Tuesday, June 19, 2007


Jonathan sent me a great link today from marc andreesen's blog (blog.pmarca.com) about startups and "why not to do a startup." Having done a few startups and also experienced what happens when 10 startups are acquired, here i am living to tell about it. One piece of Andreesen's post cites various X factors that can come along and "whup you right upside the head"...completely knock you off your plan. He gives a few examples that i believe are intended to be illustrative of what can happen to you. As i read through the list, I realized (wanting to cry) that I experienced everyone of them & more....

That realization really helps provide some perspective on things. How tough is your day job / project / current objective / startup? How tough are you? Can you handle the rollercoaster ride of a startup or early stage company? Having drive is important, brains, etc...but you have to also have some degree of toughness.

Read through the examples and tell me what you think:

1. Stock market crashes … uhhh yeah, it happened. That was a piece of cake compared to what happens when you mis-state earnings. See below.

2. Terrorist attacks….uhhh yeah, it happened. 9/11 - I was on the phone with our Dublin office and getting ready to get on a plane. Let's just say that if the market and earnings issue didn't kill sales, 9/11 surely did. At least for a year or two.

3. Natural disasters. Try closing a bell south deal when katrina hit, or a telecom deal in bangkok in q4 two years ago (tsunami). good bye quarter, good bye region.

4. A better funded startup ....in stealth mode, that unexpectedly releases a product that swiftly comes to dominate your market, completely closing off your opportunity, and you had no idea they were even working on it. Can you say Ironport ($400 M acquisition by Cisco), or Brightmail ($300M acquisition by Symantec)? What's worse about Brightmail, they rented space from us originally. Ugh.

5. At best, any given X factor might slam shut the fundraising window, cause customers to delay or cancel purchases -- or shut down your whole company. How about a $40M lawsuit involving one of your founders? How about a prominent financial services .com's board and questionable CEO pay tied to one of your founders chairing their comp committee?

6. Russian mobsters laundering millions of dollars of dirty money through your service, resulting in the credit card companies shutting you down. Can anyone say supernews (nntp) and porn?

Some examples that he didn't give, which arguably are less startup and more early stage / public company:

1. Sarbanes Oxley being applied to you as a sub 100M software company, driving your G&A (accounting bills) higher than your R&D.

2. SEC investigation. Suits. Lots of suits.

3. DOJ / FBI investigation because your service was used for terrorist email communications

4. Class action lawsuit. Angry shareholders coming for you with pitch forks and torches.

5. Your debt needs purchasing on the open market before anyone will invest in you. Did I mention that you have 300 times more debt than you ever raised in venture money?

6. Your primary market (telecom) tanks, slowly suffocating you and your business.

7. Front page Business week article about your fraudulent CEO & that the company should die.

Other, seemingly minor challenges:

1. You have to cut the size of your company in half. Twice.

2. You have 50+ offices to shut down.

3. You have to raise 100X more money than you did before.

4. You have to fire your entire exec team, and most of your domestic sales team.

5. See #4, repeat.

Today I came into the office and one of our biggest challenges was getting a powerpoint together for a meeting tomorrow. Maybe I am exaggerating, but I am certainly understating the above. Being in a startup or early stage venture is tough and it takes a special breed. Startups represented the first decade of my career and for me at least, it proved to be the best training ground i could wish for. Some day I'll write a book about it (that only I will read) :)