I remember one of the last stories my dad ever told us: the story of a small company.
There’s this kid, 8 years old, and he invents a new type of jack in the box.
Being a child, he understands everything that should go into a great toy, and uses that knowledge to build a product that’s super attractive.
This kid starts selling jack in the boxes and becomes an overnight sensation: people are practically throwing themselves over each other to get his toys – it’s like the store scene in Jingle All The Way.
After a few months of outrageous sales, the kid becomes very wealthy — so wealthy that his name and picture get published in Wired as one of the top rising entrepreneurs.
And that’s when the trouble starts -
Within a few weeks, customers report defects in the toys and start suing. So many people sue that this kid doesn’t leave the courtroom for 6 months.
Eventually, he’s forced to declare bankruptcy, and because the company was in his parent’s name, they end up dealing with the consequences while the kid makes it out okay.
Dad laughed when he told us that last sentence — like it was a joke that his parents got destroyed.
The story is similar to what my parents went through with their company: inventing a revolutionary product, colored latex gloves, becoming a sensation, selling incredible amounts of them, ending up in court, then going bankrupt – potentially to stop the lawsuits.
That was my first exposure to the business world, and it affects the way I look at people in a professional setting today.
I’ve seen a company that everyone thought was going to keep growing forever burn to the ground in MONTHS, leaving it’s founders bankrupt and, in two cases, dead.
Actually, I’ve seen the same thing happen THREE TIMES in the last 15 years, all within the family: extraordinarily successful businesses that ended in heartbreak for every single person involved.
The WORST part about the fate of these companies is that, even through they ended horribly, nobody started with the goal of hurting their employees or families.
They went into business to make a bunch of money and free themselves from struggling to survive. For my parents it worked a little, but for the others it was a much different, much more tragic story.
How this ties into raising capital -
As an Account Manager, I talk to a lot of entrepreneurs, both funded and not so funded, some with experience and others total newbs, but they all have the same trait: HOPE for their company.
Most founders know, or at least project to investors and stakeholders, that their company is going to successful, and it helps them raise massive amount of capital.
It’s a great perspective, but if my parents had big investors they would have ended up with NOTHING when things went south – no company, no freedom, and a lot of debt to deal with – instead of more than a little cushion.
Bootstrapping allowed them a cleaner exit from their business failure, and I plan on doing the same if possible.
P.S. What’s your opinion on raising capital: Like it? Hate it? Why? Hit reply and let’s talk.