Marc Randolph, cofounder and first CEO of Netflix
Netflix has 151 million subscribers worldwide, but most of them have never heard of Marc Randolph, its first CEO and cofounder. Randolph stepped down as CEO in 1999—replaced by cofounder Reed Hastings—to turn to product development and departed the company in 2003, a year after its IPO.
“I’m an invisible face,” he says.
But Randolph is fine with that and with his decision to leave before Netflix became the streaming giant that it is today.
In his memoir, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea, he chronicles the journey of Netflix from an eight-employee startup in 1997 when DVDs had just entered the U.S. market. The most vivid anecdote: a pivotal moment in 1998 when Hastings and Randolph considered selling Netflix to Amazon.
The duo met with Jeff Bezos in Seattle—Randolph compares his laugh to The Flintstones character Barney Rubble’s—and were offered “probably something between $14 million and $16 million,” by his estimate, for Netflix. The company was only a year old at the time and the bid seemed reasonable to Randolph. But Hastings resisted.
On the plane ride back to Santa Cruz, they mulled the pros and cons of selling to Amazon: DVD sales were profitable, but rentals only contributed 3% of revenue and put the Netflix in the red. More importantly, Netflix would soon be competing with Amazon in the DVD sales market if they didn’t agree.
“Selling now would solve all these problems—or at least it would hand them off to a larger company with deeper pockets,” Randolph writes. “But ... we were also on the brink of something. … It didn’t seem like the right moment to give up.”
They decided to turn down the acquisition offer and double down on rentals, closing the sales business, as Amazon would beat them anyway when it entered the DVD market.
Reed Hastings, cofounder and CEO of Netflix.
The choice paid off in spades. Netflix’s market cap stands at $129 billion. Hastings, who owns approximately 2.5% of the company, is worth $3.3 billion. As for Randolph, his stock at the time of the IPO would be worth roughly $250 million today, and he has likely sold most of it. (He writes in the memoir that he stepped down as president and board member so he could sell his shares without frightening shareholders: “Banks and investors don’t usually view a high-ranking executive in the company selling off massive amounts of stock as a good thing.”) But he can afford to do what he wants: spend time with his family and mentor other entrepreneurs.
“I still have long lists of things that I want to accomplish every day,” Randolph says. “There’s still things I want to learn, but now it’s my own list.”
His choice to leave Netflix and start mentoring go hand-in-hand. He missed the “scrappy, underdog days” of Netflix—brainstorming startup ideas in Hastings’ Toyota Avalon, working out of diners and a Best Western conference room, the thrills of succeeding and stumbling.
“As you get older, if you’re lucky, you realize two things: what you like, but also what you’re good at,” Randolph, 61, says. “The answer to both of them [for me] is early-stage companies. I like the chaos. I like the fact that you’re working on hundreds of things at once.”
Mentoring gives Randolph the excitement of the startup world without the 24/7 lifestyle. At first, he tried being an advisor and soon realized that many founders just wanted to put his name on their pitch decks, which was unfulfilling. It took a few years for him to figure out what he wanted and what founders needed: 30% business advice and 70% personal advice.
“That the role that you fill for these people is not telling them whether they should debt or equity, not to go to market,” he says. “You are one of the few people that they can go to for what’s an extremely lonely job.”
He typically mentors two to three founders at a time in order to know them deeply on a personal and professional level. “They’re going to call you at two in the morning all panicky about something,” Randolph says. “If you don’t like them, or you’re not too willing to talk on the phone, and when they have a crisis, you want to plunge in and help them because you’re friends with them.”
Randolph makes it a rule to never invest in founders that he mentors—“My motto is ‘You can have my money or my time, but not both’”—but he has made a notable exception. He has been a mentor to the cofounders of business intelligence software startup Looker since the company’s founding in 2012. Randolph invested in the seed round and was its first employee. His title was ABC (Anything But Coding).
He left as an employee a year and a half ago but remained a board member, and this past June Alphabet announced it would acquire Looker for $2.6 billion. (Randolph declined to comment on his stake.) Randolph emphasizes that most of the startups he supports are a far cry from Looker. “It's just part of the game,” he says of the probability of failure. “It’s impossible to tell.”
Two of the biggest founder missteps that Randolph sees are getting paralyzed by overthinking and failing to prioritize and triage. He also frequently has to talk down expectations of fame and fortune.
“People watch The Social Network, and what they hone in on is the wealth and the parties and the excitement, and they don’t realize the grind and the ‘gruelingness’ and the disappointment,” he says. “If you don’t enjoy that, you’re in the wrong business.”
