The Hidden Pain of a “Lean” Approach
May 19, 2011 § 4 Comments
When I quit my job in 2007 to start a company, I felt prepared. I had relevant work experience and training. I felt I was as ready I was going to get. I just didn’t realize how completely un-prepared I was for hardest challenge that I would face…the personal financial stress of starting a company.
When I left IBM to start BYFAD, Julie and I had a plan to deal with the financial challenges we would face. You know the saying about what God does with plans. Well within a few months, our plans changed dramatically. We had decided it was best for Julie to leave her job and not too long after that we were blessed to have her become pregnant. All of the sudden, my plan to not take a salary for the first year while I was bootstrapping it didn’t seem like such a good idea. But we kept going with the plan, even while our bank account kept going lower.
At month 8, one of my co-founders tapped out due to the financial stresses. I was disappointed, but understood. The pressure of tight finances was too much, plus he wanted to buy a home for his family. Hard to argue with that logic. But I was all in. I couldn’t give up. The product was not yet ready to raise a big round, regardless of my desire to get paid a livable wage. So I kept going…even while my bank account kept going lower and my wife kept getting more worried (rightfully so).
At month 13 (early 2008), I had drained my savings and started withdrawing from my IRA. Yep, a really inefficient way to finance, but my best (read: only) option at the time. The business had started achieving modest success, so I didn’t want to give up. My wife got (rightfully) more stressed about our financial situation. Our baby was coming soon.
I will fast forward to January 2009. The “Great Recession” slammed our business. Our customers put their programs on hold or killed them. Customers who were highly interested in new programs stopped calling me back. I was hearing crickets on the other end of the phone. Do you remember how bad the economy was in January 2009? At that point, Julie was “done with BYFAD.” “Time to get a job Steven! You have obligations to your family. You have paid your dues to your investors and gave it all you had, but the terrible economy tanked your business. Not your fault. Time to move on.” Boy, was this stressful. I went to work and it was stress. I came home and it was worse. Julie had a good point. I needed to provide for my family and the money was getting really low. To make matters worse, prospects were not looking good for the business. But I knew I had to create an exit before I could move on. It was my fiduciary and moral responsibility. I kept focus and two months later we sold the business and my investors are now looking at a great return.
I share this story because I talk to entrepreneurs all of the time about funding. The Lean Start-up is all the rage right now. I just talked to two different entrepreneurs yesterday who are married (one with a new baby). They are both considering doing a Lean start-up approach (aka bootstrapping it). I am not saying it is a bad approach. There are real benefits to it. But I am saying, there is a personal toll that all first time entreprenuers are completely un-prepared for. And it’s a doozie.