In Part 1 I told you the story of getting in everyone’s face at a ‘friendly’ company dinner party, and how if they didn’t do their friggin’ research they’d fall flat on their happy faces.
In Part 2 I told you about getting in El Presidente’s face about the fact that they weren’t even running an actual business because after 2 1/2 years they still had not demonstrated that they knew how to MAKE ONE DOLLAR.
Then in Part 3, El Presidente struck back, accusing me of being a small-time player whose only expertise is creating income, not building real companies. He offers to buy my stock back for $100,000 at the end of the year, which would be a nice ROI.
I write the board members:
I called [Board Member #1] on the phone and ranted at him for a half hour last week. He says, “Perry, it’s really good to have a different perspective on this, I like your contribution.” Well thank you so much, that’s nice, but my perspective is not a “different perspective.”
Truthfully it’s the only way I know of, to keep this whole thing from sailing over a cliff in a burning bus.
If I do not see a radical change in the direction of this company in the next 30 days, I will resign my board position and mentally write off the money I invested into this company as expensive experience. In the future I will only invest in companies that are willing to demonstrate in advance that they know how to “make one dollar.”
It’s time to do something here. Are you guys ready for a change?
I get this reply from Board Member #3:
I’m on board. I made the same comment to El Presidente. For the same reasons you cited plus misappropriating $30k of my money makes it hard to ask others to invest. Thanks for sending this.
I get this reply from Board Member #2:
As you have so adroitly explained in your e-mail, you would prefer the company take a more snail-like approach to growing: make a dollar, invest it back, make another dollar, invest it back, and continue making progress at a slow scale until the business is self-sustaining, and without the need for large amounts of outside capital.
El Presidente, on the other hand, having been directly involved with the rapid growth and taking public of a prior employer; has seen just how successful a company can be; and how quickly it can grow…………..”if” it has the support, resources, manpower, and capital…….to accomplish that level of growth.
We knew from the beginning that the “goal” was for the business to be a big one, and NOT for it to be a small venture from El Presidente’s garage or basement.
I thought you especially, having already spent years helping entrepreneurs build their businesses to a higher level of success, would have reams and reams of names of people you had helped make successful; and who would (as fellow entrepreneurs) have likely jumped at the opportunity to be a part of this vision and business idea.
Thus, I could never understand why you have never been able to bring any of those people to the table as investors. The same is true of some other board members who I knew had very strong business contacts.
It turns out that [Board Member #1] and I have been the most successful in helping raise capital for the company even though he and I are the ones with the most “restrictions” in that regard. Despite being in the financial services business, we are unable to contact our own clients and talk to them about the idea. So we have never done so.
Given the fact that we have those professional restrictions, and you and other do not, it has always baffled me as to why you have not been able to be successful in the raising of capital for the business.
(Don’t you love it? He’s asking ME for money! Again!!! And not just me, but you! I guess he learned the ABC’s of selling – Always Be Closing! Sorry for the interruption – back to his memo..)
I agree with the path the company is currently following. Thank you for your input.
[Board Member #2]
I’m trying hard to restrain myself. I volley back:
My point is not that it is bad to raise capital or to have a large vision. Or that we’re supposed to work from a basement.
NOT AT ALL.
My point is that this company ought to have a functional sales model by now and it doesn’t. That “sophisticated” people may not seem to understand that, but they ought to. “Unsophisticated” people certainly do. When someone stands up and points out that we’re ignoring the most very basic disciplines – and then people with suits and ties and MBA’s chuckle – I see that as cause for alarm.
2 years into the development of this company it still lacks a business model. I agree, the market is viable and growing. But being in a viable market is never enough.
Nobody has a clear idea how this company is going to make money, what it’s going to sell, how much or when; at board meetings there is almost no focus on holding El Presidente accountable for growing sales of the company and meeting sales benchmarks. All the conversations are about raising money and negotiations with trivial people like acquisitions of other tiny companies etc etc.
The attempts to sell our 40,000 members anything at all have been weak and poorly executed.
We also need to recognize that there is no such thing as “version A” of business in the world for small businesses, and a “version B” that only big companies participate in. ALL businesses operate on the simple principle of acquiring a customer at cost X and achieving Y revenue from those customers in Z period of time. There are no exceptions to this.
There should be no reason why anybody needs to raise $16 million of capital before they ought to be expected to demonstrate their ability to do this. From what I can tell, nobody is even trying.
I understood that I was being brought onto the board because my expertise in selling to niche markets on the Internet would be employed. I invested because I believed this to be true. The only expertise of mine you have tapped, has been used to only spend money (on Google, which is fine in and of itself) but in no way has that expertise been used to help the company sell anything.
The response from people who are borrowing money and not selling anything has been to pat me on the head and make belittling remarks about my business and the nature of my customers.
When in fact my customers businesses are making money and theirs is losing money.
They are eating, while our employees almost literally starving.
Small businesses, even bootstrap businesses that have proven business models, can and are quickly scaled with investment capital to become bigger companies. At my previous job we grew a business from 1/4 million to $4 million in 4 years with the help of angel investors, and sold the firm for $18 million to a public company.
We were able to do this because we proved that we knew how to make $1 first. Don’t think for a minute that I am unfamiliar with the process of growing a company with investment capital. Or that I think it’s unnecessary.
I could bring you investment money and would be happy to do so IF El Presidente had the proof that when he spends 75 cents to get a customer he gets $1.50 back in a specified period of time. The people in my world understand that and they do have money. It should not take 2 years and $2 million for a company like this to still have no idea what it’s going to sell or when.
El Presidente’s retorts about Facebook and Yahoo and me having no $1 Billion Customers (BTW I do have customers in the tens of millions… including [Company Z], one of the largest and most successful [industry] firms) only underscore the fact that [Company] exists in in the very kind of niche, almost “fringe” market that he is making fun of, which I specialize in.
Sooner or later, [Company] is going to have to play by the same rules as any real business in order to survive; because [Company] is not going to be another YouTube. Anybody who thinks otherwise is drinking Pink Koolaid.
I don’t understand, sympathize or agree with the strategic path this company has followed.
My email gets us nowhere. At this point I resign from the board.
- You will recall that El Presidente had said, “On December 31, 2008 we will meet for lunch and I will pay you $100,000 for your stock.”
That would be a hot bargain any day of the week.
I didn’t even bother to try to schedule lunch with him.
Because he didn’t have two nickels to rub together, much less a hundred thousand dollars.
How do I know that?
Because several months later, quite by accident, I bumped into a guy whose wife worked for the company. She had a customer service job.
She hadn’t received a paycheck in 2 months. She was being asked to lend her paycheck to the company based on her belief in their vision and mission.
If she can’t get a $1500 paycheck there’s no way on earth I’m going to get $100K.
I cut my losses and walk away. It is NOT worth my time to try and fix this company. Laura, my wife and human BS Detector, agrees. (She’s tried to unsubscribe from their emails and the unsubscribe link doesn’t work… she emailed El Presidente to have him personally take her off the list and she’s still getting his emails… you’re probably starting to get the drift.)
As a matter of fact, if they GAVE me the whole company outright and made me El Presidente, I’m still not sure it would be worth my time. Even though… heck, I’ve got Bobsled Run grads that could turn this thing around and make it profitable by December 31, 2009. (Of course they’d have to fire the board of directors and El Presidente and basically start from scratch.)
Sometimes you just have to cut your losses and do what works. I’ve got my own business to grow. I don’t need their problems.
Just because you can fix something, doesn’t mean you should!
HEY WAIT A MINUTE –
I just got a shareholder letter a couple days ago. Story’s not over yet. There’s a new development. I’m supposed to sign all this paperwork and have it notarized because something BIG is coming down. Really big.
What is it?
Saga continues in Part 5…..
P.S. You got any stories like this? Post your comments below.
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