Survivor Finalist # 3
David Spiselman of Montara, CA, USA
Not Dead Yet
I've lived through startups that succeeded and startups that
failed, and for me, the stories that I found myself a living
part of were always the best piece of the reward. There were
always lessons to learn, but lately many of us find these
lessons to be more and more transitory, a sign that Moore's
Law is at work.
Before co-founding CyclopsMedia.com, I was the CFO of a
startup that had come to the brink of garnering a large seed
round. But, the CEO and the Venture Capitalist began
arguing at the final meeting. That startup was never funded
and disappeared into a puff of smoke. We all went our
separate ways. So, weeks later, I found myself at the Maui
Writers Conference where my wife, Andrea Brown, is a
faculty member. I was drinking beer with Dan Poynter. Dan
is the CEO of ParaPublishing, a company that helps writers
self-publish and promote their own books. Dan told me that
he thought eBooks were the wave of publishing's future. He
convinced me that it would take a Silicon Valley mindset to
produce a successful ePublishing company. He thought
that the New York publishers weren't tech-savy enough to
pull it off. Later that evening, I returned to my room at the
hotel and began writing the Executive Summary for
CyclopsMedia.com. I felt that I was the right person to
recalibrate the supply chain for the publishing industry.
When Andrea and I returned home I contacted several
co-founders of startups I'd worked with from my past, and
together we began refining our business model. As we
started the business, we made assumptions about what
might work. This was October 1999. We incorporated in
January 2000. By Mid-March, the Business Plan was ready
to send to investors, and after I had spoken to five Venture
Capitalists and emailed them the Executive Summary,
NASDAQ began to hit the skids. By the time I'd gotten
feedback on B2C funding, its availability had evaporated.
My management team met and we decided that the only
way to fund the company was with angel investors. The
angels told us that we'd need to show traction before they'd
invest, so we began to fund it via credit cards and stock
deals. Every time we reached the traction point that angels
told us was the level for their interest, valuation declines in
their other investments forced their rules to change again.
The rules for funding were changing faster than we could
adjust. If funding was going to remain a moving target, then
we were going to need to find other ways to make money to
survive. A few of my cofounders worked as consultants or
joined other companies while giving CyclopsMedia.com as
much time as they could. We launched our website,
www.cyclopsmedia.com, on October 31, 2000, several
months behind schedule, but at that point the company had
burned through only $10,000. Slowly, we increased our
catalog size, and we closed the year with a tiny bit of
revenue and some positive press and publicity. At our first
Board meeting after year-end, one of the Directors
suggested that the business model wouldn't work the way it
was constructed until after our catalog had grown by
several multiples. We started working on ways to double or
triple the catalog without diminishing the quality of our
content. The way we chose is very difficult to work, and
takes more time than we'd like, but it's the only way we've
thought of that won't diminish catalog quality.
Meanwhile, we noticed interesting things about consumers
that visited our website. They appeared to exhibit two
completely different behaviors. After a bit of analysis, we
discovered that those who visited our site from publicity
that CyclopsMedia.com look around, download all the free
stuff they could during multiple visits, but NEVER BUY
ANYTHING! They would enter our site through our home
page and spend a lot of time going everywhere they could
on the site. However, those visitors that were drawn to the
site by a writer promoting the writer's own work would enter
our website at the page where they could buy the writer's
eBook, purchase it and leave fast, never looking around for
anything else. And, few would ever return. The conclusion
we drew is that writers must promote their own work, for us
to garner sales. After we achieve critical mass, if ever,
maybe our site will draw visitors that buy on impulse, but
that day isn't today.
So, we're not dead yet, and we're still on that path. So far, in
16 months we've changed or massively refined our business
model three times. We've paid out less that $1,500 in salaries
but over 5 million shares of common stock and options.
We've paid less than $15,000 in expenses but over 300,000
shares in warrants to vendors. We've had revenues the past
several months, and we're almost breaking even on an
operating income basis. We've received $15,000 in
investment, from co-founders and our securities attorney,
but we've received nothing from angel investors or Venture
Capitalists. By the time outside investors figure us out, their
rules will likely change again.
And, we've learned several immutable lessons:
- There are no immutable lessons.
- The half-life of any lesson is inversely proportional to its
importance in your long-term plans.
- If a lesson you learned doesn't work, abandon it fast.
- If a lesson you learned worked yesterday, this doesn't
mean it will work tomorrow.
- Even if a lesson you learned is working, ask "why" and
"how" so you can guess when it will stop working.
- The best defense of a business is executing your business
plan without waiting for investors to find that you fit into
their comfort zone.
- While you are trying to convince investors to love you,
remember that CASH ALREADY IN THE BANK it what
matters most.
- S/he who survives the longest, wins, and that means
TIGHTLY CONTROL CASH.
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