Gilt Groupe Hires A New CEO — Chairman Kevin Ryan Explains Why

Kevin Ryan
Kevin P. Ryan

Gilt Groupe was one of the first web 2.0 companies to ignite the New York startup scene when it launched in 2007.Since then, the designer flash sales site has attracted over $220 million in outside capital and its valuation has toggled between $600 million and $1.1 billion.

But over the past year, Gilt Groupe has hit a few snags.

In January it went through a series of layoffs. A couple of its smaller brands, Park & Bond and Gilt Taste, have been scaled back or are folding. Jetsetter, a travel site Gilt Groupe spent $3 million to get off the ground, is being sold off.

The company says it’s doing all these things to hit profitability.

The biggest shake up came a few weeks ago, when The Wall Street Journal reported that Gilt Groupe’s CEO and co-founder, Kevin Ryan, would be stepping down. [Full disclosure: Ryan is also co-founder and chairman of Business Insider]

Today, Gilt has announced Ryan’s replacement: Michelle Peluso, former Global Consumer Chief Marketing and Internet Officer of Citigroup. Peluso will take over in February, 2013. Ryan will then become the company’s chairman, a position he’s held before. Gilt Groupe’s current chairperson, Susan Lyne, will become Vice Chairman.

We spoke with Ryan about what’s been happening at Gilt Groupe, what he’s doing next, and why he won’t be the one to actively see Gilt Groupe through to an exit.

Below is a lightly edited Q&A:

Business Insider (BI): Tell us about Gilt’s new CEO and about the recruitment process.

Kevin Ryan (KR): I’ve known Michelle for three years. She’s been a board member of Gilt, and I’ve spent the last year and a half trying to recruit her but she wasn’t ready to leave Citi yet.

Over the last four months, I’ve interviewed probably seven people, including her. She’s the only person we offered the job to. She was my first choice. I’m really, really excited about it.

Why are you no longer the CEO?

KR: There’s a clear answer. I went to the board six months ago and said I wanted to step down. So really, they didn’t have a choice…The decision for me to step down, whether it’s good or bad for Gilt, was 100% me. I did the CEO search, I interviewed all the candidates; the senior team and the board interviewed the finalists. Michelle was the first and only offer we made. We interviewed other people but she was our lead candidate.

I’m not going to be doing anything different. I was only spending three and a half days at Gilt Groupe per week, and it takes more time than people realise for me to handle everything that comes up.

There will be a Business Insider board meeting for two to three hours one day. Then I’ll be offsite for 10gen [where I’m a co-founder], interviewing candidates. This morning I was at a Yale event. But my office is going to stay in Gilt.

When I looked at Gilt, I wanted to get the business to profitability. But I can’t take the company public working there three days per week. I’d either have had to give up everything I’m doing, or bring someone else in.

michelle peluso citigroup
Michelle Peluso, Gilt Groupe’s new CEO. She was formerly president of Travelocity and CMO of Citigroup.

[credit provider=”Citi” url=”!peluso”]

The decision was entirely yours? It has nothing to do with sections of Gilt folding? What about executive turnover, like the CEO of Jetsetter or early employee John Auerbach?
If you look at our current executives, most have been at Gilt for multiple years. David Zucker (Gilt’s CMO) left a year and a half ago, so it wasn’t recent. In the last year, there’s really been no one. There was the Jetsetter CEO; he did a good job building up the business, but he wasn’t the right guy for the job.

John Auerbach was a year ago too. He was one of the first 20 or so people in the company, but he didn’t report to me.

No one has actually ever resigned who reports to me, since the beginning of DoubleClick. I’ve never had someone come in and say, “Kevin, I’m really sorry, I’m going to a different company.” I’ve let people go, but there’s really been no executive turnover in the past year.

What about the recent news that Park & Bond and Taste are folding? I know you’re a fan of throwing things at the wall and seeing what sticks…

KR: I never, never said I believed in throwing things at the wall and seeing what sticks, but I know what you’re getting at. I do believe companies should be trying one or two big things per year. Sometimes you can determine, “What we’re trying is pretty good, let’s keep it.” Other times it doesn’t work and you shut it down. And then other times, it works really well and you keep it.

Everything, including Jetsetter, has worked really well except for Park & Bond and Taste. There’s no question Park & Bond hasn’t worked as well as we thought it would.

We’ll continue to launch new verticals, new businesses and new ideas. I hope we keep our track record, in that most of what we’ve tried has worked, but I doubt 100% of it will.

Why are you selling Jetsetter? Is $30-50 million about the right price?

KR: We’ve never commented on the appropriate price. Jetsetter is a separate company, which most people don’t realise. We’ve put about $3 million into it, and I’m confident it’s worth much, much more than that.

What about the report that suggested Gilt wanted $100 million for Jetsetter?

We have never given any price expectations on Jetsetter. I saw that number but it didn’t come from us.

Are flash sales still a viable business? They don’t seem to be what they were when the recession first hit and Gilt Groupe took off.

KR: Here’s what’s really happening in flash sales and Gilt is a part of it. The large flash sales companies are all doing well. If you look at Gilt this quarter, Zulily, Rue La La and HauteLook, all of them are going to be in the $300 to $700 million gross revenue range. That’s bigger than some publicly traded companies. All of them will be EBIDA positive this quarter, I’d guess. The growth rates in the flash sales category aren’t 150% anymore, but the whole group is still growing at probably 20-40%.

Then there’s Fab and One Kings Lane. One Kings Lane is solid and I think it’s going to do well. Fab is growing quickly; I think they’re a long way from profitability, but they’ve accomplished a lot.

No other sector has four, maybe six companies that are getting to break even. The sector is doing amazingly well.

You’re not worried about the per cent dropping from 150% growth to 20-40% growth across the entire category? What if it continues to drop?

Every company would love to grow at 150% forever. But the law of large numbers catches up to you. So I think at our size, the sector is growing at a really healthy rate.

As for growth continuing to drop, yes, I guess everyone who runs a company worries about that. But if you start at 1,000%, it always goes down. It’s inevitable. But I think on big numbers we’re growing quickly.

You’ve had a spectacular career, having founded all of these companies after rising through the ranks at DoubleClick. But you departed DoubleClick before its [even bigger] exit to Google and now you’re leaving after taking over Gilt. Every great business person has strengths and weaknesses. Are you a better visionary than someone who can take companies to the finish line?

KR: I’ve never been replaced, at DoubleClick or at Gilt Groupe. Let’s not forget I was at DoubleClick for nine years. I think for me, and for most people, after four or five years of doing something, they actually should do something else.

I think you are sharpest and best in your first five years. Some people like to keep going and some like to stay too long. But I think it’s great to have new energy at companies and excitement as someone else comes in.

For me, it’s not about doing smaller things versus bigger things. I wouldn’t exclude that I would go on to run an even bigger company someday. But then if I did, that would be new and exciting and, even then, I wouldn’t do it for 10 years.

There are people who like to run companies from zero to 30 people. Most of my companies are at scale. I didn’t spend much time at 10gen when it was 20 people. I do spend more time on it now that it’s heading to hyper-growth and more complexity.

I like when you come up with an idea yourself. But in terms of running companies, I actually like it when they get into that bigger stage.

What’s next for you? Will you be taking a permanent position at 10gen? Will you found more companies?

No, I won’t be taking a permanent position at 10gen, but I will spend a little more time there. Will I found more companies? Possibly. In the next year I might.

I’ve heard rumours of people approaching you to run for mayor.

Some people have approached me, but there’s no chance I’m running for mayor in the foreseeable future. Zero chance.