Micah November 11th

Confessions of a Failed CEO

You might to grab a cup of coffee, or bookmark this for later because this might be a long one…

Quick & Dirty Background

I started my first business when I was 9 years old. At least thats what my mom told me. I have always been a bit Tom Sawyer-ish in my businesses, finding it more interesting to run the business than to make money.

I remember convincing friends and family members to run a lemonade stand when I was seven or eight, there was a paper route when I was nine, where I had two friends deliver most of the my papers (for a salary of course), at ten or eleven I got my cousins together to wash cars so we could go to a movie and dinner, and, what I consider my first real business, a pool cleaning business at 14, where I got the popular kids in school to help me clean pools.

Through out high school I made money by brokering. I always knew someone who wanted to sell something, and someone else who wanted to buy that thing. I would extract a commission, and made quite a good amount of money doing that through most of my high school career.

In terms of jobs, I was never anywhere for long. I worked at a non-profit for a couple years out of school. Then raised money from colleges and universities by running call centers and soliciting annual gifts. After seven years of the non-profit world, I started working with local startups in San Diego, landing at Kozmo.com for six or seven months in 2000, leaving right ahead of the layoffs, then moving to Oakland to work at MyPersonal.com (which became Synacor) for about a year, before I was laid off in the fourth round (right after dissolving my group, and working myself out of a job). While at MyPersonal, and for awhile afterwards, I did consulting work as Current Wisdom. I moved to Colorado for a summer in 2001 with the intent to attend business school at the end of summer, but didnt get into any schools. So, I started applying for jobs, landing a short gig at Video Professor (which was the worst job ever), before landing at ServiceMagic.

I continued to consult with startups and other businesses on marketing and other business development functions, but ServiceMagic really took most of my time. While at ServiceMagic, I began to do some search engine marketing, and like my Tom Sawyer youth, got a good friend to help out with the work. As the side projects began to grow, I made my entire annual salary on the side in three months. It was time to leave ServiceMagic.

Failure Begins

In the first six months of running Current Wisdom, two of us brought in more money that we knew what to do with. We bought the nicest computers, went on great trips, and I started living the life of a rock star to land and keep clients.

Things just continued to grow.

The business was doing great, it was profitable, and we were able to cover all expenses, plus some. I continued to spend like the faucet would never be turned off. Current Wisdom was invincible.

Then we lost our first client. It was no big deal, I quickly found other, bigger clients.

Things continued to grow and I started hiring people. Now, instead of two people, we were five. I started outsourced payroll for the first time. Health care for employees became an issue. And we continued to spend.

Still cash flow positive but with shrinking margins I came to three realizations:

1) We had no money in reserve to help spur growth;

2) I needed to raise money or sell the company;

3) I had failed as a CEO.

Current Wisdom had reached a point where I could not take it any further. Market conditions were shifting where small search marketing firms were getting acquired or going out of business. We had no money in reserve to defend our position or grow the business. There were a ton of unpaid bills and other responsibilities that were not being taken care of even with the books showing a slight profit.

So, I got out. The company that took over my clients and employees is run properly. They understand the value of the dollar, and with improved structure, the revenue generated by the old Current Wisdom increased 500%.

Lessons Learned From Getting Punched in the Face

1) I am not a CEO today. I know now what a CEO should be, and I am not it. I dont have the love or understanding of structure to be effective. Instead, what I am really good at is introducing people and finding ways for companies to work collaboratively. Which is my role at Lijit, and one I am very happy to have.

2) Treat every dollar, especially if you are a funded company (Current Wisdom was self-funded), as if its your last.

  • Dont like the chair you are sitting in? Suffer.
  • Wish you had a new computer? Keep it to yourself.
  • Want a new car? Buy a bus pass.
  • Want to fly around the country (for business)? Use a phone.

Every dollar that I spent reduced my ability to do something to further the company. If I had been less of an entertainer, there would have been money in the bank to take more risks, hire a top notch sales person, have a booth at a trade show, provide better health insurance, etc.

Every dollar that didnt create 3, was a wasted dollar.

For freshly funded startups with no revenue, every dollar spent is a piece of your company. Is that shiny new wireless keyboard really worth $80 in equity?

As a self funded CEO, the amount of money I spent was indicative of my hubris, arrogance and lack of ability to manage. What does the money you spend say about you and your company? If you are an early stage startup, who has just gotten their angel round, what do you want future investors to be impressed by? Your stuff or your product? Your spending habits or you?

I often think about what I could have accomplished if I had a bit more maturity about the management of the business. While the sale of my company certainly was a success, in terms of being a CEO, I failed.