The Accidental Entrepreneur: My Crazy Roller Coaster Ride As A Clueless First Time Founder
Part 3: That Press Release Stole My Free Viper
I am frantically pounding the keys of my laptop and my heart is racing. Sweat is starting to soak through my shirt and bead on my bald head.
I’m sitting in a large conference room in front of about 25 high-powered executives. My business partner is introducing ourselves and our company. We are at the headquarters of our long-time software partner to demo a product that I had created that solved for one of the significant challenges in the partner’s existing product.
The leader of their mergers and acquisition team had invited us to demonstrate the product to their leadership as part of a process to consider acquiring either the software or possibly the entire company. “Come ready to strike a deal.” she had told us just days before.
The problem was, the meeting had just started, and the demo wasn’t working.
It was working 5 minutes ago, but now is being completely unresponsive. I am trying to look calm while doing the equivalent of the EMT shock-paddles to my code to try and get it running in the next few seconds.
It’s not an understatement to say that this was one of the biggest moments in my life as an entrepreneur. I would be looking at a multi-million dollar pay day if everything went according to plan.
And right now, everything is fucked.
My business partner shoots me a glance, senses my distress, and starts to stall. “Why don’t we go around the room and everyone tell us who you are and your role within the company?”
My fingers are flying. I have never typed so fast in my life. I’m desperately trying to jolt this non-beating heart back to life. CLEAR!
“Well, you guys know me. I’m Christy and I’m the head of partnerships…”
They are going around the U-shaped series of tables and doing way-to-brief introductions. I’m trying to avoid the WTF glares coming from my business partners from the back of the room as I bear down on my code. The key clicks are so fast it almost sounds like buzzing.
BREATHE DAMMIT, BREATHE!
And then, suddenly, data starts scrolling down my screen. The demo was working. I had fixed it with about 4 introductions to go.
I pull my hands away from the keyboard and slowly take a sip of the bottle of water that was sitting at the presenters stand. I wipe the sweat off my forehead. My shirt is damp. My breathing is heavy and labored. I try to use the last few minutes to get my breath under control and give my panicked business partners the “We’re good” nod.
From that moment on, the demo goes well. Extremely well. Everyone is highly engaged. There are a lot of questions and a lot of good dialog. It is obvious that they are very interested in what I had built. There are a lot of “I’m impressed” nods. It had started out a total disaster, but I had pulled it out at the last minute and had crushed it. Yay me!
The meeting breaks and there are a lot of handshakes as people slowly file out of the room. The head of M&A sticks around to debrief.
“That went well. Much better than expected actually. I’ve been given the go-ahead to start negotiating with you. We are interested in acquiring the entire company, not just the new software. For us it would mean additional sales people, much needed consulting resources and of course a killer new product. We want the whole thing. Huddle up tonight and meet me in my office tomorrow morning at 8:00 a.m. and we can talk numbers.”
That’s what I’m talking about! Shit’s about to get real in the Whole Foods Parking Lot!
I need to step back and explain at a high-level what this software did.
As I mentioned previously, our software partner had a set of tools that would help IT teams monitor and manage their new ERP environments. Our consulting practice was responsible for implementing these tools at the customer site. One of the biggest things we would do would be to set the thresholds in the system as to when it would alert somebody that there was a problem. As an example, if the ERP software was suddenly using 90% of the CPU resources of the server it was running on, someone in IT should be alerted to investigate.
The tool basically covered the asses of the people responsible for keeping the systems up and running. It would let them know that they should take a look the system before it crashed and someone got fired.
The challenge is that out of the box, these alert levels were arbitrarily set. Our consultants had to tune these to each specific customer environment. For example, for one customer, it may be that the administrator should be notified if more than 70% of the CPU has been utilized. 90% might be too late to combat the issue before the system crashed (which happened a lot).
This tuning took a lot of time and was more art than science. The more experience a consultant had the better they were at it. The newer guys basically guessed and hoped it worked out.
The thorn was that false alarms were a massive pain in the ass and subsequently the biggest cause of dissatisfaction related to the tool. The IT admins wanted to know that the system was having issues, and if there was an alert and that wasn’t the case, everyone got their panties in a bunch. If it happened too often, they would start ignoring the alerts all together and most of the value of the tool would be lost. This was killing a lot of opportunity to sell additional tools into accounts.
About a year earlier we had noticed that many of the businesses that were buying this monitoring solution were using another vendor to do the testing of their new ERP system. These systems were so important to the business operations that they had to thoroughly be tested before they were deployed into production. Sensing an opportunity, we had partnered with that company to resell and implement their testing solution.
And while those two practices (testing and monitoring) were largely separate, I had realized there was an opportunity to bring them together.
If we installed the monitoring solution while they were doing their load (stress) testing, we could baseline the systems performance and determine where we should set our monitoring thresholds. We would know what “normal” should look like and create alerts when the system wasn’t behaving normally.
In theory, this was much, much better than a guess.
We did this by hand for the first 6 months, but I then decided to create a software the would act as bridge between the two systems. It could be set up to automatically set the thresholds based upon how the system behaved under load. The consultant now only needed to handle small fine-tuning of the alerts.
Now, if the tools triggered an alert, it was far more likely that something was indeed wrong. False alarms started to go way down.
Bitching and complaining dropped as well.
The monitoring company that had asked us to present that day really liked our system for two reasons: 1) It could dramatically reduce false alerts and raise customer satisfaction and 2) it encouraged businesses to buy the software earlier in the process (before they had deployed it) during the testing phase. It “brought revenue forward”.
My software was bringing together two industry titans in a way that was highly beneficial for both of them. And best of all, it put our little 15 person company on a rocket ship.
We were about to get paid!
That night after the demo my business partners and I were both celebrating and strategizing. None of us had ever been through anything like this and we had absolutely NO idea what we were doing. We would each take turns ordering a plate of sushi, a round of drinks and then throwing out a number and then defending why we thought it was the right amount.
“I say $10 million dollars. They are going to get $3 million a year in revenue that we are generating. Plus we have to say that our software is worth at least $2 million for the intellectual property. How can we even define the value of the partnership with the testing company and pulling all that revenue forward? The whole thing HAS to be at LEAST $10 million”
We went on and on like this, the numbers going up and down between $5 million and $30 million, until absolutely hammered drunk we stumbled back to our rooms at about 3:00 a.m.
We huddled at breakfast the next morning at 7:00 a.m. We were hungover as hell and absolutely looked (and smelled) like it. My head was pounding and I had forgot to iron half of my dress shirt.
One of my business partners made a proposal over breakfast, “If we close this deal today, we are going straight to a Dodge dealer and buying three Vipers (the hot sport car of the day). We drive them home from here and whoever get’s back to the office first, get’s theirs for free.”
A 2,000 mile race for a free car was the best idea I had ever heard. I started daydreaming about flying across the country in bad-ass sports car while using my cell phone to call the cops on my lagging business partners.
You bet your ass I was gonna play dirty! Eat my dust suckahhhs!
We still couldn’t agree on how much we were going to ask for as we gathered our stuff to go to our meeting, but as it turns out, it wouldn’t matter.
“Hey guys,” she said as we walked in, “did you get my message?”
“No, what’s up?”
“Well since you’ve already come in I guess it doesn’t matter, I was trying to save you a trip. I’m assuming then you haven’t seen the press release?”
“No. What press release?” We were all very confused.
We huddled around her monitor as she pulled up a press release that had hit the wire just after we had left our demo the day before. It was from the testing company that we had built our integration with. The short version is that they had announced a deep partnership with the largest competitor of the monitoring company.
I wasn’t getting a Viper. Grim.
“Sorry guys. I met with the CEO this morning and we both agree that the timing is just off with this one. I’m sure you’ll figure something else out. We still really value you as a reseller and consulting partner. And I’m sure there are still a lot of our customers that will want to buy this product.”
One business partner bolted out of the room to call our primary contact at the testing company. The other and I stayed and tried to convince her that there was still an opportunity to do a deal. Any deal. We could refactor the software to work with another testing solution. There had to be something we could do. But she rebuffed it all. The patient was dead and no electric shock that was going to save it.
We left dejected and headed to the airport.
“What the fuck just happened?!?!”
When you create a business in the wake of a larger company there is absolutely an opportunity to derive a significant amount of revenue and position yourself for a significant exit.
But you are extremely vulnerable to the dynamics of that other company. Such as highly ill-timed press releases.
Unfortunately, that was just the beginning of our troubles.
Later that year we saw a dramatic decrease in the consulting deals that were being outsourced to us as a result of the internal team getting pressure to use internal resources, “even though they might screw it up”.
A few months later their sales rep compensation would change. Reps would now only get paid on 90% of a deal value if it came through a reseller. And while 10% isn’t a huge amount, it basically all but evaporated the blue bird opportunities were getting with internal reps.
Within 12 months of that demo, our revenues had dropped in half.
I was pushing my business partners to expand our partnerships with new software companies as we had with the testing company, to protect us from any one company going through mood swings and killing our revenue, but they had decided that they just wanted to keep riding the current cash cow until it had stopped producing milk.
Things were bad, but they were about to get a lot worse.
In Part 4 — When Partnerships Go Bad, I will share some of my learnings of going through a shit-show of a partnership breakup.