Is a "one size fits all" accelerator right for me?

The accelerator offered a lot of training and programs that I could learn from. But there was also a lot of material I had already mastered and didn’t need to go over again. When I asked if I could get extra exposure in particular areas, they said there was only one program, so I could “take it or leave it.”

This caused me to reflect on whether I wanted to join them. I know there are things I need to learn, but is this the best way to learn them.

Investors want us to change our strategy, what should we do?

We built a platform that will allow chocolate and nut producers to bypass the middleman and wholesaler. This will give them higher margins and more liquidity. We have a partnership with FairTrade, five manufacturers, and three retailers.

Given the nature and geographic location of the producers, we created a global platform. We have invested over $100K in it and have completed beta testing.

We sent our business plan to five investors. Two said they had no interest given the size of the addressable market .The other three said that they needed proof of concept in a local market, meaning one country. Our platform and partners can’t accommodate this.

The investors told us the risk of global launch was too great. What do we do? Modify the platform and focus on one market or seek other investors?

If I leave to get an MBA my business will fail; what should I do?

I started my business four years ago and sales are over $4m. We have 43 employees and have made a profit every month for the past 14 months. The market place is growing more competitive, inflation is rising, and the economy looks like it might stall.

I have good people working for me but there is no one who can replace me. I got into INSEAD two years ago and postponed my entry to work on the business. The offer expires this year and I really want to go to get more education, build my networks, and mature. But I know if I leave the business for two years, it will probably fail. It would also be a big risk to bring someone else to run it while I’m away. I only take $40K in salary because of my equity and I can’t get anyone good for that low a salary without giving away more equity, which I don’t want to do.

I have to decide by the end of the month. My parents say I should go, my investors and employees say I need to stay.

I'm a terrible leader

John came in and I could tell right away something was wrong because his head was down and he was not standing up straight. He was reluctant to talk when I asked what was wrong, but eventually told me we lost all our shelf space at the XYZ chain of stores. Our competitors now have that space. He said the competitors offered the buyer a better deal and extended payment terms.

When I asked why no one told me, he said because everyone knows I don’t like to hear bad news and will yell at the person who tells me something I don’t like. I started yelling at them immediately, telling them what idiots they are and that they should have told me. There was nothing to do now and I have would have to fire people. By not telling me, they hurt the business. I spend every waking hour doing things for them and they betrayed me.

My cofounder and I were gone for three days and everything fell apart

My business was 8 months old and it’s been a roller coaster. One day I thought we had the next Google. The next I thought we would fail by the end of the year. Whenever both of us cofounders were away, chaos seemed to erupt.

I had to go to China to place the orders for next year. My cofounder wanted to go to NYC to see potential investors. We both wanted to go at the same time.

I said the business was too volatile and the employees too inexperienced for both of us to be away for two weeks. He said we weren’t married to the business needed to trust our employees.

We both ended up going away at the same time. Three days after we left, I got a text saying our merchandise manager decided to join our competitor and just walked out. The accountant didn’t come into work and never told anyone. He was supposed to run payroll so no one got paid. Finally, there was a robbery at our newly opened shop. They took all the money and a lot of merchandise. They also broke the door and the glass in front.

My partner got on the next plane back from NYC.

I signed off on a contract without realizing costs had increased

I ran the farming operations and production facilities in Ghana while my cofounder and partner did sales and marketing from Washington DC. When we started the business, we shared all the decision-making and everything worked well.

As the business grew we were making more decisions and making them faster. The flow of information was just enough to get by, but things started falling between the cracks.  Our roles and responsibilities were getting blurred. The worst example was when our largest customer visited Ghana. They wanted to talk about a long-term contract and wanted a quick decision. If we did not do business with them they would find someone else while they were there.

They laid out terms that seemed reasonable to me. They were higher than we were getting and it was for a year. I did not see any problem with signing there. That night, I updated my cofounder. She was shocked because it was way too low and didn’t  include the cost of customs clearance. Now we would lose money on every delivery. I told her I thought we were making money from them and she said we were, but that the cost of clearance was going up and we needed a 2% increase to cover the cost of currency movements.

After a lot of heated discussion we agreed we needed to meet face-to-face. We needed to set out our role and responsibilities and who makes what decisions. We needed to talk more often.

We expanded without thinking about margins and cash flow

Our sales growth was rapid and very quickly we found that we were doing a lot of business in a city 60 miles away. The transport and service costs were high so we opened a depot there.

We only had 12 people in the company. One person moved and we hired two more. The extra salary and rent meant that all the operations in the new town were unprofitable. We needed more sales quickly. I sent our best sales person there and we saw a 20% increase in volume but the margins were low. At the same time sales in our home market stopped growing. 

By the third month with the new depot, the pattern got worse with an actual decline in the home market and only 5% growth in the new market. We weren’t covering our operating cost and the cash flow turned negative. I closed the new depot, which meant writing off our investment and closure costs. It took us three months to regain our sales momentum and we will lose money this year.

There were some clear lesson here, sales without margin are useless, margin is necessary to cover fixed costs, and start up cost for a new depot take more cash than you ever anticipate.


 

A fundraiser wanted equity even if she didn't raise any money for me

I wanted to use a convertible note to raise the first $400K for my company. It meant I wouldn’t have to have the expense of a formal valuation and it gave me degrees of freedom. Most of the people I’d be talking to are friends and family, so I wasn’t overly concerned and didn’t want to give away equity at this stage.

At a party, I was introduced to a powerful woman who raises equity for companies in Africa. She was so self-confident and unshakable in her conviction that one only used equity to fund startups. I listened to her and asked questions. I came away thinking I was wrong to use a convertible note.

I told others I trusted what this woman said and they said that a convertible note still made sense and that I should talk to other people, including people who had used this woman to raise funds.

I tracked one person down who was very satisfied with her work. But she had raised $25m for a series A. She said I should talk to other people who did not have such a good experience and where the fundraising efforts failed. When I spoke to them I learned this women took equity even if she failed to raise funds. I also learned she tended to undervalue the company to make the raise easier.

I went to her and said I would use her services but that she only got equity if she was successful. She refused my terms.

I should have educated myself about the legal documents

I never paid much attention to the legal work that was done when we formed the company. There was so much detail it was overwhelming. I assumed the lawyer knew what she was doing so I just signed things.

The first problem arose when the Board couldn’t agree on the terms of an employment contact for our new CFO. Eventually we had to vote and it was two in favor and two against. The issue was the options package.  It turned out that we needed a super majority to appoint a director and distribute options.

We only had four directors so there was no way to break the tie. We finally hired an arbitrator. We appointed the CFO, but two Director harbored deep resentment.

The next problem was when our senior sales manager resigned. The Directors did not want him to keep his options, but the incentive scheme granted them to him after 18 months. The Directors wanted to change the scheme but couldn’t make it retrospective.

The next problem was when we needed 95% of all shareholders to approve a new investment. Three small shareholders responsible for 5.2% of the shares refused. We had to buy them out at a premium.

Someone is using drugs in our office; what do we do?

I worked late and was in the office alone.  I went to get a cup of coffee and found a hypodermic needle in the trash.  I didn’t know what to do. Was someone diabetic or was someone injecting drugs in the office?

I asked my partner what she thought. She was uncertain what to do. We decided we would wait and see what happened next. There was no signs of anything for a month of more. Then, we found another needle and some white powder. We called the police who tested the powder and said it was heroin.

How do we find out who was using drugs in the office? What do we do when find out?