What Makes an Entrepreneur (4/11) – Resiliency

Posted on Dec 18, 2009 | 121 comments

What Makes an Entrepreneur (4/11) – Resiliency

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.

  • gary erickson

    True comments Joe, Business in the trenchs, is alot different, than theory's about it, as you know, Sometimes the best plans can dissapear, when you run into crocks.

  • 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)

    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…

  • 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

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

  • http://www.elieseidman.com Elie Seidman

    love that quote!

  • 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://www.elieseidman.com Elie Seidman

    great story – the game is over when you quit. Don't be a victim. I bet you breathed a pretty big sigh of relief when you fired all those people and poof – 2/3rd of your burn disappeared.

  • 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 than coming across by accident the method that does work.


  • 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 started off in in a higher team, I would so totally be playing f or 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 first.

  • http://bothsidesofthetable.com msuster

    Oh, dude. I often acknowledge my mistakes. Read the opening paragraph here –> http://www.bothsidesofthetable.com/on-entrepene

    But to catalog / self flagellate:
    – I raised too much money too quickly, I therefore:
    – Hired too many people
    – Overspec'd my product
    – Built too many products
    – Charged too much money for my products
    – Drank my own Kool Aid from all the positive press I got

    Want me to go on? This blog is never about saying I'm great. When I was a first time entrepreneur there were no resources for people like me to stand on the shoulders of those that came before. That's all this is about.

  • http://bothsidesofthetable.com msuster

    Awesome video link – really enjoyed watching that again. Thank you.

  • http://bothsidesofthetable.com msuster

    Yeah, I'm sure that's true. An AA for recovering entrepreneurs 😉

  • http://bothsidesofthetable.com msuster

    re: layoffs – true. But that's for a separate post!

  • abir bhattacharyya

    Mark: Great post. Can you elaborate on how you specifically you evaluate resiliency during the “Getting to know the entrepreneur” period. Ask them, ask other people?
    I will retweet this right away. Best, Abir

  • http://www.elieseidman.com Elie Seidman

    looking forward to reading that post. Your comment about it being better to do all the layoffs in one felt swoop is very true. Go as deep as you can all at once – if you need to, you can add people back later. But you don't want those remaining living in fear.


  • http://communitas.tumblr.com/ tobymurdock

    This is great stuff to hear. It provides great encouragement to those in the midst of the battle. And to David's point about EIA I'll add my own story:

    So my last start-up was seed funded by a mega-successful angel. The financing trickled in over a set of traunches. We came in for a meeting with him to update him on where we were and he began the meeting by telling us that they would not be investing in the third traunch. The news hit me like a ton of bricks. I had already burned the little savings I had to get the busienss going, and, with the story of this investor pulling out hanging around us, it was going to be very difficult to raise from somewhere else. We were screwed. Visions of not being able to afford my mortage, moving my wife and kids out, shot into my head.

    But in that moment of hearing the news, I tried to remind myself that dwelling in the negative never helps, that in fact every kick to the head provides motivation to crank it up. So instead of being horrified and deflated for the rest of that meeting, I let it rip and dazzled him about the progress that we'd made and where we were headed. He didn't change his decision there, but was impressed enough that by the end of the meeting he came back to the issue and said that he and his fund would actively help in getting us the next round.

    So we visited a number of investors and particularly strategics (i.e. potential acquirers one of whom later actually did make an offer) with a member of the angel's lieutenants. Those investors and strategics were really impressed with us and the lieutenant reported that back to the angel. Not too long thereafter the angel was back in, in a bigger round, no more traunches, with new investors to boot. And the end of the story was ultimately a successful sale of the company.

    Like you said, so much of entrepreneurship is not sexy but brutal. You have to push ahead through the kicks to the head. I still struggle with it all of the time, but posts like this one help in reminding you that such setbacks are a normal part of the process and the key element is just how you react to them.

    I'm all for joining the EIA group. 😉

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

    Why not?

  • http://arnoldwaldstein.com awaldstein

    No, thank you. Your posts are honest, transparent and drive response…and likewise create value.

  • http://www.fixstars.com/ Camilo

    Your personal story is a page turner. Thanks for sharing.

  • Shane

    Deep Survival is a great book. I guess I will have to re-read it with my business in mind now…

  • http://mikeschinkel.com MikeSchinkel

    Interesting story Mark. Resiliency is super important, yes, but I wonder however if your story would still apply had your lead investor GRP Partners never called or when you called they said “We're going to cut our losses?”

    Honestly, I think your story emphasizes less about resiliency and more than the relationship and respect you had build with your investors, no? That's probably more importantly, honestly.

    Want a story about resiliency? I can give you a story about resiliency. But I digress…

  • 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://reecepacheco.com reecepacheco

    A lot of the principles apply to business, particularly startups where
    everyday is a matter of survival.

  • geekstack

    I'm going through a smaller resiliency moment right now. There's the holiday slowdown, my partner deciding whether he will continue working part time or escalate to full time, and two sources of money I've been pursuing have been delayed. We also missed our schedule date to start playtesting which is discouraging.

    But we're proud of the quality of our work so far and for every one thing we finish we think of five new things we can do to make it better. We're really focusing on getting our first version into the hands of playtesters so we can focus our future development.

    PS Funny that this came out the same day: http://jonbischke.com/2009/12/17/never-give-up/

  • 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://bothsidesofthetable.com msuster

    You know, I can't say that there is a formal, scientific way to evaluate it. First, if someone has been beaten down and feels like a kicked puppy you can tell. Danger, Will Robinson! If they've lost confidence you're toast. But when you hear the stories of what people have been through (many posted by others on my blog) and have survived you know you have somebody more resilient. Also, I look for people that quit companies when things weren't going well. They always tell me that they got a better offer elsewhere. I don't back them.

  • joeagliozzo

    Really enjoying your series.

    It occurred to me about reading the “nature vs nurture” comments along with your posts on Tenacity, Street Smarts and Resiliency that my belief is that anyone can be good at each of these elements if you have one, over-riding personality trait – Ambition (aka Drive).

    If you really want it and have a burning desire, you won't quit until you find the right route to success, and will use whatever means necessary (street smarts) to achieve your goal.

    As an aside, I believe entrepreneurs are made rather than born, but I think for most people you are either born with ambition/drive or you're not.

    I haven't seen many people acquire ambition later in life, but I have seen people work as employees for 10, 20 years and then be successful at starting their own business.

    They had the drive to do it all along, but for various reasons never used it to be an entrepreneur.

  • http://bothsidesofthetable.com msuster

    Great story. And to Abir's point above – that's how you find out whether somebody is resilient. Your angel told you “no” and you didn't go mental on them. They watched your leadership skills and at some point decided to back you nonetheless. This is not uncommon. Well done.

  • http://bothsidesofthetable.com msuster

    I think it is more fun in retrospect than it always was while I was there! Actually, a reporter from the FT wrote about VC in early 2001 covering Europe. She featured a lot of my stories. Some are truly outrageous. I look forward to sharing more throughout 2010.

  • http://bothsidesofthetable.com msuster

    You might be right but I'll never know for sure. But it's no surprise that I work for GRP now. They treated me with so much respect in my darkest hours. I can't say that about many VCs. But when you see many more of my stories throughout 2010 I think you'll see that the resiliency gene was there.

  • http://bothsidesofthetable.com msuster

    Too funny – Jon's a good friend. I hadn't seen that.

    Good luck working through your issues. They never end. I guess Ev is feeling it today after their attack on Twitter last night. So no matter what your issues just get more critical. Good luck working through yours.

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

    Thanks Mark for sharing these insightful lessons learned. I rarely see this level of transparency from other VCs (perhaps because they've never been in the trenches?). It goes along way in helping Entrepreneurs.

    It takes a remarkable human being to look failure in the face and say I'm not going to give up. Personally, I like to say I'm a survivor of failure, not a victim of it. I'm either thriving or I'm surviving. Thriving is a lot more fun though.

  • http://bothsidesofthetable.com msuster

    You might be right. It's funny because I just got done leaving a comment on the 'street smarts' post about nature vs. nurture. I'm in the former camp but that's clearly subjective.

  • http://bothsidesofthetable.com msuster

    I'm not worried about sharing mostly because I don't care about social convention 😉

  • geekstack

    Yeah, I haven't had to deal with Iranian cyber terrorists so I'm not doing too badly.

    Thanks for the encouragement!

  • http://shanacarp.com/essays ShanaC

    I saw that film for a class: I thought that the definitive moment of resiliency was when our man sheen found his soul. They made me watch it after also reading a good junk of Hobbes….

  • http://www.appwhirl.com Richard Jordan

    I'm stealing your comment on entrepreneurship I'm afraid :-)

    “being an entrepreneur is really sexy … for those who have never done it.”

    You're right. I think people a lot of people in boring jobs fantasize about the path of entrepreneurship, but I think entrepreneurs just have something inside them that drives them towards it. True entrepreneurs, experienced entrepreneurs, understand what's involved. They've seen what goes into the sausage. Sadly too many people think it's about having a “good idea', someone gives you some money, then you're google and flying around in private jets. All a bit underpants gnomes really http://en.wikipedia.org/wiki/Gnomes_(South_Park).

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

    Interesting true story here:

    In a job interview I was once asked: “What do you value most in your career?”

    “My failures” was my immediate reply, instant and without thinking. Not what I should have said… (remember this is in the UK).

    HR did not think this was cool, nor did the VP interviewing me (“this guy is admitting to the fact he fails!”). The CEO thought it was brilliant. We discussed which ones I valued most and what I had learned. He gave me the job (He was very un-British by the way and was an amazing leader).

  • http://shanacarp.com/essays ShanaC

    You seem very normal, you also seem like if you want a second after retirement career, you might want to write an adventure novel about business. It might prove popular one day.

  • http://shanacarp.com/essays ShanaC

    Back to the pivot- when do you move forward, back, or to the side. This is about moving with grace, as if you are a disciplined ballet dancer, or at least pretending you can. Not every move forward is positive. Sometimes they will have negative repercussions.

  • http://shanacarp.com/essays ShanaC

    That sounds like a painfully true quote.

  • http://www.linkedin.com/in/rajatsuri rajatsuri

    Yeah I was thinking the same thing. Surely the answer isn't as clear-cut as genetics, though right? Very likely many of these 'founder features' are a combination of education, cultural values, personality, IQ and particular circumstances.

    I'm a little worried about telling people they can't be entrepreneurs because two cells didn't combine properly in a womb X years ago. In fact, lots of people in the world operate businesses, both service and product-oriented, which suggests that maybe the right genetic combination isn't the only factor. While it's probably true that some people can NEVER be entrepreneurs, it's also probably true that a large number of people who aren't entrepreneurs right now could be successful founders if they chose that path.

    And if you look at Steve Jobs and Bill Gates interviews, and other successful entrepreneurs I've talked to (one who has built and sold each of his 5 businesses!), a surprising amount of time they boil down their success to 'right place, right time' and 'luck'.

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

    You got to watch Wall St in school? Remarkable. I am continually amazed (and in awe) at the progressiveness of US education. The only films we got to see were those covering the electronic tags of our library books.

    I would have got the class to debate this quote: “I'm gonna make your rich, Buddy boy”.

  • gary erickson

    True comments Joe, Business in the trenchs, is alot different, than theory's about it, as you know, Sometimes the best plans can dissapear, when you run into crocks.