This is one of the better pieces linked to from HN in some time, yet most of the comments here are critical of either the author or her husband or both. Critics, please raise your hands if either you or your spouse has raised $10M in a depressed economy, nationally launched a new consumer product into a hyper-competitive industry, and achieved multi-million dollar revenues while trying to hold a marriage and family together. Anyone? Bueller?
What's questionable about the article is that it portrays entrepreneurship being so extreme and anti-social. It's about running a business. Bill doesn't do a good job here.
He's great at marketing and raising money but that's not what a company survives on and continues to pay people's paychecks and paying back his investors. Summary: the company founder did a poor job at taking care of employees, investors and his own family. Is this considered desirable behavior these days?
I thought we learned something from two market crashes after 2000. This is basically a typical reckless Gen-Xer dot-com story risking it all and going broke. I'm amazed his investors (which got screwed) even gave him money.
You imply that you could have done better. So please share your relevant comparable experience. Ever raise $10M and bear the weight of those investor expectations? Ever been CEO of a multi-million dollar company? Ever launch a manufactured consumer product? I suspect that it might be a bit difficult. I suspect that what is best for your investors, your partners, your employees, your customers, your family, and yourself might not always be the same thing, which I suspect might lead to many difficult decisions along the way, decisions which unfortunately will later get called into question by a peanut gallery of HN readers who consider themselves business experts because they've built a couple of websites.
Well, I've raised and received an acquisition offer of about that number, but the startup team quickly disintegrated. Guess what, I don't put this on my resume! It was a failure and caused a major fallout under several friends!
Regarding the "built a couple of websites" - I've worked for startups in bioinformatics/ AI and for public research projects with several million bucks funding.
I'm sorry but my heroes are company owners that can sustain a business for a long time and give back to the community. Not quick scams that screw over investors. I know quite a few startup founders (in IT) here in Ontario, Canada, that know how to support their people. And these aren't guys building websites, but in the 'top 10 awards, up and coming in Canada'.
The guy hung in for 6 years on a modest salary, not quitting until his hand was forced when the bankruptcy court rejected his buyout offer. How is that a "quick scam?" He kept the business close to the edge of solvency because he was optimizing for growth rather than profit on the entirely defensible theory that he needed to quickly get the business to a size where economies of scale would work in his favor. (It's a strategy that Bezos used at Amazon in the early years too, consistently forsaking profit in favor of growth and operating in the red to do so.) Investors know the risks involved. Nothing in the article suggests that they were "screwed over" as you claim. In fact the "risk it all, go for broke" attitude that you blame on the CEO is more likely attributable to his investors, who are going to push for strategies that result in a 5x-10x ROI.
Sorry, for the long comment in advance. But this issue is something that has been bothering me for a long time.
Agreed, I give the guy all the credit for hanging in for 6 years and as mentioned before his strength in raising capital and marketing. He's definitely not ordinary.
But in the end - does he have a sustainable business, where he gave back to the community? Is he in the ranks of a stable company owner, who can finance his children's and his employees's children's college education etc.? I know people like this and I don't know that much about how hard it was for them to outlast. But this is the measure of success. Not the 'almost' go-big-go-bust success displayed annoyingly in many American business zines (Inc, Fast Company, Business Week, Wired etc.) during the dot-com era... and this recent article.
Daimler-Benz, Siemens, GE... they are all still here and it took them a long time to grow. History is on my side on this issue: 2 major market crashes - dot-com and now real estate. My family lost a good portion of their retirement money as many others have. The end result of so much hype in the market is hazardous to society.
Summarizing, raising capital with inflated growth targets is a thing of the 90s. Growing a business slowly is the way to go, unless you have a major technology or product breakthrough.
I must add - this is a personal view. Many others will still achieve success growing quickly.
Your concerns about recent economic down-cycles are misplaced. Our economy needs more not less entrepreneurs like the CEO profiled here. He ultimately failed but he went down fighting to keep alive a new business that provided new jobs. And he pioneered a new market segment whose inheritors will employ many more people in the future. That growth-creating ripple effect will leave a bigger impact on his "community" than most people can ever lay claim to.
There are plenty of villains worthy of your scorn, from banksters to bureaucrats to politicians. Yet you blame a business-building job-creating entrepreneur for trying to grow too quickly? Daimler, Siemens, et al were once the size of Switch Beverage Co, and their initial investors also took big risks for the expectation of big returns. Had this guy succeeded in creating the next Coca-Cola, you probably would have been singing his praises ten years hence. It sounds like what you really object to is failure.
BTW, the next time you try to raise money, be sure to show deflated growth targets to your prospective investors, then let us know how that works out.
I can certainly see your point. But yes, I do blame an entrepreneur setting a bad example trying to grow too quick and burning through lots of cash. I inherently do not see this as such a big admirable success story.
Further, I strongly object to the sensationalist reporting of such business magazines. Why don't we hear more about the quiet guys slugging it through and building something lasting?
Also, I don't fancy yet another beverage product on an already overcrowded consumer market and the tendency of the business owner to believe that he can only succeed by growing big fast. Why doesn't he believe in the strength of his product. If it's good, people will buy. He inherently believes people only will buy it if it's big. And that's wrong with the picture.
He has not created any new knowledge on how to make beverages and trained specialized staff accordingly, which would create positive skill feedback loops in the region of his plant. He's buying juice wholesale and outsourcing production to a local plant that makes everything from Coca-Cola to beer. This is just all marketing: take two kinds of juice, mix em, carbonate it and market the crap out of it. Where are the jobs created out of that? And I don't think he has created a viable plan for young people to follow his footsteps: the plan was to go big and he went bust. His only lasting legacy seems to be staff turnover.
Further, I suspect flaws in his management style, because it seems like he's putting out fires constantly. Something's not right here.
I don't think the world needs more entrepreneurs like him. He's clearly a very financially motivated guy, who doesn't believe in growing a great product organically. We need more great product companies instead! (Ironically, "the switch" does sound like a really neat product: 100% healthy juice)
Historically, companies that had product experts (engineers) in management have outperformed MBA run companies many times over. The lesson here is: build a great product and the rest will follow in time. I have the stats to back this claim over a 50 year period (study done at MIT comparing MBA-run companies to engineer-run companies).
Yes, I don't want to ever again create a business plan and pitch to VC's based on the growth curve of the Internet. What a f*ing joke. But that's my mistake.
I inherently do not see this as such a big admirable success story.
I doubt anyone, least of all the CEO or his wife, would disagree with you. But their failure is instructive, and telling the story of their failure takes courage.
sensationalist reporting
There was nothing sensationalist about this article.
Why doesn't he believe in the strength of his product? If it's good, people will buy.
I'm sure he did believe in his product. But to think that you just set a new kind of beverage on a few shelves and then let the product quality take care of all of your sales, marketing, and brand-building for you is incredibly naive. Apple's products get a lot of acclaim, yet Apple still spends a fortune on advertising and on its distribution outlets.
He has not created any new knowledge on how to make beverages
Whether he has or hasn't is not evident one way or another from the article.
growing big fast
Economies of scale are present in beverage manufacturing just as they are in online retailing, search engines, and social networking. So all of your objections to his high-growth strategy also apply to Amazon, Google, eBay, Facebook, etc. But this guy is an easier target for you given the outcome.
young people
He did a great service to young people by replacing all of the crap chemical-laden sodas sold in California schools with his 100% juice alternative.
I don't want to ever again create a business plan and pitch to VC's based on the growth curve of the Internet
The Internet will remain the best bet for growth in the world economy for generations to come. Choosing not to leverage that will only hurt your future business prospects.
There is something odd about the glossy way business mags display entrepreneurs as heroes and even more when they are tragic. It's part of the same hype culture that I despise.
Growth Businesses
Google is a technology and product breakthrough - Pagerank, GFS, BigTable, MapReduce, AdWords, Server Design etc. Amazon - Cloud Computing, Recommendation Engine. Facebook - Social Graph. These are deserving growth businesses that have built out a true market niche. I don't see the beverage market in that same category.
Knowledge, Young People, Jobs
Building a beverage like this is not like hiring and training Master Brewers from Weihenstephan in Bavaria or red wine experts from Bordeaux. Packaging juice bottles is a minimum wage job like any other. I don't see the armies of new employees that will be created in this market segment.
A different kind of hype culture exists here on HN, which glorifies engineering, discounts sales and marketing, and considers non-technology businesses unworthy of respect. I'll bet if you were stuck on a plane next to this CEO and were somehow able to talk to him with an open mind you would learn a lot.
This was also published in another journal there. I'll post to this later. Bare with me!
I'll have to make a call to Germany on Monday morning - I don't have the paper anymore! I thought it would be an openly accessible PDF on their website.
Several points in no particular order why I think this may be a "good" article (i.e., it's good storytelling), but I'm still critical of this article.
While writing this reply, I skimmed a couple of food startup companies on Wikipedia. It looks like these guys tried to do a SoBe (started 1996 bought by Pepsi in 2000; they year they started their company) and failed. I'd be very interested in an account of the SoBE story.
1. No reasoning in the article about why they thought this drink would sell.
2. First expenses are to buy two Land Rovers? AFAIK, these are not the cheapest SUVs. And this is literally like in a recent bad movie I watched ("Role Models").
3. On the same lines, they got an RV and two salespeople to drive around nationwide in an RV handing out samples? Was this drink even available nationwide? I've never seen it. Why were they spreading themselves so thin?
4. No mention in the article about how they got things done on the cheap. Which is a staple of all startup stories. Looks like they splurged on everything.
5. I had to read the BevNet link somebody posted to this article to find out that this drink costs much more than sodas because it uses real juice. It costs $1 to make and sells for $1.29. Is there a tiny probability that this could have contributed to the failure of the drink?
6. I mean this thing costs in the range of Red Bull and Starbucks but they market it as a competitior to Pepsi and Coke?
7. As I kept reading the article, I noticed how everything was being blamed on everybody else other than Bill. Bill did no wrong, and others let him down. I did not see enough evidence to convince me that this was the case.
8. Though billed as wife's story, this article is equally about Bill. So I have a problem that Bill is written up from the point of view of an adoring wife.
9. The BevNet thread shows that there are some people who are very angry with Bill. Btw "Wayne" (he doesn't get the courtesy of his real name being using, I think he's Mike Gilbert from the bevnet thread) has a book out to put his side of the story. This article sounds like an attempt to rehabilitate Bill's reputation.
10. Notice how they heavily criticize LKCM for "attempting" to bankrupt the company. But I'm supposed to find nothing suspicious about Bill proposing a deal with a new investor which would give the new guys 51% of the company (meaning management control with ability to replace Bill etc).
11. In short, at the end of the article, I was completely unsurprised at the total failure of the company. There is only one lesson to learned from this story for me: if hire a Bill, you'll fail. But I already knew that.
What I don't get is why this guy (Bill, the entrepreneur) is always teetering on the brink of disaster. The story with his design company almost owning his brand, because he didn't specify the contract under which they created design work for him, is telling. He seems like an energetic and very creative sales guy, who burns easily through money, but doesn't look at details enough. Also, his staff turnover rate doesn't sound good either.
Why is he always so unstable? Come on, if you have an account like Costco or 7Eleven, you are making money. You should be able to run a stable business taking it from there - but then the job is not about being that creative anymore but about operations (just like in a big company).
An entrepreneur friend of mine, who has been in business for over 40 years always says: "It's not what you make, it's what you keep!". Entrepreneurship does not need to be this extreme as it's portrayed here. I know enough company owners that coach sports for youth teams on the weekends and spend enough time with family.
It's probably a very low-margin business and that doesn't leave much room for error. Software businesses are about the highest-margin ones out there and that can skew your perceptions when you look at other fields. I think this guy took on a lot more than he expected to and that was the source of a lot of the problems: energy only takes you so far. At some point you need actual knowledge and that's where hiring experts helps.
The instability comes from the fact that he's not just getting these big contracts, but at the same time is trying to grow rapidly. Were he just to settle at a certain level of sales and stay there for a few years, he'd probably be running a profitable, but smaller business.
What I don't get is why this guy (Bill, the entrepreneur) is always teetering on the brink of disaster.
It says he was the manager of an industrial laundry facility prior to being a cofounder of a soft drink startup. Those sound like wildly different roles. He could have just been totally over his head.
The first startup I worked at hired a bunch of corporate IT execs and former management consultants to be executives. Their old jobs seemed more related to their new ones than the guy in the article, yet they were still totally out of their element. They always tried to spend their way out of a hole, which always put us further in financial jeopardy. It sounds like the guy in the article tried to manage his company by doing the same sort of spending.
Neither of the company's two founders, nor any of their successors, can alter the product's basic economics.
This former executive claims they were trying to sell a product for $1.29 that cost them more than $1.00 to produce and distribute. If true, this sealed the company's fate regardless of any drama or inattention to detail.
This woman sounds remarkably selfish. She admits to not working during the three years her husband was starting the company and spending summers on vacation with her child learning Spanish, yet her catalog of grievances includes the strange claim she has lost time that could have been spent publishing and socializing.
Couldn't she have churned out a couple of articles while on vacation in Spain? Or maybe have saved some cash by spending the summer at home.
I agree. She wants him to work his ass off, and when he does, complains about not having him around. And to top it off, she stops working on her own profession, gets depressed, and then considers leaving him (which would entail taking his child away from him). She says, "but I couldn't stop picking fights about his lack of time at home.". Nice, kick him while he's down.
Later -- talking about sales in general -- she adds, "When he convinces me to stay married to him, he's selling me on the better future we will have together.".
So, he's got to convince you regularly to stay married to him, eh? For better or worse too old fashioned I guess.
Regarding what she's given up: "I lost a friendship, an airplane, a lot of money. I sacrificed years of socializing that could have sparked new friendships."
Near the end she says: "I'm betting that before too long, Bill will decide to do it all again." Keep holding out your hope for all that money.
She tries to present the facts, but her insatisfaction skews the story. Actually, I think sharing this personal story with all the details mainly from her viewpoint can be deemed as selfish behavior.
Agreed. Rich people complaining about trials and tribulations regarding conditions they can actively change and/or control. The author's comments and general attitude have all the earmarks of a "trust-funded" childhood.
I've personally seen it happen twice. A company that has a reasonably well developed product is short on cash. Some "white knight" appears with a big investment, but the deal drags out, the company is forced into bankruptcy, and the so-called savior acquires it for a fraction of the original investment amount. Seeing this same scenario here makes me think it must be a common predatory tactic. Lesson is, if you've got a good product but are short on cash, be very wary of big investors.
"When I think about those start-up days, I realize I've given up far more than I had planned. Years of writing, of books and magazine articles I could have published. I lost a friendship, an airplane, a lot of money. I sacrificed years of socializing that could have sparked new friendships. I lament the toll on Bill's health, and Lily had no choice in giving up precious years with her father."
Therein lies the biggest difference between the entrepreneur and the non-entrepreneur: he looks ahead and she looks back.
What a whiner. My girlfriend is a musician, and a very driven and inspired woman. I don't think she will ever describe herself so publicly as ${MALE_ADJECTIVE}'s wife.
Stop deriving your identity and self-worth from your partner; writing is not the sort of thing that one has to put on hold because one's partner is busy making business .. quite the contrary, the fucker is busy at home and away, crack those fingers and get cracking!
> the CEO said, "it's better to have 1 percent of 10 million than 100 percent of nothing."
A false dichotomy, surely.
The voice in the back of my head says its better to have >=50% of something small with real, stable growing than 1% of 10 million where you are trying to outsmart the wolf packs of the VC industry.
Oh, come on...a long, well-written essay, and the best you can do is a one-line swipe at the author? At least explain why you think she lacks introspection!
The comment voting here is getting to be really bad.
