What Makes an Entrepreneur (4/11) – Resiliency

Posted on Dec 18, 2009 | 121 comments


rockyThis is part of my new series on what makes an entrepreneur successful.  I originally posted it onVentureHacks, one of my favorite websites for entrepreneurs. If you haven’t spent time over there you should.

I started the series talking about what I consider the most important attribute: Tenacity.  I then covered Street Smarts and Ability to Pivot.

4. Resiliency – I like to say that “being an entrepreneur is really sexy … for those who have never done it.”  The reality is that it’s lonely, hard work, high pressure and filled with mundane tasks.  It’s a gritty existence.  In the grand scheme of things no matter how hard you work and despite your appearance on the TechCrunch50 stage no one seems to really care.  That next round of investment is proving difficult.  Customers are harder to sign than you want.   Journalists have just written an article that wasn’t favorable.  Your competitors just announced positive news.  You’ve got 8 weeks of cash left and one of your employees just asked you to fill out a form so she can buy a house.

Every day you go home and face self doubt but you’ve got to come back in the morning strong.  Your employees are looking in your eyes for signs of weakness and self doubt. They believe in you and they draw strength from you.  You’ve got to be able to come out of unsuccessful VC meetings, pull your socks up, and go into the next pitch.  You’ve got to accept customer losses as learning experiences and see how you can improve next time.  You’ve got to see your product weaknesses and plug them.  You’ve got to hear all of the doubters, and the world is FILLED with doubters, and still not give up.  You’ve got to look your staff in the eyes daily and let them know not to worry.  You’ve got to put the competition into perspective.  Not lose your cool.

Tenacity is about pushing forward every and not accepting “no’s” while resiliency is about taking punches every day and not falling down.

Resilience is one of the tell tale signs of an entrepreneur.  As a VC if I can tell that you’ve survived tough times and you don’t appear beaten down that’s a huge plus.  One of the most famous case of resiliency in the US history is Abe Lincoln.  If you haven’t seen how many setbacks Abe had before becoming president check out the link.

Or more succinctly from Sir Winston Churchill, “Success is the ability to go from one failure to another with no loss of enthusiasm.” (quote via David Fishman)

My own personal resiliency story.

There was only once in my career where I actually thought that I was going to go bankrupt.  We had been working on a merger between BuildOnline and a competitor called iScraper.  We were strong in the UK and they were strong in Germany and Israel (where they had a development office).  I had developed a great relationship with the CEO whom I still admire (he left many years ago).  The agreement was that both sets of investors would fund the combined entity, we would reduce overlapped costs and become a healthier company.  This was soon after the bursting of the dot com bubble – in early 2001.

The deal terms were agreed, the combined business plans were prepared and both sets of investors had verbally agreed to do the deal.  Whew!  We were going to avoid the embarrassment of being a total dot com flame out.

And then I got a few disturbing calls.  The first came from the CEO of iScraper telling me that they would not be able to complete the deal their investor, Apax Partners, had decided not to proceed despite verbal assurances that they would.  At BuildOnline we had brought one new investor to the deal – a Swiss/New York investor called ETF Group.  My contact at ETF told me that Apax had called them and told them that they were planning to fund iScraper on their own without the merger and that ETF should back their deal rather than ours.  I was incensed since we had brought ETF to the table.  I learned quickly about some investors’ ethics (or lack thereof).

So Apax went ahead and funded iScraper without us.  Their calculation was that we would go bankrupt and they could pick up our assets for free.  We had 3 weeks of cash left in the bank so we were screwed.  I called the top management team of BuildOnline to get together for an “all hands” meeting at a nearby pub (we were in England after all) and told them the news.  We started drafting out plans for what we were going to do in order to have an orderly winding up of the company.  We spent a couple of hours (and drank a couple of pints).

But then I got a call from my lead investor (coincidentally it was GRP Partners where I now am a partner) and they told me not to lose confidence.  They said that they don’t plan on getting screwed by Apax and that they still believed in us.  I called ETF group and they said they would stick with us if we could create a revised plan that they agree with.  I called Goldman Sachs (an investor) and they said (literally), “if those F’ers at Apax think they’ll get away with this they’re kidding.”

We had a rallying cry.  I jumped on a plane and immediately flew to New York for just 1 day to meet with the Chief Investment Officer of ETF.  I presented a revised plan that I had created in 24 hours with the help of my team.  I then flew from London to Los Angeles to meet with the partners of GRP.  I flew 12 hours, got off the plane, showered at my hotel and then went into their offices to present.  In the morning I flew home.  We committed to cost focus, customer adoption and delivering our numbers.  We commited to getting by on much less capital than was planned.  We got their commitment and our existing investors bridged us until the new financing round could close.  We cut our staff in one day from 92 people to 38 and then immediately to 33 (yes, we should have just done one cut).

And the beautiful thing was that Apax had only given iScraper $1.5 million to see what would happen.  They blew through this and went bankrupt within months.  We picked up their management team in Germany for free.  We looked through their contracts, flew out to Germany and met with all their clients.  We agreed to transfer their data for free in exchange for long term commitments.  We signed deals worth $1.2 million over 2 years that made us profitable in Germany from day 1.  Any customer not willing to commit we didn’t sign.  And for all of this we had no dilution and paid no money. (iScraper Israel shut down and another UK competitor took on their UK assets).

That was our first year of sales.  It was the worst year in history to be selling Enterprise Software and worse yet we were selling SaaS software, which was still experimental in buyers’ minds.  But we did $2.1 million in recurring revenue of which $600k came from Germany.  The next year we did $5.9 million of which $1.8 million came from Germany.  We were on our way to building a real business.

I was feeling resilient.  With the exception of a couple of hours in the pub for one afternoon – I never let my stress show.  I never let my extended team absorb the uncertainty that I faced daily.

Stories like these are not rare.  Ask any entrepreneur who has been through the recent washout that began in September 2008.  The best entrepreneurs have a survival instinct.

Next up: Inspiration.

  • http://shanacarp.com/essays ShanaC

    History of Business since the 1980's to today. It was a piece of its time,
    and I was assigned to watch it in comparison to the beginning of Hobbes's De
    Cive (we read a good chunk)
    http://www.constitution.org/th/decive01.htm

    We then had to compare it to the culture and style of the 1980's LBO and
    Junk Bond growth as a medium of investing. I wrote a paper on Michael
    Milken as a historical character…and a paper on irrational exhuberience in
    the market during the 1990s dotcom (and they made me watch Startup.Com and
    The Smartest Guys in the Room for that)

    Plus we got to here panels about these periods of time about being on Wall
    Street. Definitely the oddest moment was when one of our TAs got a female
    partner in McKinsey talking about feminism….

    I did figure out that I was the only person in the class talking to business
    people every day. I was the only person who read Mary meeker reports via
    floating twitter stuff for fun. And I was one of the few humanities
    students in the class. Definitely was interesting….

    I also figured out that it is a really good way to learn a lot about
    business. Those who don't study history are doomed to repeat it. So I
    managed to ask a lot of questions (like why exactly don't venture
    capitalists in Web technologies use weird convertible bonds- what exactly is
    an LBO, and do media companies need it, what exactly is a hedge fund and how
    they work with other parts of the street) and I am really glad I took the
    class. Even if it was a strange class…

    The only really unfortunate thing: It's taught by an Alumni of the GSB of a publicly traded company. So I'm trying to figure out what exactly I think is up with Tracked.com (that is a very big pipe for business information, and that page needs to be restructured). I managed to track my professor as a joke. Which I find ummm…..interesting that I can see his trades.

  • http://lmframework.com/blog/about David Semeria

    Bubble smubble.

    The same dynamics that allowed Milken and Boesky to flourish were at play centuries earlier in the tulip madness, and a few years later for the S&L crisis, the dot com bust and our most recent mortgage fun.

    Fear and Greed. That's all you need to know.

  • http://shanacarp.com/essays ShanaC

    We actually discussed that too in that class. We even got the charts for the
    tulips and with S&L

    And one of the topics for the final paper was “Is greed good” Discuss
    historically,

    It's just how you manage your greed and your feelings. Something I keep
    trying to explain to people my age.

  • http://giffconstable.com giffc

    You have to be wired a certain way to love entrepreneurship through the highs and lows and all the uncertainty. The CEO spot can be a lonely place, and I've found that no one really understands it completely until they do it — no matter how senior a VP they were or how big their company got.

    It is a great story you shared. I'm glad it worked out the way it did and you are willing to write about it. So few investors are willing to call other firms out – understandable but it allows bad behavior to continue.

  • http://lmframework.com/blog/about David Semeria

    As the Italians like to say, “the truth lies in the middle”.

    Even discounting European discomfort with the “F” word, rejoicing in failure is almost as disconcerting as not mentioning it.

    Striking a balance is admittedly tough; share and analyze your failures, but don't wear them as medals.

  • http://bothsidesofthetable.com msuster

    ;-)

  • http://arnoldwaldstein.com awaldstein

    Hi Shana. Sure you are right, but in start-ups, in work generally, there are just bad days. Poise in process is always the goal but a challenge to maintain at times.

  • http://twitter.com/davidsmuts David Smuts

    Why not wear them as medals? Why not shout about them? Better to have failed than never have tried. It's exactly because of this fear of failure that people do not achieve their full potential, and because of this fear they don't even try. How can you not achieve your full potential without having failed along the way? A genius fails…, an idiot fails. To fail, is human. To learn from failure makes you a genius. To ignore your failures makes you an idiot. To deny your failures makes you a liar. To share your failures makes you a helper. To wear them as medals makes you confident.

    Thomas Edison famously said, when asked why he had failed 990 times to identify a conductor of electricity:

    “I have not failed, I have positively identified 990 methods which do not conduct electricity”. It was sometime after his 1000th attempt (utilising bamboo fibre) that he finally cracked it.

    I WEAR MY FAILURES as my medals. I will tell my children about them, I will tell my business partners about them, I will tell you about them (if you want me too). I have learned, I have learned, I have learned.

    Failure is the greatest form of learning. When I tried DIY I learned that crossing a Live cable with a Neutral cable was not good! I learned in business that outsourcing fundraising does not work. I have learned in driving that going through red lights gets you into trouble. I have learned that trying to have a logical argument with a policeman in the USA is futile. SO MANY FAILURES, so many lessons learned. HELL YES I WEAR THEM AS MEDALS!!!!!!

    If you can't wear them as medals, then you'll never help others and none of us will fess up for fear of looking foolish. The science to learning is more about positively identifying what doesn't work, rather than coming across by accident the method that does work. Only by sharing our failures with one another can we foster innovation and social change.

    WEAR YOUR MEDALS BABY!

  • abir bhattacharyya

    Thanks Mark, Gotcha.

  • http://lmframework.com/blog/about David Semeria

    You write very well, David – have you considered a career in the motivational video market? :)

    Joking aside, I'm reminded of a conversation I had yesterday evening. I was describing my screening interview with Arthur Andersen. The screening interview was supposed to be a formality, necessary merely to unburden full partners of the need to spend their valuable time talking to total wankers.

    My interviewer (fully 12 months ahead of me in the Great Game of Life) wanted to know why, even if my university had 8 football teams, my services were required mainly by the second team, rather than by the majestic first. I launched into an intricate monologue explaining how, being none-too-confident in the abilities of my left foot, I would frequently “cut inside” so as to cross with my right. Shortly after, I found myself on the wrong side of the door.

    This being England, the subject came up again in another interview. But the Boy had learned. I explained that I came from a rugby school, prior to university I had never played in an organized football match, and so they put me in the 6th team. Over time, I worked my way up to the second, and it was quite hard to be promoted from one team to the next. I stated confidently that if I had started off in in a higher team, I would so totally be playing for the first team by now. All but the last bit was true. I still didn't get the job, but at least the interview lasted more than five minutes.

    Key learnings? Learn from advertising – package your experience in a positive light. Losers are good for the first act of films, but not much else. Explain how you got into the second team, not why you failed to get into the first.

  • http://lmframework.com/blog/about David Semeria

    Why not?

  • http://twitter.com/davidsmuts David Smuts

    It's all about presentation and perception isn't it?
    One man's failure is another man's treasure.
    I think the greatest failure of all is just to never have tried.

  • http://twitter.com/mikeschinkel Mike Schinkel

    Well, clearly you've done something right. :)

  • http://bothsidesofthetable.com msuster

    Yeah, I often talk about entrepreneurship as being inside the sausage factory. It's certainly not for everybody.

  • http://bothsidesofthetable.com msuster

    re: CEO being lonely – you got that right. And VP's often think they can step into the CEO's shoes. Not as easy as it sounds.

    re: naming firms. Apax is a good firm. But they did screw me on this transaction and I have no problem mentioning that.

  • http://www.kidmercuryblog.com kidmercury

    thanks for sharing your story mark. it's a good thing you were able to recover, can you imagine how much this story would suck if you had the merger setup and just got robbed, lol, man that would've been terrible

    i don't see the difference between resilience and tenacity though. i think resilience is a subset of tenacity; put another way i don't think a person who lacks resiliency can be considered tenacious.

  • http://www.kidmercuryblog.com kidmercury

    thanks for sharing your story mark. it's a good thing you were able to recover, can you imagine how much this story would suck if you had the merger setup and just got robbed, lol, man that would've been terrible

    i don't see the difference between resilience and tenacity though. i think resilience is a subset of tenacity; put another way i don't think a person who lacks resiliency can be considered tenacious.

  • http://howhealthyisyourpersonalfinance.blogspot.com/2009/12/internet-marketing-affiliate-program.html scheng1

    Thanks for sharing. Fortunately you didn't drown yourself in the pub that afternoon!

  • http://howhealthyisyourpersonalfinance.blogspot.com/2009/12/internet-marketing-affiliate-program.html scheng1

    Thanks for sharing. Fortunately you didn't drown yourself in the pub that afternoon!

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  • http://jayliew.com jayliew

    inspirational! Thanks Mark… now I know to stay the F' away from Apax :D

    Isn't that the nature of an M&A due-diligence? You share your secrets .. and you just hope that if you don't get married, the other person doesn't use the insider-info to screw you over?

  • http://jayliew.com jayliew

    inspirational! Thanks Mark… now I know to stay the F' away from Apax :D

    Isn't that the nature of an M&A due-diligence? You share your secrets .. and you just hope that if you don't get married, the other person doesn't use the insider-info to screw you over?

  • http://jayliew.com jayliew

    inspirational! Thanks Mark… now I know to stay the F' away from Apax :D

    Isn't that the nature of an M&A due-diligence? You share your secrets .. and you just hope that if you don't get married, the other person doesn't use the insider-info to screw you over?

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