Movin' On Up
There comes a time in every entrepreneur's life when your business-your baby-grows up. The adolescent years have come sooner than you thought, with complications like client conflicts, personnel issues, technical difficulties and space limitations galore plaguing your business. Now as you gaze wistfully at your creation, remembering the good old days when things were so simple, so manageable, you are faced with a major decision: Do you take your company to the next level, or do you keep things status quo?
At that moment, status quo feels pretty safe. You can continue to make enough to cover your expenses and incrementally increase profits, only hire additional people as the projects come in, and juggle those bills (because now you have it down to a science). Grow? Who needs to grow?
But instead, you decide to take the plunge and go big. Is it the right thing to do? When I first started Cybergrrl in 1995, my goal was to be able to work from home, set my own schedule and pay my bills. It wasn't until nearly a year later that I realized I wanted to build a media empire, but I was faced with tough decisions about an outside investment.
The issues I debated internally were mostly philosophical: What would happen to the soul of the company if a big investor stepped in and changed things, or if our team grew and we were forced to sit in separate cubicles or offices? When we finally took an investment from an outside company, it was probably too little too late, although we were also one of the few Internet companies that actually turned a profit.
Catherine Winchester, founder and CEO of New York City-based e-commerce software company Soliloquy Inc., recalls the issues she faced when considering the next growth stage for her previous company, Wanderlust, a CD-ROM developer: taking her company public. "It is a huge issue to become a public company," she says. "VCs were very different beasts back then, when there were far fewer of them and less competition for deals, and they could demand far greater percentages-[up to] 70 percent [of your company]-whereas with the IPO, we sold 30 percent of the company and remained firmly in control."
Looking back, Winchester has no regrets, despite the fact that the CD-ROM market suddenly tanked and the stock market took a nosedive. "I make the best decisions I can based on the information I have at the time, and if that turns out to be a mistake, I cannot kick myself," says Winchester, preferring to view her Wanderlust experience as a great "warm-up for the real deal," that is, Soliloquy.
Now faced with the decision of whether to raise the next round for her new company and more than double her staff of 60, Winchester offers advice for other on-the-brink entrepreneurs: "Be prepared for instant change because the market could move much faster than you expected. On the other hand, your vision can be way ahead of its time, and you end up waiting a long time for the market to catch up, so you had better figure out a way to make money in the meantime!"
For Elliot S. Cooperstone, co-founder and CEO of EmployeeMatters Inc., being big was the plan from the start. "We knew our intended growth would require significant capital, and we were eager to attract financial partners," he says. "Our concerns revolved around who would be the best long-term partners for us."
Initially, EmployeeMatters was funded by Cooperstone and his business partner, Thach Pham, and they were able to convince several larger companies to do development work for them "on spec." "We ran for six months until we determined we were ready to seek outside funding," explains Cooperstone. "We have learned many lessons the hard way in our short existence. Fortunately, in the area of financing, we feel we made the right decision when it came to picking investors. We selected a capital provider that focuses exclusively on companies that serve our target market and wants to build a great company over the long haul. We got lucky."
Deciding to grow your business involves many factors, but more than anything, it means trusting your gut and just going for it.
Aliza Sherman is an entrepreneur and author of several books, including Cybergrrl @ Work: Tips and Inspiration for the Professional You (Penguin Putnam). She speaks nationwide on entrepreneurship and the Internet.
EmployeeMatters Inc., (877)793-4900, www.employeematters.com.
Soliloquy Inc., 255 Park Ave. S., Fl. 6, New York, NY 10010, firstname.lastname@example.org.