Do co-CEOs make sense?

Last week, Brex announced that it would be ditching its co-CEO model, and that got Equity hosts Haje Kamps and Mary Ann Azevedo wondering about co-CEO teams and the effectiveness of the structure overall. Brex, founded in 2017 by Pedro Franceschi and Henrique Dubugras, initially thrived under the co-CEO structure, with Pedro focusing on internal operations and Enrique handling external relations. However, as the company grew, this setup began to slow decision-making, prompting a shift to a single CEO model. Pedro will now lead as the sole CEO, while Enrique transitions to Chairman of the Board. We discuss the broader implications and challenges of co-CEO leadership, highlighting how this change aims to enhance agility and appeal to investors as Brex eyes a potential public offering. We also explore other companies that have adopted or abandoned similar leadership models, providing a comprehensive analysis of the pros and cons of shared CEO responsibilities in the competitive tech landscape. Equity will be back with a full rundown of the week's startup and venture news on Friday, but if you want more from TechCrunch podcasts until then, Darrell and Becca spoke to both Brex CEOs on Found last year about why the duo chose to go down the co-CEO path in the first place. Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:11Speaker 00

  Hello and welcome back to Equity, TechCrunch's flagship podcast about the business of startups. I'm Haya Camps and this is our Wednesday episode, where we hone in on a trend in the startup world and dive deep. And I'm not alone. As always, I'm joined by my co-host, Marianne Acevedo. Marianne, how are you doing today?

• 0:27Speaker 01

  I am good, Haya. It's been a hectic start to the week, but it's good. Lots going on. Happy to be doing this today with you.

• 0:35Speaker 00

  It's always good to see your face. We've got a lot to get into today. Last week, Brex announced that they would be ditching its co-CEO model. And that got us wondering about co-CEO teams in general and the effectiveness of the structure overall. So to start, Marianne, can you kick us off with what happened at Brex? And what's new and what's different?

• 0:52Speaker 01

  Yeah, so Brex started in 2017. And from the beginning, they've operated under this co-CEO model. And for the unacquainted, Brex is a rather large fintech, last valued at about $12.3 billion a couple of years ago. It was started by a pair of young Brazilians, who actually were friends as teenagers and started a different company prior to Brex that ended up getting acquired. And with that company, they were also co-CEOs. So interestingly, I talked to the two founders, Pedro Franceschi and Enrique Dubigros. They were telling me about how it came about in general. The point is that they were both coders.

• 1:35Speaker 01

  They both coded, but they realized that Pedro was the better coder. And also, so he kind of just led the development of the company's core financial infrastructure from scratch. Pedro also led what they described as the entire organization over the last six years. It's grown to over 30,000 customers, larger product suite. And Enrique was more of the face of Brex. Whenever I conducted interviews, I was usually talking to Enrique. He was the one that I think spent most of his time talking to investors, trying to win over the larger customers. Brex had raised over $1.5 billion. In both primary and secondary transactions over the years. So that's just kind of how it's been. They've both been co-CEOs, but one was kind of more internal leading.

• 2:18Speaker 01

  The other was more external leading, if that makes sense. So what Enrique had told me that they each had their own responsibilities. They made many decisions together that worked extremely well when the company was smaller, but naturally became harder as it grew. So they announced last week, they told us an exclusive interview that they decided to ditch the co-CEO model. Pedro is now the sole CEO of the company and Enrique will be chairman of the board.

• 2:45Speaker 00

  Awesome. So thank you for the summary. I'm always super kind of skeptical to co-CEO roles. I mean, it doesn't make sense for two people to do exactly the same job, right? And so for me, it becomes one of those things where you're like, okay, why, why do you have two people with the same job title? When externally, it's actually really important, right? What the CEO says is kind of the official spokesperson for the company. And per definition, one of the strengths of being co-CEOs is that you get two angles into thing, two voices, two everything. But that kind of goes against the purpose of having a single flagship leader for a company to begin with. Can you make sense of this, Marianne?

• 3:24Speaker 01

  Yeah, I mean, I think that's part of the reason why they're doing this. They were saying that they feel like this new structure will help the company be able to move faster, enable better and faster decision making. Because like if there was a large, major decision to be made, you know, they had to confer, they had to discuss, which of course executives would anyway. But I think it was starting to slow them down. And this is a very competitive, heated space, spend management, expense management, lots of players in it. We've got Ramp, we've got Mercury now trying to get in on it, Airbase. I mean, just a long list of other companies doing what Rex is doing. So they need to move faster to keep up. And so I think they realized, okay, we're slowing ourselves down. And that's what Enrique said is that they, they're at a scale. They're starting to see some of the cracks in that co-CEO model.

• 4:09Speaker 01

  And they want to help enable faster decision making, help them continue to, to grow quicker. Also, they're planning to go public and that could potentially be, I mean, maybe next year. They said their goal is to become, I think, cash flow positive first, then they want to go public. So they also believe that they would be more attractive to investors with a sole CEO model. Because I think public markets don't necessarily favor this kind of leadership structure. So I think that's part of their thinking as well.

• 4:39Speaker 00

  Yeah, I mean, the only company I can think of that was very, very successful that had this structure for a long time was Netflix, right? They, for a while, ran co-CEOs and, you know, you essentially didn't hear from one of the CEOs in public. And so I think it's kind of a similar structure where they're kind of standing back to back. One is outward facing, one is inward facing. But if you look at company structure, often the person inward facing is actually the COO, the chief operating officer, right? They're the ones who kind of make sure that the trolley stays on the tracks, as it were. And I, yeah, I continue to be pretty skeptical. There have been some really good examples of companies who've done it well, though. And as we were researching for this episode, we found a whole bunch of articles and opinion

• 5:21Speaker 00

  pieces and stuff that argue that, you know, co-CEOs is a really good model. Did you find some of that as well?

• 5:27Speaker 01

  Yeah, I did. I was curious about it because it's not something I had truthfully, honestly paid that much attention to because it doesn't come up very often that I see, you know, co-CEOs. And yeah, so there have been companies out there that have had co-CEOs and grown still to be very successful. Notably, though, none of them are really in the tech world. They were JM Smucker, Amway, Whole Foods Market, Chipotle, Mexican Grill. So, I mean, it can be done and it can be done well, but it's not something you see very often. And again, especially not in the tech world.

• 6:01Speaker 00

  Yeah, no, and I think it's so interesting. I worked with a bunch of startups at the earliest stages, right? And quite a lot of the time I see pitch decks where it's like, oh, we have two CEOs, we do everything together. And it takes one or two questions to realize that honestly, they're just too nervous to have a conversation among themselves about who should be steering the ship. Where realistically, one of them is the CTO, is more technically focused, or one of them has a lot more legal experience and should be kind of the legal driver of a legal tech startup, that kind of thing. But it becomes interesting when you have companies that are growing rapidly and especially in the public markets, right? Like, people want one person to take responsibility, which on the one hand, I'm like, that feels

• 6:43Speaker 00

  like a really outdated kind of patriarchal kind of system almost. But on the other hand, I'm also like, well, that's kind of how this works. One person speaks for the entire company and whether or not they're accurate or not, that's kind of an internal issue. So I totally get it. There's been some notable splits, though, in addition to Brex, where the company started out as a set of co-CEOs, but then kind of split up and went to single CEO. Do you have a list of those? Do you know some of those?

• 7:10Speaker 01

  Yeah, let's see. Brett Taylor stepped down from his co-CEO role at Salesforce. That was, I think, in 2022. Workday's founder became an executive chair, leaving Carl Eschenbach as the sole CEO. And then Allbirds, they were co-CEOs, Tim Brown and Joey Swillinger, but Tim Brown stepped down. And this has been 2016. But it's just another example of where companies had a co-CEO model and then realized, you know what? This isn't really working and shifted. Yeah.

• 7:39Speaker 00

  The one time where I've seen that this works successfully is if there is a shift. Like, if you're moving from one CEO to another, it's actually helpful to have a little bit of overlap. And then, you know, there can be like a handover in a way. And so if somebody gets brought in as a co-CEO or an interim CEO and then takes over as full CEO. I mean, famously, Steve Jobs came back as interim CEO after building Pixar and all that kind of stuff while he was kind of ousted from Apple for a while. He came back as interim CEO and then eventually became the full CEO again. And then that was the beginning of all the good things happening at Apple. So there are good examples of this, but I don't think a lot of the companies are doing this purely as a matter of course.

• 8:24Speaker 01

  Well, no, I don't think so either. Another kind of more recent example, though, that I guess is a co-CEO, but it's one that I haven't heard a lot of, this model. But in late April, Bob Bakish or Bakish was replaced as president and CEO of Paramount Pictures by three people, not two, three. And they're forming what they are calling an office of the CEO. So that was a new one for me. But we were reading about, as we were researching this, a couple of reports. And there's some conflicting data out there, right? And there's some studies that say, hey, co-CEO-led companies do better than sole CEOs. And then others that say, no, no, no, the ones with the sole CEOs do better. So, I mean, there's conflicting information. But one of the studies found, and this is, it's a little bit old,

• 9:08Speaker 01

  but of 2,200 companies listed in the S and P 1200 and Russell 1,000 from 1996 to 2020, fewer than 100 out of the 2,200 were led by co-CEOs. So that's interesting. It's, I can't do math.

• 9:24Speaker 00

  It's like a vanishingly small number.

• 9:26Speaker 01

  Yeah, but that's really small.

• 9:28Speaker 00

  Yeah. Well, and I think there's just so many reasons not to do it, right? And so this is why I was so attracted to the stories of the people who are giving it a whirl. And I mean, I'm a massive company structure nerd. I love all the kind of self organizing companies, holacracy and all those kinds of things that people try out. And even then, even in kind of self organizing company structures, you do kind of need a unified voice to the outside world where having a single CEO seems to make a lot of sense. And so, you know, in terms of division of labor, it makes sense that people have different parts of the role, right? But same job titles, I don't know. And that's of course, different at different levels of the org. I mean, we're both reporters. It makes perfect sense for TechCrunch to have two reporters, right?

• 10:11Speaker 00

  Because our roles, our beats don't overlap. But like, it would be very confusing if we had two CEOs of TechCrunch, for example.

• 10:19Speaker 01

  Yeah, I think for employees, it can be. And I think also, again, when you're at a scale, I mean, Brex has about a thousand employees. So they're not, they're not huge, but you know, for in the startup world, that's a decent size. And maybe it was getting confusing to employees. And I know they've had, they've had a lot of internal shuffling with regards to their management in the past few months as well. So I, I think maybe they just sat back and were like, okay, you know, this is a bottleneck to our growth, keeping us from moving faster. Let's change it up. Now internally, how much will be different? I'm not sure. Enrique says he'll still, Brex is still his main and only thing right now. And he's there as much as he is needed to be.

• 10:59Speaker 01

  And he'll still be doing the things that he was doing, but not in that, you know, top leadership capacity.

• 11:05Speaker 00

  Yeah. Well, and the interesting thing about the chairman of the board role tends to be a much more strategic job, right? It may turn out to be full time, but often a chairman of the board isn't. But they're the person who is kind of working on the bigger strategic picture side of things, while the CEO does the day to day kind of large vision leadership kind of thing. So it's like the CEO has a 30,000 foot view and the chairman of the board has a 60,000 foot view. And that division of labor actually makes a lot of sense to me. And then if you have like somebody who has like the 5,000 foot view, that's the CEO who's kind of making sure that everything keeps rolling in the right direction.

• 11:46Speaker 01

  Another company that came up was Pair Eyewear.

• 11:49Speaker 00

  Yeah.

• 11:50Speaker 01

  That had a co-CEO model that seemed to work.

• 11:52Speaker 00

  Yeah, Nathan and Sophia I know pretty well and they together have been co-CEOs of this company for a long time, since it was founded, actually. And I think the interesting thing about that is that they just seem to be an incredibly closely knit unit who make a lot of decisions together. Now, if they eventually become a public company, I don't know if that structure survives, but I think we should try and invite them onto the show and talk with them, see how it works out.

• 12:17Speaker 01

  Yeah, what, how it's worked well for them and.

• 12:19Speaker 00

  Yeah, it is unusual. And I also know that throughout their journey, they had a lot of people telling them that, hey, maybe don't do it this way, right? Have different job titles, but they were just, what's it called, stand haftily, continued down this path.

• 12:32Speaker 01

  Now, over the years, I mean, you've worked with a lot of startups, Haya. I mean, how often would you say you've seen this?

• 12:38Speaker 00

  I reckon about 10% of people or so that come to me have co-CEO roles and then by the time they leave, none of them are co-CEOs. I just, again, I obviously have a very strong opinion here, but in my mind, the CEO has a very specific job. They only have three jobs, in fact. One, make sure you don't run out of money. Two, set the culture for the company. And three, hire the right people. And being kind of the person running those things, I feel like those are really hard things to do as a team. The office of the CEO type situation actually makes a lot of sense to me. Companies like Autodesk, for example, have had an office of the CTO for a long time, where they have a single CTO, but then they have a whole office built around that. But that makes sense for something like Autodesk, right?

• 13:22Speaker 00

  They have god knows how many business units. They make software and everything you can possibly imagine, from filmmaking to CAD/CAM to manufacturing, to everything. And so having a single CTO that can keep track of all of that. Is a little bit absurd, so it makes sense to have an office working on that. For overall company direction, though, which is more the CEO role, I would love to learn about the people who make that decision and make it work for them, because I rarely see it work out well.

• 13:50Speaker 01

  Yeah, I think also in the case of Brex, I mean, the co-CEO model made sense for them when they were younger, the company was younger. But again, they're trying to present a more mature, a mature company, right? To investors, to the public. And having the two CEOs almost seems, I don't want to say amateur, but you know, it just has a different level of kind of, I think, credibility or professionalism as a company as you grow. And I think maybe they kind of started to realize that. It doesn't look like they've had any kind of internal discord. They seem to still get along very well. And Enrique actually said himself was like, you know what? This was mostly my decision. I was like, you know, it's just time for me to step back, just be chairman of the board. It's just at some point, it seemed they were like buddies, they were great friends,

• 14:35Speaker 01

  starting these companies together and they realized we've grown up, you know?

• 14:38Speaker 00

  Right.

• 14:39Speaker 01

  We've grown up, it's time to grow up as a company as well.

• 14:43Speaker 00

  Yeah, totally. Well, and it's rare enough that I imagine it gets a little boring, that the first conversation you have with any would be investor or any would be analyst is like, why do you have two CEOs, right? It's like, after you've answered that same question 10,000 times in a row, you're like, well, actually, why do we have two CEOs? Maybe it is so unusual that it actually becomes something that draws unwanted attention.

• 15:06Speaker 01

  Right, that too. And again, like we said, this is a competitive space. They want to present themselves as looking like they've got their act together. There have been questions about their cash burn over the past year and a half or so, which they've been trying to reduce. They had layoffs earlier this year. They said they've managed to reduce cash burn by 50%, but I think it's just, again, part of the evolution of the company. Like, we're growing, we're maturing, we like each other a lot still and we trust each other a lot. But hey, I trust my co-founder enough to give him the full reins, so here you go. And, you know, that might be able to boost confidence internally too, because there's been a lot of shuffling in the executive team there. There's been layoffs, there's been all this worry. About, oh, they're burning so much cash or, you know, what's going on? So maybe this is also going to instill confidence internally.

• 15:51Speaker 01

  I think that could be part of it there. So in general, it's sending a message to employees as well as potential investors one day. Hey, look, we've got our act together. We like each other and respect each other enough that we're able to still do this with just one CEO. So they're trying to send that positive confident message out there.

• 16:09Speaker 00

  Yeah, I love that.

• 16:10Speaker 01

  Before we go though, Hyah, I know you're a very opinionated person, which I love about you. What are your thoughts on this? Do you think having co-CEOs is a turn off?

• 16:21Speaker 00

  You know, I'm, short answer, yes. Long answer is I just cannot see a single good reason to have co-CEOs. If I'm thinking about the role of the CEO, it's like, as an investor, you want to be able to call the company and have a quick conversation. And that is typically a conversation with the CEO. Just a simple logistics of having to get two people on the phone if you want to talk to the company. That feels weird, right? And similarly, like, who's running point on investor updates? Who's running point on customer complaints or evolution? Who is doing the internal communication and all that sort of thing? I feel like there's a very well formulated set of roles. Like for internal communication, you often have a chief of staff,

• 17:05Speaker 00

  who basically, you know, there's different varieties of like how official a chief of staff is. But a lot of the time, this person could have pretty serious clout within the company. And they, you know, for operations, you have the CEO. For internal like projects and things like that, you might have a director of special projects, or you might have a head of skunk works, or you might have a chief of staff, or whatever that job role is. It's just, in all my years of working with startups, I've never really, I've never seen a good reason to have co-CEOs.

• 17:35Speaker 01

  Yeah, I mean, it's hard to say. And going back to one of the data points that we'd found about. Some of the companies led by co-CEOs performing notably worse than their peers. And of course, that's not all of them. But, but again, I do think it does go back to the speed and agility, like to make decisions of every time something big comes up, you know, you have to kind of stop, confer with your co-CEO and go back and forth. Well, how much time does that, does that take? And then does it become really confusing? So even just from that perspective alone, I could see where this just wouldn't necessarily be the best way to scale.

• 18:10Speaker 00

  Yeah, totally.

• 18:11Speaker 01

  Yeah.

• 18:11Speaker 00

  I mean, if I wanted to play massive devil's advocate, I would be like, okay, what if you have a CEO who's like a 10x engineer who works incredibly fast and who just needs to be reined in? They like make decisions too fast. They are like running at 1,000 miles an hour and they make bad decisions because they're a little impulsive. Maybe in that's very specific set of circumstances, it would be helpful to have somebody who can balance them out.

• 18:34Speaker 01

  Yeah, I think so too. And I think it's almost kind of sweet that these two at Braggs, you know, liked each other enough and respected each other enough to say, hey, let's be co-CEOs and let's do this together. But you're trying to present a certain image to your internal team, to the world externally. And eventually this just kind of gets old. And that's what they indicated. So now that we've had this conversation, I'm going to be definitely paying a lot more attention out there to see if there are more companies with this model or not. And if we find a bunch more, maybe we can talk more about this.

• 19:07Speaker 00

  Awesome. Well, I think we'll leave it there for Equity for today. But we're back on Friday with our weekly news roundup. Mary Ann, thanks you so much for hanging out with me today.

• 19:16Speaker 01

  Always a blast. And until Friday, you can find us under the handle at EquityPod on X and Threads. And don't forget to check out our sister show, Found, which dives deep into the stories behind startups with the founders who built them. Thanks for listening. Bye.

• 19:29Speaker 00

  Cheerio.

• 19:32Speaker 01

  Equity is produced by Teresa Loconsolo with editing by Kel. Bryce Durbin is our illustrator. And we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages Tech Crunch Audio Products. Thanks so much for listening and we'll talk to you next time.