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EntrepreneursLast Updated
08 Mar 2024Reading Time
21 minutesThe Right CEO
When e-cigarettes looked like bloated crayons, a chic little device came along and revolutionised the smoking industry. Its creators, Adam Bowen and James Monsees, had a vision. They were both addicted to cigarettes and close friends. Although different in many aspects, they were a perfect equilibrium to envision a product that would make smoking less harmless. It all started with a thesis that soon turned into a business venture with the name Ploom to revolutionise the smoking industry by replacing cigarettes with electric ones. However, their stories of how it started in 2007 and flourished in 2018 are entirely different.
Initially, Adam Bowen was Ploom’s CEO, and James Monsees was its chief operating officer. Bowen’s tasks were mainly concerned with fundraising, flavour development, and anything related to tobacco pods. Monsees’ duties were related to product design, material, and production. Although their roles made sense in theory, they did not in practice. Employee Kurt Sonderegger recalled how Bowen and Monsees disappeared behind closed doors for hours to hash out their disagreements over even minor parts of how to run the business. They seemed to butt heads constantly, and it did not matter that Bowen was the CEO. Monsees always wanted a say, which meant they were often at an impasse. “Maybe a decision was made or not,” Sonderegger said. “It was a two-headed monster.”
The de facto leadership soon showed who owned it. Monsees was growing impatient. Start-ups always hit bumps in the road, but Ploom’s path had been incredibly rocky. After years of development, its product was not selling well. Financing was touch-and-go. However, most worrisome, Monsees was becoming increasingly convinced that Bowen was not the right person to be Ploom’s CEO. Bowen was studious, introverted, and prone to getting lost in his thoughts. Monsees was sociable, always cracking jokes, and Bowen was happy to fill the silence. Bowen, reserved as he was, did not seem at home pitching investors or talking to reporters, which is often the name of the game for a start-up CEO. He seemed more at home in the lab than in front of a camera. Monsees had always been the more charismatic founder, at least in public.
In early 2011, Monsees met with Ploom’s board members to determine a path forward. Everyone seemed to come to the same conclusion: Bowen was not fit as CEO. He was a brilliant product designer, not a born fundraiser, and he needed to be financially savvy. He needed to attract more investors, his financial reports were quite haphazard, and the board grew frustrated with the unusable information he brought to the meetings. By the spring of 2011, Monsees and their investors made a joint decision: Bowen was replaced by Monsees, who stepped into the spotlight as CEO. Bowen would handle all the technological side of the business since it had always been his strong suit, along with some administrative tasks. Bowen accepted this change without drama – perhaps even some relief. Investor Ralph Eschenbach swore there were no hard feelings after the swap.
With Monsees at the herm, the organisation attracted sufficient investments and released another device, Pax, a newer version of its original device, ModelTwo, and the revolutionary of all, called Juul. Ploom also went through some transitions and became known as Juul Labs. However, in 2015, even Monsees was removed as CEO. He managed to attract sufficient investors and launch promising products but did not meet the board members’ expectations. Sales were not great, the products had some defects, marketing was attracting the wrong audience, and Philip Morris and public health advocates had found a rare patch of common ground in their belief that Juul Labs was imitating Big Tobacco’s branding with its latest device, Juul.
Besides, Monsees' leadership style was getting controversial. It was hard to be offended by Bowen, who was quiet and easy to get along with. It could be challenging to know his thoughts, but he was pleasant around the office. In contrast, Monsees was a more complicated person. He was brilliant but also stubborn and exacting, and he liked things the way he liked them. He was funny and charismatic, and he had that trademark loud laugh. Yet, he had a short fuse. Some employees got along with him well, but others walked on eggshells around him.
It was not that Bowen and Monsees were inadequate leaders. After all, they developed the Juul device, arguably the best e-cigarette the world has ever seen. Being beautifully constructed, eminently usable, and scientifically sophisticated, Juul was the first e-cigarette that stood a chance of dethroning combustible cigarettes. They cracked the code of delivering “smoke” without fire and did so in a way that people found irresistible. As soon as they tried it, many smokers noticed a difference between Juuls and the low-tech e-cigarettes that came before it. However, when Big Tobacco organisations are your direct competitors, it is not enough to have an outstanding idea or a great product. Leading innovation is not enough. Having a seasoned and crafty leader with high emotional intelligence is also mandatory. And while someone would turn up, the board’s executives decided to run the organisation.
Then, almost a year after Monsees’ public demotion, the board brought someone much older and experienced for the CEO position. The board chose Tyler Goldman, a middle-aged serial entrepreneur who worked for the music streaming company Deezer. Under Goldman’s leadership, Juul Labs went on a hiring spree to keep growing, building a team that could help sell and market Juul to the masses. Goldman had done well for the organisation in his year and a half as CEO, but if Juul was going to keep growing at its pace, the board knew it needed someone with the expertise to help it scale. Juul Labs needed someone suitable to grow into a giant corporation, so the board had just the man for the job: Kevin Burns.
Burns was a gregarious, straight-talking man in his fifties. “This was the point in time when Juul decided, ‘We’re a real company now,’” said a former employee. In less than a year into Burns’ tenure as CEO, Juul Labs made history: with a $650 million influx of venture capital funding, the organisation was valued at $15 billion. It was the youngest organisation to surpass “decacorn” valuation – the nickname for organisations whose valuation had reached $10 billion, compared with the $1 billion–valued “unicorns”.
With Burns as CEO, however, Juul Labs paid a hefty price. During Burns’ tenure, Juul Labs was undergoing political and legal turmoil. Juul was a controversial product because it attracted many young teenagers to vaping. In September 2019, Burns announced his replacement with Crosthwaite, a long-time Altria executive who served as its chief growth officer. This new CEO seemed like a controversial move. Altria was not only a competitor but also the enemy because Juul Labs’ vision was to replace cigarettes with a less harmful alternative. However, Juul Labs was more busy fighting legal battles than developing innovative products. Crosthwaite rarely said anything controversial, and he had a great deal of regulatory knowledge. He was the polar opposite of colourful, casual, cursing Burns and the right candidate for Juul Labs’ situation.
“It is not uncommon at all that a company will outgrow the CEO,” said early Juul investor Ralph Eschenbach. “They’re perfectly matched [when they come on], and then a year or two later, they’re going to be way under what the company needs at that point in time.” Burns had pushed Juul’s growth into hyperdrive, increasing annual revenue from $200 million to $1.3 billion and doubling the company’s valuation in less than two years; nobody could deny that. But he was volatile; he had a temper; he could be short-sighted, losing focus on all but the goal in front of him; and, under his leadership, Juul Labs had seriously angered regulators. Organisations that live under a harsh, constant spotlight need stability in a CEO. That is what Crosthwaite offered.
From Founders to a Founders’ Office
In February 2007, Adam Bowen emailed the Stanford Alumni Listserv, announcing an exciting new investment opportunity. This crowd-sourced investing was about as good as two young and unproven entrepreneurs working to launch a business venture into the tobacco industry. Many venture capital firms have “vice clauses” that prevent them from investing in controversial fields like tobacco and marijuana. Bowen and his business partner, James Monsees, learned this harsh reality quickly as they tried to scrape together the money needed to launch Ploom – a start-up that produces electronic cigarettes. They realised it was much easier to seek individual investors who could invest in business ventures freely. Their first investor was Ralph Eschenbach. With one investor on board, it was even easier to convince Riaz Valani, an investor at Global Asset Capital with deeper pockets than Eschenbach. Not long after, these two co-founders got an investment from Nicholas Pritzker. Slowly but surely, Bowen and Monsees were attracting enough money to launch the business venture with a board of directors.
Still, money remained an issue when Ploom began gaining traction because product development took far longer than any investor bargained for. Bowen and Monsees had promised their investors a working product by the end of 2008. However, the process kept hitting snags. They were still empty-handed more than a year after that target date. “If you ask a designer, ‘How long is it going to take?’ whatever they say, you multiply it by two or 2.5,” recalled employee Kurt Sonderegger. Ploom kept burning money without any return, so they needed to secure a million dollars. Bowen and Monsees had found an investor who liked the idea of Ploom, but he was not ready to hand over a million dollars of his money. Instead, he organised a pledge fund, a form of fundraising through which many people chip in smaller amounts of money to reach a larger goal. Still, he was having trouble convincing his contacts to get involved. The choice was either to go under or beg one of the existing investors to give a little more. Bowen and Monsees chose to beg until investor Riaz Valani came through with his own money.
The investment paid off, and Ploom launched its ModelOne product in 2010. It looked like a sleek, black fountain pen and vaporised tiny tobacco pods in different flavours. However, the co-founders’ challenges did not stop there. Customers soon discovered that ModelOne was riddled with issues. Facing an eighteen-month redesign process, Valani and the other investors could not keep pouring money into the organisation forever. Monsees and Bowen knew they needed investors who could offer money and help with product development. With difficulties and striving to survive financially, Monsees eventually took over Bowen as CEO and started to look for more investors.
With more investments, trials, and errors, the organisation underwent major changes, including a rebranding change, which became Juul Labs. But most importantly, it found Archimedes’ stone: the Juul device. Outwardly, Bowen and Monsees got what they always wanted: a sleek, sexy product, people talking online, rave reviews from journalists and bloggers, and fifty million dollars in fresh venture capital funding. But behind the scenes, the picture wasn’t quite so pretty.
Monsees was a brilliant product designer but did not seem fit for the CEO role. The manufacturing operation still was not where it needed to be, and the Vaporized campaign was turning out to be quite a public relations headache. Under Monsees, both problems just kept lingering on at a slow burn. He was an erratic leader, as likely to be disliked as he was trusted. That was no way to run a business.
In October 2015, the board’s directors called for the entire staff to gather for an all-hands meeting. It was an unusual request. The board’s role was typically behind-the-scenes. It weighed in on major business and financial decisions and offered advice to Monsees, Bowen, and the rest of the executive team during monthly meetings. These members were not in the office regularly, and only the highest-level staffers interacted with them—so if they were calling an all-staff meeting, it was clear that they had something serious to say. Once everybody had gathered around, a management team member stepped forward. He cleared his throat. “We’re looking for a new CEO,” he announced briskly. Effective immediately, Monsees was no longer the CEO.
When Bowen was at the helm, Monsees could picture a scenario of a two-headed monster where each head fought for dominance. However, with the board members having the majority ownership through their investments, he became a headless monster, hopeless against a sword.
Then, years later, Altria arrived to put the final nail in the coffin. In 2019, Altria announced an investment of $12.8 billion for a 35 per cent stake in Juul Labs. Under the terms of the agreement, Altria would support Juul’s product distribution, marketing, sales, and regulatory services operations, perhaps most crucially by helping in legal and political manners. The deal valued Juul Labs at $38 billion, more than double the already massive valuation it had hit earlier that year. It made Bowen and Monsees billionaires. However, these co-founders paid a hefty price for each investor they acquired: power.
By this time, Monsees had less than 5% equity in his co-founded organisation. One morning in September 2019, an email was sent to employees at Juul Labs. It explained that Kevin Burns was no longer Juul Labs’s CEO. After almost two years with the organisation, he was replaced by Crosthwaite, a long-time Altria executive who served as the chief growth officer, would be taking his place.
In October 2019, Crosthwaite moved Bowen and Monsees—previously Juul Labs’ Chief Product Officer and Chief Technology Officer—into the “Founders’ Office,” from which they would theoretically provide advisory services to him and his team. The message was clear: It was another demotion from power, albeit one dressed up with a fancy name. “They may have called it the Founders’ Office, but that was a joke,” said one source. “It was like, ‘You’re gone, see you.’” Monsees was the co-founder, on the board, and the man whose idea had launched a multibillion-dollar organisation. However, he could not make the day-to-day decisions or steer the organisation in any direction because he became powerless. Each time he gave away part of his equity and ownership to attract more investors was another nail in his coffin.
Slowly but surely, Juul had been wrenched from James’s grip over the years. First, he’d been removed as CEO. Then, the board took over. Then, he had to answer Tyler Goldman first and then Kevin Burns. Then, he was sequestered in the “Founders’ Office,” contributing more in a symbolic than a substantive way. His app project was dead, and whatever shreds of the Juul culture that remained were dying with it. The organisation he had built was no longer his.
On a Thursday in March 2020, James Monsees sent a companywide memo to the staff at Juul Labs. “After 15 years on this tremendous journey, it is with a great deal of thought and consideration that I have decided it is time for me to move on from JUUL Labs and step down from our Board,” he wrote. “These many years have been incredible, and I did not make this decision lightly.” He added that he looked forward to spending more time with his family and pursuing new interests. Most of all, he wrote that he would treasure the legacy Juul had built. “I am most proud when I hear from an adult smoker who has transitioned away from combustible cigarettes about how grateful he or she is for our product.”
From the outside, Monsees’ departure may have looked like another Silicon Valley entrepreneur taking his payment and walking, looking for the next pain point to solve or the industry to disrupt. But for those who’d watched the company transform over the last few years, it seemed that James’s decision was inevitable. Altria and the ex-Altria executives who now ran Juul wanted him out so they could run the company as they saw fit. The company James had built with his grad school buddy didn’t exist anymore; like Adam and James’s friendship, it had slowly eroded under years of pressure from investors, journalists, and regulators. Now, it was corporate, controlled by men in suits with legal degrees. Bowen—always more reserved, never getting too close to anyone or anything—had been ready to admit this earlier than James, who had clung on long enough that he never really got around to admitting it. “James did not decide to leave. He was marginalised,” says a former high-level employee. “The path that he ended up walking down was an inevitable path that had been laid the moment he was removed as CEO.”
A Tobacco CEO
Juul Labs came from the idea of two brilliant minds who embarked on a mission to revolutionise the smoking industry and change the lives of millions of smokers forever. James Monsees and Adam Bowen, the masterminds behind the vaping giant Juul Labs, had a vision to create a product that could help smokers quit cigarettes for good. And that's exactly what they did! With their cutting-edge nicotine-vaping electronic device, they have provided a safer, healthier and more convenient alternative to traditional smoking. Their innovation has not only transformed the industry but has also positively impacted the lives of countless smokers struggling to quit.
So, it was no wonder that as Juul Labs grew, no one was keeping a closer eye on it than Altria, the parent company of organisations that sold cigarettes, notably Philip Morris. E-cigarettes were not going away, and sales were down across the cigarette sector as these devices gained popularity. Some customers seemed to be switching from cigarettes to vaporisers. This might have been fine for Altria if they had been switching to its products—but many were not. MarkTen, Altria’s e-cigarette brand, was quite popular, but it was beginning to look outdated compared to Juul. Altria had been watching Juul Labs practically since it launched. Altria executives knew that Juul was a better product than MarkTen ever had been. So, in early 2017, the executive team at Altria decided to test the waters. They informed Juul Labs’ executive team that Altria was intrigued by Juul Labs’ products and its growth and wanted to stay in touch. By the spring of 2017, the two organisations’ executives were in serious talks about a partnership.
In December 2018, Juul made a deal with Altria. The Altria deal closed, including a staggering $2 billion for employee bonuses. Less than $300 million of Altria’s massive investment went into the company, much of it going toward making a few people very rich. Yet, despite money falling into the employees’ laps, the culture that co-founders Monsees and Bowen established was dying. Juul Labs was meant to be Altria’s worst nightmare. It wanted to be the antidote for cigarette’s dangers. There was such rivalry that many opponents and activists against the tobacco industry perceived Juul Labs as the saviour that could get rid of this habit once and for all.
Thus, when the largest cigarette maker in the country announced ownership of 35 per cent of Juul Labs, it felt like making a pact with the devil. Some employees viewed Altria’s involvement as a betrayal of Juul’s mission, a sign that Juul had sold its moral backbone. If Juul had been created to make the cigarette obsolete, why take billions of dollars from a major tobacco producer? For many people who worked at Juul Labs, the glass had shattered. “I don’t know if defeat is the word,” said a former employee who worked at the organisation when Altria joined aboard. “But we thought we were going to kill the cigarette industry. And then accepting Altria as an investor—it wasn’t the future we imagined for ourselves.” Even if employees could see the logic of partnering with Altria, a company with massive resources and regulatory experience, it was a tough pill to swallow.
When the news broke, Burns did his best to spin the investment but was fighting a losing battle. People in tobacco control already saw the Altria deal as “the death knell for Juul,” as NYU’s Cheryl Healton called it—the final tear in Juul’s already tattered reputation. Burns admitted in a statement that Altria was an “unlikely” and “seemingly counterintuitive partner” for Juul. Still, he stressed that the larger company’s resources, connections to smokers, and knowledge about regulatory science, sales, and marketing could help “accelerate our success switching adult smokers” to e-cigarettes. That may have been true, but very few of Juul’s adversaries saw it that way. To them, the deal was evidence that Juul’s executives had never cared about health—or, at least, not as much as they cared about money and power.
It felt like the organisation’s whole culture was hijacked. With a Big Tobacco organisation as a major investor and business partner, it was impossible to pretend Juul was just another innovative San Francisco technology start-up. “It just hurt because you were fighting for something as an underdog for so long,” says a former employee from the legal team. “Then you get in bed with one of these well-rooted companies. You’re basically saying, ‘We are now the establishment.’” Some employees quit after the news broke. “I didn’t want to work for a tobacco company,” says a lobbyist who left shortly after the Altria investment. “It’s not what I set out to do.”
To make matters worse, when Crosthwaite took over as Juul Labs’ CEO, he announced massive layoffs as part of what he called a “necessary reset.” A pall fell over the office as employees tried to guess who might get the axe. Everyone at the organisation was on edge, and no one felt safe. Managers were getting fired, and so were their managers. “If you got an email the night before to show up at a certain time at a [certain] location, it’s like, ‘Well, that’s it,’” says an employee who was let go at this time. More than six hundred employees were fired over the course of a couple of weeks in November, called into meetings with a department head and an HR manager, who would walk them through their separation agreement, ask them to sign a nondisclosure agreement and escort them off the premises. “It was brutal,” the former employee says. “A lot of people were crying, in shock, upset.”
As hundreds of his employees faced layoffs, Adam made his own decision. It was time to go. A company source says he’d had one foot out the door long before he and James were relegated to the Founders’ Office. Bowen never had a taste for the limelight, and Juul was now at the centre of a drama unfolding daily in the news. Building an organisation once seemed like it would be “easy and fun,” but it didn’t feel that way anymore.
The old guard from the Ploom and Pax days mainly had moved on by choice or force. And as they left, they took pieces of the old culture—the innovative start-up out to disrupt the cigarette industry—with them, leaving behind Altria suits and PMTA regulations. If there was any culture left, the customer service rep says, it was “people getting trashed on the weekends or doing whatever they had to do to release steam because they’re getting worked to the bone.”
With Monsees gone only a few months after Bowen had packed his bags, Juul Labs’s culture had the last nail in its coffin. An organisation built on two undergraduates’ ambition to change what it meant to consume cigarettes had become enmeshed with what it sought to disrupt. The men who innovated their way out of a smoking habit had been replaced by the executives who had sold the products that hooked them in the first place. Two friends who succeeded in crafting a device that could tempt people away from one of the deadliest consumer products in history would be remembered not as public health saviours but as merchants of addiction. Five years after Juul Labs began its incendiary rise, Monsees and Bowen abandoned ship, taking their money and their notoriety and leaving the world to wonder if their company’s mistakes sank what could have been one of the most revolutionary public health tools of all time—or if it had all been smoke and mirrors from the start.
Final Thoughts
In Jamie Ducharme's book "Big Vape," she meticulously documents the rise and fall of the Monsees' story. Like many other young entrepreneurs, James Monsees embarked on a business venture with a vision to impact the world positively. He was full of ambition, passion, and optimism. However, as he dived deeper into the business, his interest in money grew more significant, overshadowing his original cause. In an effort to raise capital and expand his business, he offered equity to investors in exchange for investment. Unfortunately, each investor who cared more about making money than supporting Monsees' cause became a nail in his coffin. Eventually, the organisation was hijacked by Altria, and Monsees lost control of his organisation.
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