Written by Richard Prieto, Co-Founder, MUNI Tech
It was a warm Thursday morning and our company was mortally wounded. The investment fund that was going to write us a life-altering check – the one we needed to develop our software application – suddenly, and without warning, imploded. Our product was a barely-functioning prototype and we had no money left in the bank. After three years of struggling to build a technology company, we were suddenly faced with the stark reality that we were going to have to shut down the business.
With little hope we would survive past the end of the week, my co-founder, John, and I decided to throw one final Hail Mary pass. Global Startup Battle was starting the next day. We would sign up and try to build an MVP in fifty-four hours. John called around until he found two developers interested in a weekend competition. The four of us arranged to meet up the next evening for the kickoff event.
Night before Startup Weekend pitch
After a long weekend of coding and hustling, we had a working version of our collaboration application, Cnverg, and a dozen companies willing to pilot it. Although we didn’t end up winning the competition, we had built the kernel of what would become our new business. More importantly, one of the developers who worked with us that weekend decided to stay with the project. In the span of a weekend, we went from the brink of disaster to a fully fleshed out software company with a viable product.
We continued to work on Cnverg over the next nine months and lined up additional beta users but, being headquartered in Delaware, we were struggling to attract investors. In early August, John decided to apply to DreamIt Ventures, one of the world’s top accelerator programs. We submitted our application ten minutes before the deadline. Two weeks later, they called us in to interview. We demonstrated Cnverg to the partners and explained our plans for world domination. Their offer came a week later. Would we like to be one of the twelve companies to participate in the 2014 class?
The MUNI team and Entrepreneur, Peter Thiel
The road from Global Startup Battle to DreamIt has been long and trying, but we discovered a lot about ourselves and what it takes to become a great company. Here are the 5 lessons we learned along the way.
Prepare for Both Failure AND Success
Most entrepreneurs understand the odds of succeeding are stacked heavily against them. Failure, we’re told by others in the entrepreneurial community, is a rite of passage (see lesson #4 for the caveat). It demonstrates you took a risk and tried to do something extraordinarily difficult. The problem is that we spend so much time preparing for failure, we sometimes forget to prepare for success.
A good example is when you land your first big customer. It’s like finding out you’re pregnant. There’s a brief moment of celebration followed shortly by creeping fear and dread. You realize that you now have new responsibilities. You have to deliver the product. You need a sales contract or service level agreement. You need to send an invoice. What does after-sales support look like? Are you ready to handle help desk requests?
Being prepared to handle success also means knowing how to talk to the press. As your business grows, journalists and bloggers will seek you out. You need to make sure that everyone in your company is on the same page and stays on message. Journalists love to print contradictions and inconsistencies, so be consistent in your communications. Be able to clearly and succinctly articulate what it is you do and why it is valuable. Finally, and most importantly, know what not to say.
It’s Okay to Walk Away from a Deal
We are incredibly fortunate to have dodged several bullets, from bad hires to bad investors to bad customers. I’d like to say it was shrewd assessment, insight and experience that saved us from these potential disasters, but really it was just blind luck. In each instance we were ready, even eager, to do the deal. It was always the other side that turned us down. Only in hindsight did we realize that any one of those deals could have irreparably damaged our company.
When a startup is young and desperate for traction, it’s tempting to jump at any deal that walks through the door when, in fact, it is in the earliest days that you are the most vulnerable. One bad deal can cripple your company, poison your culture, or spoil you for future investment.
Take your time and do your due diligence on all deals. Ask for references and then actually check them. If the other side won’t give them to you, it’s a red flag. If the terms aren’t where you need them to be then ask for better ones. Negotiate an exit clause – some way to back out of the deal if things go sideways. No single deal will make or break your business, and better deals are always around the corner.
Choose Your Partners Wisely
This is a corollary to lesson #2. Many business relationships last longer than some marriages, so choosing the right partners will be the most important decisions you will make. This begins with your cofounder. Consider this person carefully. Starting a business is stressful and there will be moments of tension and disagreement. You want to pick a cofounder who will keep her head in these types of situations. You want someone who is honest, tactful, forthcoming, level headed, decisive, and willing to find common ground.
Your next key partnerships will be early employees. These individuals will effectively cement your company culture and be the model for every future hire. It is critical you select people who share your values and will represent your company well. Other partnerships to consider are strategic and channel partners, vendors, suppliers, and even customers. Always take the time to consider the long-term impact each will have on your company’s culture, values, and mission statement.
Persevering is Easy, Quitting is Hard
We’ve been at the brink of failure more than once and yet somehow, whether by landing an unexpected sale, making a key pivot, or just plain luck, we’ve managed to survive. At various times John and I contemplated quitting but we always talked ourselves out of it. After five years, we’d invested far too much to let little things like financial ruin and marital disharmony with our spouses stop us.
Making the decision to continue was easy. At some point, sheer momentum keeps you moving forward, even in the face of seemingly insurmountable odds. Even when everyone around you is telling you that it’s over. Even when your spouse begs you to get a “real” job so you can finally pay the bills on time.
Quitting, on the other hand, is hard. Extremely hard. After a while, your identity gets wrapped up in your business. It’s all you talk about at parties and family get-togethers. “How are things going with your company?” The last thing you want to respond with is, “I wasn’t able to make it work.” Quitting is an admission of failure. It means looking your investors in the eye and telling them their money is gone. It validates every person who told you your idea was crazy. Or at least that’s what you tell yourself.
Seasoned entrepreneurs know the truth: there’s no shame in failure. But just like a gambler doubling down after a loss, don’t throw time and money into a failing enterprise. If the writing’s on the wall and there’s no chance for success, scuttle the business and start over. Failure is fine when you fail fast. It’s brutal when you try to hang on to a sinking ship. Knowing whether the business is still viable can be difficult. This is why a seasoned board of advisors is worth its weight in gold. If they all tell you it’s over, it is.
Don’t Be Afraid to Ask For It
A former employer once told me, “You only ever regret the thing you didn’t do.” That bit of wisdom has stuck with me and guides my decision making every day. It’s why I decided to become an entrepreneur in the first place. I knew that if I didn’t at least give it a try, I would regret it for the rest of my life.
What you quickly learn, however, is you spend all your time asking people to do things for you. Things they often don’t want to do. It could be asking a friend or colleague to quit her well-paying job to come join you in a crazy venture. It could be asking your friends and family for cash to help bootstrap your business. It could be asking a prospect for the sale.
Whatever it is, we sometimes find ourselves hesitating. What if they get offended? What if they think less of me? What if they say no? None of that matters. Your company will never get off the launch pad unless you’re willing to ask for whatever it is you need. Anyone in sales will tell you that if you’re not hearing “no” then you’re not working. In fact, what you ultimately come to realize is that people want to say “yes”. You just need to give them a reason to do so and that usually means making the right offer. If you can demonstrate value for both parties then you’re already most of the way there.