horowitz’s book is more than a memoir. The Economist calls it “a leadership classic.” Filled with no-nonsense advice on the hardships of running a company, it’s a deliberate attempt to avoid the sugarcoated, formula-for-success books written by his peers. In Horowitz’s opinion, those have a very short shelf life—especially for a young CEO. “After two weeks on the job, I had already screwed up my company,” he says. “Where was the book for what to do next? It didn’t exist.”

In the end, Horowitz steered Opsware through a whole new set of hazards, selling the company to Hewlett-Packard five years later for $1.65 billion. His brave decision to change course paid off big.

It’s in those moments of crisis, when you feel like hiding or dying, that CEOs define themselves, Horowitz says. Leadership isn’t about doing what everyone thinks is a good idea, he explains; it’s about standing tall when they all disagree with you. That takes courage. And that’s what distinguishes a great CEO from the rest—the confidence to make the bold choice regardless of the consequences.

***

He doesn’t look like a tech titan, even by the loose standards of Silicon Valley. When he steps onto the stage at South by Southwest Interactive with a goofy smile, his balding, egg-shaped head floating above a baggy gray sweater, he reminds you of a bookish cousin, the one who always seemed out of place in public. But the longer he talks, the more you warm to his wisdom, the shrewd tips, soft-spoken humor and sly pop-culture references that dot his comments. When he speaks of the importance of communication, about how to promote a sales manager without offending her colleagues, or how to fire a friend or lay off one-third of the staff, it comes from a deep understanding of human nature. You can’t help but see why Bill Campbell—famed mentor to Jeff Bezos, Steve Jobs and Larry Page—calls Horowitz one of the sharpest business leaders he knows.

Born in London in 1966, Horowitz was raised in California, as he often jokes, among the counterculture crowd of the “People’s Republic of Berkeley.” His mother, Elissa, was a nurse, his father, David, one of the New Left’s leading lights, an influential author and co-editor of Ramparts magazine. (David’s parents were New York City schoolteachers who embraced the communism of Joseph Stalin, although they eventually broke with the party.)

While his peers were watching Happy Days and The Six Million Dollar Man, young Ben was chatting up Black Panthers and screening Alex Haley’s Roots. (His favorite sitcom was Good Times.) In 1985, Ben’s freshman year at Columbia University, his father suddenly shifted allegiances, renouncing his liberal ties and rallying behind Ronald Reagan.

Needless to say, Ben developed a very broad worldview. Under the selfless guidance of his mother, he learned to embrace athletes and honor-roll students, entrepreneurs and renegades, rappers and programmers. Painfully shy (to this day he has trouble making eye contact with people he doesn’t know), Horowitz seems to have a sixth sense for what motivates people. He dissects problems like a systems analyst, studying the results of exit interviews for answers to retention issues, for example, or plotting the pros and cons of training programs. But he thinks like a philosopher, too.

If there’s one story that illustrates Horowitz’s genius for leadership, it’s the tale of how he came to buy a company called Tangram Enterprise Solutions.

In 2003, just a few quarters into his stewardship of Opsware, the CEO learned that EDS, the tech company that had purchased Loudcloud and later agreed to license Opsware’s software, was dissatisfied with the product—dissatisfied enough to want out of the deal.

Horowitz quickly sent two of his lieutenants to EDS’s Texas headquarters with instructions to rescue the partnership, which amounted to 90 percent of Opsware’s revenue. The first emissary was instructed to iron out the bugs in the relationship. The second was told to find an unexpected value Opsware could use to sweeten its offer.

The two men learned that Opsware’s fate rested in the hands of a disgruntled IT executive who was about to lose his favorite inventory program because the purchasing department of EDS wanted a free alternative. His program was produced by Tangram. So Horowitz bought Tangram for $10 million and folded its inventory program into Opsware’s software free of charge. When the IT exec saw how committed Horowitz’s team was to repairing the relationship, he was duly impressed and gave the firm time to resolve its other issues.

In Chapter 4 of The Hard Thing About Hard Things, Horowitz writes: “I don’t believe in statistics. I believe in calculus.” It’s his favorite line in the book. That’s what kept him going in his darkest days as a CEO—the idea that, despite the bleak odds, he was sure there was a way to succeed. He just had to find it.

That credo convinced him to sell the Loudcloud part of the business. To build a brand-new company around the Opsware software. To reinvent the whole mission, all while keeping his employees focused on their jobs. “Management by its nature is dynamic and emotional and situational,” Horowitz says. “Other business books are written as if it’s logical and static, like you’re building widgets.”

And that’s not very useful.

***

On the walls of his office on Sand Hill Road—the venture capital equivalent of the Vegas Strip—in Menlo Park, Calif., he has a series of small vintage boxing photos encased in black frames. They include snapshots of the sport’s greats, such as James “Cinderella Man” Braddock, Sugar Ray Robinson and Muhammad Ali.

“In a [street] fight, you have this rush of adrenaline, and then the fight’s over,” Horowitz explains. “In a boxing match, you may have some adrenaline, but then you have to sit on a stool for a minute and feel the pain from all the punches you’ve taken. And then you’ve got to get up and fight again. It’s the ultimate test of courage.”

In Horowitz’s vision, the people who start companies are the ones with the vision and the passion to lead them, and the resilience to accept the misery and keep throwing punches. Consider the founders of HP, Microsoft, Facebook or Google. It seems such an obvious mistake now, but for years venture capital firms thought it was smarter to replace a Steve Jobs with a seasoned CEO type like John Sculley.

When Horowitz launched his own venture capital firm with Andreessen in 2009, he was determined to help young founders master the CEO role. To achieve that goal, he and Andreessen borrowed a model used in the 1980s by Michael Ovitz to turn Creative Artists Agency into a full-service Hollywood juggernaut. Like CAA, Andreessen Horowitz employs dozens of “partners” assigned to help tech founders find their way. Much like at an incubator, they offer them connections to clients and mentors and provide them with marketing, recruiting and business advice. One of the primary rules at the firm is that you never keep a founder waiting. If a partner is late to a meeting, he’s fined $10 for each minute that passes. This reinforces the idea that a CEO’s time is precious.

In the five years since its launch, Andreessen Horowitz has backed some amazing talent, investing in Facebook, Twitter, Pinterest, Airbnb, Foursquare, Groupon, Zynga, Instagram and Skype. During that stretch, the company’s investment fund has increased from $300 million to $4 billion.

For Horowitz, the best part of the new job is that he gets to speak his mind. He remembers all too well how isolated he felt as CEO, how hard it was to turn to peers for support. “I’d run into other CEOs and say, ‘How’s it going?’ And they’d be like, ‘Oh, fantastic!’ None of them were telling the truth,” he says. “Their businesses were just as screwed up as mine.”

He’s happy to have those days behind him. “Being able to say what I think has been just an incredible release,” Horowitz concedes. “As CEO, it’s just not feasible—especially if you’re the CEO of a public company.”

So he shares the gritty details of his life in the hope that they will help others find their way through “the struggle.” Horowitz concedes that he once signed a 10-year rental agreement without giving it enough thought. He admits that it’s virtually impossible to anticipate even half the setbacks that befall a company. He kicks himself for having to lay people off. And along the way his blog posts at BHorowitz.com have attracted nearly 10 million readers.

He opens nearly every post with a rap lyric, which may seem odd at first, but he truly believes that hip-hop is the music of entrepreneurship. “Rock ’n’ roll and folk music are about railing against the man,” he says. “Rap music is about being the man.” It’s about pride, ambition and hustle. Working without a label. Selling CDs on the street. Doing whatever it takes to leave your mark on the world. And Horowitz, who first heard the music as a football player at Berkeley High, clearly identifies with that. Other people quote Greek philosophers, his partner Andreessen says. Ben quotes freestyle artists and MCs.

The experience of watching Roots has stuck with him, too. He will never forget the shock he felt the first time he witnessed the horrors of slavery. It sparked a lifelong aversion to prejudice, so the proceeds from his book will go to the American Jewish World Service to help women in developing countries achieve equality. That, he argues, is where the Roots saga plays out these days.

“I always felt—if that ever happened in my lifetime—I’d want to be one of the abolitionists,” he says. “I’d want to be one of the very few people who stood up.” Because that’s what great leaders do.

Check out Ben Horowitz’s 2 techniques for squashing the drama that comes with company politics.

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