When It's Too Soon To Quit...
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In my last post, I talked about the thought process we (should) go through when deciding if it’s time to quit what we’re doing.
While there were multiple idea threads that inspired that post, one of them was an article by Mariam Naficy, the Founder and CEO of Minted, an online design marketplace. In that article, Mariam talked about how she raised a small seed round from friends and family and then launched the business, originally intending it to be a lifestyle business. And then:
There was not a single sale for a month. It was total crickets. And then after maybe four weeks there was one transaction. And I thought, "This is such a dud! I should really take the money that remains and return it." I felt so responsible for people's money.
She was stopped from doing so by a friend who suggested she raise additional capital to save the business, which made sense to her, only because it would allow her to get the business to a point where it was making some money, and then be able to pay back her friends.
Literally the only reason I sought venture funding in 2008 was personal obligation. Otherwise I was ready to shut the thing down. Thank goodness I didn't.
Thank goodness, indeed, because today Minted generates hundreds of millions of dollars in annual sales, and raised $208 million in Venture Capital funding last year.
Which is what got me thinking about the idea of “appropriate returns”, and then, whether we should consider doing something different if those returns aren’t being realized. (Hence, the post on Monday)
A key point that I touched on in that post, that I want to expand on today is the fact that appropriate returns are directly a function of expectations - both in terms of the magnitude of what constitutes “appropriate” and how long it should take to get to “appropriate”. And these expectations are not only those we put on ourselves, but they are influenced by those around us as well - our family, friends, investors, etc.
For the most part, “magnitude of return” tends to be overestimated and “how long” tends to be underestimated by entrepreneurs (in general). We always think we can sell our way through anything, that our ideas will be self evident and the customers will come (and quickly). Sometimes, this is the case, but often, it’s not.
The reality, in fact, is that, at the outset, the road to revenue can be rocky, particularly if you come without any brand, are putting forward a new business idea and asking someone to simply trust in you. It takes a while to make that first sale, and so expectations - usually your own - need to be carefully managed. Patience is essential, as is a positive, focused mindset that emphasizes the right behaviors and actions, even as the results aren’t coming.
In fact, I remember that in the first three months of starting The Smart Cube out of my home office, I sold exactly: Nothing. $0. Zilch. I can still see myself sitting in my home office at the end of those 3 months thinking: what the heck have I done? Is this right? Have I made the right decision? To this day, I remember how it felt. That emotion is engraved in my psyche as clearly as if it was yesterday.
The thing is, I was doing the right things, taking the right steps, getting the message out, and so I reasoned with myself, thankfully, that I needed to give myself more time.
Sure enough, the next month, I sold my first two pieces of work and then some, and then some. And the business has continued to grow ever since. Had I not been patient with myself, had I not reset my expectations to give myself more time, we wouldn’t have created what we have.
Of course, we were self funded, having decided to bootstrap the business, so the question of both “magnitude of return” and “how long to get there” was up to us. Entities that have VC funding tend not to have that luxury, and that’s entirely because of the nature of the VC machine and its resultant expectations. As Sahil Lavingia wrote in a very interesting Medium post about the growth issues his startup was having:
…We were venture-funded, which was like playing a game of double-or-nothing. It’s euphoric when things are going your way — and suffocating when they’re not. And we weren’t doubling fast enough to raise the $15M+ Series B (the second major round of funding) we were looking for to grow the team. For the type of business we were trying to build, every month of less than 20 percent growth should have been a red flag.
That’s a whole different ball game to grapple with. Not to say it is good or bad — plenty have made both cases, rightly and wrongly. Having VC backing allows you to do certain things you could never do if you bootstrapped your way forward.
By definition, bootstrapping requires a different type of care when it comes to resource consumption. But you also give up a certain level of control when you take on VC funding (sometimes you give up a lot), all with the goal of shooting for the stars. A decent moderate return and even the very existence of consistent profitability isn’t always enough for the VC, whereas for the bootstrapper, it’s wonderful.
My point in all of this is that there are many variables at play as we consider whether or not we should quit something we’re deeply immersed in. And it’s important to do so being mindful of the expectations we need to work with.
If it’s our own, it may be that we need to be kinder with ourselves (assuming we’ve been doing all we could to make a go of whatever we were doing). Being hard on yourself when it isn’t merited isn’t tough (self) love, it’s stupid and destructive.
If it’s others’ expectations and they don’t matter i.e. they don’t have a stake or they don’t have the knowledge or they’re too easily influenced by conventional wisdom, then don’t get caught up in a race that isn’t yours.
And if it’s others’ expectations and they do matter, listen, absorb, rethink and feedback, as appropriate. It’s your job to do so, because it’s what you asked for when you took their money in the first place.
