Archive for the ‘Startups’ Category

When Investors Treat Us Like Toys

3/2/11

Update: Dan Primack, Senior Editor at Fortune Magazine, approached me and asked if they could put this post on their website. It’s now on Fortune’s website. Very cool.

I spent a few days at Launch Conference last week and had a great time. Great conference for entrepreneurs and investors. Good description of the event here.

I met some entrepreneurs doing really interesting things. Their passion and energy is contagious. They are underdogs. And I love underdogs.

The conference was also filled with early-stage investors and VCs. I interacted with a few personally but mainly I listened and observed as they participated on panels and as they gave feedback to the presenting startups.

The Investor

I don’t appreciate the way some investors talk about the startups in their portfolio. I’ll sometimes hear, “Yea, i’m in on that deal.” The words themselves aren’t that bad… but it’s the way they say it. They convey an attitude of not really caring. It’s just a “deal.” It’s like they’re playing a game of monopoly or doing some fantasy baseball trade or playing a game of Poker and us entrepreneurs are just the Skittles they’re playing with.

I get it. It’s often their job to invest in a bunch of companies. I understand. Spray and pray. Yadda yadda yadda. But it’s no excuse for not caring.

The Entrepreneur

We put our entire life and livelihood at risk for the startup. We have no alternative. No portfolio to lean on. It must work. All day every day, we are consumed in building value in the enterprise. We forgo great jobs, great schools, and great opportunities to be building a startup — a startup that will most likely fail. But we continue.

Some of us are post-economic (we’ve sold a company), but most of us aren’t. We’ve got no track record. Little money in the bank. Just hustle in our veins and a dream that won’t die.

I’ve had my share of battle wounds. I’ve gone through tens of thousands of dollars in debt. I’ve slept on couches and bunked up with friends. I’ve begged family members for loans… as humiliating as that is. I’ve gone through a nasty foreclosure. Yes, you heard that right: i’ve lost a home. Do you know how hard and embarrassing that is? My credit is a complete disaster and will take years to recover. This hasn’t been easy.

Yet to so many investors, we’re just a “deal.” Just a drop in the bucket. Just a Skittle on the poker table. And while these investors are worried about what country club they’re gonna join next or what imported car they’ll get their wife for V-day, we entrepreneurs are busting our butts and sacrificing everything trying to get the company off the ground.

The Exception

Not all investors are like that. Many investors are former entrepreneurs and they still remember what it’s like. They know what we’re going through. They understand how wet the pillow gets at night when times get tough. They understand what it’s like to come home and tell your loved one, “honey… i don’t know how we’re gonna pay rent this month.” They remember.

Many investors aren’t former entrepreneurs. But you’ll know what kind of investor they are by how they talk about their startups and founders. You’ll know by how they express concern and empathy for them, their family, their situation. If they are truly founder-friendly, they’ll care. You’ll hear it and you’ll feel it.

The Conclusion

If you’re an investor, care. Really care. Don’t forget the blood, sweat and tears that we shed every day to make this happen. To you we’re just one investment. To us, this is everything.

If you’re an entrepreneur, don’t take money from investors who treat you like a pawn. You aren’t a toy for them to play with. This means the world to you — literally. They need to respect and appreciate that.

Note: We’re lucky to have great investors at Zinch.

When a Team Refuses to Die — Part 2

2/18/11

Note: This is part 2 of a recent post called “When a Team Refuses to Die.

The point of my last post was not to tell the “Zinch Story,” but to share an abridged version of certain historical events to help convey a message: great entrepreneurs always find a way.

My post covered the time period between q4 of 2007 and q1 of 2008. Though a very important part of the Zinch story, it’s exactly that — just a part of the Zinch story. And it’s just my perspective. The beginning of the story dates back to my Princeton days in 2006. The end of the story has yet to be told.

It’s very hard to summarize a span of 6 months in a blog post. In startup world, that’s an eternity. There were so many intricate details, unique experiences, and drama-filled events that took place during that time. The story is so much more powerful than what I shared. A lot went down. Fights. Creative investor buy-outs. Rogue employees. Luck. You name it, we had it. It’s as sexy, complex and crazy as the early days of the Facebook story. Not even an epic novel or a Hollywood thriller could give “The Zinch Story” the justice it deserves.

Having said that, let’s unpack “The Storm” section of my blog post just a little bit more. That wasn’t the focus of my post so that’s why I didn’t get into much detail. But that part of the story definitely deserves additional attention, and one of my cofounders put together his perspective that I wanted to share. This was q4 of 2007. There is so much untold — so many unsung heroes.

Below is Brad Hagen‘s perspective on what went down during that time period. Hopefully this paints a better picture of how tough the times were. It was a dark, dark time for Zinch. But we were determined. We refused to die.

The Angels

We worked our butts off trying to figure things out. We weren’t charging colleges when we raised capital from the Utah Angels. Metrics started slowing down and we were burning money because we had no revenue. Users we’re growing, but not as quickly as we’d have liked. We decided to try to monetize with colleges and this was in the middle of us going to battle with the angels (vision wasn’t aligned).They weren’t on the same page as us, and we found that out quickly after the money came in the bank. The battle with them felt like the movie ‘300’ when we we’re in it. It seemed epic and it seemed as if it would define our company. At the time it did. We won, we got it the way we wanted, but not without some battle wounds. We took on debt to save ourselves and got them out of our way. We changed CEO’s. We were exhausted. We slayed the angels and got rid of some rogue employees, but this still didn’t save our cash flow problem.

The Push

All during this time we pushed Than Hancock to help monetize with colleges. In September we talked about what it would take. Could we ramp up colleges before we ran out of money? We got our first check from a college in November. Were we worried? Yes. Were we too busy with photo shoots and admiring ourselves? No. What were we doing? Battling the most important battle ever, taking down crappy employees and the Utah Angels who didn’t believe. That’s what the distraction was, and even with that, we knew money was draining.

It came to the first week of November and we realized we would not make payroll at the end of the month. We talked about a lot of things. We decided to pay the tech team and keep them all happy. We needed them. We figured out a way to pay them — I would pull another $60K out of my personal bank account to float payroll that month. That was my reality to keep this company alive — to keep it breathing. To be honest, I don’t even know if I got paid back that money. Doesn’t matter. Zinch was my life, my baby, and it was going to succeed. I wasn’t… none of us were going to let it die without a fight. We knew the concept was valid, we just needed to get it to the masses. We decided to let a team go, a team of five people that were dedicated to grassroots high school marketing. It was a team that I was working with on a daily basis, so it was tough. We still needed to talk to our sales team, who up until recently, we hadn’t really asked to make sales.

The Loyalty

But the toughest thing was talking to the sales team, most of whom I had personally brought on through friendships. Over two nights, after work, I met with each of them individually. This is where the real story is. There was four or five of them. They were all at Zinch because they believed in it. And it broke my heart to have to meet with them and most likely tell them bye. I explained the situation. I explained our plan to get out of it. And then I asked them if they would be willing to work for a month without pay. I told them they could leave but we wanted them to stay. We couldn’t pay them, but we needed them.

It was probably the first time I had tears as a grown man. It was emotional. I was real with them. It brought me to tears. I’ll never forget these talks. Every single one of them wanted to back the company. Every single one said they’d stand with us. Every single one stayed to make this happen. It’s because of them that we are where we are today. This was a humbling moment in so many ways. Those early employees not only had character that I didn’t believe people had, but they had a loyalty to our company and to us as founders. That was the power that made Zinch. Do you want to talk about never willing to quit, it was the sales team that exemplified this to me.

So that November we all busted our butts. Everyone still at the company knew our situation and bonded together to make it happen. Being open with them empowered them. We ended up getting revenue started. But that wasn’t the end. The story doesn’t end happy there. We didn’t have enough money still. We were still skeptical about making payroll for December. I’ve never pounded the streets so hard, we all were, trying to figure anything out. Trying to find someone to invest, and give us more time to ramp revenue from colleges.

Christmas Miracle

Sid and Mick were all pounding the pavement pretty hard, we were doing everything. I was flying to New York, New Jersey, trying to talk to anyone we could through introductions people gave us. Then one of our loyal sales reps came to us and said, “My dad has an extra $100K that he wants to put somewhere before the end of the year. Do you think he could invest in Zinch (paraphrasing).” I won’t forget that moment. It wasn’t that easy, but we had another opportunity. I remember going to his fathers office and pitching him. It was one of the most important sales I’ve ever made. I convinced him and then I wondered, should we take his money? Is this going to work or am I going to just waste his $100K? It was a serious moral dilemma. When I got back to the offices and saw the sales team doing work on the phones, I knew that $100K was not going to waste. There was a team ready to make it happen. An entire team that wouldn’t quit. This was what we needed to get over the hump.

We ended up getting the check the last couple days of December, something like the 30th and payroll went out the day later (a little more than half of that money). By January we had ramped revenue, colleges were jumping on board and paying good money for it. We’ve never looked back since then. And your post covers well what happened in early 2008 (March Madness, fundraising effort, etc).

The Conclusion

I know its hard to get specific in a blog post, but I felt like our reality of that time period was cheated in your post (I don’t blame you for it, not many will understand all the emotions, sweat, tears that we went through during that time. I know my words still don’t capture the reality, there is much more that we are leaving out). The never say die attitude was in the details of the events over those 3 months and it came from multiple people. Those were tough times, challenging times. But all for the better. It was an amazing experience for me. And it’s a challenge that I will never forget and hope to never have again. I’m glad we didn’t go through that alone. We needed 3 founders to get through that, I’m glad we had each other and a team that supported us. I know we all worked extremely hard to not let Zinch die. I’m sure Sid has an even different lens. But this was mine. And it probably still missed some things, but this is etched in my mind forever.

What Passion Feels Like

1/28/11

Passion is an interesting thing. It can’t be taught or told. It can sometimes be influenced or shared. It sometimes evolves and changes. It usually relates to something — some idea, some topic, some purpose, some problem, some vision.

Entrepreneurs

Entrepreneurs are typically very passionate people. We’re restless, hungry, fast-paced and intense. Most of us have the skill-set to land a comfortable 9-to-5 corporate job working for ‘the man.’ But we usually make terrible big co employees. We can’t stand not being able to get things done. So our passion leads us elsewhere.

Oxygen

It takes a rare breed to be involved with startups. Startups aren’t always “fun.” It’s a long and sometimes lonely journey. For that reason, people involved must be passionate about what they’re doing. They have to take joy in going toe to toe with their Goliath. They must embrace obstacles with a wide smile. Waves will come crashing down, and just when you get your head out of the water for air, another will come pounding on top of you. It’s a war and the team has to be committed to the cause and to each other. The team’s collective passion is the fuel of the enterprise. That and money. It’s your oxygen.

The Feeling

You’ll know exactly what passion is when you have it. It’s what you’re thinking about when you’re waiting in line or driving your car. It’s what you’re dreaming about when your head hits the pillow at night. It’s what you’re doing any spare moment you have.

If it’s a startup you’re passionate about, you wake up every morning, bouncing off the walls excited to get to work. Days just fly by. At the end of each day you have a hard time leaving the office, not because there’s a lot of work (though there always is), but because it doesn’t feel like work at all. You love it. And when you’re home, you’re working. And if you’re not working, you’re thinking about working. Your mind feels like it’s about to explode with excitement. Your body shakes with optimism. There aren’t enough hours in the day. Your friends/significant other have to drag you away and force you to eat, sleep, exercise or hang out. It consumes you. It’s life and it’s *the* life. It’s a fantastic feeling.

We got one shot at this thing called life. Follow your passions today. Tomorrow might never arrive.

The Paranoia of Idea Theft

1/25/11

It’s common for noob entrepreneurs to get paranoid about their idea. They’ll insist everyone sign NDAs. In meetings at coffee shops they’ll whisper as if on some spy mission — constantly looking over their shoulder. They’re afraid someone will pull a Zuckerberg, and make billions on it.

That’s silly. It just doesn’t happen.

Ideas mean very little. The world is full of people with great ideas. If you’re idea is a half-decent idea, dozens of other entrepreneurs are already working on it. The race has already begun and you’re laps behind.

Is your idea good? Is there a real problem? Is it worth solving? Do people care? You’re gonna need to talk to people to get answers to these questions. It’s impossible to validate your startup idea unless you air it out to some extent.

Your idea will most likely change, adapt and evolve over time. There’s no reason to get too hung up on it, obsess over it, or get paranoid about someone stealing it. Many great companies didn’t start with earth-shattering ideas. Take Google. Internet search was nothing special when they started. Lycos, Alta Vista, Yahoo were the big players in the market. What about Dell. Selling computers? Was that a great idea?

Finding a seed to plant is the easy part. The real challenge is making it grow and flourish. It’s about execution. That’s a post for another day.

“No battle plan ever survives first contact with the enemy.” – Helmuth Carl Bernard Graf von Moltke

Why Being Young & Naive Can Be A Great Thing

1/20/11

We did Zinch focus groups the other day at a local high school. Every time I talk to teenagers face to face, i’m reminded of how insanely challenging it is to get high school students to care about something, anything. There are always those high-achievers who have their whole life planned out, who find Zinch without us needing to tell them. But for most high school students, it’s a different story.

I often say — half serious — that had I known how hard starting up a company was, I probably wouldn’t have dropped out of Princeton to do it. Building a product that people truly care about; selling into colleges & universities; dealing with investor drama; getting high school students to use our site.

Building a startup (and keeping it breathing) is incredibly difficult.

I speak at a Princeton entrepreneurship class every semester and I get to meet young, bright, talented entrepreneurs (I was sitting in that chair 5 years ago). They often come up after class, full of energy, and tell me about some app or website they’re working on. It’s inspiring and I love every second of it.

They have no idea the path ahead. They have no idea what they’re in for. They have no idea what it it’ll take.

And that’s okay.

For if they did know how treacherous the journey, they’d step aside and watch from the bleachers like most. There are monster problems that need to be solved. Sometimes only the blindly ambitious will enter the race.

So many of the great American companies we have today were founded by young entrepreneurs: Google, Microsoft, Dell, Hershey, Fedex, HP, Oracle. Recent companies include Facebook, Mint, Tumblr, Etsy, AirBnB, Dropbox, Quora.

Being young and a little naive can be a beautiful thing. You have an unwavering — sometimes false — sense of optimism. Your mind is open; your hope is pure. The world is a blank canvas just waiting for you to paint your story. You don’t know what “normal” or “best practice” or “standard” even means. There are no limits. Your perception is distorted, but it’s your reality.

Many (if not most) of these young entrepreneurs will strike out early. But often… they’ll learn or accomplish something that’ll completely alter their life trajectory. Most probably won’t build the next Facebook, but it might be something that propels them into the fast lane for success.

The realities of startup life can easily leave one bruised, battered and hesitant to get back into the arena. But the thrill of the ride will often keep us coming back for more. I’m now 26 (yes, still very young) and I now have added responsibility (wife and son). But I hope that when I start my next company I can be as ballsy and near-reckless as I was 5 years ago. Being young, naive and fresh can be a great thing.

It’s much easier to swing for the fences when you have a full life ahead at bat. As Bob Dylan once said, “When you got nothing, you got nothing to lose.”

For the “old” people reading this: Age is a mindset. Don’t let everything you’ve learned get in the way.

“The young do not know enough to be prudent, and therefore they attempt the impossible – and achieve it, generation after generation.”
– Pearl S. Buck

Something Out of Nothing

1/7/11

There’s something especially fulfilling about creating and building value out of nothing. It starts out as a crazy thought or perhaps chicken scratch on a napkin. Maybe it’s lunch with buddies. Maybe it’s dinner with your significant other. You share your ideas — half kidding — just to hear how crazy they think you are. Most will have no idea what you’re talking about but nod their head anyway. Deep inside, they’ll probably doubt you. They won’t believe. Thankfully, most won’t have the courage to tell you that. And those that do… take it with a grain of salt.

You like to hear yourself pitch your own idea. You talk to yourself in the shower. You talk to yourself while exercising. You talk to yourself in the bathroom. You try convincing yourself, over and over and over again.

Eventually, you make the move. You go after it.

As you work and build and hustle and attack…. that ‘nothing’ turns into ‘something’. It’s a miracle if that seed actually grows. It’s an even bigger miracle if that seed grows to the point where it sees the light of day. Most don’t.

The problems. The solutions. The highs. The lows. The dreams. The nightmares. The hirings. The firings. The investors. The invested. Oxygen. No oxygen. The drama. The victories. The defeats. Starting a company is not for the feint at heart.

But…

As you witness that seed start to grow — no matter how little the growth or how painful the process — an interesting transformation occurs in you. You start to better understand why you do what you do. You start to understand why you’re putting everything on the line — why you’re maxing out credit cards, sleeping on couches, eating off Ramen and sacrificing everything. It all starts to make sense.

It’s an adrenaline that few experience. It becomes a drug. An addiction. An obsession. It brings satisfaction but certainly not complacency. It brings fuel, but still leaves you hungry. It keeps you going.

You’re really doing it.

You took the blue pill. There’s no turning back. This is how life should be. Your fate rests on your own shoulders. You’re creating something out of nothing. It’s all on you.

Welcome to entrepreneurship.