A while ago Peter V. Therkildsen Schlegel wrote an emotional blogpost about the closing of his startup Admazely. A little later Trendsonline did an article about it as well. We missed that story when it came, but we feel that the openness and lessons from post-mortems, especially this one, are always worth highlighting. We have picket insights and highlight from both sources. However, if you want to get the complete story, do really check out Peters blogpost and the Trendsonline article. Also thanks to Peter for checking thru this write-up and making sure it is correct.
The right idea at the right time
Admazely (also known as admaze.ly) was a startup that focused on providing tools for re-targeting advertisement: a field that has grown tremendous that recent years. The timing was good: Admazely was started informally in 2011 by Peter, David Björklund and Sylwia Erhardt-Bednarska, when things in this area were just taking of. In 2012 Søren Holbech joined and later they got seed financing: SEED Capital and business angels Martin Bochineck and Christina Rind Helsbro invested about 600 000 Euro in the startup. But it all ended in 2013, when they had to file for bankruptcy.
”My startup, Admazely, has gone bankrupt. It has failed. It’s over. Done. We ran out of funding and didn’t manage to raise more money.”
Is one of the opening paragraphs on the emotional blogpost.
From cash to crash
That the startup would go big was a plan formed early. The timing was good, the focus globally and the team managed to get early investment from business angel and SEED Capital. It also joined Accelerace.
”We’d joined the Accelerace program based on a recommendation from our chairman and representative of our lead investor, SEED Capital. The program does a lot of good things. The reason we joined was that it has a loan option for program alumni companies. The people in the program have to recommend you, you jump through a few hoops, you pitch and negotiate and finally you present to their equivalent of the infamous partner meeting – the Investment Committee.”
Getting funding for a startup requires a lot of effort, and Peter knew this. He also planned well ahead – just a early investment is seldom enough if your plans are further then the local market.
“I had eyes on our first major funding round, the A round, which was planned for spring 2014. And so I spent not that much time on the bridge financing, as long as I was convinced it was in place. Instead, I spent time talking with investors who began to arrive from London, New York and San Francisco to prepare for a big A round. “
The problem – the plan of relying on Accelerace’s loan option was not working out as intended.
“We were in a cycle of raising money from SEED and Accelerace and we had both negotiated conditions in place and got approval from SEED and from Accelerace’s Executive Board. It just lacked the final approval from Accelerace’s Investment Committee. The approval should fall in early February, and our cash-out date was the end of March. We got for a variety of reasons not the expected approval of investment and therefore not from SEED because their investment was subject to a co-investment from Accelerace. This meant that when we got the rejection we had very very short time to navigate.”
It was a unexpected, and emotional shaking, experience for Peter:
”In the afternoon [on the day of the rejection] I had a speaking engagement in the other end of the country, pitching to a huge room full of potential customers. It was an absurd experience. I was crumbling on the inside but had to pose confidently. I had invited two of our customers to also speak at the event and after dropping them off I sat in the rental car staring at air. Crying. Feelings of fear, anger, self-righteousness and uncertainty overwhelmed me.”
“When I look back at it there is much that could have been done differently. We had already received funding from SEED Capital and angel investors in April 2012, and we had promised to stretch that money for 12 months. After this we planned on raising more money, either from SEED, external or a combination of the two. But having a burn-rate also suddenly meant we became depended on somebody investing in us. We should have waited to raise money until we were further in our development and more mature as a company.”
Not just a funding problem
Not getting the funding from Accelerace as planned was a major blow in the startups progress. However, running a startup is never a straight line to success – something the team knew. This was just one problem to solve, albeit a bigger one.
However, more problems soon emerged.
”Most Danish startups begin selling locally and then expand from there. We had chosen a pretty bold strategy, against the advice from our board, and gone for ‘instantly global’, meaning the bulk of our effort was in calling the UK. And for that you need native English speaking sales people. Hence my praise of Harriet and Nate [from New Zeeland], and Sophia, our Aussie sales supporter. We spend three months achieving what a successful startup like Trustpilot reportedly spent almost a year doing: making steady sales progress in the UK.”
”Mid-February – roughly two weeks after having our funding plan dissolve before my eyes – Harriet and Nate received news that they would not be granted permanent work visa in Denmark and were to leave the country within 30 days. It felt like the most unfair thing that could possibly happen at that point in time. I had less than two months to raise about 3 mdkk with a pitch that now had zero chance of delivering if an investor should decide to invest.”
”As I thought things couldn’t get any worse, our CTO and cofounder, David, pulled me aside one day and told me that he and his fiance were moving back to Stockholm. It had been a long time coming. His fiance couldn’t get settled in Malmö and wanted to go back. David had been postponing the decision but had finally chosen not to jeopardize his relationship. A good decision and one in which I support him 100% as a friend. As a cofounder – I found his timing to be the worst possible.”
Trying to save it
”I probably went and pitched somewhere between 10 and 20 potential angel investors after this point. And my pitch got weaker and weaker. Because I had lost faith myself. I remember one meeting in particular that our chairman, Niels Vejrup from SEED Capital had helped tee up. It was with Jesper Buch and Ditlev Bredahl who had been dancing in the shadows for a while and were now ready to talk. It was a Skype call and I had tried to prep for the meeting. Tried to find ways to frame our situation that would appeal to their hands-on approach to angel investing. Especially Jesper is known for investing heavily in the team and the founders. Which would – under normal circumstances – be great news. I’ve pretty consistently gotten good feedback from both VCs and angels. But this time I sucked in a major way. As I was pitching I knew I sucked. I felt like a dog that has been beaten to the point of scared submission. And I acted the role of a loser. Because I utterly felt like one. That meeting was an image of how I felt at the time and how my performance suffered from it.”
Today Peter looks back and regret that he was not stopped, and considering its options. Back then he drove on, with grit and passion for his startup and his team.
“As founder and CEO, I should of course have had a plan B. This is clearly what I should have done differently. The plan B could have been so many different things: other potential investors in the game, a plan to reduce costs faster, etc.”
“As our costs were 90% labor costs, and all of our employees had 3 months’ notice, we had no operational capabilities to respond before we ran out of money. And thus we had to declare ourselves bankrupt.”
It has been a journey – starting with the idea to assembling a team that got the first funding, and the failed attempt to raise further money – to take the final decision on bankruptcy.
“Most entrepreneurs have pretty big egos. Therefore failure hits hard – this was also true for me, and it is a major self-examination which is still ongoing. I still use a lot of mental energy to grapple with the causes of the bankruptcy, and thinking about what I could have done differently.”
Crucial element in the history of Admazely is about how important it is that the parties involved have expectations balanced and not too different in priority and passion.
“One of my most important lessons is quite clear that the group of founders and other owners need to be better aligned than we were. There is not a 100 % harmony in a marriage and we where not disagreeing on crucial things related to the product or the company. However, there were other things that became difficult. We did not have the same risk tolerance and not the same willingness, for example, to take six months without pay when we ran out of money.”
Things like this influenced how it did go when the times got hard. He does not blame anyone, just presenting the fact that it is his insights that an aligned view is a very important factor for surviving harder times.
But lessons learned are also on a very personal level.
”I guess shame was also a major driver of my behavior in the [last] months. I was afraid to admit my failure to the world. Afraid to tell people that we had gone bust. Publicly admitting it was like crossing into a whole new dimension. I had a lot of psychological equity invested in my identity as a startup founder. Now, I was just a bum without a job.”
Sharing the knowledge (and source code)
Peters blogpost itself contains valuable lessons for any startup founder. But he is not content with just that, he wants to enable others to benefit from their creations as well. Peter still wants to share his knowledge with others who can get something out of it.
”We have decided to devote some time and energy to open source our source code. There are very many general – and very difficult – problems we solved along the way that we think other developers and startups can benefit from. And so we really like to make an effort for others to reap the fruits of what we have sown.”
Peter ends his blogpost with telling that he got hired by one of his Business Angels, and was now doing ok, even if employed. He also ends with a highlight, a notion that I think many entrepreneurs share but few mention:
”If you’re a founder and you find yourself in a similar situation, feel free to get in touch. Drop me an email, ping me on Twitter or give me a call. I’ll be happy to spend an hour talking about how I cope (sometimes denial is an underrated survival strategy) and see if anything I’ve done might help you.”
Read the entire story over at Peters blog and Trendsonline. A big thanks to Peter for sharing his personal story and lessons learned.