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Nov 24

Smooth Seas Don’t Make Skillful Sailors

Posted by: Mark Solon        

The other day, I received a phone call from Geof Barker. Geof was the founder & CEO of Vigilos, the second company we ever invested in at Highway 12 Ventures, way back in 2002. I hadn’t heard from Geof in some time and it was good to hear his voice. Our investment in Vigilos hadn’t turned out very well yet we remained good friends. He was reaching out to me as the board of directors of Vigilos has recently decided to shut the company down, and he was literally calling to apologize for losing our money. He was extremely gracious and we had a terrific long talk which amounted to a great verbal post-mortem on the company and how things might have turned out differently. It was a classy move on his part and I look forward to a lifelong friendship with Geof.

Let me give you a little history. Back when we invested in ’02, Vigilos was selling a very elegant and rather sophisticated physical security platform which was really state-of-the art at the time. We conducted a great deal of due diligence prior to our investment and to this day, I believe that our investment thesis was a sound one. It was shortly after 9-11 and both the government and corporate America were spending a great deal of money to augment their physical security efforts. Due diligence suggested that a solution such as Vigilos’ would greatly resonate with these customers.

It wasn’t long after our investment that I realized that Geof and I had a difference of opinion on how to attack the market. We didn’t always see eye-to-eye at board meetings and there were a few times that it got a little bit lively. Given the slow progress, the company came back to the existing investor base to raise more capital and we made the difficult decision not to participate in any subsequent financings. The venture firm that had invested prior to us continued to invest in the company for many years after and we never put another dollar into the company after our initial investment, ultimately writing off the investment three or four years ago. To his credit, Geof was a complete professional about our not continuing to fund the company and we’ve remained good friends through the years.


On the other side of the spectrum from Geof, I’ve seen CEO/founders wallow in self pity, blame everyone around them but themselves, and hurt their personal reputations in the waning days of their start-ups. Including Vigilos, we’ve been involved in five companies at Highway 12 Ventures where we’ve lost all or most of our money. That’s the business we’re in and it’s part of the job. I understand that a CEO who has just watched his life’s work evaporate isn’t going to be thinking about singing kumbaya with his investors. When companies go south, tensions run high and no matter how well intentioned we are as humans, we don’t always live up to the expectations we set for ourselves. I’m not sure I can imagine what it must be like to be the Founder/CEO of a company that’s failed. Despite knowing that there are legitimate odds that every start-up won’t succeed, I’m sure every new entrepreneur sets out thinking that it won’t be them.

Therefore, if you know a CEO/founder, especially a first timer, share this with them. There’s a better than zero percent chance that your company won’t survive, that’s a fact. If you’re a serial entrepreneur, those odds go up dramatically. While you can’t guarantee the success of your start-up, you can guarantee how people will remember and think of you if the company fails. Here’s a few things to remember:

  • There’s no place in the world where failure is more accepted than in the U.S. and there’s no segment in our country where it’s accepted more than the start-up community. (okay, maybe at Wrigley Field…)
  • The game is long. Your next start-up is right around the corner. It may be hard to see right now but investors like to invest in people who have learned the hard lessons on someone else’s dime. Smooth seas do not make skillful sailors.
  • Be the last man standing. The grace that you demonstrate as you wind your company down will be capital you’ll be able to call on for years to come. Look every person in the eye and personally connect with every single investor in the company. There’s a process to making sure a company is wound down correctly, find an attorney with this experience and do it the right way.
  • Do all you can to make sure that the employees who stayed ’till or near the end land safely on their feet. There’s a good chance you may want to hire them again for your next start-up. They’re watching you carefully now, be a leader.
  • Try and see the forest through the trees. There is no education like adversity. It was none other than Walt Disney who said “You may not realize it when it happens, but a kick in the teeth may be the best thing in the world for you.”

While I haven’t had the personal experience of shutting down a company that I started, I’ve been involved in my fair share.  As an investor and board member, I’ve had a front row seat to the gamut of behavior that people exhibit through the personal hell that is a shut down and I hold those that manage it with dignity and class in the highest regard. I hope that anyone who has to go through this someday takes a nugget of wisdom from these words and it helps them make it through that gauntlet with head held high. Remember, the darkest hour only has sixty minutes…


11 Responses to “Smooth Seas Don’t Make Skillful Sailors”

  1. avatar Phil Reed says:

    Mark -

    Mark - I have to say, your post this morning on Geof Barker is one of the finest business articles I have ever read. In my past life as a serial entrepreneur I have seen my share of shut-downs, but rare indeed is the entrepreneur who handles the hurt and challenges of a failed business with the sense of responsibility and grace that Jeof has displayed. I also agree with your thought on the value of an unpleasant experience like a shut-down - lessons learned from adversity are some of the most valuable. I look forward to learning about Geof's next start-up.

  2. avatar Gerry Langeler says:

    Speaking as someone who has seen this same movie many times, let me share a supporting story. I recently got a call from a former CEO of ours who wanted to have coffee. It turns out he might be loose in the socket over the next year or so and was starting to reach out to carefully survey the landscape about what else might be out there.

    As with your conversation, it was a delightful catch-up chat and we too pondered how close we'd come to greatness the last time we'd worked together. I made it clear that anytime he was ready to jump, we were holding a big net!

    The punch line? This CEO lost more money for our partnership than any I've ever backed.

    Yet here we are ready to back him again if we find the right opportunity. Why? The reason is he was a great leader, and fully lived up to his commitment to us when we invested. The seas were just too rough at that point. Very few sailors survived.

    And in another common comment, both then, and since, and again now he's always expressed his regret that he lost our money, and has always made it clear that it would make him feel much better about his career if he could make it up to us in another deal.

    Great CEO's almost always get there having developed some scar tissue. As a wise man once said, "Good judgment comes from experience. And experience comes from bad judgment."

  3. avatar Mark Solon says:

    Unfortunately we've seen the darker side of this together Gerry. it's VC's like you that have taught me so much about how to handle this part of the business with class…

  4. Mark, your thoughtful comments on this topic are right on. I'm sending them on to a number of early stage entrepreneurs I work with at the Idaho SBDC.

    I would also comment that the other side of the transaction is equally important. That is that the investors also be classy. A CEO who has to eat the crow that comes with a failed business needs support. There are those of course, who in hindsight shouldn't really be entrepreneurs. We need to let them know that. But many are excellent entrepreneurs who will rise again. Those CEO's needs to hear that business failure is a common element of entrepreneurship, but that business failure does not equate to personal failure.


  5. avatar Pete Warden says:

    What you just said.

    Seriously, this post articulates a lot of what I've learned from handling both disastrous and successful projects. You end up doing a lot more introspection and trying a lot more solutions when the world is collapsing around your ears, as well as seeing who's graceful under pressure.

    My favorite interview question is "Tell me about your worst project". Bad candidates will reel off off complaints about how hard it was, but I know I've found a keeper when their eyes light up and they tell me about their epic struggles with a nightmare codebase, all the tricks they threw at it, and the little triumphs in the face of adversity.

  6. avatar Mark Solon says:

    I love that interview question Pete, that one's definitely going in my CASE file ( Copy And Steal Everything)

  7. Social comments and analytics for this post…

    This post was mentioned on Twitter by chriskilmer: RT @hwy12: Smooth seas don’t make skillful sailors

  8. avatar Tom says:

    Great post, Mark!

    The "connect with every investor in the company", which could even be enlarged to "connect with every constituent in the company", may be difficult, but it is important and helps bring closure. Too many don't have the courage, and instead choose to hide in shame, but by connecting, they will often find respect.

  9. avatar Mark Solon says:

    Great follow up Tom and excellent advice!

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