How did we get into this mess?
The danger of having too much money
2015 has been an interesting year. Since my business partner left in January, I’ve had to re-think my business model, I’ve pivoted the business, employed two people, started building two startups… And now we’re only weeks away from bankruptcy. What went wrong?
Well, as always — it’s a combination of things. Bad math, bad planning, bad luck (bad excuses) and summer. But let’s start by going back in time.
Background
The last quarter of 2014 was tough. Both me an my business partner consulted full time to generate revenue. We did classical management consulting gigs at large corporations, and ran Seed Nordic in the mornings and at night. We averaged 60–80 hours per week, and I did my career’s first 100 hour week. My partner and I stopped talking, started arguing, and after a long Christmas holiday we decided to go our separate ways.
So I started the year alone. I owned 100% of Seed Nordic, and financially we were in a good position. We had 600.000 SEK in cash (and expected revenues), and with my burn-rate of 50k per month I calculated that I had 12 months to figure out what I wanted to do. I needed time to reboot. Time to think. So I travelled. I went to the Caribbean and borrowed a house from a friend who just happened to be sailing at the time. I spent my days reading, and my nights thinking about purpose and the meaning of life (or in other words, why I get up in the morning?). I realised I have two main drivers:
- I love the creative process. Dreaming up the unknown, and then going out an building it.
- I play best with others. I need to have a team. Someone to bounce ideas with. Someone to coach, and someone to keep me focused.
Given this insight, I started sketching out what today is Seed Nordic — Startup Factory: A team of experienced entrepreneurs who work together to build cool startups. Both for ourselves, and for corporate customers.
I returned home full of energy. Knowing what I wanted to do, I started recruiting, started building startups, started having fun!
Bad math
What I didn’t do was pay to much attention to the revenue side. We had 12 months, right? Let’s first prove that we can build stuff, then try to find paying customers. Wrong.
Turns out we didn’t have 12 months. First of all the initial 600k wasn’t quite 600k. It was more like 530k. Also, I had already spent a few months splitting up the company and playing in the Caribbean. So 530k was closer to 400k. And then, binging on people increased the burn rate so suddenly 400 turned into 300k — or in other words 117 days.
Bad planning
Looking back my biggest take away is that having to much money makes you lazy. I thought I had money to survive, so I didn’t focus on sales. My grand plan was to “handle it later”.
Bad luck
Thats’s not 100% true, because I had two potential leads. Second mistake was blindly expecting that potential clients would turn into customers. The first lead was super excited, and said that they wanted to buy our services. They actually wanted two. But when it came down to it, it turned down they didn’t have any money, which they proved a week later by firing their innovation department including my buyer. The second customer also thought it was a great idea. So great in fact that they had created their own “Lab’s” division, and didn’t need external help. Ant that was my entire pipeline.
Summer
This one is a Nordic thing. No-one outside the Nordic countries will ever understand this, but Norway, Sweden, Denmark and Finland shuts down over summer. Everyone goes on holiday and the few who are left just zones out. Nothing is sold, and no new projects are started in July or August. Having calculated that we run out of cash September 4… Summer is bad news.
Lesson learnt
It would be fair to say that I got myself into this one… I couldn’t argue against it. However, you live and you learn, and instead of beating myself up over it I choose to focus on the task at hand. My lessons from the last few months are as follows: Don’t get comfortable, don’t underestimate sales, and most importantly don’t ever give up.
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Thanks for reading!
Kenneth Hellem
