There are no certainties in a startup’s path, apart from one: you are bound to have a roller coaster ride, and a bundle of war stories to recount. No matter how successful you end up being. It’s never a straight line to success or failure. Along the way, the true test of whether you have what it takes to make it is what you do in your lowest of low moments. When you are most vulnerable. For make no mistake – they will come!
In my experience you can almost bucket people into two: those who stay down when they’re down or drift sideways, wither and die. And those who jump back up stronger. My biggest successes, leanings and adventures always followed from such low moments. When I was weakest and most vulnerable. I’m one of those people who performs much better when things aren’t going my way. It’s like a slap in the face, it wakes me up, makes me more stubborn and determined to hit back even harder. Ben Horowitz put it perfectly in his last book ‘The Hard Thing About Hard Things’. He said ” there are two kinds of CEOs: peacetime CEOs and wartime CEOs”. Peacetime CEOs are those who do well when things are doing well. They are typically the people who you hire to take a business from B to C and scale it up. They are smooth, political and great at blowing the trumpet. But the journey from A to B is definitely a wartime situation. You need to thrive in the gutter.
My first moment of vulnerability was when my first business – essentially a ‘brick n mortar’ version of PeoplePerHour.com – wasn’t scaling. I was in my mid-twenties with no experience at all, no co-founder, partner or other senior member of the team, running what’s probably the hardest type of business to run – a service business. I was essentially the head of sales, delivery, quality assurance, and the person everyone called when things went wrong. Which they did! Often! And in weird hours.
Exhausted and demoralized, with employees and clients jumping ship at an accelerating pace, I had to figure a way out. Failure was not an option – I had friend’s and family money in the business and countless hours of sweat and anxiety. This being 2006 and in London where there is much more taboo around failure (decreasing no doubt but still much more than the US) I was petrified. To make it all worse my then long-term girlfriend decided to split up with me because I was working too hard, so the one person I had close to me jumped ship too.
I felt like a brick had hit me on the head. Fortunately my cost base was quite low (and getting lower as more people were jumping ship) so going bust would take a while, but that’s like dying a slow and painful death. It’s almost better if it’s a short sharp blow. I kept racking my brain constantly ‘how on earth will I scale this business up”. I decided to go away for a few days (in the beautiful Cannes I recall) steam off and think it through (and in the mean time try and forget this ex girlfriend who ditched me at the worst possible time!). It was in that trip that the idea hit me. Why don’t I turn the business on its head, circumvent my own self by turning a service provider to a platform business that connects service providers (like myself) with customers and take a cut instead of delivering the service myself? That way it can scale. It was the eureka moment I was waiting for. PeoplePerHour.com was hence born.
My next low moment was almost 2 years later. After putting in all the hard work of building a working platform (which in those years was not as quick and easy as it is today I should add!) and getting initial traction that proved early ’product-market fit’ we needed capital to grow. After a lot of networking and cold outreach we started having some interest from big name VCs. Within a few months we had a few competing offers so we felt we are bound to do a deal. Then, literally a week away from closure, the financial meltdown happened. Back to square one. We had no more than three weeks of runway until we went under. It was one of those moments your parents are waiting for, thinking ’finally! he’ll go get a real job now! Instead I spent a many sleepless nights contacting absolutely everyone I knew, thought I knew, or didn’t know but thought I should have known! I begged, I pushed, at some point I screamed to a few I recall, I persisted like a dog on a bone, unwilling to give up.
In the end that was one of the biggest blessings in disguise. Not only did we raise money to stay in business but we raised less money (so suffered less dilution and stayed more disciplined), from highly relevant angel investors who brought in better operating experience than those particular VC’s would have, (one of those angels – Fabrice Grinda – has since become a dear friend of mine and someone who’s helped me numerous times along the journey) plus on better terms that allowed us to retain control of the business to date. I didn’t know it then but that was a strike of beastly luck. To this day I am pretty sure had the original deal gone through the investors would have pulled the plug later on or in the very least fired me as CEO.
Another low moment was almost at the other end of the roller coaster ride. We were on top of the world, VCs’ darling, plenty of cash in the bank and a stellar management team. Burning through a heap of cash per month but with the support from our investors who wanted us to shoot for the stars. Until that support dried up. This time round I knew that the likelihood of raising new money before going bankrupt was slim or close to none, no matter how much I persisted, and however many sleepless nights I was prepared to have. I had to do probably the hardest thing a founder CEO (or any leader) is faced to do. Fire half the team. Some of whom left by themselves of course but still moments of downsizing are not for the light-hearted. I had to get up and deliver the unthinkable speech: “sorry folks, I screwed up, we’re running out of cash. Its either you or the business”
It was painful demoralizing and also humiliating. I felt I let so many people down. Yet once again, out of that moment of weakness we re-emerged so much stronger. To cut costs I proposed a ‘salary sacrifice’ scheme to those who stayed, in return for a much bigger chunk of stock at a highly discounted strike price. Those that didn’t take it will regret it today. And those that did went through a 100% transformation. Firstly, they went from employees with a salary and a ‘nice to have’ upside to employees with real ‘skin in the game’. They were investors in the business now, and members of the wartime team. They started – and still do – acting like owners. Not just doing what they are told but thinking for themselves and challenging the status quo, challenging everything including the CEO! It was an amazing transformation that paid off multi-fold for the business as it did for them.
Secondly, it was the best filter you could ever apply to ones’ true loyalty. There is no substitute. People may say, or even act like being loyal but the ultimate test comes when you ask them to chip in. And if you don’t need to, you most likely won’t!
Lastly, as a lot of the people that left were the more expensive management layer, this created another transformation. It gave a chance to the more junior, newly fired-up team members to step up and fill some deep shoes. They were now the ones at the front, punching above their weight and doing a job that normally someone ten years their senior would do. The best people, the real ‘A-players’ are the ones who thrive in these very rare opportunities. And the only way to find out is to put them in one.
There are many more startup war stories than the ones that I cite in this post but these are some of the few that stand out. Equally I’m sure there will be plenty more to come which (by now) I look forward to! I will end with a quote from one of my favorite books – the Count of Monte Christo, by Alexandre Dumas. In a scene of tragic irony the Count is giving advice to his (unbeknown to him) son and says “Life is a storm, my young friend. You will bask in the sunlight one moment, be shattered on the rocks the next. What makes you a man is what you do when that storm comes. You must look into that storm and shout as you did in Rome. Do your worst, for I will do mine! Then the fates will know you as we know you”