When You Don’t Know What To Say
I started in business my freshman year of college after a girl I thought I was in love with dumped me. My first business (“Apex Industries” — I added the word “industries” at the end to make it sound really big at a time when I was really small) was selling carpet to freshmen at the University of Michigan. I realized almost instantly that I had a knack for business, and so throughout college I expanded Apex from one school to five and ended up making about a hundred thousand dollars a year, which, I thought at the time, essentially made me the richest man on planet Earth.
My second business was Mascot Sportswear, a company that made t-shirts with college logos. We focused on school mascots and developed a $4 circular t-shirt program for JC Penney stores in the midwest. The company grew and I sold it shortly after I started law school at U of M. When I graduated, I joined up with my friend Brad Keywell and bought a Wisconsin-based company called Brandon Apparel Group which made children’s licensed apparel. We bought the company when it was doing about $2 million in annual sales and we leveraged it up to about $20 million. Along with our sales growth came lots of debt which eventually crippled the company when fashion trends changed in the late 90’s.
In the midst of trying to save a dying business, Brad and I decided to switch industries altogether and jump on the Internet bandwagon that was raging at the time. In March of 1999, we started a company called Starbelly.com, which used the Internet to dis-intermediate the promotional products market. In May of 1999 we raised $1.5m, in July we raised another $8m, and in December of that year we sold the company for $240 million just before the Internet bubble burst. Unfortunately the company that acquired Starbelly, HALO, was itself a failed roll-up. After a year as HALO’s COO, I left and a few months later started my second technology company, InnerWorkings, which sought to make the printing industry more efficient by finding open capacity. Unlike Starbelly, InnerWorkings was a a company with lots of revenues and profits, and it eventually went public in 2006. Around that same time, Brad, who had been working for Sam Zell, joined me to start a company called Echo, which used technology to disrupt the transportation space by finding the right truck moving in the right direction at the right time. Echo grew even faster than InnerWorkings, and it too went public a few years later. In June of 2006, Brad and I started MediaBank, which is a software-as-a-service (SAAS) business using technology to route media in real time. MediaBank has also grown rapidly and today, approximately $50 billion of advertising is routed through its systems.
That brings us to Groupon. In December of 2006, a guy named Andrew Mason, who had worked for me at InnerWorkings, called with an idea he had to launch a company that used the power of tipping points and the Internet to solve collective action problems. I was intrigued with the idea and offered to invest $1 million if Andrew would drop out of school and start the company. Andrew agreed and ThePoint.com was born. About eighteen months later, it became apparent that ThePoint.com would never make money and so Andrew and his team pivoted to use the power of collective action to save people money, instead of saving the world. Boy do people love to save money. After we realized we were on to something big, we renamed the company Groupon.com. Groupon took off and became one of the fastest growing companies of all time.
In January of 2010, Brad and I decided to take our string of successes and institutionalize what we were doing informally. We started LightBank, an incubator/venture capital fund/operating entity/idea lab. Since early 2010, we have made approximately 20 investments in tech start-ups throughout the country and have incubated a few new businesses of our own.
Enough about me.
I realized that it had been a while since my last blog post, and since I was planning to give a speech to Kellogg’s MBA students, I thought – why not kill two birds with one stone. I find when you don’t know what to say, it’s always best to try and steal the words of others, which is exactly what I’m doing here today.
Robbery Number One.
One of the greatest business quotes I have ever heard or read comes from an unlikely source, the founder of Paypal, Elon Musk. In a recent Business Week editorial, he said
“Business is like a multidimensional probabilistic chessboard. The rules aren’t set, and the same moves don’t always make you win. A lot of people can be really good in a set-piece battle; my biggest differentiating skill is I can invent new pieces.”
People have often asked me what makes someone a good entrepreneur and my answers have always been a bit convoluted. But when you really stop and think about it, this quote sums it up perfectly. The ability to invent new pieces is a quality shared by all great entrepreneurs.
InnerWorkings was a new piece. We built Starbelly focused on disintermediating the supply the chain of the promotional products industry. But there were too many SKUs and too few manufacturers, and the business eventually failed. InnerWorkings was a twist on that model. A paradigm shift focused on a new industry, in which the SKU count was smaller and number of manufacturers larger. In other words, a new chess piece in a game I was losing.
Groupon was also a new piece. ThePoint.com was a great site but we couldn’t achieve enough traffic to make it a meaningful business. People love to save money far more than they love to save the world. When we launched Groupon, it caught on instantly.
These new pieces are often referred to as pivots; a dramatic change to the rules of the game that give the player another chance to succeed.
When something is not working, you can either keep pounding away at it, endlessly suffering the same fate while you build up scar tissue; or you can adapt, change, pivot. In other words, invent new pieces. No one has done this better (maybe ever) than Steve Jobs. He continuously self-examined the fate of Apple and was willing to shift strategy and chase new products or focus on entirely new markets when his back was against the wall.
Theft Number Two:
Ronald Reagan once said:
“I do not believe in a fate that will befall us no matter what we do. I do believe in a fate that will fall on us if we do nothing.”
I am absolutely amazed at how often people seem paralyzed to take action. Whether its someone with a great idea that just never takes the first step. Or a disgruntled worker that has an idea of how to improve something at their company but instead spends their time complaining, instead of fixing. Or an entrepreneur that knows he or she is struggling and yet feels immobile and unable to scrap their initial plan and start over.
I have never been afraid to act. It is one of my greatest strengths in business. When I have an idea or reach a conclusion, I act on it, immediately and without reservation. I don’t over-think the movement, I embrace it. You can’t always be right, so you have to get comfortable with the fact that you are often going to be wrong. You are often going to fail. But like a baseball batter who tries to hit home runs, the true measure of success is the net sum of all of your hits versus all of your strikeouts. In other words, you have the luxury of being judged over time (over an entire career), not an individual turn at bat.
The first business Brad and I did together was Brandon Apparel Group. It ended up being a huge failure. We over-leveraged the company and it eventually crumbled under the weight of that debt when the industry began to consolidate against us.
Our second business together was Starbelly. We started that company in 1999 and despite the fact that our shareholders made lots of money, the business itself was also a failure. We never reached the full height of our potential. The business never really took off.
With two pretty big failures behind me, I never slowed down. I never thought of stopping. I just put my head down and kept moving forward, kept working toward success. I knew that doing nothing would seal my fate far more decisively than any single action I could take.
Had we tossed in the towel after Brandon and Starbelly (which most people would have done), there would have been no InnerWorkings, no Echo, no MediaBank, and maybe no Groupon.