In the early days of Runkeeper, we were in our element and I was in my element as a leader. We were bootstrapped and profitable, and we were about as customer focused as one can get. And we were having fun!
Then, we raised a big round of venture funding. It was a $10m round when I think we had 12 employees at the time and didn’t need the money. We raised it on a big vision (similar to what Apple is trying to do with HealthKit/Apple Health), but it was more a case of finding a story that was big enough to attract venture money vs. defining what we wanted to create and then determining the right way to fund it. We had great traction at the time and the vision really was a big one, but as a running app, it just wasn’t ours to pursue (in hindsight).
The next couple of years were kind of a mess. We became allergic to revenue, ramped up our burn, hired as if we were going after the big health vision, but kept executing incrementally on the running app. It eventually pushed the company to the brink, and in late 2014 we were running out of cash, unable to raise an outside round of funding, burning a lot of money, and our numbers were good but not anywhere near the hockey stick they needed to be in order to be attractive to new investors. Especially at a big step up in valuation from our previous round.
In addition, I was bone tired. I had been pushing a boulder up a big hill for a long time, and the stress of it all was really getting to me. I hit the road and pitched the partnerships at each of our existing venture firms, and if they didn’t pull an inside round together, the company would almost certainly have hit a wall. In hindsight, I must have been a sorry sight to see — frazzled, haggard, and generally uninspiring. But I told these firms (and believed) that we had a compelling path forward, and if we had the time and the laser focus that we had been sorely lacking, we could get the company to more stable ground where we would have lots of options at that point.
Most venture firms would have either let the company hit a wall, funded the company with super painful terms, or funded it contingent on firing me. In fact, to be honest, I probably did deserve to be fired at that time. But for whatever reason, the board stuck with me. It was irrational, and a big gamble for sure, but it ended up fundamentally changing the outcome for the company and for me.
Once the money was in the bank (on reasonable, non painful terms, all things considered), we were all aligned around getting back to a laser focus on being the best running app possible. It was clear how the running app could be a wedge, not to a horizontal health platform, but to building a new kind of fitness brand that was a consumer technology company at the core. The big fitness brands were making all the money, but had no direct relationship with the end consumers. And the running/fitness apps had direct relationships with millions of consumers, but were only making tiny (relatively) digital revenues. These worlds were intersecting, and I became convinced that the big fitness brands of the future would be embedded in the daily lives of consumers through technology and digital experiences. Either the apparel companies would need to start becoming tech companies or the tech companies would need to start selling apparel — or both.
So, the money came in. I rebuilt the leadership team with some new additions that were excited about a more focused (and profitable) path forwards, we cut almost a third of the team to better align our costs with our revenues and get back to our scrappy roots, and we were off to the races. It was an insanely difficult time, but out the other side of that turbulence emerged a company that was healthier than it had been in years, was essentially running profitably, had focused execution, a clear vision of the future (and plan of attack), and a compelling and obvious story for a select group of very strategic partners. And the other thing that emerged out the other side of that turbulence was a re-energized and newly confident CEO.
In the end, we were acquired for what ended up being a great outcome on many levels. And in the last phase, I finally stepped up and became more of the leader that I should have been all along. In that middle part though, I really didn’t deserve to keep my job but for whatever reason, the board gave me an irrational vote of confidence. Maybe they saw something in me I didn’t see in myself. Or maybe they just didn’t see any better options (haha). But seriously, I owe the board a huge debt of gratitude for believing in me, even when I was having trouble believing in myself.
I am not of the belief that founders should remain the CEO of their company in perpetuity as a god-given right. And there are certainly cases where the right thing to do is to remove the founder as CEO, if all other options have been exhausted. But this situation has taught me that sometimes, that irrational vote of confidence can be just what is needed to get that founder/CEO and the company to where they need to go.