Joe Kraus posting no 2 about the history of Exite and lessons in persistance (part 2)
Fact 1: There were at least three bidders for the two buttons: us, Infoseek and MCI (they had a yet-to-be-launched web search and directory product that, I think, was going to be called Genuine).
Fact 2: We had a little less than $1,000,000 in the bank
Fact 3: We were screwed..... .
is a great reading of history and courage, it’s the kind of story telling that I, that we all love to read, a history of persistence and guts, where at the end, due to hard work, the small guy wins, an it is demonstrated that when there is a will there is a way…
As an entrepreneur I to believe that persistance is key, and will make things happend, but as a VC, I ALSO want to voice the other side, the difficult question of when to stop?
As a VC this is one of the most difficult things to do, after all we are pay by our limited partners to build companies and not to shut them down…
.... As a matter of fact, no, as director of one of our investee company, we are working for our shareholders, and we are there to maximize shareholder value, which sometime will mean stopping the business, and returning the remaining cash to the investor.
I have seen this happening in several cases like:
- Wrong market timing
Great technology, and a product that intellectually should be in demand, but no supporting eco-system, and still years away from enough earl innovator demand to support the burn-rate of the company…
- Wrong management unwilling to step-down
Poorly structure term sheet where the founding members have enough power to stay, board control, but lack any of the capability needed to build the business, and the intelligent to step down…
- Wrong business model
As the product demand increased, you realise that the cost of the infrastructure needed to support the business growth faster that the revenue of the company and that you have a money-loosing machine on your hand for the foreseeable future
Etc…
In cases like theses, the right thing to do, is not to continue, and believe that your sheer will make a difference, but to close the company down, release its people, and move on.
Making this call, knowing when to stop might be the hardest decision a VC and the board of a company might have to take, and it’s important to remember that something things do not work out....
To use a movie metaphor, while I love Hearts of Darkness (brilliant moving on the making of Apocalypse Now), I also remember that Lost in La Mancha (great movie of the disaster failing of Terry Gilliam’s attempt to shoot Don Quixote) is the other side of the same question…
J'aime beaucoup, mais le type cite des passages entier du bouquin "High Noon" (sur sun).
Hate de lire la suite
Posted by: Julien | September 23, 2004 at 10:57 PM
Julien
do you agree with my movie metaphoe with the two examples ?
Marc.
Posted by: Marc Goldberg | September 23, 2004 at 11:01 PM
Totally !
But in the very precise Excite@home case: "honey i shrunk the balance sheet ! " or " par où le cash est rentré on l'a pas vu sortir ?!?" could be good ones too.
Just kiddin'
Julien.
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Bye
Posted by: rofovnifo | July 03, 2007 at 12:40 PM