|the risks and rewards of
taking the leap
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the home fires burn
At its heart, every marriage has a contract about boundaries
and who will go where and how far.
The entrepreneurial experience tempts the entrepreneur, in some
cases almost demands, that he or she break those boundaries.
I broke mine in a big way.
I had been with my wife since high school, so it was a long
marriage, but she was into home and family and wine.
I took us progressively further, in steps.
There is always a false bottom in the suitcase, and it just
kept getting lower until, by Christmas of '97, it was bad.
Everything was gone. We
had met with or talked with maybe 100 VCs at this point, and there had
been no joy. Nothing was
happening. I remember
coming home one night and Danielle was sitting by the Christmas tree.
There was a pitiful little necklace of presents around the
bottom of it. My brother
had kicked in a couple of thousand dollars, which is the only reason
we still had the heat on. The
dining room ceiling was falling in because I couldn't afford a plumber
to find the leak to fix it. We
had canceled guitar lessons and karate lessons and dance lessons and
my daughter was still sleeping in her crib, corner to corner.
She was so long now, but I couldn't afford a freaking bed to
move her into.
I realized that we were getting right out there on the limb.
At this point, my house, my marriage, my family, it was all
hanging out there on a thread. Danielle turned to me and said, “You know, Tom, we can't
eat moonbeams forever.” I
realized that I had gone past a lot of deadlines and a lot of promises
and I just flat out asked her, “Are you going to leave me?”
It was getting close. You
could smell it.
She sat and looked at these three presents for a long time,
then she turned and I saw a little humor in her eye, which I knew
meant, “Okay, okay, maybe it's not so bad.”
She said, “I'm not going to leave you now.
If I left you now, I'd
be the one paying you
support.” Another bullet dodged.
the dark and the dawn
I want to read you another little section here.
This is from one of those bottom of the barrel times.
Since you are entrepreneurs, I hope you will appreciate some of
the dynamics of what's going on here.
We had been abused, I had eaten more rejection in all of this
than I had in all of the rest of my life combined.
I'll give you just a little snapshot.
Here I was with my partner, Rolly Rouse, and w had been talking
with lots of people . . .
Hearst said no. They would not invest now. They were very hot
on Home Portfolio, but the company was too young for them to invest
in. Please come back in six months.
Six months! We could be dead in three!
US West said no. They couldn't get agreement between their
Colorado and Boston offices on whether this was a priority for them.
They were undergoing their own corporate reorganization. Maybe later.
Oak said no. At least not yet. We weren't sufficiently
“consumer-ready” for them. A very fair point. Despite our star
turn on NetCaster, we knew we were not really ready for prime time.
But how were we going to get ready without resources?
Here were three big rejections in a row, and that didn't even
count the investors who hadn't been interested in the first place. I
had eaten more rejection in the past twelve months than in all the
rest of my life put together. This rain of blows was grinding me down.
“What is it?” I ranted, sitting in the wild clutter of the
office. I was losing it. We couldn't wait forever. Our great vision
was starving to death. “Do we smell bad? Is our cosmic fly down?
What exactly is the problem here? Do we sound stoned to these
“Not at all,” said Rolly pushing right back, “We’re on
the right track. And the proof is in the hearings we’re getting.
These aren't brush-offs. These are real hearings. Visits. Serious
considerations. It's just that we’re not quite there yet.”
you hear this? Have you
been there? Do you know
what I'm talking about? It’s
just the two of you alone in the office and everything sucks and you
are trying to buck it all up.
This guy was amazing. He had a point. I got it. But I also knew
his reflexes now. Put him in a corner, and he would spin stories of
imminent success all night and all day. He would turn that big brain
on and scour every angle and tiny crevice for hope, for light, for
tools of rebuttal. And he would find them.
But behind that reflex he was hurting, too. We had walked away
from careers. We had worked seven days a week until midnight for a
year. We had put everything on the line. We had nearly abandoned our
families. And his bed was the one groaning with a mother lode of
“Okay, maybe they are right, then,” I said, “Maybe the
company is too young. But how do we get older without money?”
Our little operation had gulped Rick's latest hundred thousand
down like a snack. We had bills stacked up all over. Just keeping the
telephone service turned on was a challenge.
We sat in silence for long minutes. Rolly's eyes clouded over.
“Well, the reality is, everything has its clearing price,”
he said. I knew what he was thinking. We could slash our asking price
for equity in the company. Forget the $5 million valuation we had won
in the seed round. Take whatever we could get. Let Rick and Scott be
crammed down, let their stake in the company be gutted by a fire sale
valuation on the next round. I pictured us selling to some ruthless,
bottom-feeding investor looking for a distress sale. Vulture capital.
I pictured us lashed into the deal, working like slaves for a tiny
share of our company.
“Even junk gets sold at yard sales,” Rolly almost
whispered. I had never heard him talk like that before.
“You don't want that,” I said. “and I don't either.”
The phone rang and it was Jeff.
was an investment banker, the kind you use when you are young.
“We’re going to have to aggressively pursue a bridge
round,” he said, meaning a smaller investment that could tide us
over until we would get a big one. “We’re just too early for most
of the people we've been talking to. The question is, how do we keep
going until we’re ready for the big money?”
I loved this guy. I really did. He was as crazy as we were. He
was hanging in. Another can-do dreamer, smart and crazy all at once,
just like the rogues in the old all-American storybooks. Lock them in
a room and anything seems possible. Slap them around with some sharp
reality, and five minutes later they’ve brainstormed their way back
to the dream, like bobbers that just won't go down. They’re like
ecstatic worshipers, like coal walkers. They chant the words, they
caress the idea, the vision, and it makes them high, makes them
impervious to pain. It's their cocaine, their khat, their peyote. And
ruin is the snake they handle. Look, it won't bite me, they say. I can
wrap utter ruin all around my neck and lay its fangs on my throat and
howl, and it won't bite me. I am armored by belief, made imperishable
by vision. Even ruin is
not ruin. Only my flesh is vulnerable, and I am not flesh. I am one
with the vision. I will walk on water, I will pull the sun up with my
bare hands. I will be immortal. I will make new worlds. I will rise
above all ordinary cares and fly.
But he was also retreating. Forget the big money for now, guys,
Jeff was saying. Squeak out what you can.
“How far could you get on a million dollars?” he asked.
“We could make it to launch. We’d make it to January,”
“Would you take it at $5 million pre-money?” asked Jeff,
meaning no increase over our seed round valuation, no bump for all the
work we had put in.
“We would do it at $6 million pre-money,” Rolly said, and
then he remembered all the desert and wasteland around us. “Well,
okay, we'd do it at five million.”
We'd be lucky to get that. We were in deep shit.
“Chin up, guys, I'll talk to you tomorrow,” said Jeff. And
he was gone. And our $3.5 million dreams were gone with him. A bridge
round! It would be just as much work as a big round, maybe more, and
then we would still have to get the big round.
We sat like statues for a long time. We didn't feel like
heroes. We didn't feel anything. The road was getting way too long.
And it just got harder. We were going to have to go back to Rick on
our knees. This was supposed to be a gold rush. It felt more like
building a railroad through the Rockies with no shovel. Like walking
naked across Death Valley.
Rolly threw his head back in his chair and flung his arms out,
wide and beseeching.
“Why do people do this?” he moaned. “How do they survive
it? It's just too hard! And then it's humiliating!”
“Amen, brother,” I said. “And if you screw up, you’re
bankrupt. You’re a stupid, pathetic, overreacher, a penniless
Whoa! Things were getting a little shaky here. It was my turn
to steady the boat.
“But look, we’re doing it,” I said reflexively.
“We’re on the path. We’re still standing.”
In a matter of speaking.
You may have been at that place.
It's not a fun place. But
happily, within a couple of months of that day, and the desert days
around it, we made our first sale, signed our first contract and were
flying out to Chicago on the cheapest tickets we could score online,
renting the tiniest car we could rent at O'Hare, driving in a blizzard
out to see Grohe America, the US division of a big German faucet
maker, giving our spiel for the thousandth time and waiting for them
to say no so we could go back to Boston and go bankrupt.
And they said yes.
We almost couldn't believe what we had heard.
We stood in the parking lot in the snow crying because our
marriages were shot, everything was gone, but that first sale, that
cash in the door was the proof of concept that the VCs had been
looking for. With that
proof of concept and the chain of manufacturers that came in behind
them, including Gaggenau and Viking . . . I remember going down to
sell Viking in the Yazoo River Valley in the Mississippi delta, still
broke, but they came in. Suddenly,
we did have the VCs, and suddenly we were there.
We began to pull out of that long, dark night where we had
tested ourselves and our marriages and our families to the brink and
someplace beyond that.
how far should you go
The experience of writing the book was an important one for me.
I knew going into the company that I would write it.
In fact, the advance on the book was part of the early funding
for the company¾a
novel approach to Internet startup funding and my publisher's gamble,
I would say. I used to
think, “What will I say if we don't make it?
Who wants to read that book?” The
advance fed the family for about two months, then it was just more
debt, just one more gun to the head with all the others lined up
But the beauty of it was that it helped me bring my old career,
in some dimension, along to this new one.
They say that in this New Economy we'll all have half a dozen
careers in a lifetime. I
think it's important, as you do that, to bring along the things you
love from your old career. Life is not a series of chopped up pieces; it's got to have
some continuity to it. Make
sure that you can bring things you love along, because the place you
are going you don't know yet. You
might love it and you might not.
The book kept it all together.
At this point, it's interesting because of all the feedback it
brings and lots of business schools are picking it up.
At Babson College’s business school, outside Boston, they are
using it as the text for the introductory month and a half that all
the incoming B-school students take.
We were sitting there with the faculty 10 days ago.
The finance course will be built around it, and the business
plan writing course will be built around it, and the ethics course
will be built around it. I
got the distinct impression that the professor of ethics at Babson
believed that I had ultimately behaved unethically in the degree of
risk to which I had exposed my family.
Well, so I did it. What
can I say? Hang me now,
but it's an interesting thing for everybody to think about.
Exactly how far should you go?
You do get obsessed; you do become intractable.
I learned a lot of things about myself in this process. I learned that I was completely intolerant of nonbelievers.
I didn't want to hear it.
If you didn't believe in what I was doing, get out of my face.
It was partly because I was a guy on a mission, like everybody
who is doing this, and partly because I was vulnerable and that was a
start nibbling away¾when
your wife thinks you’re nuts, when your friends think you’re nuts,
when the VCs aren't responding. It's
a funny balance to keep, to stay humane with the people you love and
stay on the rails of where you are going.
houston, we have a company
Let me tell you a little bit about the end of this story and
how it proceeded. In the
spring of '98, three or four months later, the full working Web site
at HomePortfolio.com went up and the first people began signing on,
paying cash and we closed our first round with Scripps Ventures, the
venture arm of the E.
W. Scripps publishing company.
Lucky for us, it’s also the company that was the seedbed for
Home & Garden Television, HGTV,
which was a huge story in the early- to mid-'90s. It was the first 24-hour cable channel devoted entirely to
the home. It had been a
huge success, and it meant that Scripps knew this vertical sector very
understood what we were talking about when we gave our pitch, which
had become much better in the lapidary process of thousands of
We closed a $3.5 million round, and, a year later, we closed a
$20 million round led by Oak
Investment Partners, great players in retail and technology
and a real blue chip VC. I'm
happy to report that just last month we closed another $48 million
round, this one led by HGTV and including strategic partners CondéNet,
the online arm of Condé Nast, which publishes Architectural
Digest and House &
Garden magazines, and Meredith
Publishing out of Des Moines which publishes Better Homes & Gardens, Traditional
Home and Renovation Style.
These three together represent the major media powers in the
home design world. Their
simultaneous investment in one dot.com, when they could have invested
in any dot.com, as well as their investment coming after the market
swoon in March, and at a good valuation, is very, very heartening to
Today, HomePortfolio.com is the leading online marketplace for
home design products, information and services.
We have 100-some employees working in Newton, Massachusetts,
just outside Boston. We
have offices in five or six cities now, a network of 1200 top
manufacturers showing their products on the site and more than 65,000
physical retailers in a network we direct consumers to so they can
touch, feel and buy.
It's amazing when I look at it some days.
We are still in the same old church building where we started
out, up in the garret, up in the eves, but it's bursting at the seams
now. There's tremendous
activity there, and it kind of blows my mind what's happened.
We're going into a new world, and that's my story.
I hope that I can share it with you in the book.
I'm very grateful to the Morino Institute and Netpreneur.org
for setting this up today, and to all the people who have been so
helpful along the way. One
thing I'm sure that you have all seen and learned is how important the
contributions of individuals are when you are in this entrepreneurial
mode. You are at once
powerful and incredibly vulnerable when you are on fire with an idea.
The people who share that dream a little bit, who are willing
to extend themselves, they become precious as gold¾more
than gold really, because they keep you going and they make it all
happen. I'm very grateful
to all of these people. It's great to be with you.
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