20VC: Four Criteria to Assess Great Founders, Why and How the Best Leaders Make the Wrong Decisions 40% of the Time, Lessons Scaling King from 100 Employees to 2,400 and Making $1BN of EBITDA with Stephane Kurgan, Venture Partner @ Index Ventures

0:00The way I evaluate the performance of the leadership team is I look across four dimensions. I think it's great to fuck up. I think you have to fuck up. The job of, you know, most managers and dealers is to make decisions. If you, as a manager, if you make 55 % of good decisions, you're a really good manager. If you make 60 % you're exception. We went from, you know, 100 employees to 2400 employees in three years. We were hiring 100 employees a month. We made almost a billion dollars of a bid that year before IPO. Welcome by, this is 20VC and Stayshow is a masterclass with one of the great Stefan Kurgens, Stefan is widely considered one of the best operators in Europe.

0:35During his tenure as CEO of King, King went from 65 million to 2 .4 billion in bookings, from 100 to 2 ,400 employees and it is 7 billion dollar IPO before being acquired by Art Division Blizzard. Today, Stefan serves as a venture partner at Indax Ventures and more recently as an executive advisor at Technology Crossover Ventures. But before we dive into the show today, you know all those mind -numbing tedious tasks that seemingly take up half your day. Well, Coda is here with their new AI -powered work assistant that helps you and your team not just finish tasks but make progress. So your product team can bring a feature to market faster by using Coda AI to tag customer feedback, draft PRDs, suggest target audiences, summarizing product discussions and more.

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3:44You are now arrived at your destination. Steph, this is such a special episode for me. We're talking downstairs and I was saying I've been hearing about your operational accidents for years from Fred Destin. So thank you so much for joining me. Thank you so much for having me and I've known you for a long time. It's still a surprise to be here today. First, it's a great honor, you know, if I'm not sure I'm worthy. It's very exciting. So thank you. Well, I so appreciate that, but I was obviously doing my work before the show only. And the thing I want to start on is how did you make your first four A and the world of startups?

4:15What was that entry point? Yes, so I wrote my final paper at University with a professor who founded the first commercial CD -ROM company in Europe. So he had seen in the US a product called Disclosure, which was a business database for US companies. And the CD -ROM at the time was revolutionary, because you know you couldn't store that much data on a floppy disk right it was it was a huge revolution and so he built that company and it would strap it and it became incredibly successful it's a company that was called Bureau of Undyke which was sold to Moody's for more than 3 billion euros a few years ago and so he hired me because he thought you know I I saw that like a good sales guy and then he sent me cold calling all over the the world on banks to try to sell them the the software and the data I started with Northern Europe.

5:03I went to Russia and Eastern Europe in 91. I went to South America, you know, Colombia during the NACOs. I went all over the world. For four years, I would leave the CD on trial. I was carrying CD -ROM readers. I would open the computers at the time they were 80 or XT computers. I would install a guard inside the computer. I had a vacuum cleaner with me because these were all computers. They were incredibly dusty, so you had to clean them up before you could install the card. Yeah, so I basically had my suit gears, my CD -ROM drives and I went all over the place for four or five years. I love that I'm just pitching head of NARCO Wars and Columbia and the CD -ROM is coming around.

5:39It's so hard for me to ask questions like this next one but I have to, it's just like eight years at King is such an incredible time at such an incredible company. If you think about one or two of the most non -orvious lessons from that time, what do you think one or two of the most non -orvious lessons from that time are that really impacted how you think. Sure. The first one is trusted data, not your intuition. You know, King was always pretty data driven, but it was an incredibly data rich environment. I mean, the beauty of free to play on Facebook and later on mobile is that it provides you faster and a higher quantity of data that almost any other business.

6:15And very often we had product intuition in terms of features or whatever where, you know, the team would think, okay, this is what we need to change and the data would give you a completely different dance. I mean, it's been a great lesson in humidity for product people. You have to be ready to be wrong. You have to read carefully the data and act upon it. That's one thing that's really important. And the other insight is the Swedish model of, I would say, labor relations is fantastic. You build incredibly resilient companies. So it's a bit of a shock when you get there because you have very generous parent -to -leaf policies where both parents can leave for six months and you have anybody can take a sabbatical at any time for another three months and then they all take their holidays at the same time for five or six weeks, they vanish for the Swedish term from mid -Summer to early August.

7:03As you arrive there as a foreign executive, you wonder how you're going to be able to operate a business with that. And then essentially you create all these backup and support systems and liberal mobility. The company you have then is much more robust than resilience to shocks because you have have very high level of cooperation, the level of skills is very high, they're interchangeable. And we had that shock coming in and then when we sold a company to Activision Blizzard, they had that shock coming in as well. When you say about kind of data or over -enteration, have you ever gone against the data?

7:34Yes, let me give you an example. We came up with a feature in Candy Crush, which was incredibly good at monetization. To the point where it made us uncomfortable and so what we did was we essentially kept the feature. At King we had a number of rules. We were very privileged in the sense that we had a huge number of players. So at the peak we had 540 million players and we had a huge number of spenders. We had seven or eight million spenders. And so we could afford to have players who would spend a very low amount of money in the game and still create a huge business. So we were not reliant on very high spenders.

8:09I think we were very careful to make sure that we would not essentially vulnerable people spending too much money on the title and putting themselves in challenging situations. And one way of doing that was to gap the amount of money that you can spend in the title. When we would see high spending, we actually would reach out to the players and we would ask them if they were aware of what they were doing to make sure it was not one of the kids who was using some, you know, one of the bounce grid card. Speaking of people being prone to work with King, you mentioned also kind of the Swedish culture there.

8:38Do you think you can use that culture in other countries? Do you think it carries over? Well, do you think it's only the magic source of Sweden, the Swedish people? It's not only the culture, it's just the model of labour relations. To a large extent, they take the drum out of it. They make beautiful products. You know, there are so many exceptional Swedish companies. They're big like the Japanese. They have that incredible sense of design. They're highly cooperative. And they just design a working system, which basically lets them live pretty normal lives and have families and to good kill their families and themselves, right?

9:14And I think that's a model for, you know, the rest of it. We're going to discuss and build the efficient systems, but my mother's favorite question in the show is actually the question of if we're all a function of our history in our past and we all are shaped by our parents in some ways, would you think you're running from stuff? That's a very good question. Well, for a long time I was running away from them from my father. I had a very difficult relationship with him. You know, I left home before I finished school. I never had somehow is approval or I never had recognition from him and I basically left that behind and went to build a career in life.

9:47Somewils which is the UK much later, right? Did you always see here's a prequel because you're always someone's little boy. I have three kids. There was basically a speech at school by a very famous child psychologist called Stephen Biddler. And what he was saying is, if you don't have a good relationship with your dad, how can you expect a good relationship with your son? And what you need to do if you want to fix that is to go and sit down with your dad and make peace with him I hadn't been at war with him or whatever, but you know, I hadn't had that conversation And so I went to sit down with my dad probably 15 years ago and as the Heather the hardest thing I've done I wouldn't see my life but close right and yeah, man basically I took him to lunch and we had a proper chat and it's changed a lot of things Can I ask you that relationship changed how you parent your three children?

10:33Well, I assume so, but you know, I haven't seen what it would have been if I had not, you know, sat down with him and had that conversation. From very deep there, which I love, but to the making of Europe's greatest example, and I wanted to start with high performance, and we think about building machines and models. When I think there was high performance to you, what does that mean? Well, talking about leaders, I use the way I evaluate the performance of the leadership team is I look across four dimensions. The first one is the operating or the financial performance of their function. So have they beaten their numbers essentially?

11:09The second one is organizational maturity. So have they built a great team? Do they have strong people in all lucky functions? And are they challenging them? Have they built great processes? Do they have great succession in place? The third dimension is to what extent do they contribute to the corporate agenda? You know, because if you're leader, you have two hearts, right? You have your functional or your operational heart, and your second heart, which is the collective heart of the collective leadership. And then the last one is where they stand on the leadership journey. And personnel, and so are they role model, are they a thought leader?

11:42Are they being sought after by other people in the organization? How are they developing themselves? I look at cross these four dimensions to us as leadership performance. Why do you find most people fall down? Among those four, why are the most common failure point? With founders in the early days, I don't think that greed would be applicable because there's so much uncertainty you need to navigate much more tactically in the early days and the early years of building a company. The framework applies better to professional executives and managers than two founders. You know, we will find the founders spiking exceptionally on some of these and maybe less on some others.

12:20For them, it's the ability to put a fantastic team together and then show them the way as opposed to getting high marks on all of these dimensions. The unit one here, Van Hal, which is, you know, even work with the best teams at the XN World, you work with the best fans in the world, both the masterwise and operation teams. And then you meet companies and young founders. How do you think about analyzing rate of development founders? Yeah, well first many of them are not young in the young sense, right? If you look at the average age of company founders and there was a start in the US that founders of successful software companies in the US are in the early 40s And so very often we work with founding teams who are you know from late 20s and 30s sometimes to the early 40s and so Obviously you apply a slightly different and evaluation grid at that stage.

13:07But it's really what is the appetite to listen, what drives them, what is really the objective, what do they wanna build something that's gonna change the world? Are they self -aware? They vulnerable, I mean, greatly, you know, it's self -awareness and vulnerability as well. And those are qualities you don't need to be older to have these qualities, right? They aren't so early. Do we feel that we'll be able to build a great team? That's something you can see reasonably quickly. Actually, you just look around them if they already brought a couple of people with them and you get a sense for, okay, you know, do we believe that, you know, some of the top execs will want to work with them and go through the journey?

13:42We were talking downstairs actually about relationships and their impact on, you know, being in most effective exec and kind of operational that you can be. When you think about kind of one or two lessons or secrets in being the most effective and efficient exec, what would you say those are if you were to summarize? I think you need to do the work. I think you're at the service of your team and that means that you should not be a consumer of their time but you should be a multiplier of their time and their effort. That means that before you meet with them, you know, if there is material, you read the material, if you have questions, you send them the questions and you can prepare to the meeting and you focus on the couple of issues that really matter.

14:20And if you apply the discipline to yourself, you will drive it down through the organization and you will have a much more effective and efficient organization. So it's more modeling. Now when we spoke before, he said 90 % of scaling organizations is communication and decision making. If we break this down, what did you mean by this? And how does that realization change how you lead? When you run a survey inside a company and you ask the company is communication good and are you happy with the level of communication? The answer is always no. And it gets worse as you scale. So there is never enough communication.

14:52In a company and if you aspire to be a leader and it's even true in the public markets, you have to be ready to repeat yourself a lot. And that's good. It's perfectly okay. But that means you really need to design your organization in a way where you're going to have very thorough communication both vertically and horizontally. So vertically, you want to communicate with your direct team and then tell them that they have to cascade it all the way down. So they will, they have to communicate with their teams and then the teams below. And they should communicate everything. Unless you tell them this, you can share.

15:25They should push down every little bit of information to the very bottom of the company because that's how you drive engagement and trust. Teen Teen somehow communicate. Well, you role model it. If you have your staff meeting, you know, at some point it's your turn and you should only communicate what cannot be communicated, writing or through reporting earlier. You know, when you run a digital organization, and typically they're very data rich, you know, designing and distributing these very detailed reports which would go pretty much everywhere. And you know, at King, everybody could access the data warehouse.

16:00And that was a deliberate choice. That's driving engagement. That means I trust every employee to be responsible with the data. It's a very big decision to take when you decide to go public. Because if you do that, that means the whole company will be inside us and they can only trade within trading windows. And so you have to make that decision on whether you want to treat your employees as adults, and they will be responsible with essentially the data and the power you share with them, or whether you want to allow them to trade any day of the week. You know, we had that discussion, I think, actually with Meta.

16:32I mean, we were very lucky. We spent time with Mark Zuckerberg before we went public. It was like a year after his IPO, and he shared his lessons about his IPO, which was very challenging. I just stuck went on 50 % after the IPO and I think that's one of the other insights we took from that discussion. What are the biggest ways that communication breaks down? One of the most striking, it's when trust breaks down because you know, horizontal communication is also very important. So when you get your stuff together, it's all about sharing information or sharing challenges and also, you know, getting feedback from the rest of the team that might help you in solving your challenges.

17:09And you can only do that in a trusted environment. As you scale, politics starts to enter the organization where you might have leaders who do not have the right fit or who might have been imposed or whatever. Suddenly you lose the continual nature of the meeting and the discussion around the table and you have a communication breakdown. Do you trust people from day one and is that be lost? Or do you say, you know what, we're starting a relationship and it's yours to be gained? I think you will definitely give them the benefit of the doubt if you had a thorough equipment process and you'll be very transparent and you will share with them as much information and as with any other member of the team in terms of trusting them with the ability to make the right decision and execute that trust will be earned over time.

17:55When trust is lost, say someone does something and it doesn't work out. Is there a step to regain it? But I find trust once lost is very difficult to regain. That's a personal failure of mine. I have a hard time trusting after, you know, after, you know, something goes wrong, but I can get there, but it's hard. I have a number of specific examples where, you know, I managed to rebuild trust afterwards and and somewhere basically there was always a stain that could never be removed here. I'm sorry, I'm doubling down on this, but when you think about like goal -scessing, how do you think about effective goal -scessing today?

18:27It will depend on the function. What's very important is for teams to set their own goals, because That's how they're going to be engaged and that's how they will stretch them. But if you feel these goals are not stretching enough, then you should challenge them. When you see communication right down, what's the commonalities in the mistakes that they make around communication? For some of them, it takes time to find the right balance. Either they overcommunicate, they will share too much operational data with investors and board members. They might believe that we expect or they might believe we will help with some of that operational detail.

19:00Some other founders want to keep boards and investors at a distance and sometimes there's information retention that goes beyond What makes an investor and a board member effective and then you need to sit down and have a pretty direct conversation that that's not the deal Right, and that's from a communication standpoint when you reflect when you're in all the biggest communication mistakes that you've made Decisions made too fast and communicated too fast Communication takes work it takes structure communication is about telling a story and telling a story. It takes time to build the right narrative in the right structure and find the right words.

19:36In my experience, I made communication mistakes when I communicated it before I was ready. And typically, they would be saying something in front of somebody which was not the right thing to say. And then, I have no problem to go and apologize. I can say sorry. Can you help me with that? Because I always think when someone does something and you're providing feedback and communicating about them. It's best done in real time. You know, it's staff just did this. Let's discuss it now. And as he said, sometimes things need a little bit more thought. Look, praise, you can be very spontaneous with praise.

20:08You want to be very systematic with it. When you see something that's great, you absolutely have to call it. But at the same time, you will be sparse, because otherwise it loses quite a bit of its value. Everybody will know if you are sparse with your praise, when you get it, they will value it immensely. For more challenging feedback, You need to pick your time, but you know, it's also highly valued if you have the right team members You just need to box it in a way where you say hey, by the way Maybe you could have done this differently. You could have and give an example and say but you know no problem and move on And on something that's been before which is the uncountable panel of almost radical transparency What is the uncountable panel of almost radical transparency?

20:47Yeah, so I work with a fantastic company and two fantastic entrepreneurs owners, one of their principles has been apply radical transparency to the way they have founded and they've built their company and they mean it. So everything is totally transparent from every conversation that every level in the organization with everybody to compensation. And so initially, all the employees and the board members and investors and the stakeholders would receive that weekly newsletter where everything was. And it's incredibly powerful. So what works really well is in terms of, for example, compensation discussions, which you know, an negotiation, that can take a lot of time and create a lot of tension.

21:23There's no room for negotiation because it's all, you know, they have this company, that grid, which is public, and the whole system is completely transparent, and there's no room for negotiation. So it gets these discussions short, the company, you know, the employees back to the trust point. They know pretty much everything, so the trust is extremely high, the engagement is extremely high, and so that makes the company extremely efficient in terms of shipping hours and comfortable a couple of times. When you have the names of people who are being recruited that are shared internally, you need a lot of trust in your employees to be really careful with that, because you know, that can make damaging to the careers of some individuals.

21:56Or if you have any, you know, discussions about transactions or personal matters. And I think over time, they've slightly adapted. There are a couple of things that now they might not disclose. I didn't think companies should be transparent on fundraising. I tend to agree with you. I think, you know, they've managed to be incredibly successful at fundraising while being transparent, many, many times. I think there might be a little less transparent today. How do you give a factor feedback as a leader today? I'm open, some big lessons here and I had a right and I don't. Always start with a good stuff, positive feedback to start with.

22:29There are always a couple of items that can be developed and for those you have to be very specific and have an example. So if you say, well, you know, I think you could do this differently or you can improve this and let me give you an example of what you've done. He is how you could have done it differently if you don't have that certain part It feedback is useless because they cannot action it and it's actually very toxic. It creates a negative loop So if there's an issue make sure you are prepared and you have that example and you have a way to Improve it that you can share before you give that feedback Do you think teams have gone a bit soft and we want to mean by that is that you know the shit sandwich All these nice ways to molly coddle but slightly more gentle ways of saying, hey, you know what, Steph, we fucked up here.

23:14And it shouldn't happen again. Even 20 years ago, the world was a lot more blunt. Well, I think it's great to fuck up. I think you have to fuck up. The job of, you know, most managers and dealers is to make decisions. If you, as a manager, if you make 55 % of good decisions, you're a really good manager. If you make 60 % of your exception. But that means 40 % of your decisions will be wrong. And so I was listening to a podcast with Zuckerberg, and he says, you know, failing is one of Michael competencies. That's so true. So the job is not to be right. The job is to make decisions. And of course you're going to get a bunch of decisions wrong.

23:45And there is no negative feedback about that. If you keep making the same decision wrong multiple times, then that's a problem. And then you need to have a conversation. How do you analyze your decision making framework? People have different frameworks. The InjectBase also has a programmonymization in one way and two way. Do you do anything by your own decision making framework today? Look at the data. Consult widely. and when you make a decision, if you have to syndicate it, syndicate it. And when you make a decision, stick with it. What is incredibly toxic in organizations, and I've seen that many times is, you make a decision and then you come back on it the next week, and then the following week, and basically drives paralysis in your organization.