My Worst Day: How My Startup Put Me $97,452.98 in Debt
How chasing a dream to change the world of music cost me everything.
November 3rd, 2015
By my 9th cigarette, the pinot had run dry.
Mid-inhale, I had the passing thought of running out for another bottle. But I was certainly too drunk to drive, and the only walkable liquor store would already be closed by now. “Eh, probably for the best…” I thought — a massive hangover won’t make tomorrow any easier.
Relegated to a Parliament Lights buzz for the remainder of the evening, I sat motionless on the floor of my smoke-free apartment, puffing away while trying to pinpoint where it had all gone wrong.
The cause of this self-indulgent, pity party of one?
My start-up had bankrupt me.
After months and months of begging, borrowing, and (contemplating) stealing, the Bank of America screen on my laptop flashed $3.12.
Actually, three bucks would have been a luxury. In truth my net worth had spiraled so far into the red that the only thing I could think to do with the last $20 bill in my pocket was buy a cheap bottle of wine and my first-ever pack of cigarettes.
Working my way through the Parliament’s in the middle of my living room, a strange sense of calm washed over me. Having spent every waking moment of the last few months crippled by anxiety and fear trying to keep my start-up alive, at least now I knew. Like a Captain resigning to go down with the ship, all that was left to do now was wait…
My sinking ship?
I was $97,452.98 in debt.
The Idea
This nightmare began 18 months prior.
I had agreed to play guitar in a wedding ceremony on relatively short notice, but there was a problem: I had parted ways with my acoustic guitar the year before. Not interested in shelling out hundreds or even thousands of dollars to buy a new guitar for a single performance, I called a few rental places to see if I could grab one for a couple of days. Call after call, I was met with lackluster guitar options, high daily pricing, and in the case of two shops, a flat out “no — we don’t rent to individuals”.
Thankfully, a friend came to the rescue and let me borrow his beautiful Taylor guitar for the wedding, but the whole experience left me with a bad taste in my mouth. “Why was it so difficult to access quality equipment?” Guitarists all over the world walk into music stores every day and play for hours on end. What if they could take that gear with them and play it in the comfort of their own home? As society moves further and further away from ownership of things such as cars, music, movies and more, it begs the question: do you really need to own your instruments?
The seed was planted…
Learning to Fly
Several months later, I found myself sitting through three light cycles waiting to turn left in the middle of a particularly brutal Chicago rush hour. During this misery, “All Along the Watchtower” came on the radio (the Hendrix version, of course). It was the first time in years I listened to the song all the way through, and I couldn’t help but fall in love with Hendrix’s guitar solos all over again, just like I had when I was first learning to play at the age of 12.
During the final solo, out of nowhere, I felt like I had been struck by lightning. Immediately, all the ideas I had regarding access to music equipment came flooding back — only this time I couldn’t shut them off. I stopped at Office Depot, bought a huge notepad and some Sharpies, and spent the next few weeks mapping out ideas for a business.
Better access to gear could be done — I knew it could. And I was going to be the one to do it.
Cleared for Takeoff
The next 4 months were an absolute blur. But by end of this chaotic period of planning and building, Switches+Strings was born, and there was no looking back…
Our tagline was Your Music. Your Terms. — and we pitched it simply as “like having a library card for guitars.” Similar to the DVD era of Netflix, for a flat monthly fee, users could log into their account, build a queue from hundreds of pieces of music equipment, schedule a delivery, and have their desired gear dropped right at their door.
With the help of early mentions in several local newspapers, as well as some viral sharing on guitar and bass forums, traffic to the website shot off like a gun. Converting these visitors to members was going slower than I would have liked (read: early warning sign), but I didn’t care. I knew this would work.
Over the next few months I got involved with several events around Chicago, and for the first time was meeting potential customers face to face. When I could explain it in person, the concept clicked immediately. Membership soared, and I reached a point where I was signing up several new members every single day. This meant procuring more equipment and many long nights making deliveries. At my peak, I was logging 25 hours and 500 miles a week in the delivery van — my desire to hire a driver halted by the fact that every extra dollar was going toward purchasing equipment.
I was exhausted, excited, and focused on nothing but growing the business. What kept me going through the craziness? It was the incredible feedback I was getting:
“I’ve recommended Switches & Strings to everyone I know and will continue to do so. You guys rock!”
“Do yourself a favor, and if you are even slightly thinking of giving these guys a try, GO FOR IT!”
“This is an awesome concept for anyone who wants to play multiple guitars, basses, amps, pedals and mics but can’t or doesn’t want to shell out the bucks to buy them outright.”
Unfortunately, good feedback cannot pay the bills.
Out of Runway
As I approached the fall of 2015, money was definitely becoming a concern. While I was trying to do as much as I could to keep expenses at a minimum, burn rate was still too high.
Making matters worse was my youth and ignorance. Just a few years out of college, my only real experience with entrepreneurship came from my family, which proudly boasted several generations of smart, successful small business owners. Turning to these individuals for advice, I heard the same things over and over again: cash flow is king, focus on profitable customers, don’t give up equity, get a line of credit to bridge gaps in payables and receivables, etc.
All strong advice…for small businesses. But what I failed to realize at the time was that I was asking the wrong people the wrong questions. In retrospect, it was like learning how to change the oil on a Toyota and then thinking you’re qualified to change it in a Formula One race car. Sure, both are technically cars, but they couldn’t be more different.
This was years before I understood anything about Silicon Valley, venture capital, blitzscaling, and the million other things that make fast-growth startups vastly different from any other form of business. Had I known at the time that you could literally take a company public without ever having turned a profit, I may have felt more encouraged. But from where I stood, my business was unprofitable — and that meant I was failing.
Relying solely on my personal savings, a commercial line of credit, and a wallet full of credit cards, I forged ahead the best I could. But things were turning sour…fast.
I was collecting thousands of dollars in membership dues each month, but it was no match for the massive capital investments I was making. Like any determined (and foolish) startup owner, I was also using every available penny of personal credit to help finance this venture. I knew this was a dangerous idea, but like gambler down on their luck, I couldn’t help but chase as things got worse.
If I can just reach a certain number of members. If I can get the right people to take notice. If I can just hang on a little longer, things will all work out…
While well intentioned, the problem with the phrase “things will all work out” is that when you fail to couple it with an actual plan, you forfeit control of the outcome. And when you forfeit control, things generally won’t work out the way you had hoped.
Come November, things definitely weren’t working out for me the way I had hoped. By this point, I had actually come to resent the notification I received each time we signed up a new member, knowing that the short-term cost of servicing this member was well beyond what we could afford to spend. And with my failure to realize that outside investment was the only means I had to keep this business alive, I was dead in the water.
My business had become a financial house of cards. One that was just about ready to come crashing down.
November 3rd, 2015
With $3.12 in my bank account, I spent the day of November 3rd searching for my usual financial life rafts.
By this point, I had accumulated a variety of tools and tricks to keep the lights on. Those annoying, 0% introductory credit card offers you treat as junk mail? Those were my bread and butter — each new credit card allowing me to shift a balance of the high-interest ones bleeding me dry. Need a check for rent? Credit card cash advance at 27.24% to the rescue. New equipment to service new members? Of course, Ms. Banker, I’m happy to use my car as collateral to extend my line of credit!
While this system of robbing Peter to pay Paul had kept me alive for months, on November 3rd the jig was up. First it was the commercial bank, which refused any further extension of credit barring additional collateral (of which I had none). Then Bank of America shut off my two main personal credit cards, as I had surpassed my credit limit on both. Looking to ease the pressure and get these cards reinstated, I spent several hours that day applying for new credit cards online — but for the first time ever, I was declined on every single one.
Word had gotten out: my business was a bad bet. And folks were looking to cash in their chips…to the tune of $97,452.98.
With (seemingly) nowhere left to turn for help, I lit a cigarette and made the call: it was time to shut down my startup.
The Aftermath
It took me over a year to completely close the doors on Switches+Strings. The first 30 days were the craziest. Informing my customers of the decision to end our service. Making hundreds of runs to pick up equipment across Chicagoland. Organizing my crippled financials and putting together a payment program. There was just so much to be done. And this was on top of the odd jobs I had immediately started working in order to bring in much needed money for food and rent.
After the initial 30 day rush, nearly every night and weekend of the following year was dedicated to liquidating my equipment assets. Armed with a tape gun and a stack of boxes and bubble wrap that stretched to the ceiling, I spent hours upon hours packing up the guitars, basses and amps that had been sold for pennies on the dollar to musicians around the country…each box representing a small piece of my dream I was letting go.
Thankfully, when all was said and done, I was able to pay off nearly half my debt with the sale of this equipment. As for the rest? Well, I had a difficult decision to make…
While I briefly flirted with the idea of declaring bankruptcy, I ultimately couldn’t stomach taking this route. I had built this pyramid of debt brick by brick through overzealous optimism, ignorance, and some reckless risks. And unless I tore it down with my own two hands, I would be robbing myself of the most important thing I could take away from this whole experience: the greatest learning opportunity of my life.
I needed to fully feel the pain of my failure in order to grow. So I opted instead to forge ahead with a monthly payment program stretching out over nearly four years. In fact, come October 2019 — 47 months after I closed the doors on Switches+Strings — I will make my final debt payment. Four years spent repenting for the financial sins I committed during my first startup.
While the money will finally been repaid, I’m unsure if I’ll ever be able to repay myself for the emotional toll this event took on my life. I cannot even begin to describe how devastating this failure was. Sure, I had failed plenty up to this point, but never on a scale like this. I was so confident that things would work. That I was on the path to becoming a revered entrepreneur, and that Switches+Strings would be the springboard for an entire empire. Not once did I ever consider the possibility that it might not work.
When it came time to acknowledge that I had failed, it didn’t just feel like I was giving up on a dream. It felt like I was giving up on my entire identity. With the business gone, I just felt…well, lost.
Instead of treating the failure of Switches+Strings like the singular event it was, I treated it like a disease. Something I had caught but couldn’t cure. In the moment I couldn’t make the very important distinction between I had failed and I was a failure — and this led to several years of extreme self-doubt and loathing.
In fact, this likely would have continued if not for the sage advice from a family member that I go and share my story with a Counselor. While hesitant at first, my time with this professional is what ultimately recalibrated my entire way of looking at the saga, and allowed me to realize that the failure event was already two years in the rearview. She helped me see the positive — that I had gained tremendous insights from what I experienced, and those could be used as a solid foundation for my next entrepreneurial adventure. In a way, I had self-funded a real world MBA.
As it turned out, my only real failure was not forgiving myself sooner.
(Note: for anyone who feels like they have nowhere to turn, I highly recommend speaking to a professional. This article can get you started.)
What’s Next
In between the tears and despair on the night of November 3rd, 2015, I took time out to write an extended email to friends, family, and supporters. In preparation for this story, I dug up this email so that I could fully reimmerse myself into the middle of my worst day.
Truth be told, I didn’t know if I could bring myself to read the letter. It took me so long to stop the bleeding on this wound, and I was worried reading it would rip it right back open. Thankfully, after a week of torturing myself with quick glances, I finally sat down and read it start to finish.
And you know what? It wasn’t as bad as I thought!
Even in the middle of the worst day of my life, I somehow possessed a strange sense of optimism. While I certainly don’t remember any sort of optimistic feeling that evening, it’s clear as day when I look back on my writing. In fact, the closing passage ends on quite the high note:
I wish I could say that I lost this fight on points — or a technicality — but it’s not true. My ass got knocked out cold. Ali v. Foreman. But here’s the thing: as battered, bruised, broken and broke I am, there’s nothing I want to do more right now than get back in the ring for another fight. Literally, it’s all I’ve thought about this week. I could still be a little buzzed from the head shots, but all I keep asking is “when do I get the chance to fight again?”
And maybe, just maybe, after I pull myself back out of this hole, I’ll climb back into the ring with another business or two. After all, the world isn’t going to change itself…
See you on the next ride.
Sure enough, just about two years after I closed Switches+Strings, I started that next ride — an event marketing and sponsorship agency called Silvercrate. Not surprisingly, I was vigilant about financials at first. I kept my day job. I forbid myself to use any personal financials or credits cards to finance the venture. And I only took on clients I could profitably service.
While I’m not on the cover of FastCompany (yet!), this new business has started turning a healthy profit…enough for me to live on full time. It also allowed me to work remotely for 6 months while I traveled the world with my incredible wife.
I’ll never forget the night of November 3rd, 2015. At the time I would have given anything for that day to have gone another way. But now, I’m not so sure. Yes, it was the catalyst for an immensely painful period of my life. But it’s also a story I now get to tell myself every single day. And with all the incredible lessons I learned, I have a feeling that this story will ultimately end up with one hell of an ending.
