This 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.
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.