This post has been brewing for a while. There are a variety of factors that contributed to the untimely demise of disruptorMonkey. For what it’s worth (and there are some lessons here!) I figured I’d share.
The biggest single factor was a poorly timed co-founder disagreement. As some of you may recall, we were heading in to due diligence with a local Angel group. I’ll not go into gory details here, but suffice it to say that regardless of the merits of the issues raised, they were substantial enough that they had to be declared in the due diligence process. Any early stage company is a high risk investment and investors are understandably skittish about additional red flags. It became very unlikely that due diligence would proceed, and that was a huge problem.
But there were a number of other factors that compounded the situation. Without them, we might have survived…
#1: Holy Macro-Economic Factors, Batman!
I’m not much of an economics whizz kid, but the broad economic climate really caused some pain. Two issues: housing market and the credit crunch…
I relocated to North Carolina from Arizona. The housing market looked a little unsteady when I left Phoenix, but values in my neighborhood were staying strong. We had a bumpy start getting the house on the market, but it was finally listed in October 2006. Thanksgiving rolled around all too quickly and then we were into the holiday season slowdown. Come January, the Phoenix market was slowing down rapidly. We finally sold the house in April 2007, but we sold it for $50,000 less than the original asking price. This was no mansion — just a 3 bed house in a decent part of town. Of course we’d also been paying the mortgage for 7 months while renting a place in NC too…
Much of being successful with your startup depends on having enough runway. Losing $50k+ tends to shorten things up a bit… Not so good.
But compounding that pile of suckage is the closely-related credit crunch. I have pretty decent credit, but since I’m not a classically salaried employee, I’m now on the fringe and setting off warning lights left and right.
When we moved, I had to switch banks because my former bank doesn’t have branches here. But that means I only have a short history with my new bank. No overdraft protection, frequent holds on checks and a bunch of other pain-in-the-butt issues to deal with.
And all the credit card companies are reviewing their customers for warning signs. That translates to lowered credit limits, jacked up interest rates and other silly games.
#2: Gonna Need a Bigger Boat!
We were working on a big problem — how to solve all your information management woes in one tidy application. Our approach was pretty unique and seemed to be working.
Of course, one of the problems with being unique is that you’re marching out of step with the rest of the world. That makes fundraising a whole lot tougher. We were lucky to have the support of a number of folks locally and elsewhere, but it was still a tough sell.
And when you’re the only one singing a particular tune, there’s the very real risk that you’re just plain wrong.
I still believe we were on to something, but there’s always an argument for making a simple product that does one thing very well. We knew the risks, and we chose to build something big. But we underestimated how challenging it would be to raise money for something we could explain but not fully demonstrate
#3: You’re Building a What for My What?
As I said, we were working on a big problem. When you’re talking about something big, it can be hard to give a short & simple pitch. And if you make it too simple, folks simply aren’t going to believe you. It took a long time to find a pitch that walked the wiggly line between credible, useful & deliverable, and too big, too vague and too hard to deliver. When we had the pitch, we still didn’t have all of the product in place.
And that, as they say, is that. Early stage companies are always teetering on the brink — it’s part of what drives their founders to try and succeed — but part of being a good entrepreneur is knowing when to quit. With a shortened runway, economic clouds on the horizon and co-founder disagreements, that time had come for disruptorMonkey.