The founder of Silicon Alley Reporter and Mahalo.com offers advice from the trenches to entrepreneurs in trouble.
We had the opportunity to connect with Jason this past week and get his insight and approval to post a recent contribution he made to BusinessWeek.com that we believe is extremely direct, honest, and most importantly relevant for the start up community.
Editor's note: This column is adapted from a recent e-mail Calacanis sent to his newsletter subscribers.
A lot of CEOs with less than 12 months of capital left in the bank have been asking me for advice about what to do, given the massive economic turmoil we're facing. I thought I would take the time put these various conversations into one place to help those who are "up against it," as we say in Brooklyn. The result is intended for the entrepreneurs behind startup companies who know in their hearts that their investors have lost faith, and that Google (GOOG), Yahoo! (YHOO), or Microsoft (MSFT) aren't going to pick them up on a magic M&A carpet ride.
First, some background: I've been to the precipice and faced the fall a couple of times. I've learned some things from the experience. I can tell you that the first time it happens, you're terrified, because everything you've done—all the effort and dreams—will probably be lost (like tears in the rain).
The second time it happens, you're deeply concerned, but know it ain't over until you're splattered on the boulders below.
The third time it happens, you smile and say, "let's get it on!"
You see, there are two types of entrepreneurs in this world: real ones and the folks who play entrepreneurs for some portion of their lives. From a distance, most folks can't tell who's who. In up times, when the market is flush with cheap money and unexplained exits (Bebo, anyone?), everyone looks brilliant.
It's only when the tide goes out that you know who's naked, to paraphrase Warren Buffett.
The differences between the two types of entrepreneurs become clear when the fan and the manure meet. The faux entrepreneurs run for cover rather than dealing with the storm. They go back to their plush, somewhat mindless jobs as vice-presidents at mega-companies, while the real entrepreneurs suit up and clean up the mess.
We're going to find out who the real entrepreneurs are in 2009 because they are going to spend another 12 months, on top of the last six, cleaning up the mess. It will be two years of total pain, so before we go any further, you gotta make the decision if you're in or you're out.
Here is a really easy way to figure out if you can deal with the mess in front of you. Ask yourself if you can handle the following situations:
1. Laying off half your staff.
2. Laying off half your staff again three months later.
3. Spending 20 hours a week on the phone being yelled at and threatened while trying to renegotiate a dozen contracts—like your T1, phone system, rent, equipment leases, etc.
4. Having an investor scream at you and tell you they will ruin you, your career, and that "you'll never raise money again."
5. Laying off half your staff for a third time.
6. Getting served a half-dozen lawsuits, courtesy of the folks who you tried to renegotiate with in point number three who wouldn't deal.
7. Having one of the people you're renegotiating with come to your office every week and ask for his check in person.
8. Having the same media outlet that once claimed you were the next Barry Diller write that you're a fraud.
9. Not getting a good night's sleep for six months.
10. Having dozens of paying clients default on their bills.
11. Having staffers who you really need to double-down and focus walk out the door after you helped make their careers.
Posts
