In my first post this year, “The Start-Up Vortex of Doom,” I wrote about how I scrounged for cash in 2013, trying to build a company and keep the team motivated. We often came perilously close to running out of money. At one point, I lent the company, Posse, money from my personal savings to make payroll. Other times, I raised $50,000 or $100,000 — enough to stay alive for a couple of months but not enough to plan for the future. Those were not easy times.
At my lowest point, one of our directors, Bill Tai, wrote a long email telling me his own vortex of doom story. He founded a company called iAsiaWorks and raised one of the largest rounds of investment financing that year — and then the Asian economic crisis hit. Asian currencies fell as much as 80 percent against the dollar, wiping out much of the capital he had just raised. Revenue collapsed, and he ended up laying off most of his staff and shutting several offices.
Many people would have given up at this point. But after 18 months, with $2 million left in the bank and a model that wasn’t working, Mr. Tai recruited a new management team and bid $42 million to acquire an Internet business in Hong Kong from AT&T. He won and raised $85 million to finance the purchase and build data centers in Asia. The company continued to grow and was eventually listed on Nasdaq. He signed off his email to me by saying, “Think BIG and drive it hard.”
I was baffled: Here I was, running a company that was surviving hand-to-mouth, struggling to raise small amounts each month just to stay alive. Raising $85 million to buy out another business and get listed on a stock exchange seemed like fantasy, not at all relevant to my situation. But as I thought more deeply, I decided Mr. Tai was right: I would never escape my vortex by focusing on day-to-day issues. I had to think bigger. I was also tired of scrounging for money, supporting a business that was growing so slowly. For the sake of my own career, it was time to make a bigger play.
Within a month, I figured out what I needed. Posse is a recommendation app that helps people find commercial places near them that they might like to visit. We do it well, and we’ve built one of the largest networks of shop owners and shoppers. But in its current form, Posse would always be a “nice to have” app rather than a vital utility that people would need every day. I assessed the market and looked at what other companies were offering. What if we started acquiring or merging with businesses that needed access to a network like ours? If we combined our scale with other services, what could we achieve? The answer was obvious: We could become the Amazon of offline shopping.
This time, when I began our investment road show, I felt more confident. I was pitching a transformative business with a path to success. Still, breaking out of my old habits remained a challenge. One of our investment bankers helped by introducing us to several clients. After one of the pitches, the banker pulled me aside and said, “You have to focus on selling the dream. These guys don’t care if you can turn their $100,000 into $1 million — they spend that on their Christmas party.” Even though I thought I was creating a big vision, I was directing my presentation toward conservative assumptions, showing how the company would survive in a worst-case scenario.
After that, I focused every meeting on Posse’s enormous potential. At first, I felt a combination of nerves and excitement. I do believe my message, and with every presentation, my passion for ensuring that every investor engaged with it increased. By the end of my road show of meetings, I was enjoying a 100 percent success rate.
If you’re reading this, thinking that it doesn’t apply to you and your business, I would urge you to set aside your assumptions for a moment. It’s not easy to do — the daily grind of business commands the attention of any entrepreneur. Perhaps, like me, you already believe you’re chasing a big opportunity. I now realize that I placed a lid on what I believed was possible for our business. By acknowledging the lid and stepping beyond, I discovered a bigger opportunity, one with the potential to change my life and that of our company.
I’m happy to report that last week we closed our round successfully. I’ve written about my adjustment of pitching techniques and body language when selling Posse to these new investors. This did raise my confidence, but another factor was a shift in my own perspective. I was thinking and planning on a larger scale than I had previously.
In the past, I had raised most of our money from angel investors, and most of that came from speaking at pitch competitions. This time, I approached professional investors and brokerage firms. We hope to take the company public one day, and I’d like to involve these people now so they will help us when we get to that stage.