TechCrunch Live interviews Silverton Partners and The Zebra on hiring outside leaders – TechCrunch

TechCrunch Live took a virtual trip to Austin, TX, and we had a blast even though the tacos were missing. Called TC City Spotlight: Austin, the show featured a long list of guests, including The Zebra’s CEO and its first investor, Morgan Flager, managing partner at Silverton Partners. Together, they spoke at length about The Zebra’s growth, why it moved to Austin, and what brought Keith Melnick, its current CEO, to lead the company.

It’s a good story that provides unique insight into the contribution of external leadership. Essentially, Melnick, one of Kayak’s early executives, was hired by Accel to provide due diligence on a potential Series B investment. Yet the investment firm then suspended its investment in Melnick to take the place of CEO. About five years later, The Zebra is a unicorn, and Melnick still runs the company, which employs hundreds of people in the Austin area.

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Adam Lyons and Joshua Dziabiak started The Zebra in 2012. The company was born in Pittsburgh as part of Carnegie Mellon’s Alpha Lab accelerator program as it sought funding, the company partnered with investors Texans, including Silverton Partners and Mark Cuban. The company was convinced to move its operations to Texas, where it is the cornerstone of the startup community.

Melnick helped start Kayak and worked in the company for 13 years, ending his tenure in 2017 as company president. As he tells the story, Accel recruited him to watch The Zebra’s, which has been described as the kayak for car insurance. The company was increasing its Series B and Accel was debating the investment. So it only made sense for the former Kayak president to look into the so-called Kayak for car insurance.

“Accel has asked me to watch a few things for them in the past,” Melnick said on the TechCrunch Live episode. “I knew about travel and I knew about research. But I didn’t know insurance, so I studied the market.

He discovered the huge market (and the opportunity), he said. “I estimated at the time that the insurance distribution market was about eight to ten times larger than the opportunity we saw when we launched Kayak. Like travel, there is a huge amount of consumer dissatisfaction, which I think will not surprise anyone who has purchased insurance to see this very fragmented market.

Melnick advised Accel to invest, and they came back and asked him to be the CEO. “They made me the proverbial offer I couldn’t refuse,” he said. But Melnick didn’t just take over as CEO; he invested his own money in the B series of The Zebra.

I asked him and Morgan Flager what advice they had for companies looking to bring in external leadership.

Flager pointed the finger at the founders and said it could go two ways. It’s either a negative thing or a learning opportunity.

“As a founder, you can see a CEO change in two ways,” Flager said. “It can either be, you know, I’m not cutting, and I’m being replaced, and that’s a negative thing. Or, especially if you’re a young founder, they can be like, ‘Hey, I’m going to learn from somebody. one who built a multi-billion dollar company and learn from someone who built a multi-billion dollar company who took it public.”

“I think what worked well was having founders in the company who didn’t feel threatened,” Melnick said.

For Melnick and Flager, there’s always another opportunity based on past experiences – like handing over control and taking on a co-pilot role.

“You have to kick your ego out and be willing to learn from the old man.” It’s Melnick speaking in his typical style of self-mockery.

Flager advises founders in this position to look to the future and seize the opportunity. “The next time you [the founder] dating a new company is better, faster and stronger. Plus, you have the opportunity to build relationships with other managers and investors that come with a very successful business. »

As with The Zebra, Flager points out, the other aspect of replacing the CEO is purely economic.

“We have always known the true aspiration to [The Zebra] was a potentially public asset of over $10 billion. And it is also a market. Sometimes with a marketplace, you have to build the marketplace and get the wheel running before the business spins, and it pays off. So you need someone who can approach a sophisticated investor at a later stage and raise the capital needed to realize the full investment potential of the business.

For Flager, replacing the CEO is also about realizing the full investment potential of the founders. It is also about maximizing their investment.

“But, again, I think you have to be in the right frame of mind to accept that.”

Watch the full episode here, where we explore the challenges still facing the burgeoning startup scene in Austin, Texas.

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