Why I Backed Away From 'Big Corp.' and Didn't Take the Deal
It was the early days at my company Lesson.ly. Specifically, it was nine months in. I still hadn’t taken a salary, we had just three paying clients (two of whom were friends), and the road ahead loomed long.
Our annual revenues were $12,000, which was nothing close to comfortable. I’d already failed at entrepreneurship once, and my bank account was still reeling. I was desperate not to fail again.
Then along came an angel. His name was Charles, and he worked in innovation for the human resources department of a Fortune 500 company. Charles loved Lesson.ly. In fact, it was exactly what his company, which we’ll call "Big Corp," was looking for.
Lesson.ly makes learning software. Our approach today is similar to what it was then: We help teams build, distribute and track bite-size lessons that teach employees their company’s processes and software. There was only one problem: For Lesson.ly to work with Big Corp, we needed to host our servers on Big Corp’s campus.
Charles explained that this was a security issue -- the cloud was not a safe place for Big Corp to host its trade secrets. But, if we committed to this requirement for on-premise hosting and a speedy timeline, Charles offered, we could add $200,000 to our annual revenues.
Unfortunately, this prerequisite was no small issue. On-premise hosting went against everything our business model espoused: inexpensive, multi-tenant cloud hosting. Switching our model to on-premise for Big Corp would mean that Lesson.ly’s vision would have to take a back seat. But "vision" can nourish you only so much.
By making that change, I could pay myself and others. Closing this deal would mean I'd have a viable business -- not just some speculative endeavor -- for the first time in my life. No more relatives waiting for me to get "a real job." No more hesitant questions from friends about “my project.”
I wanted this deal so badly. It felt like a gift from the heavens, until, that is, a friend brought me back to reality. His name was Dustin, and he himself was on his third viable business at the time. “You can’t do that deal,” he said.
I wondered if he’d heard me right. “I have to do this deal,” I replied.
Dustin smiled. “Two things to consider here," he said. "The first is that you effectively will lose control of your business if Big Corp makes up such a big chunk of your revenues. When the deal closes, they’ll own you, and their feature needs will own your road map. Do you want that?“
I didn’t. But based on Lesson.ly’s pricing model at the time, we’d have to close 30 deals to match Big Corp’s offer.
“You have to ask yourself a question," Dustin continued. "Do you want to go back to work for someone else, or do you want to build your own business?"
Dustin’s points were inarguable, his logic simple: Quick, enormous wins come with quick, enormous caveats.
I met with Charles the next week and told him we couldn’t accept the on-premises component of the agreement. I told him I’d overestimated the costs to the business. I told him I was sorry, and he told me the same, explaining that the deal would die on the vine without that commitment.
I haven’t seen Charles since. It took me six more months to bring on seven more clients. It took a whole year and a scrappy team of five to scrape together our $200,000 annual revenue mark. But we did it, and we’ve done a lot more since. It’s a lesson in patience: Good things truly do come to those who wait. And I’m thankful Dustin was there to show me the value in building a sustainable business the only way he (and ultimately I, too) knew how: the hard way.