1: Netscape founder Marc Andreessen to his business partner and then Loudcloud CEO Ben Horowitz:
Marc: “Do you know the best thing about startups?”
Ben: “What?”
Marc: “You only experience two emotions: Euphoria and terror. And I find that lack of sleep enhances both.”
The year was 2000. The dot-com implosion was happening.
Ben and Marc had raised almost $200 million to launch Loudcloud, a startup focused on network security, scaling, and disaster recovery.
But the money was gone. As CEO, Ben needed to raise money yet again. And quickly.
“In the fourth quarter of 2000, I met with every possible funding source,” he writes in his book The Hard Thing About Hard Things, “but nobody was willing to invest money at any valuation.
“We’d gone from being the hottest startup in Silicon Valley to unfundable in six months,” Ben recalls.
“Thinking about what might happen if we ran completely out of money—laying off all the employees that I’d so carefully selected and hired, losing all my investors’ money, jeopardizing all the customers who trusted us with their business—made it difficult to concentrate on the possibilities,” he writes.
Amid these challenges, however, there was one potential path forward: Taking the company public.
“In an oddity of the times,” Ben shares, “the private funding market shut down for companies with our profile, but the window on the public market remained just slightly open.
“This may sound like a crazy anomaly and it was, but private funds had become completely cynical while the public markets were only 80 percent of the way there.”
So Ben went to work preparing a list of the pros and cons of doing an IPO to present to his Board.
“I knew that Bill Campbell would be the critical person I’d need to persuade one way or another,” Ben writes.
At that moment, Bill was in his sixties. Gray-haired with a gravelly voice, he also had the energy of a twenty-year-old.
Bill began his professional career as a college football coach. He didn’t become a businessman until his forties.
“Despite the late start,” Ben notes, “Bill eventually became the chairman and CEO of Intuit. Following that, he became a legend in high tech, mentoring great CEOs such as Steve Jobs of Apple, Jeff Bezos of Amazon, and Eric Schmidt of Google.”
He was also the only Loudcloud board member who had been the CEO of a public company, so “he knew the pros and cons better than anyone else.”
3: Ben presented his thinking as follows:
“We have not been able to find any investors in the private markets. Our choices are to either keep working on private funding or start preparing to go public. While our prospects for raising money privately seem quite difficult, going public has a large number of issues:
“Our sales processes are not robust and it’s difficult to forecast in any environment.
“We are in a rapidly declining environment and it’s not clear where the bottom is.
“Our customers are going bankrupt at an alarming and unpredictable rate.
“We are losing money and will be losing money for quite some time.
“We are not operationally sound.
“In general, we are not ready to be public.”
Bill and the other board members listened. When Ben finished, no one said anything.
Then, Bill broke the awkward silence.
“Ben, it’s not the money,” he said.
Ben remembers feeling “a strange sense of relief. Maybe we didn’t have to go public. Maybe I’d overestimated our cash problems. Perhaps there was another way.”
Then Bill raised his voice again and said: “It’s the f***ing money.”
“Okay,” Ben recalls thinking, “I guess we’re going public.”
More tomorrow!
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Reflection: When I am under intense pressure, do I get stuck in my fears, or can I stay clear-headed enough to face the hard financial realities and choose a path forward?
Action: Identify one area of my work or life where money or resources feel especially tight right now and take a concrete step this week—having a hard conversation, revising a plan, or naming the true numbers—to face the situation instead of avoiding it.
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