1: “Remember, Ben, things are always darkest before they go completely black,” said Netscape founder Marc Andreessen to his business partner and then Loudcloud CEO Ben Horowitz.
“He was joking, but as we entered our first quarter as a public company, those words seemed prescient,” Ben writes in his wonderful book The Hard Thing About Hard Things about being a Wartime CEO. The year was 2001. It was the middle of the dot-com implosion. Technology companies that had been valued at a billion dollars a year earlier were failing.
In a last-ditch effort to raise some money, Ben had taken Loudcloud public. But things looked dark, indeed.
“Customers continued to churn, the macroeconomic environment worsened, and our sales prospects declined,” Ben recalls. “As we got closer to our first earnings call with investors, I conducted a thorough review to make sure that we were still on track to meet our guidance.”
The good news? Loudcloud would make its forecast for the quarter.
The bad news? “There was very little chance that we would meet our forecast for the year,” he writes.
“Typically, investors expect that companies will refrain from going public if they can’t hit at least their first year’s forecast,” Ben explains. “These were exceptional times, but resetting guidance on your very first earnings call was still a very bad thing to do.”
2: Against this backdrop, Ben’s leadership team met to figure out what to do.
“We were faced with a tough choice,” he notes. “Should we try to minimize the initial damage by taking down the number as little as possible, or should we minimize the risk of another reset?
“If we reduced the number by a lot, the stock might fall apart. On the other hand, if we didn’t lower it enough, we might have to reset again, which would cost us all the credibility we had left.”
The company controller, Dave Conte, raised his hand.
“No matter what we say, we’re going to get killed,” Dave said. “As soon as we reset guidance, we’ll have no credibility with investors, so we might as well take all the pain now, because nobody will believe any positivity in the forecast anyway.”
And then he said: “If you are going to eat s***, don’t nibble.”
“So we reset guidance for the year, slashing our original forecast of $75 million in projected revenue to $55 million,” Ben writes.
3: The other bad news: Layoffs. A lower revenue forecast meant lower overhead.
“We’d been the darling of the startup world,” Ben recalls, “and now I had to send home 15 percent of our employees. It was the clearest indication yet that I was failing. Failing my investors, failing my employees, and failing myself.”
Then, what?
“Following the reset,” he writes, “Goldman Sachs and Morgan Stanley—the investment banks that had taken us public—both dropped research coverage, meaning their analysts would no longer follow the company’s progress on behalf of their clients.”
That was another kick in the teeth. Ben explains, “It was a massive reneging of the promises they made when they were pitching us. Times were tough all around, and we had no recourse.”
“With a vote of no confidence from our banks and a lowered revenue forecast,” he writes, “the stock price plummeted from $6 a share to $2.”
More tomorrow.
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Reflection: When I’m facing bad news, do I tend to nibble—delivering it in small, half-truth doses—or am I willing to face and communicate the full reality so I can actually move forward?
Action: Identify one difficult situation I’m currently downplaying, write out the harshest honest version of what’s really going on, and share that full truth with the key people involved so we can make decisive, wartime‑level choices together.
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