When a Team Refuses To Die

2/16/11

Update: Part 2 now posted — a cofounder’s perspective.

We started working on Zinch in Fall-ish of 2006 and we launched in early 2007. Early momentum was strong. Admissions officers and students from all over America were jumping on board. We were winning awards and being covered in media everywhere. Things were great. People started to take notice and investors were lining up at the door. We were the belle of the ball. We capitalized on the situation and raised several hundred thousand dollars [1].

We grew the team to a dozen or so folks and started aggressively growing. We were on top of the world.

The Storm

The Honeymoon came to a screeching halt.

We were so caught up in the photo shoots and magazine covers that we didn’t even realize what was happening: our cash was quickly running out. By late 2007, we only had a few months of life left [2]. And to make matters worse, site usage softened; metrics were trending downward.

We tried to quickly raise additional capital from the current investors. Given everything going on (and how great a valuation we got on the previous round), they wanted a down-round. We obviously didn’t like that so we went externally to fundraise. Same result — folks wanted a down-round. This would have diluted founder/employee ownership significantly. We weren’t gonna do that to ourselves and to our team. So we had no choice but to leverage ourselves even further — maxing out more credit cards and taking on high-interest loans [3].

To cut costs, we had to fire almost everyone in the company, including two of my best friends. I will never forget that conversation. It was the hardest thing i’ve ever had to do in my life. It was a terrible, dark time in this company’s history. And it all happened around the holidays — quite the Christmas present to people we truly valued and appreciated. We simply had no choice.

Our company was in a death spiral.

The Introspection

By early 2008, we had some big decisions to make. We were hundreds of thousands in debt. We had fired almost everyone except the core team. Morale was the lowest of lows.

The easy decision would have been to quit. Call it good. Close down shop. Chalk it up as a great learning experience and move on.

Or… we could refuse to lose. We could refuse to die. We could turn the company around and keep the dream alive.

We chose the latter.

We knew that to keep the company alive, we needed capital. We weren’t in a position to turn on revenue (Though Than Hancock was doing a killer job at signing up colleges) so the money had to come from investors. The only way to pull this off without doing a down-round would be to demonstrate positive growth on the key metrics.

We didn’t have a lot of time to waste. Fundraising and site growth had to happen in parallel or we would be dead.

Odds were against us. The chances of this working out were slim to none. But if anyone was gonna do it, it was our team of entrepreneurs who simply refused to go away. We were scrappy sons of b’s and we were gonna make this work.

Part 1 of the Plan: Pound the Pavement

We had heard of this thing called the v100 [4]. It’s an annual recognition given from vSpring Capital (VC Firm in SLC) to the best tech entrepreneurs in Utah (or with ties to Utah). We figured this list would be a great place to start knocking doors.

We put together an email that told our story. It was persuasive and compelling. We poured our heart and soul into it.

We sent it to as many people on this list whose email we could find. Some responded. Some didn’t. We immediately started connecting, setting up lunches, meetings and pitches. The end goal was of course to build our network and ultimately find investors who believed in us…

Part 2 of the Plan: March Madness

In parallel, we thought long and hard about how to demonstrate success on the product. Key metrics needed to go up. How could we inject the site with energy and growth.

There were many long hours and sleepless nights just white boarding a lot of ideas. Ultimately, we landed on one solid idea: a scholarship contest similar to the NCAA Basketball tournament. We called it March Madness — The $20k Sweet Diggity Dawg Scholarship Contest. Though it certainly evolved and morphed, Brad Hagen should be given credit for the original idea.

The way it worked is that 64 people would compete in a bracket-style competition. So with each round, people would go head to head against another person. The person who received the most votes would move further into the bracket. Each round was 5-7 days. This would happen until there was one person left standing. We started this in the middle of February and ended it early April.

The little money we had left we were gambling on a scholarship contest. $20,000 dollars. Scary. Crazy. Perhaps again reckless and irresponsible. We were hella ballsy. We basically went all-in.

Luckily, it worked out great. Traffic surged and took down our servers on multiple occasions. We got a ton of buzz and PR. Many of these students became hometown heroes, getting stories in their local media and being rallied around by their community. March Madness was a huge success.

Things were starting to fall into place for us. Did we catch our big break?

The Bait

Our plan was executed to perfection. We had placed the lines out in the water with the v100 networking. And we sweetened the bait with the success of March Madness — demonstrating positive growth. It culminated with us getting major props on NBC’s Today Show. People jumped all over the deal. We brought in a handful of great investors at a great valuation.

Mike Levinthal (formerly of Mayfield Fund) lead the round which also included the likes of Josh James (Omniture), Tom Ngo (NextPage), and Morgan Lynch (LogoWorks) [5].

Mike immediately proved his value and started connecting us with companies, people and partners. He became a very active part of the Zinch story and still serves on our Board. He knew we had talent — mostly raw talent. He believed in us and he helped guide us.

Mike’s greatest contribution was connecting us with Anne Dwane, who has now been our CEO for more than two years (and is fantastic). Mike also helped lead us to great investors like Chris Michel and New World (our VC backers).

The rest is history. Zinch’s world has completely opened up since then.

The Conclusion

Though we’ll always have challenges, Zinch is a very strong company today. A global team making a global impact. Whatever and whenever it may be, Zinch will have a very successful outcome. In many ways it already has. We provide an incredibly valuable service to millions of students and hundreds of universities. We provide livelihood for more than 60 people.

None of this would have happened had it not been for a group of entrepreneurs who simply refused to lose. Sid Krommenhoek. Brad Hagen. Cache Merrill. Than Hancock. Al Wild. Drew Hales. Surya Prakash. Lance Hydrick. Dave Blake. And many others from the early-ish days [6].

It’s a story of hustle, perseverance, determination and luck. At a time when our backs were completely against the wall and nearly dead, the team executed flawlessly. The margin for error was zero. We had to perform to perfection. We did.

We stared death in the face. And we refused to let it take us. Great entrepreneurs simply find a way. There always is a way.

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Footnotes

[1] Shout out to Utah Angels. Though we disagreed on so many levels, I’ve got nothing but respect for John Richards, Ben Peterson and Warren Osbourne.

[2] This was so incredibly reckless and irresponsible of me and the other founders to let happen. I was a terrible and inexperienced 22-year old CEO. As obvious as it sounds, this is exactly how businesses die: they run out of money.

[3] Shout out to Rich Ferguson and Levi King for keeping us alive and believing when no one else did.

[4] In a fun twist of irony, I was voted to be on 2010’s v100 list. It’s an honor. Funny how things come full-circle.

[5] Through that time of heavy networking we were fortunate to meet some other great entrepreneurs and mentors. They include Bill Aho, Brad Baldwin, Jeremy Hanks, Chris Lee, Brock Blake, Paul Allen, Bryce Roberts, Kevin Santiago, Anthony Soohoo, Greg Peterson, Cydni Tetro and David McGinn.

[6] Ryan Caldwell, Josh Westover, Jeremy Johnson, Andy Baxter, David Parkinson, Mason Chen, Melissa Robison, Brandon Boulter, Ikwo Ibiam, Sarah Blanton, Joe Pututau, Taylor Seibold, Ted Williams and so many others.

  • http://www.ethandparker.com Ethan Parker

    I thought I knew all there was to know about Zinch, guess not! Great story.

    • http://www.mickhagen.com/ Mick Hagen

      Oh and there’s so much more. :)

  • Brad

    Those were good days, and i would do it all over again. Though this is simplified, its fun to reminisce. A whole book could probably cover those 6 months. I disagree with one thing: “We were so caught up in the photo shoots and magazine covers that we didn’t even realize what was happening.” A bit of an exaggeration there.

    • http://www.mickhagen.com/ Mick Hagen

      Agreed. There was a lot more too it than that. But I think we’d all agree that we shouldn’t have let our cash get that low. It made things much more difficult for us to recover.

  • http://joshuadance.com/ Joshua Dance

    Great post. Thanks for sharing. Not easy admitting mistakes.

    • http://www.mickhagen.com/ Mick Hagen

      Thanks Josh for stopping by.

  • http://twitter.com/VarsityOutreach Mark Rothbaum

    Great post, Mick. Glad things are working out for you and the Zinch team. Starting a company is definitely a roller coaster (but it’s one I much prefer to my past life as a strategy consultant).

    • http://www.mickhagen.com/ Mick Hagen

      Thanks Mark. You are a great entrepreneur and it’s been great to see your success w/ CTK and now VO.

      Definitely no other way to live than being a creator and innovator. Entrepreneurship is hard but fulfilling.

  • Lance

    Awesome post Mick! It’s always great to see how far we’ve come in such a short time.

    • http://www.mickhagen.com/ Mick Hagen

      Thanks Lance. You were part of that team as much as anyone. Couldn’t have done it without you.

  • Anonymous

    Great story of just how far ‘hustle’ can take you. Great post!

    • http://www.mickhagen.com/ Mick Hagen

      Thanks Logan!

  • Richard Ferguson

    I’ve known the founders of Zinch for the better part of 10 years now. They are a fantastic team and driven to succeed. We will be hearing a lot more about them in the future.

    • http://www.mickhagen.com/ Mick Hagen

      Couldn’t have done it without you. Congrats on the funding!

  • Andy B.

    Great story Mick. Definitely the right team for the job. Congrats on your success! Thanks for the opportunity. Special thanks to Brad for the follow up in part 2.

  • Cache

    It is a great story, glad you are telling it. Such a history behind the Zinch, and you tell it well.

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