Editor’s Note: We’ve got a fantastic lineup of speakers on tap for GeekWire’s Startup Day, taking place Saturday, Sept. 22nd at Meydenbauer Center in Bellevue. Among the entrepreneurs on the agenda are Box CEO Aaron Levie; Zulily CEO Darrell Cavens; BigOven founder Steve Murch and many others. It’s going to be an informative and high-energy day for those in the midst of building their startups (or those unsure about taking the plunge).
As the day approches we are featuring talks from past Startup Days. This one is from BigDoor CEO Keith Smith, sharing his views on how to avoid failure and deal with hard times while building your business.
Something that every founder will have to deal with is failure. You’ll launch a feature that falls flat on it’s face, you’ll miss payroll, or you’ll have to completely pivot away from your previous hypothesis about the market.
What makes a great entrepreneur is how they deal with failure. In this talk from Startup Day 2010, Smith talks about where he failed with his past company, Zango, and how you can side step these pitfalls.
1. Be prepared to make sacrifices: “I started my company inside my daughter’s playroom. I sold all the stock that I had, took everything I had and put it all into this business where we jumped in and started having a blast. Within nine months we were completely out of money. Here we were trying to figure out how to get to the next level. We felt like we were close to being able to release the next product that was actually going to mean something and we were somehow able to secure a commitment for a $100,000 bridge loan! I was really excited and I called up our lawyer and told him, “Fantastic news, we’ve secured a $100,000 bridge note. We just need to get the paper work done to close this and we can continue to be in business.” The lawyer then says: “Sorry, but you actually owe me $10,000 already and I’m not going to do the work for you until you pay me back the $10,000 first.” Here I was stuck, I needed $10,000 to get $100,000. I remember, I walked out into my garage and there was only one thing that was paid for in the entire garage, my prized Harley-Davidson motorcycle. So I called up my friend who worked at the Harley-Davidson dealership and asked: “How much will you give me for my bike?” And he said: “Well, the dealership will probably give you $14,000.” I tell him, “Great. Make out the check to my attorney and I’ll be there in an hour.” Two hours later I dropped off the check to a very surprised attorney and we got going, and closed that $100,000. There are times like this that most entrepreneurs experience. Low times that you just have to do some interesting and creative things in order to move the company forward. We, of course, ran out of money again…”
2. Be ready for anything and be ready to trek through testing times: “I pitched every VC in this town at least ten times and got resounding “nos.” Finally we got a strategic investor that wanted our technology, wanted to do business with us, but they wanted to make a million dollar investment in the company first. So, we closed that round of financing and literally the day after is when the NASDAQ bubble and Internet bubble truly began to burst. It was interesting timing. The startup world is a challenge. It takes a big toll on your personal life as well and I was no different than that. After five years and two absolutely wonderful kids, I ended up going through a divorce. It was through this period of time that it just seemed like absolutely nothing could go right. We had closed this million dollar round of financing, but then every single one of our customers had gone out of business. We were left with a huge amount of receivables that we couldn’t collect. We were over a million dollars in debt at this time and it just didn’t look like there was any potential to turn this company around and go forward. Shortly after all of that we did turn the company around. We launched a new product and were actually able to scale the company. During the subsequent four years we grew the company from a million dollars a year in revenue to $78 million a year in revenue, 4 employees to 300 employees, from one office in Kirkland to six offices scattered across 4 countries across the globe, and had a big viable business that was highly profitable.”
3. Build your team: “This is not hire your team, which is important. This is build and develop the people that are going to be able to bail your ass out when you get into difficult times. It’s basically the concept of “Dig your well before you’re thirsty” and apply it to people that you know will be able to be there for you and get you through difficult times.”
4. Know which balls to drop: “You can’t possibly keep all the balls in the air that you need to juggle all the time, especially when you are going through crisis. Some of them will have to drop. The call with the trademark attorney this afternoon isn’t nearly as important after you get the call from your bank saying that they just called your loan. There are some things that you can let slide. I have a pretty simple process. Layout the problems that you have, identify those that can kill you, and work on the ones that can kill you the fastest, first. It’s not really super complex or sexy but it’s important and needed.”
Look for more talks from the Startup Day archives in the coming weeks, and make sure to join us Sept. 22 for Startup Day 2012. Early-bird rates expire Wednesday, so make sure to get your tickets today!