My £10 Million MBA

The Rise, Crash and Burn of Ammo City, a startup story

This story was first published in 24 Ways to Start in December 2010

It was 1999 when we launched Ammo City (Ammunition for Life) as part of the first wave of UK dot com 1.0 plays. Designed as an online destination for the elusive 18–34 year old trend-setting opinion formers as an alternative news and entertainment network combining sharp editorial covering music, fashion, art, design, gossip and politics with streamed radio shows and mixes from respected underground DJ’s, music videos that typically didn’t get rotation on MTV (remember that?) and the building of a community of “citizens” who occupied this online urban environment. Think Facebook meets YouTube meets Buzzfeed whilst their founders were still in high school.

Fuelled with what seemed like a phenomenal amount of money from angel investors we expanded from 20 people in a small digital media studio in Beak Street, Soho to circa nearly 200 people on 3 floors of No.1 Regent St, London where we kitted out two recording studios for our online radio station that featured the best DJ’s, a video editing suite for the online TV broadcasts and hired the best writing talent we could find.

So there you had it. It was 1999 and we were at least 5 years too early with an on-demand streaming radio station, video station, digital magazine and online community that was growing fast all wrapped in a hyper-cool, search engine unfriendly Flash based site. Pretty much anybody who was part of the London underground music, fashion, design or political scene was involved.

We were burning through money at a rate of £250K per month while our membership and site visits were going through the roof. The on-demand streaming of high bandwidth audio and video in those days meant that the more successful we were the more it cost us and did those costs escalate — every month. We quickly became victims of our own success. I experienced corporate vertigo having gone from a happy almost family like atmosphere of a 20 person team to a 200 person company + 100’s of freelancers in less than 6 months.

We made a tactical error in the design of Ammo City. Having been spawned out of a cutting edge digital design company called Digital Arts our creative team was naturally precious about the visual presentation and navigation of the site at the expense of understanding how the net worked and the future importance of search engines. Hence the site was beautifully crafted in Flash but unless you knew how to find it none of the great editorial or shows would be found via a search engine yet this lent the site a kind of cool cachet.

Awareness of the site was spread by word of mouth and it’s lack of 1999 Internet etiquette provided an unintentional aloofness that didn’t appear to hurt the volume of traffic. One problem however was that it was a site that could only really be enjoyed with a broadband connection and in 1999 the UK was still mainly in dial-up mode certainly for domestic connections so we were relying on people goofing off at work or access from the US and other places where broadband was more prevalent. We could literally tell from the server loads when universities in the US were waking up or getting into their evenings where East and West coast students were pulling down on-demand radio streams from the hippest London DJ’s. UK Garage, Drum and Bass, early Grime were all achingly hip and these shows were incredibly popular in the US and Canada. Ammo City was essentially the London underground music, design and fashion scene online with the added dimension of intelligent editorial.

So the audience and the costs of servicing that audience continued to grow at an almost exponential rate which lent a strange pain/pleasure principle where more users equated to a higher burn rate unmet by incoming revenue.

Shareholders and investors were quick with advice and I must confess that even when it was counter-intuitive I felt so out of my depth I assumed that they must be right. We spent money like water because we were told if we didn’t spend it we wouldn’t get the next, yet to be negotiated, tranche. This was a land grab and we were grabbing land. Yet in the grabbing of land we were yet to really figure out how to monetize.

Suddenly at the behest of my shareholders I was surrounded by people who came from big corporations but had never run a start-up. They used lots of clever words and management double-speak that I was rapidly trying to acquire less I seemed like an incompetent CEO. I had a former marketing director of Coca Cola, a former COO from Virgin, an editor from NME each from an entirely different culture and with old media ideas of how to make money. Of course none of us knew how to make it online in 1999.

The missing ingredient here was an understanding of how the net would evolve yet in truth we did know as can be seen from our promotional video. It’s just that we didn’t have visionary shareholders or deep enough pockets to achieve what Facebook and YouTube achieved 5 years later. We succumbed to the mantra of the time and tried to sell advertising space but online advertising wasn’t really understood back then and besides the sport shoe advertisers that might want to connect with our audience were put off by editorial that talked about sweat shop labour.

Advertisers, as in other media, want access to your audience but at the same time want to influence editorial and as soon as you do that you stop being authentic and you lose your audience. It’s a vicious cycle but explains why so much mainstream media and corporately sponsored sites are crap.

So there we were with a growing audience, a respected brand and burning money. Internally we had running battles given that we had kept the digital design business as a going concern whilst at the same time attempting to build a global youth brand.

Both sides of the business thought they were supporting the other either via incoming revenue (the design business) or credibility (Ammo City). Fights continually broke out between fiefdoms, my creative director stopped talking to me for reasons still unknown and then shareholders began holding secret meetings with members of my executive team concerned that I may be cracking up under the strain of running two large businesses and having to switch personalities between being the head of a ultra-hip youth brand and then the head of a corporate digital design company for clients such as Swiss Re and Volkswagen.

I’ll be the first to admit I was finding it a challenge especially as the staff numbers had grown so quickly and inevitably I became seen as a bit of a wanker by people who I hadn’t hired but had been hired on my behalf by a shifty HR director.

What I found strange was that the concept for Ammo City was sound and this was what attracted investors to the proposition in the first place yet once installed they felt it necessary to deploy checks and balances that made it impossible for me to function. Whilst they were attracted to my creativity and entrepreneurship they then expected me to be able to speak like an accountant, a lawyer and the head of a public quoted company whilst still driving an authentic youth brand and an utterly disparate corporate digital design company.

What only occurred to me later was that these business advisors had absolutely no idea about how to run a start-up, they had only ever run businesses from the comfort of a spreadsheet and a cursory glance at a then popular business journal called Red Herring.

The melt down happened when a couple of passenger planes were parked on the Twin Towers in New York.

It didn’t help that for the week prior to 9/11 we were featuring an interview with hiphop artists “The Coup” with their record sleeve on our home page.

credit: The Coup

Suddenly money just stopped moving around, the dot com 1.0 bubble was already letting out air and 9/11 gave it the final burst. Contractually committed funding to the business was withheld and we found ourselves traffic rich and cash poor.

By this time a shareholder and executive team mutiny was well under way which meant that I had to fire people, whom I’d had long term business relationships as well as friendships with, for gross misconduct. Unlike many CEO’s at time I had been too naive to set aside a personal escape fund so almost went down with the ship but naturally the majority of people whom I’d provided employment for blamed me for the failure and I experienced a period of complete isolation.

So what did I learn from this experience?

It took many years of reflection to understand what I’d learned. But here’s a few things I know now.

1. Don’t be taken in by people who have lead corporate careers. Just because they come to you as former CFO, COO, CEO or whatever from a major corporation might look good when talking to a venture capital firm but it means shit when it comes to building a new business from the ground up in a totally new area. These people can be useful advisers but always remember that you don’t have to take their advice. Use them as a sounding board only because in talking to them it may help you define your own thinking but don’t let them side track you. If they’ve never built something with their bare hands from scratch they won’t understand what you’re up against.
2. Keep your vision and go with your intuition. If I had 1999 again I would have done many things differently. I would have taken the cheap warehouse space in Brixton rather than moved to expensive offices in Regent St that kept our shareholders and corporate customers happy. I would have conserved cash and spread it like marmite rather than burn it as fast as my shareholders encouraged me to. I would have concentrated on one business rather than tried to run two in order to maintain a fake source of revenue at the expense of losing focus. I wouldn’t have taken on senior executive team members introduced to me by shareholders as in the end this created distrust and fragmentation within our team.
3. Understand what you’re good at and don’t get deflected into areas that you’re not. This has been a constant challenge in my career and I think it’s something to do with being an entrepreneur in the UK. As a CEO in the UK it seems that you’re expected to not only be the visionary, creative genius and person that can lead a team up mountains fuelled on passion and a love of late night pizza you’re also expected to be an accountant, a lawyer, a spreadsheet jockey and half a dozen other things. I know lots of start up CEO’s who are good at a lot of this stuff but I’ve yet to discover a successful start up that has been run by a bean counter. This is an area where it appears that the US has a more enlightened approach to investment and where there is a “wrap around” of professional support that allows you to pursue the vision they invested in that plays to your strengths rather than forcing you to operate within your weaknesses. You may only be the CEO in the start-up phase, once it’s rolling you will probably need new management to make your idea sustainable.
4. Compromise is the enemy of integrity. Great ideas are not realised by consensus. Be authentic and stick to your vision. Even when nearly everybody says you’re wrong you’re often right.
5. Being a CEO or founder is lonely. Don’t assume that your employees are as committed to your vision as you are. You may have egalitarian ideals but most people just want a job and need clear direction. Not everyone is a leader or thinks like one. Shareholders are not your friends, they have invested in you because they expect a significantly better return from their money in your business than if they had put it in a bank. They will want to see that return earlier than you expect and will not be sentimental or care about the 72 hour weeks that you are putting in to realise your vision. In many ways you are an indentured slave. It might be your idea but it’s their money you’re spending. Don’t assume that they really understand where you are going.
6. Don’t fear failure because this is where you get the most powerful and useful learning. The UK investment community still hasn’t recognised that success is going from failure to failure without losing enthusiasm. Each failure tells you more about yourself and the world around you. Use this knowledge in your future ventures and don’t let it dent your confidence, just try not to repeat earlier mistakes.
7. Entrepreneurship is not something you learn at school or from an MBA. An MBA is fine if you want to take a position within a going concern but it teaches you nothing about the day to day creation of something out of nothing.
8. Ignorance is bliss. If you don’t know what is impossible then you have no limitations. Disruptions and $multi-billion dollar businesses are often caused by people imagining impossible things and then doing them.
9. Be authentic. Understand what really matters to you and how you define personal success. This will take time but it is the key to long term success. It is tempting to behave and be the person that the outside world wants you to be but maintaining multiple personalities is time consuming and you will be found out. If you don’t like wearing suits then don’t wear them, if you don’t agree with something then speak out. Do you really want to be trapped inside a personality that isn’t you?
10. Understand that money changes people. Even the people who you think you know the best.
11. Burn as few bridges as possible. You never know what’s coming next. But having said that don’t be a doormat, some people really deserve to know exactly how you feel. If they are decent people they will respect your honesty if they’re not then you really haven’t lost anything.
12. Think disruptively and don’t fear the big boys.

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An entertaining & thought provoking slayer of sacred cows, Graham Brown-Martin works globally with senior leadership teams to help organisations adapt in the face of rapid change & innovation. By challenging entrenched thinking he liberates teams to think in new ways to solve complex challenges. His book Learning {Re}imagined is published by Bloomsbury and he is represented for speaking engagements via Wendy Morris at the London Speakers Bureau.