Startups & Online Business

I have learned a few interesting lessons over the past 4 months. As some of you may know I was put into a Venture Funded Startup as a turn-around CEO by the main VC investor.

I have long believed the adage that "when a business/industry with a bad reputation meets an manager with a good reputation, usually only the business keeps their reputation". This venture has not changed my opinion.

This company had been backed by early stage investors and had spent over $2 million AUD developing a piece of software that actually didn’t work, well certainly as it turns out not like the previous management said it worked.

The Emperor had no clothes. Everyone from prospective customers to investors believed it worked, there was mountains of powerpoint slides saying it did, volumes of reports about the product and the market and copious stats which were difficult to interpret, but no one actually questioned the efficacy of the product in doing what it was supposed to be doing (wont go into to much detail but it was supposed to pick up certain transactions 3-5% of the time according to previous management but only managed to get 0.3% true positives)

We set out to build a business case for this product but found there was no ability to actually demonstrate ROI on the product. Turns out no one had ever done a test to sort False Positives and True Positives and actually see what alerts were real.

Turns out the system generated almost as many alerts as the transactions it was monitoring and was absolutely useless in the hands of an end user.

So, sadly we have had to pause its operations while we work out if we can navigate our way out, I dont hold much hope for it.

To add to this there was a litany of sins that the previous management had committed that had completely alienated the prospective customers and the only customer they had was not a fan of the product.

Also it didnt help that the market had been talking to this customer and they all formed the opinion the product didnt work that well.

It was a bit of a waste of 4 months of my life but here are the lessons learnt about doing turnarounds;

• As a prospective appointee at a senior level you should actually do extensive due diligence on the company you decide to work for. Get a very good idea how much trouble it is in.
• You are probably being brought in too late, with too little cash left and a big mess.
• The biggest thing is that the investors will still believe that they have an asset, your job is too convince them that they dont and that you can offer them a small return back and they need to come to grips with this, it will make your job easier.
• Keep reminding your investors and staff that you didnt create the problem, you are there to fix it.
• You have about 3-4 months before you become part of the problem. Thats it, no longer, after that your predecessors sins are blended with yours.
• Make sure that you dont believe anything previous managers, investors or staff tell you without verifying it for yourself. Myths and Bullshit have a habit of perpetuating in problem companies.
• It always comes down to people. Assess very quickly if you have B or C graders in the team and separate them early.
• If you negotiate equity in these deals, write it off from day one and insist on a big retainer. There is so much risk with a turnaround that your chances (along with the investors) of seeing a return are minimal.
• The previous management will have wasted a lot of time wheel spinning with new strategies and ideas to fix what has usually been either an execution issue or a fundamental problem (ie the product doesnt work) cut through this and work out if the original strategy was fine and just poorly executed, dont get drawn into the new idea, its a result of desperate management trying to work out what to do