LivingSocial’s board of directors had discussed bringing in an operating officer with business management experience to support Tim O’Shaughnessy prior to the chief executive’s announcement earlier this month that he would step down, according to sources close to the company.
The sources said the discussions took place “from time to time,” but there wasn’t an active search when O’Shaughnessy approached the board late last year with his intention to hand over the reins of the District-based company. They spoke on the condition of anonymity because the board deliberations were private.
Eric Eichmann previously held the chief operating officer position at LivingSocial before heading up the firm’s international business. He departed in 2012. A spokeswoman said candidates were interviewed for the position, but it was never filled.
An operational skill set will likely factor heavily in the board’s decision on who should replace O’Shaughnessy, with several board members emphasizing the need for an executive with experience running a large, multinational e-commerce or retail business.
“Given the background of the company, technology and product innovation and local sales, someone who brings that kind of background to the company will also be helpful,” said Jeremy Liew, a board member representing Lightspeed Venture Partners.
O’Shaughnessy has said one of the company’s missteps was underestimating the challenge of integrating acquired companies. LivingSocial completed nine acquisitions in a short space of time, including six companies that were purchased solely to expand the online deal company’s geographic footprint.
The spending spree proved too much for LivingSocial to digest. The company eventually had to exit some of those markets and write down the value of acquisitions that proved to be worth less than the amount paid for them.
“We could have been a little more focused ... both in what [acquisitions] should be considered and how do we actually do them,” O’Shaughnessy said.
O’Shaughnessy said in an interview that he decided to depart after LivingSocial inked a $260 million deal to sell its South Korean business, Ticket Monster, to rival Groupon.
The infusion of cash will provide the new leader with money to invest in growing the company, executives and investors said, which may include expanding existing lines of business or making acquisitions.
“We have a lot more strategic capabilities than we have had in the past,” Liew said.
Several sources interviewed for this story said the board did not initiate O’Shaughnessy’s departure, and it was not seeking to replace him.
“This was a unique moment in time that I think he seized. There may not have been a better window for him to depart for another few years,” said a source close to the company who declined to be named.
The decision came over many weeks of reflection and confidential conversations, O’Shaughnessy said.
“You have a tight circle of people, who are predominantly family, who you know well and will have a level of confidentiality, that’s the first place that I kind of turned,” he said. “And then as the process evolves, you can gradually expand your circle and start to talk to the board and a couple key investors.”
Those conversations included dinner with Steve Case, Revolution’s chief executive. Case was among the company’s earliest investors.
O’Shaughnessy “had a seven-year, pretty intense run, and he was thinking it was time to pass the baton,” Case said. “I was a little surprised, but once I heard his logic, I understood it.”
“For him personally to think about the next act, I can’t argue with that,” Case added. “Every entrepreneur or CEO has to make that decision at some point.”
The departure comes at a potential inflection point for LivingSocial. The company has shed jobs and hemorrhaged assets in the past year and a half while searching for a business model that replicates the rapid success it found offering daily deals through e-mail.
The latest incarnation has the company serving as a distributor of online coupons for major retailers and a seller of long-term deals for travel getaways, local events and home goods, among other products and services.
“The core audience is creating a sustainable business, but a high-growth business is still a question mark,” said the source close to the company. “The question is can a leader be found who will pivot it into a high-growth business?”
O’Shaughnessy acknowledged there are challenges ahead for the company, but said the layoffs, write-downs and business closures since late 2012 have put LivingSocial in the best position possible for growth.
“Nowhere in my job description is there something that says depending on how much or how little of a challenge [exists] should impact whether I’m the right person to keep running things,” O’Shaughnessy said.
“I think bringing in a different perspective and someone who has a new voice on things ... is something that will serve us well at this point,” he said.