We asked Bauer he if would elaborate on the details of what happened, maybe share some insights and lessons learned with the pure candor that he’s known for. Following is the second segment of our interview [read the first here] as part of the Entrepreneur 2 Entrepreneur series:
Why not keep going, you already had half the money?
The investor that didn’t want to continue had a preferred position and thus making a new investment by anyone very unlikely. This includes my willing investor as his terms were for the preference to be removed prior to his investment. When you raise money it’s done along a curve. Depending on a large number of factors that curve is either favorable or not to new investors, existing investors and founders. We were in that unique place where it’s wasn’t favorable for anyone.
That’s why we decided to mothball. There’s some talk of buying the assets of the other failed company out of bankruptcy and starting up again. Honestly though, I have no idea what will happen. I haven’t heard anything from that VC. I’ve only hearing rumors from people near the deal.
What was your biggest learning experience?
Damn near everything was a big learning experience. When I started I had no idea how anything worked and that was very important. Had I known, I’m not sure if I would have done it. I did though and will do it again except with all the knowledge and experience I’ve acquired.
Here’s just a small list: how to negotiate chip prices with distributors, prevent Chinese counterfeits, stay clear of the EPA, FCC and the alphabet soup of other regulators, fight competitors taking your production slot, get information on what your competitors are doing, international import/export laws, the legal system in multiple states and countries, how to price damn near everything, GAAP in detail, winning negotiations, secure banking relationships.
That doesn’t even include all the mechanical, electrical and software engineering I learned. The biggest skill though is this: I’ve learned how to get the shit kicked out of me, get a cup of coffee and start fighting again day after day. The difficulties and emotional roller coster of a startup is hell when things are going right. When they’re going bad you can’t tell heaven from hell.
What would you do differently next time?
Call bullshit out sooner.
There’s a few reasons for this. The first is bullshit takes your time and you really need to guard your time. The second reason is bullshit is almost always of the positive kind. It’s an investor saying they’re interested or a potential partner asking to for more information. It’s never an investor saying they’re not interested when they are. Bullshit just adds to your emotional roller coaster and you don’t need that. Finally, bullshit makes things more complicated than they need to be. When you aren’t able to just say what needs to be said or your not willing to hear what needs to be said, your decision tree becomes a complicated mess.
My lead investor still thinks highly of me and I attribute that mainly to our no bullshit communication policy. The no bullshit policy is what allowed me to put together that large deal in the end. Ironically, I didn’t follow the no bullshit policy till much later with the VC that imploded. I should have called them out sooner but didn’t for a few reasons. That was a mistake.
Stay tuned for part 3 next week…