In his Building a Business series, Nikolaus Kimla has shown us we need to start off with a cause. Following that, you need a technical team. The next step—as it did in Nikolaus’s case—might require a very bold move. Now we move into some very important areas, in which mistakes could cost you your business.
Right from the start, any company needs liquidity. For that reason many companies, when they’re first starting off, seek venture capital.
Shortly after I began building my company in the U.S. I did the same thing. In fact, I made over 80 presentations to VC investors—but fortunately I saw very early on that it didn’t make sense to me to try and obtain VC. I took a look around at other companies and realized that many—perhaps most—companies of my size (at that time) who go after VC investment are deluding themselves into thinking that they’ll just be able to take that money and expand the way they want. I saw that when VC comes in early in the life of a company, very often the primary officers are replaced—or their voting rights are cleverly purchased—and the investors end up selling off or closing the company.
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I didn’t come all the way to America so that someone else could come in over my head and make decisions for my company. I wanted any mistakes to be my mistakes and not someone else’s. So I decided I had to do it the hard way.
Bootstrapping
The answer for me was bootstrapping—funding the company and its growth myself, with the financial assistance of my private co-owners. It was certainly a challenge, because I wasn’t tremendously rich and didn’t have millions to put in. But I did it, and It’s been six years and counting.
No matter what your story is, no vendor, business partner, employee or independent contractor cares how you pay your bills. They’re only worried about if you pay your bills (meaning them). As long as you do, you’re in business. I carefully built a structure from which the company could grow, and from which I could consistently pay the bills.
Hard Lessons Learned
Even when you’re experienced, as I was, you’re still not 100 percent sure of everything, especially in a new country. In obtaining private financing and running the whole thing myself, I did learn some hard lessons, which I’ll share.
I ended up selling some shares and bringing in a so-called friend, who wasn’t an actual institutional investor. His first action was to push me to “grow fast.” As a result, I ended up paying the money that was brought in to some very expensive hires that did not return on investment.
In short, I spent more than half a million dollars for nothing.
These people were hired over the course of a year or so. The real problem was that, once I realized that I did have a problem, I wasn’t clear on how I could fix it. In his fantastic book Zero to One, Peter Thiel dedicates a whole chapter to the subject of foundation.
He says, “A startup messed up at its foundation cannot be fixed…Bad decisions made early on—if you choose the wrong partners or hire the wrong people, for example—are very hard to correct after they are made.”
That happened to me! I had the wrong board of directors—I ended up having to get rid of over 50 percent of them. If I’d had actual investors, it would have been a total disaster. As it was, this serious error cost me not only time and money, but energy, major emotional stress and momentum as well.
Righting the Ship
The upside was, we did continue to grow, even though all that, and did come out of it and today are truly flying along. Not all my management choices were wrong—my Chief Strategy and Marketing Officer has been a lifesaver and a Godsend. We work incredibly well together, and he’s been 100 percent behind me the whole way.
And I learned a lesson that will keep me going from here to the end of time: listen to your inner voice. If I had done so, and had not allowed myself to be forced into action, I most definitely would not have made those hires. I honestly did not want to make them, because my inner voice said I shouldn’t. Today I would not do so.
Watch for Nikolaus Kimla’s next article on building a business.
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