You probably read David Cummings post from a few days ago, Entrepreneurs with the Killer Instinct, in which he asks, what “near death experiences or crazy things you had to do to make it succeed?” That post gave me pause to recall my “near death experience” in my first company.
It was 2008. We didn’t see the storm coming. We had launched a secondary, complementary business that had grown from zero to $750k in under 6 months, mainly through one contract with a very old and established Fortune 500 brand name in the wireless business. But as I mentioned, we didn’t see 2008’s financial disaster coming.
In January of 2009, that old and established client split into 2 companies, laid off 15,000 people, and turned our agreement into vapor. They even said, pretty nicely for the circumstances, “go ahead…we’ve got a lot more lawyers than you do,” referring to our contract that they just ignored. They were right. There was nothing we could do.
During 2009, we went from 10 people to 4, and three of the founders left. I was what is commonly referred to as “the last man standing.” We had a solid base, but our revenue had slowed seriously, and people in the industry were casting (not so quiet) doubts about whether or not we could make it without one of the other founders, who was highly regarded as a technical expert in the industry.
We also had $150k in outstanding debt from a line of credit we had take out in order to expand the business to meet the needs of the aforementioned Fortune 500 client. The other 3 founders who had left the company were still on that debt, having signed personally. They were willing to let it go into bankruptcy if that’s what was going to happen.
I was not.
I went in person to the bank and laid it all out on the table, everything that had happened, how grim it actually was, and what I thought it would take to turn things around. As it turns out, I “had them at hello”, since showing up in person at a bank has become more and more rare. They allowed me to take on all that debt personally with a second mortgage on my home, so long as I could get the other 3 founders to give up their equity (and related control) in exchange for letting them out of their personal debt.
Those were three of the hardest conversations I have ever had, but in the end, all three agreed to trade their equity in the company for relief from that debt. Insert huge sigh of relief here.
Then I had to face the remaining three employees, and try to convince them that (a) we’d actually make payroll and (b) it could somehow really be better than before. They were all in. They had seen everything that had happened, and they still believed it could work.
What followed from late fall of 2009 until 2012 were three of the most fun and exciting years of my career. I can now joyfully recall sitting in Charlie Paparelli’s office, begging him to tell me it was ok for me to just “check out”, and let it die. He would not. He said, and here I quote, “Get your ass back in there and FIX IT!”
And so I did. The company was acquired in August of 2012.