O n a Monday in April, Shannon Spanhake stood at the front of Cleo's office as her executive team lined up beside her. It had been only a few months since her parenting benefits startup had raised its latest round of funding—$27.5 million from blue-chip venture capital firm NEA—and Cleo's CEO and cofounder was telling staff to push harder. A lot harder.
The San Francisco-based company's 50-person workforce needed to spend more time in the office and raise their performance to what she considered "an A-plus-stage appropriate team," according to four former and current employees who heard the talk. She wanted no complainers. There was not enough hustle and not enough presence at work. One bullet point from the slideshow spelled it out: "Expect to work 50- to 60-hour weeks." Her presentation got cut short before she could get to the next part. The company's work-from-home policy was being eliminated.
The harangue stunned some of Cleo's employees, who felt that it flew in the face of the company's mission to create a better workplace for parents. One employee handed in the company laptop and walked out the door, quitting that afternoon.
Two months later, it's Spanhake who is abruptly leaving the startup she cofounded. The exit culminates a turbulent two weeks that started with a Forbes inquiry and led to the revelation that Spanhake had lied about or embellished her professional background to more neatly resemble that of a tech founder on the cusp of success. It had seemed to work—clients liked the service—but her sudden embrace of a hard-charging culture unleashed complaints from more than half a dozen former and current staff with whom Forbes spoke, who said the startup had become a pressure cooker, the antithesis of the parent-friendly vision Cleo was selling .
On Monday, after Cleo's board of directors concluded its own investigation into Spanhake's background and management, it accepted her resignation."We recently learned that Shannon Spanhake hasn't met the standards expected of her as CEO. Shannon has taken ownership of her mistakes and stepped down, and we are actively recruiting a new CEO," the board said in a statement.
Such an outcome would have been unthinkable six months ago, when Cleo closed the books on its $27.5 million Series B round that lifted its valuation to $115 million, according to Pitchbook. In three years, it had signed up companies from Uber and LinkedIn to law firm Cooley and dairy farm Straus Family Creamery, for Cleo's benefits program, which assigned "guides," typically registered nurses or lactation counselors, to coach employees through their pregnancy and subsequent return to work. The plan to sell employers a benefit that could prevent new parents from quitting was paying off. Cleo says it signed $10 million in contracts in a 13-month period from January 2018 through January 2019, widening access to Cleo's products to 500,000 people. Former General Electric CEO Jeff Immelt had come on as board advisor, and ex-Yahoo CEO Marissa Mayer had bought in. Its rise was chronicled on this website and by outlets such as Fortune, TechCrunch and Business Insider.
The credit largely went to Spanhake, who had become CEO after a somewhat unconventional background in art and public policy and had a plan to help new parents in ways health insurers didn't. Her company applied to the Forbes Next Billion-Dollar Startups list with the belief that it was going to become another unicorn, in the footsteps of $1 billion-plus-valuation companies such as food delivery company DoorDash, luggage startup Away and real estate company OpenDoor.
Yet underneath the hallmarks of Silicon Valley startup success—the name-brand investors and established tech clients—Spanhake's story was fraying. Spanhake lied about her age and graduation dates to Forbes to present herself as a 36-year-old CEO, while voting records from two states show she is 42. (Age is not part of the application or the criteria for the Next Billion-Dollar Startups list, and she was asked her age only in a follow-up interview.)
Her résumé, where she advertised stints at the prestigious London School of Economics and a smattering of startup jobs, contained more fantasy. She exaggerated her credentials, like a two-year stretch as a United Nations "expert"—her actual UN involvement was traveling to two workshops in Kazakhstan in 2015. She fabricated a "Top 100 Women Innovating Science and Technology” award from the Grace Hopper Foundation, an organization and award title that does not exist.
On Monday, Spanhake admitted she had misrepresented her background and not performed to the expectation of a CEO. "I am truly sorry for my dishonesty," she wrote in a statement to Forbes . "While there are circumstances that contributed to my actions, largely born of insecurity, there is certainly no excuse. Further, several missteps have been made under my leadership with respect to Cleo's culture—we strive to be the gold standard of employee support."
W orking parents face pressure everywhere, but particularly in the Silicon Valley startup culture that thrives on long hours and having colleagues become a de facto family. Even tech founders are divided on how supportive tech companies are to parents: In venture firm First Round's annual survey of 529 startup founders, two thirds of male founders felt tech companies were inclusive for parents, compared with only one third of female founders.
Spanhake had a vision to put the responsibility for inclusivity and the transition back to work in the hands of employers. She didn't have children, but she had seen her friends facing hard decisions, from not taking a promotion to leaving the workforce entirely because they didn't have support at home. "There's just this stigma around it, like, 'I am a woman and every woman does this, and I should have it together,'" Spanhake told Forbes in early June. "The reality is no one does."
These new parents could turn to blogs and apps for pregnancy tips and managing the first few months at work, but most online sources fell short when it came to the help overwhelmed parents needed, she thought. Her fix: turn parenting coaches into an employee benefit paid for by companies, who wanted not only to appear more inclusive for working parents and therefore more competitive in the talent market but also to lower their medical costs by helping employees have healthier pregnancies and better work lives.
Former General Electric CEO Jeff Immelt had seen it firsthand with attrition rates for women between the ages of 30 and 40 higher than those of men, he says. Spanhake struck him as both curious and creative when it came to her approach, and he invested in the company, becoming a board observer. "In the U.S., employers really carry such a burden on the benefit side. It's a natural place for Cleo to go," Immelt says.
Spanhake's creativity grew out of her background, which mixed art with an interest in science. Adopted from South Korea, she grew up mostly in upstate New York before graduating in 2001 from the School of the Art Institute of Chicago. She later completed her master's of fine arts at the University of California, San Diego, and spent time at the Mexican border building a device that could help track air pollution levels from a phone plug-in, according to university reports.
In San Francisco, she joined the Mayor's Office and became the city's deputy chief innovation officer from November 2011 to May 2014 before joining space startup Planet Labs. Spanhake lived with a dozen roommates, many working at startups or big tech companies, in a San Francisco communal house called The Embassy . Spanhake was able to quickly bounce company ideas off other founders.
"I always kind of work on these sort of, like, weird, big, hairy problems that may not have, like, an obvious answer or solution to them, but they feel important. It takes a lot of chipping away at something," Spanhake said.
She had been kicking around the idea for Cleo with friends before she met Chitra Akileswaran, a practicing ob-gyn who has an M.B.A. from Harvard. At the time, Spanhake was calling her idea Instacare Group. Then she and Akileswaran, whom she brought on as cofounder, changed the name to Lucy, in reference to the mother of all humanity.
The company publicly launched in September 2016 from the stage of TechCrunch Disrupt. Six months later, it had already closed $2.25 million in seed funding and signed up employers like Slack and Reddit. "She kind of hacked the first prototype herself together, found initial users and customers and made it all happen really quickly," says Sarah Guo, a partner at Greylock and a Cleo board member.
Employers would pay for their employees to get access to one of Cleo's guides, professionals who would be on call to help out parents with anything from how to talk to managers about their pregnancy to help with sleep training. One Cleo guide helped a German couple who were using a surrogate have a conversation about boundaries in the delivery room, Spanhake said. They could also connect parents with Cleo's network of professionals that could visit them at home if they needed a lactation consultant or do virtual career coaching to help parents navigate reentry.
Guo herself tested out the service, and while seven months pregnant, handed Cleo its Series A term sheet for $10.5 million . The June 2018 fundraising came with a name change: Lucy was dropped in favor of Cleo, short for “Cleopatra.”
The money proved to be a turning point. Values rooted in building a better workplace for parents started to clash with the realities of being a cash-strapped startup in pursuit of growth, according to more than half a dozen current and former employees. Some of the employees who went on parental leave said they felt pressured to return early. (A Cleo spokeswoman said the company was unaware of any cases in which the employees were encouraged to come back early.)
More outrageous to some was how Cleo handled one mother's return from maternity leave. The company had subleased out its mother's room, a space that had been used by several employees to privately pump breast milk, to another startup in the building as an extra income source. When the employee returned to work, she found the company hadn't readied a replacement, current and former employees said. The work order to set up a new mother's room—in a conference room—had fallen through the cracks. The company brought in a TaskRabbit contractor to hang up curtains in a conference room around noon that day, according to a Cleo spokeswoman.
Most of Cleo's early executive team started to leave as the company transitioned to Spanhake's vision of a startup on track to a billion-dollar valuation. It brought in executives with backgrounds ranging from software analytics company New Relic to Amazon and Snapchat. Akileswaran, who was never given a board seat and was seen as frequently pushing back against Spanhake, eventually also left and transitioned to a role as an advisor. She declined to comment on the leadership changes for this story.
By the time Cleo had raised its Series B round at the start of 2019, current and former employees say, the work-hard, party-hard culture was full-blown. On a weekend in January, Spanhake gathered her employees in Las Vegas at an offsite retreat in a rented house that oozed a tacky Vegas charm. There were statues of roosters and medieval suits of armor and a long palatial staircase that led to the second floor of the villa.
The staircase bannister would turn into a slide as the celebrations became increasingly rowdy. The house was trashed. A mattress, still tangled with sheets, sat at the bottom of the stairs. Pieces of medieval armor were scattered through the house. In the kitchen, the dining room table had collapsed in half after executives spent the night dancing on it.
If the retreat was supposed to help the company let off steam after reaching a big milestone, it had the opposite effect. Instead, multiple current and former sources say the company started to push employees harder and that Spanhake became obsessed with pleasing investors and beating the competition as Cleo moved forward. Several startups, from Maven to Ovia Health , turned maternity health into a benefit, too. (The company declined to comment on Spanhake and its workplace culture beyond the resignation statements.)
"Shannon is a dreamer, which is what got the company off the ground," one former employee said, calling her "invincible" following the latest funding. "There was always a tension between what we were selling and what we could deliver."
Whether compelled by invincibility or something else, Spanhake lied to Forbes in early June. The interview had been set up after Cleo applied to Forbes' list of Next Billion-Dollar Startups. The metrics-based list of 25 companies relies largely on a company's self-reported financials and growth, and then reporters do further vetting on each company. When a reporter asked the CEO her age, she first said 35, then changed her answer to 36—still six years off reality. Later that week, she also claimed to have graduated from the School of the Art Institute of Chicago in 2005 (the Institute confirmed it was 2001) and received her master's in fine arts from the University of California, San Diego, in 2008 (it was actually 2007, per school records).
When Forbes asked Spanhake a week later about the discrepancy between her age and the graduation dates she subsequently provided, Spanhake answered with silence. That night, Spanhake admitted in an email that she had misled Forbes : "I wasn't honest with some personal information about myself for no other reason than my own ego."
Spanhake shared her mistake to employees at an all-hands that day. A week later, she stood in front of employees one more time. On the heels of the board's rebuke, she resigned.
Additional research by Sue Radlauer, Haley Kim and Kenrick Cai.
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