After over a year of striving to bring his company out of an SEC probe, Endurance International Group (EIG) CEO Hari Ravichandran has finally decided to step down. The Massachusetts-based company recently announced in a statement that amid “significant” expansion of business, risk management, and an SEC investigation regarding non-GAAP metrics, the EIG board of directors and Mr. Ravichandran agreed on a CEO transition plan.
According to the plan, Mr. Ravichandran will step down from his position as soon as the company finds his replacement. EIG has hired international executive recruitment firm Heidrick & Struggles to help the web hosting company find its new CEO.
Troubles for Mr. Ravichandran started back in December 2015 after EIG received a subpoenas from the Securities and Exchange Commission after the company agreed to acquire the online marketing company, Constant Contact Inc. for $1.1 billion. A class action lawsuit was filed against Constant Contact as the authorities claimed that company failed in their fiduciary duties to shareholders by selling the company at too low a price. The deal was however completed in February 2016.
It is also important to mention the famous report by Gotham City Research in which the firm accused EIG of using “shady” business practices and deceit.
Hari Ravichandran, 40, dropped out from Stanford and bet his $8,000 savings on the dot-com boom. He started offering his digital services to establish and host websites for businesses in newspaper ads. That was the start of Ravichandran’s empire. He founded BizLand (now Endurance International Group) in 1997. The company now owns famous hosting services including Domain.com, HostGator.com and Bluehost.com. It has 3,900 employees in 15 offices globally. The company has about 5.4 million customers. EIG’s revenue in 2017 is expected to come in at $1 billion.
The dot-com bubble crash of early 2000s brought the first real test for Ravichandran. The company that was delved deeper in its macroeconomic cycle, overgrown spending and rapid growth was shook to the core after advertisers started backing off and revenues declined. Ravichandran took it as a challenge and decided to turn the tide. He planned to transition Endurance towards a subscription model. About 2% of the company’s top-tier customers were charged for the services. This brought a whopping $2 million in revenues within a year.
Ravichandran had successfully driven his ship out of the troubled waters. He decided to rename his company from Bizland to Endurance International Group. The new name alluded to years or endurance, tenacity and perseverance.
Ravichandran’s next task was to do something about the dwindling customer base of EIG, which was the result of subscription model. Instead of burning dollars in marketing and advertising, Ravichandran, who also holds an MBA with a focus on Entrepreneurial Management, decided to go on an acquisition spree. The strategy was to acquire small web hosting firms to expand customer base. For example, in its first deal, EIG bought a web hosting company with around 300 customers for $30,000. EIG grew rapidly over the next few years, and became an attractive buyout target. However, EIG also acquired a reputation for acquiring good companies and then ruining their quality and customer services.
In 2008, capital market firm Accel-KKR bought a huge stake in Endurance. In 2011, Warburg Pincus and Goldman Sachs Capital Partners acquired EIG from Accel for $975 million.
But Ravichandran wasn’t ready to stop. He wanted to grow EIG internationally. In 2014, EIG acquired web business of Mumbai, India-based company Directi for $109.8 million. The plan was to enter the Asia-Pacific market. Last year, Ravichandran said that EIG was also planning to expand to the Russian market through Directi.
Hari Ravichandran was the highest-earning CEO of all the publically traded companies in Massachusetts, as of 2016. Ravichandran reportedly took home a whopping $36 million in 2015. EIG’s Board of Directors slashed his annual salary from $750,000 to $200,000 and reduced his annual cash bonus with respect to calendar years 2015, 2016 and 2017..