"Failure Can’t Outplay a Refusal to Quit"
I was securing funding from one of the top ten wealthiest men in Los Angeles. We were in his office in Hollywood and I noticed that there was an actual Oscar sitting on one of his shelves. It caught my attention and I saw that written on the famous golden statue was "Best Picture for Gone With The Wind". It was very impressive. After our meeting we had lunch by the pool at the Beverly Hills Hotel. I was flying high and swimming with the uber-successful. What I didn't know was that our company was about to look death square in the face.
I hadn't paid my team for a while. The weeks had passed while I was securing investment. The team continued to work but Christmas was coming and I knew that It was very hard on them. I felt a tremendous responsibility. They were trusting but obviously concerned about why things were taking so long. I was confident because I knew things were going really well and it was just a matter of time.
I kept the team up to date as we neared completion of the deal. The terms had all been negotiated. The company valuation was locked. The preferred shares were approved by the board of directors. Lawyers from both sides were finally in agreement. There was nothing left to do but write the check. At our meeting the investor said that he would have his lawyer send the funds in the next couple of days.
I flew back to Seattle with the good news and eagerly awaited the happy day when I could pay my people. Their belief in me, that I would come through, meant the world to me. You could feel the weight that they were carrying. I certainly felt the weight I was carrying. It was a great feeling to see all of the hard work come to fruition and finally be able to pay them for their heroic efforts.
Four agonizing days went by before I got the phone call. I was at my apartment where the phone was working but the lights were out as my apartment had no electricity and I was sitting in the dark. I was always the first person to stop taking a paycheck, of course. Funny thing but I was proud to have my lights out. It was an honor to fight so hard for my vision and team. I liked being a leader and truly believed in our mission. I would do anything to see it succeed. I would do anything for my team. I truly cared for them.
I answered the call after waiting about 1/1000th of the first ring. Almost immediately I felt the world fall out from under me as the investor told me that he had bad news. One of his advisors had gone over our books and found that we owed too much money, almost three hundred thousand dollars. He also didn't like that we had outstanding loans from early investors who had helped us get going at the very start. The news was devastating.
The investor said, "I love the vision and believe in you, especially your passion, but if I give you this money I'll be paying for the past and I only want to invest in the future". He didn’t want to send a check just to have a large chunk of the money go to pay debts. He just flat out said that he was not going to invest. "Sorry", he said.
It was ironic that the delays in securing the investment had caused us to incur the debt. At first things moved along very quickly as he was excited by our vision, team, and execution. He almost immediately became a true believer and was "with us" enthusiastically. Following the early excitement the negotiations took some time but even after we were in full agreement the darned lawyers took forever. Now, all of a sudden, he was saying “no” because of the debt we incurred while waiting.
In fairness I must say that my confidence in securing the investment stopped me from paying enough attention to our financial burn rate. I was not focused on survival as much as I was determined to race to the finish line. Any investor has the right to take all the time they need. As a leader I lacked the experience to foresee such delays after all of the praise heaped on us and all of the promise of the negotiations.
When we hung up the phone my heart stopped beating and I couldn't take a breath. I called my leadership team. What can we do? Each one of them said, very sadly, that we had done our best but couldn't keep going without money or immediate prospects. A company without money is like a rocket without fuel and not even your greatest hopes can make it go anywhere. I called our advisors and asked if they had any ideas but they didn't. It seemed all too easy for people to accept the end. In one quick moment we had gone from phenomenal potential to out of options.
It has been said that being an entrepreneur is like convincing a group of people to jump from a perfectly good airplane. I was honored that they had jumped with me. They had jumped because I had talked them into believing we could fly. I never intended for anyone to get hurt. Now, It felt as if everyone had pulled their parachutes and accepted the painful end to our dreams. But to me it felt as if I didn’t have a parachute. All I felt was the tremendous speed of my fall, the stomach churning, absolute fear of hurtling down to meet the impact of the ground.
How could I let that happen? The weight of the responsibility of letting everyone down, of losing our dream, was brutal. I had hurt people and It was my fault. It was my idea, my vision, my responsibility. My mind raced. But what could we do? Then I had an idea. It was a desperate idea but it was the only idea I could think of.
I called all of my team members and told them the plan I had thought of. I told them that it was my only idea and that it still might not be enough to change the outcome. I suggested that if we could get everyone to forgive their back pay there was a chance I could convince the investor to come back in and then I could at least start paying them again going forward. It was a painful thing to ask of them but every single one of them agreed to do it. My remarkable team did this heroic thing. I have never been more humbled in my life.
I then called all of the companies we had been working with and I told them the same thing. I said that our company was done if we didn't get this investment. Our only chance was for them to write off what we owed them. I promised each of them that if they agreed we would commit to them going forward. It wasn’t much but, frankly, there wasn't much choice. They could choose not to get paid now and not to get paid going forward. Or, they could choose not to get paid now and accept our commitment going forward. Every one of them agreed to write off our debt. It was amazing!
I had asked every employee and every company if they would forgive our debt. Every one of them agreed. I also asked the people who had loaned us money in the early days if they would convert their loans to stock and they all did.
I called the investor back and told him what had happened. It had only been a couple of hours since we last spoke. Now the debt was all erased. I said, "every dollar you invest will be committed to working towards the future, just as you had said". He was surprised at how all of the change had taken place so fast. He was amazed that almost three hundred thousand dollars of debt had disappeared almost instantly. But after some discussion he wrote the check. I insisted that he write it immediately. No more waiting.
I told him the story of how I called all of my team members and asked them to forgo back pay. I told him how they all agreed even though Christmas was near and their families had been counting on getting paychecks. I told him how awesome and dedicated my team was.
Then I said, "don't you want to reward loyalty like that and don't you want our very special team to keep feeling motivated and valued - so let's give them each some money." He had seen what this wonderful team had done, their generosity, their commitment. "I'm asking you to give them each a check and I'm telling you it's the smart thing to do." Miraculously, he agreed.
So I got the check, deposited it, and drove to the homes of every one of my team members and handed them a chunk of the back pay that they had thought was gone. It was incredibly emotional. Then I went home to my apartment with no electricity and I cried for two straight days.
My biggest fear had been realized and I was exhausted. It was truly a near death experience and I was almost broken. The one thing that kept me alive was the knowledge that I would get to go back and join that wonderful team on the next phase of our journey.
I learned not to be so confident of any investment until it is completed. I learned not to put all of my eggs in one basket. If I've got a very promising lead I will always continue to seek funding elsewhere until the deal is done. My reliance upon that single investor, although it seemed so very promising, weakened me. In hindsight I should have had alternative avenues of funding which would have given me leverage.
I learned to closely monitor burn rate because even the best ideas cannot continue without funding. We were scrappy and everyone was incredibly loyal. They kept working, even without pay, because we all were deeply committed to our vision. However, you can only go for so long before you must have money in the bank.
I learned a lot from this experience. You might say that I grew up as a founder. We have a great impact on the people we talk into joining us on our journeys. We carry a great responsibility. I take that responsibility very seriously and encourage others to do the same. Ultimately, although we all envision our dreams reaching amazing heights, we must also understand that our teammates have put their well-being into our trust.
We survived that challenge. When you overcome severe adversity, and when your team cares for each other and believes with such commitment, it's one of the best things you can ever be a part of in life. It brought us closer as a group of people committed to each other. And we knew we would each stand shoulder to shoulder against anything that came against us. What an incredible team!
And now I’ve experienced that if you continue to believe, even in the face of an impossible challenge, and look hard enough, even when there is no hope, you can pull off almost anything.