admin | January 30th, 2012
This FounderDating Guest Post was written by Lane Becker for our series: FounderTalk – The Real Story. Lane is Co-Founder of Adaptive Path and Get Satisfaction and co-author of the upcoming book, “Get Lucky” (get it now!). He’s also an advisor to several startups and can be reached and/or followed at @monstro.
Silicon Valley runs on money, talent, and sheer, unadulterated willpower. At least, those are the obvious things. Less obvious are those skills that are just as important but not so readily apparent. In particular, this industry banks on an ongoing influx of naiveté and unchecked optimism to keep its motor running. Try asking anybody who’s been ground through the venture mill a couple times—the second and third times down the startup chute are much harder than the first. First timers all share one distinct quality: they don’t know how hard it is. Yet. This is a blessing.
It Never Gets Easier
In my career I’ve done 4(ish) startups, and each one has required from the get-go a huge leap of faith: A belief that we know what the future holds, and that our new idea will push it further and faster in that direction. In other words, a belief that we could truly change the world—an easy thing to say but a hell of a thing to do. But each time, that belief gets harder to sustain, because every time you start over you’re cursed with the knowledge of how hard it was previously: The absurd challenges you faced. The places where you got it wrong and had to reboot. The hurdles you had to jump. The diving saves. The constant rejection. And worse of all, the times when you didn’t quite pull it off. For all the talk about our culture of celebrating failure, the truth is that failure, when it’s yours and you own it, fucking sucks.
And yet, I love it. Love it. Wouldn’t have traded any of my experiences in those 4 startups, the great ones or the awful ones, for anything else. Can’t believe how crazy lucky I’ve been to ride along for both the first and the second wave of dotcommery, and quite curious to find out what role I can play in the ones that come next. But here’s the thing: I don’t love it for any of the reasons I was told I would love it.
Instead, I love it for what I learned along the way about what really matters. So, here’s my advice for people who are starting companies right now, or anytime in the future. It’s not ten tips or eight things. It’s just a story, but one that matters hugely to me, because it taught me what really matters when you’re trying to build something you care passionately about. It’s the thing that keeps me going in this industry, even after all the tired Silicon Valley cliches long ago ceased to mean anything. It’s the story of our five million dollar seed round. Here it is.
Up, up, and Away
My most recent startup, Get Satisfaction, is doing quite well these days. Get Satisfaction sells customer communities to over 63,000 companies ranging in size from Procter & Gamble to one-person startups. If you’ve ever clicked on a “Feedback” tab on someone’s website, odds are good our product popped up in response. Get Satisfaction is now a prime player in the burgeoning world of “Social CRM,” which wasn’t even a concept when we launched in 2007 but has since become a significant force in the enterprise CRM market. We have an amazing CEO at the helm, Wendy Lea, who has a deep background in both enterprise CRM and social software, and she’s done an incredible job of driving our sales through the roof, all without ever losing her impressive Southern charm and composure.
So, nice work us! But it was not always thus. In fact, for most of the company’s history, it was a slog and a half and a constant struggle just to stay alive. My cofounders and I started the business in January of 2007, about a year into the Web 2.0 era, just as the first seed investment firms were starting to appear on the horizon. Between January and September of that year we took in $285,000 in investment from friends & family, which we rolled into a “Series Seed” round of $1.3 million, led by First Round Capital and O’Reilly’s Alphatech Ventures, that we announced on the same day that we launched our product out of beta, September 13, 2007. It was also my birthday, so we threw a combined launch/birthday karaoke party. I drank too much and belted out a slurry rendition of Bon Jovi’s “Livin’ on a Prayer.” It was a good day.
Things got harder after that. A lot harder. We launched the site as a consumer service—our initial idea had been that we would do “customer service without companies,” creating one huge discussion platform where anybody, customer or company, could show up and start asking questions and sharing product ideas with other passionate customers. And this absolutely happened, but it wasn’t happening fast enough for our investors—customers wanted to talk about the products and services they loved, but the growth was linear, not exponential.
But there was this other little thing that we noticed. One of the features we had created was the ability for companies to “claim” their areas, so if a customer was discussing, say, Adobe products, employees from Adobe could show up and identify themselves as such, we would verify them, and then the employees could use Get Satisfaction to have a product discussion directly with their customers. This feature, it turned out, was huge. Because we had done a good job SEOing individual topic pages, they were ranking well in Google, so whenever a new customer showed up and added a new company to the system (any customer could start a topic about any company or product) it would quickly get added to the Google index. Then, because every marketing person on the planet had set up Google alerts for their company and products, they would get pinged via email every time a new question or a problem a customer was having showed up in Get Satisfaction. Once the employee showed up on our site, it was a short hop to “claim” their company in order to be able to answer authoritatively.
Soaring… Like the Hindenburg
So, hey, we have companies signing up by the thousands! We have a long list of names and email addresses of marketers, executives, and customer service people inside thousands of different companies, all of whom are actively engaging with their customers on our site! Whoa! There’s the beginnings of a business model! (We think). It’s working! (We think).
By now we’ve been running the company for a year and a half, it’s mid-2008, and we’re running out of that $1.3M. Time to hit Sand Hill Road and bring in the big money! Except, as those of you who’ve been doing this for a while will recall, mid-2008 was the beginning of the last tech downturn, and investors were getting cautious. Turns out we didn’t have a business model—we had some directional indicators for a business model, and those are two very different things. Investors weren’t feeling generous. All we had to show was an idea—one that we knew would work, because of the initial traction, but since we hadn’t really even begun to move the service in that direction it wasn’t enough. There were a few false starts and partner meetings, but in the end everybody said ‘no.’ We were in trouble.
Our seed investors re-opened their pockets, we re-opened our seed round, and in came an additional $500k. The hope was that it would be enough to weather this brief (fingers-crossed) downturn, and would give us enough time to begin to build out a SaaS backend and prove out the financial model for the site enough to interest one of the institutional VC funds. But that didn’t happen—instead, thanks to a bunch of slimy east coast investment bankers, in late 2008 the economy collapsed.
Whoops. Well, at least we had company now—VCs weren’t funding anybody, and that definitely included us. We were, in a word, screwed.
It was a strange, disconnected, almost surreal moment. Get Satisfaction was really beginning to take off. We had launched our paid services, we had figured out a way to attach our community-based approach to traditional customer support strategies in a way that significantly reduced the number of inbound customer support emails the businesses that used us were getting, and all our of charts and graphs had lines going up and to the right in exactly the way we’d been told they were supposed to. We were getting accolades from customers, we were getting great press, but what we weren’t getting was funding, and largely because of factors completely out of our control.
All of this culminated in one of the worst board meetings I’ve ever had in my life. It’s December, 2008, and I’m sitting in the room with one of my cofounders, Thor, and two of our investors, and I’m yelling at everybody. This is not a proud moment for me; in fact, looking back on it, I’m hugely embarrassed at my behavior, but at the time I honestly didn’t know what else to do. The economy had collapsed; capitalism itself, it seemed, was on the rocks; what chance did our little company have? Our investors had already put in half a million more than they had intended to, and they weren’t in the mood to do it again. From where I stood, everybody seemed to think the best thing to do was prepare for the inevitable shuttering of the company or, at best, selling it on the cheap.
This was not ok. I started yelling. “You don’t trust us,” I yelled. “You don’t believe in us.” Kudos to our investors for taking all that pretty well, and letting me rant. “What will it take? What will it take to change your mind?” The answer came pretty easily: Find another half-million in investment. By next month. “Fine,” I yelled. “Screw you guys! We’ll do that.” Fuming. End of board meeting.
And then, very quickly, sheer panic. Because we had absolutely no idea how to do that. Where were we going to find half a million dollars? What could we possibly do next?
Guess Who’s Coming to Dinner?
It was at that point that I remembered a conversation I’d had just a few weeks back at a conference we’d attended—on the beach in Kona, Hawaii, no less, at a VC conference we’d signed up for back when times were more flush. Thor and I had been sitting on the beach mai-tai’ing our troubles away when we noticed that the guy next to us was a reading a book we’d both really enjoyed—“Cloud Atlas,” I think it was. So we struck up a conversation and it turned out he was an angel investor—Josh Felser, one of the two guys who now runs Freestyle.vc, a seed investment firm. Josh had been a serial entrepreneur himself, along with his partner Dave Samuel, and we sat there for a while and heard his story. We talked about books we’d read. We shared our histories. We told him how well Get Satisfaction was doing, even though that was only half-true. We drank more mai-tais. We hit it off. And at the end of it, in the way of every Silicon Valley conversation we’d ever had, Josh said the thing we all say to each other (and usually mean): “Let me know if there’s any way I can help.”
Well, ok, I reasoned. He’s been an entrepreneur; he’s sold two companies. I’m out of ideas, but maybe he’s got one. I called him up, told him I wanted to take him up on his offer. He immediately agreed to meet me for breakfast the next day.
I now refer to this, without exaggeration, as “the breakfast that saved Get Satisfaction.” Josh met me at Cafe Centro in South Park, just around the corner from our office, and over coffee I told him the whole story. Huge potential business, out of cash. Existing sources tapped. New sources uninterested. Economy collapsing. Investment bankers are jerks. Was there anything I could do? And he looked at me and asked me a really simple question: “Well,” he said, “Have you tried asking any of your friends for money?”
I had not, though I certainly had some wealthy friends by that point. Just like anybody who’s hung around this industry for more than a couple of years, I know a number of people who’ve tripped over the money land mine and had wealth blow up all around them, but one of my favorite things about living here is that for the most part nobody makes a big deal about it. We’re all still friends like we used to be—they just pick up dinner a little more often. And I didn’t want to invade that, or take advantage of the relationship—honestly, I told him, the idea of asking my friends for money seemed really difficult, and a tad uncouth.
“No problem,” he says. “Here’s what you do: Throw a dinner party. Make a list of all your high net worth friends and invite them. Make it clear that it’s an investment dinner—that you’ll cook, that it will be delicious, but that the point of the dinner is to pitch them on investing in Get Satisfaction. If they’re not up for it, there will be other dinner parties. Some of the people won’t respond, which is fine. Some will tell you no, which is also fine. But the ones that say they’re interested, that come to dinner and see the pitch—if they show up, I guarantee they’ll invest. They’re your friends.”
We threw that dinner party—Josh and Dave came, among others—and he was, it turned out, 100% right. We didn’t collect the full $500k that evening, but we got almost there, and doing so generated enough momentum to pull in the rest of it shortly thereafter—including First Round and O’Reilly, who were more than willing to participate once they saw that we’d actually managed to, against all odds, get traction.
And the best part of that evening was that one of the people who had come to that dinner was another person we’d recently met and hit it off with—our now-CEO Wendy Lea, who was impressed enough with the pitch that she wanted to do more than just invest. Fast-forward to 2012, and Get Satisfaction is skyrocketing. Wendy led three more investment rounds, convincing our existing investors to put in another $2.6 million against the current round (bringing our seed round, entertainingly, to $5 million), and then going on to land another $6 million from Azure and $10 million from InterWest. She’s brought in a stellar group of executives and employees who never fail to deliver. 2012 is already lining up to be a banner year. In other words, we made it through, and I couldn’t be prouder. And though I didn’t know it at the time, it turns out it all came down to one incredibly well-timed piece of advice.
The “T” Word
So here’s what this story says to me, and what I think the industry is really about, and what really matters in the end: Trust. Trust is a hard thing to find, and a harder thing to earn. Trust is what you get when you promise something to someone and then deliver, when you give something to someone without expecting something in return, when you invest in someone not because you think it will benefit you but because you genuinely want it to benefit them. Because with trust comes loyalty, and loyalty is critical to getting through this environment. We didn’t save our company by going on MSNBC or by throwing some extravagant party, but rather through private moments and experiences with people who trusted and believed in us.
I love Josh and Dave and would do just about anything for them, because when the chips were down, they were willing to do it for me. As I’ve made my way through the Valley, there are other people—not a bunch, but enough—who I feel similarly about, and who I hope feel similarly about me. I cherish these relationships and wouldn’t trade them for anything. So my one piece of advice I’ll give to anybody who gets into this industry is just this: Whether it’s your investors, your board members, your employees, or your cofounders, work with people you believe in, and people who believe in you.
Startups are hard—hard hard hard, hard in a way you can’t truly understand until you’ve been through it, and that’s true regardless of whether you’re a stunning success or a catastrophic failure. If you’re like me, you’re the kind of person who landed here because you’re passionate about what you make and because you truly want to change the world for the better (and if you’re not, I would recommend you quit now and take up investment banking instead.) And if that’s the case, when you look back over your career, it won’t be about how much money you’ve made or lost, or how many venture capitalists you’ve dined with, or how many private planes you’ve flown on. No, what you’ll care about most is who you spent your time with, the friendships you’ve developed along the way, and what you were able to accomplish as a team. Nobody can succeed on their own, and nobody can sustain the belief that anything is possible by themselves—better to find the people you trust, hold on to them tight, and change the world together.