If every plan that we ever imagined was going to play out as we had thought, everyone would be a millionaire! Is it not?
Things don’t go as planned. That is normal.
In my experience, perseverance is more important that intelligence in making sure that a business is successful. If you are incredibly smart but unwilling to persevere you are most certainly going to fail.
Sounds like a startup many have been talking about recently?
I was incredibly, unbelievably and astoundingly surprised when the story about Zoomo broke. A company which had been funded decided after looking at ‘data’ that things were not going their way and that they needed to shut down. They were further going to return the money that was leftover to the VC!
The internet erupted with jubilation and founders were being congratulated for taking the courageous decision. For giving up!
Apple was staring a bankruptcy when Steve Jobs came back to the company. If this is a good decision, by the same measure, Steve Jobs should have returned the money to shareholders. Would you even know who Steve Jobs was, had he done that?
Would any company have ever pivoted if they were to just call it quits and return the money since the journey they embarked on did not turn out the way they planned?
Myntra was founded as a company that was going to provide customised good, caps, wallets, mugs, t-shirts, etc. Things did not go their way and they had to start selling branded clothing, they pivoted. The data was obviously not supporting them.
You can hear Alex Shutlz speak in this video about the crisis of confidence at Facebook when they hit 100 Million users. Every social network before Facebook had hit a plateau after reaching 100 Million users, there was a school of thought inside Facebook, that they were done. But, they persevered.
Read this:
Fred Smith was an undergraduate at Yale University in 1965. As part of the coursework, he wrote an economics paper exploring the process of transportation of goods in the United States. He found that the shippers relied on transporting large packages across the United States by means of truck or passenger airplanes. Smith thought of a more efficient transportation idea. He wrote a last minute paper on how a company carrying small, essential items by plane could be a much better business. He, however, did not go into details about how to actually run such a company. His paper was graded “C”. But Smith did not give up on the idea and launched the company in 1971.
But within three years of the founding of the company, Federal Express was on the verge of bankruptcy. It was losing over $1 million a month, due to the rising fuel costs. At its zenith, the company had just $5000 to its name. Smith made a final pitch to General Dynamics for more funding. The request was turned down.
Most ordinary people would have quit at this point and shut down the company. Not Fred Smith. What he did next is easily the boldest move by the founder of a company. Smith flew to Las Vegas and played Black Jack that weekend with the remaining company funds. Yes, all of the $5000. On Monday, the management of the company had a pleasant surprise lined up. FedEx had $32,000 in its bank account, which was just enough to cover the fuel for their planes and to continue operating a few days more.
Soon after, the company was able to raise significant amounts in funding. Today FedEx is a global giant with operations in more than 220 countries and territories and an annual revenue of US $45 billion.
So should he have given up? You do not know how the market is going to react. True. You also, do not know when the market is going to turn. Giving up is the biggest failure; in my books its worse than running out of money.
If Zoomo is going to be celebrated, we would probably never have another inspirational business story to share.
Posted by Vivek Srinivasan
Originally published on Startups Club Post
Mahendra Sharma
Good examples of surviving in troubled time and thriving when market conditions support. We really wish that startups today understand such facts and preserve till new avenues for growth are available. Also the myntra story is interesting example of pivoting and finding out what works for startups. Fred Smith’s story is an epic for new age businesses.
Thanks a lot for this post, it inspired me.
Sridhar Rajendran
Hi Vivek,
I get the point that you are trying to convey – one should not give up in the face of adversity but I think the tone of your article could be framed in a better way.
Sure I have no startup experience but from what I have read, it takes an immense toll on you. As per the media reports, the business model is unsustainable and so they decided to shut down. The fact that they were forthright with it and returning the money back to VC is indeed laudable when many head-strong founders drive their companies to death even after pivoting.
Given the fact we do not know what other reasons could have let to this decision, we need to accept facts available at face value. Failing to acknowledge a startup that decided to withdraw from a fight that were most probably going to lose if like saying all athletes except the winners at Olympics should not be recognised for their efforts.
Vivek Srinivasan
Today, Twitter is a company that is not considered viable. They have yet to deliver a single quarter of profit. Should we extend the same advice?
The media likes to spin the story the way in which the PR people ask them to.
This is certainly an issue of giving up!
Alok Rodinhood Kejriwal
AMAZING AMAZING post Vivek
What I loved most was your comment “In my experience, perseverance is more important that intelligence in making sure that a business is successful. If you are incredibly smart but unwilling to persevere you are most certainly going to fail.”
Thanks for sharing the FEDEX story. TOTALLY Goose Bumpy.
This is what I wrote for Zoomo on my social walls (got a fair bit of flak for the same)
There is a lot of brouhaha about this story of a startup whose founders have returned money to VCs. Public reactions seem to make them modern day heroes. I have a contrarian view:
– The founders (IIT chaps) belong to the brightest cohort of professionals in our country which is now at its brightest time. Honestly, this is the smartest career move they are making for themselves vs. slogging at sub mediocre salaries and for worthless shares for a few more years. No one wants a shitty career and this is a logical move.
– Lets flip the argument. Assume that these folks had borrowed 7+ million dollars from banks to startup (like 99% of businesses in the world do). Do you think they could walk into the bank, return just half the principal and walk out with roses? Forget it! The bank would liquidate everything they possess and sue them for ‘failing’. (NPA problem of Indian banks). Thank God for the VCs in this case who took a haircut (oops full body wax) instead.
– Speaking about VCs, was 7 million US$ required as the first round? Couldn’t 3-4 million have worked? Would that have inspired the founders to not punish themselves so much by the “overhang of the raise” as I call it and still look for a miracle in the business model? Heck, things look clear after years of practice and meditation… Was this thrown away too fast?
– Finally you and me. First we celebrated Funding news stories and when that vanished, we now salute closing down tales? Are we bankrupt in ideas & inspirations? India has at least 1000 startups that have created SOLID VALUE for employees and customers – who are NOT VC funded. (Non Tech included). If we just celebrate these guys, that’s 1 great story to share for the next 3 years…
Finally, respect and salute to the founders of Gozoomo. I’m sure I’m speaking their mind vs. making them feel smaller.
Check out this REAL life story of mine from the 11 most important lessons 10 VCs taught me
Lesson 1 – “Let’s see how long your entrepreneur stamina lasts.”
Who taught me this lesson?
Abhay Havaldar – Then at Draper International and serving on the rediff.com board.
Where?
At the rediff.com office at Kemps Corner – Off Peddar Road, Mumbai
When?
Circa December 1998
The context:
I launched contests2win.com in August ’98. In December ’98, I received a call from a stock broker who said that someone from rediff.com wanted to meet me.
I excitedly went for the meeting and met Ajit Balakrishnan (founder of rediff.com) and Abhay Havaldar. This was my first ‘important meeting’ as a digital entrepreneur, and it turned out to be an exploratory meeting for rediff.com to acquire c2w.com!
I was totally charged up!
Ajit asked me, “Alok, what’s your business model?”
I did not understand the question because I had not heard the term “business model” before.
Abhay grinned at me (he has a great grin) and explained the meaning of what Ajit had asked me.
I mumbled some stupidity.
Ajit looked at Abhay and said, “Alok is running a passion business. This is not for us.”
Abhay agreed and then told me, “Alok, you have something going for you. The passion in you to create c2w is awesome! Now, prove to me that you have entrepreneurial stamina to make your passion last and make a business out of this. Best of luck!”
I left the meeting crestfallen and challenged. Of course the advice imparted to me was priceless.
Abhay became a great friend and my first ‘VC’ contact. Eight years later, when I sold mobile2win to Disney, I met him and told him, “I am still running the bloody marathon.”
He flashed his zillion $$$ grin and said, “Yeah, I noticed that.”
I love Abhay for what he taught me and he remains one of my favorite VCs.
***
keep doing man, keep doing