Foreword
What did Sully Erna, lead singer of Godsmack, Julian Geiger, the former CEO of Aeropostale, a half dozen extremely bright Angel Investors and A&R/Marketing executives at Virgin Records, Geffen/A&M Records, Rounder Records and Disney Records have in common? They ALL thought BandDigs.com was going to be the next Web 2.0 phenom... another Myspace or YouTube!
Obviously, I shared the same sentiment or I wouldn’t have invested my own money, sacrificed half of my earning potential and worked seven days a week to bring the concept to market over two and a half years in my late forties. How could all these knowledgeable people have been wrong and missed the mark on this one? Why wasn’t this venture an over the top success? Why couldn’t a first of its kind, live and interactive video website for the entertainment industry become a successful business?
Allow me to save all of you wannabe entrepreneurs a LOT of money, and of course, the pain and suffering of a startup gone bad. Follow my journey through the ups and downs, twists and turns, and capitalize on my 50 lessons learned throughout the process.
In the end, we will all say, “Goodbye to Yellow Brick Road Entertainment LLC” (the company I founded), but not without pause and reflection. Enjoy some of the music industry stories along the way... And most of all, prepare yourselves more effectively for managing any type of new business that you may be contemplating or are currently running. I seriously wished that I had read a book like this before I jumped into the entrepreneurial abyss. Please allow me to help you to avoid the same mistakes and to help you save a lot of money.
The Entrepreneur
This book is for you if:
1. You are working in a company now and are contemplating leaving it to start your own business . . . you are looking for greener pastures . . . you found your true passion . . . you are sick of working for someone else.
2. You left a company recently and are thinking about starting your own company versus looking for another “real” job.
3. You are a student and contemplating becoming an entrepreneur after you graduate.
4. You are an entrepreneur currently struggling in your role and are looking for ideas and lessons learned that will help you succeed.
5. You failed in an entrepreneur capacity, and are seeking out someone who may have failed worse than you did to make yourself feel better. There is no shame in that!
6. You are the spouse or significant other of a recently failed entrepreneur and are trying to figure out what the hell he/she did wrong!
Okay, so let’s assume you fit one of these profiles. Here are my objectives to help you address your concerns:
1. To talk those of you who are on the fence out of making a BIG mistake.
2. To help you “plungers” avoid some of the mistakes that I so effortlessly made along the way before you jump in.
3. To counsel you folks who are failing, or have already failed, by commiserating with you. Basically, I want to talk you down from the ledge.
4. Someone told me that licking my wounds in public would be really good therapy. Maybe those who can’t do really should teach. Hmmm, novel idea.
In the following chapters, I will explain my thought process leading up to my decision to start Yellow Brick Road Entertainment LLC and throughout the life of it. I will then share my specific 2005-07 circa business concept, which was BandDigs.com, an interactive video platform/community for the music industry—a cross between Myspace and YouTube.
Subsequently, I will drill down on everything from the business plan, funding model, financials, technology, marketing analysis, customer base, vendors, and alliances, to the adjustments my team and I made, the investment banking process we followed . . . and, SPOILER ALERT, to the eventual closing of the business.
The meat in the sandwich, however, will be the brutally honest lessons learned that I will share with you. If you run with just a few of these tidbits, your ROI on this book purchase will far exceed 10,000 times.
The lessons in this book will address topics such as who you should choose for investors and why, how to write your business plan, how to know your customer, how to better develop your product or service, who not to hire and why, what types of vendors to avoid, and how to deal with angel investors, strategic funding sources, and VCs to avoid being turned down for an early round of funding. I will even share lessons I learned about myself as a person, which I hope will help you sort out your own feelings and better deal with your own struggles and doubts.
Finally, I will tell you about the aftermath—shutting down a business and facing failure for the first time. Will you be able to look at yourself in the mirror and not think of strangling yourself if you go down in flames? What will it be like dealing with your investors, friends, family, and your health if the business shuts down? Ouch… sounds rough, doesn’t it? But here’s the bright side: my losses may very well turn out to be your gains! And that is my goal for this book, and for you.
Hopefully, by sharing the consequences of my actions, you will be able to leverage my mistakes into a much better outcome for yourself. If it is too late for that, maybe you will find solace in relating to my distress and it will ease your own.
With all of that in mind, let’s start by defining what an entrepreneur is. Here is an excerpt from an online definition of “entrepreneur”:
An entrepreneur is a person who has possession over a new enterprise or venture and assumes full accountability for the inherent risks and the outcome . . . Entrepreneur . . . is a term applied to the type of personality who is willing to take upon herself or himself a new venture or enterprise and accepts full responsibility for the outcome.
. . . They are successful because their passion for an outcome leads them to organize available resources in new and more valuable ways . . . A person who can efficiently manage these factors in pursuit of a real opportunity to add value in the long-run, may expand (future prospects of larger firms and businesses), and become successful.
Entrepreneurship is often difficult and tricky, as many new ventures fail. Entrepreneur is often synonymous with founder. Most commonly, the term entrepreneur applies to someone who creates value by offering a product or service. Entrepreneurs often have strong beliefs about a market opportunity and organize their resources effectively to accomplish an outcome that changes existing interactions.
Picking apart the word entrepreneur is a crucial aspect of making your decision to “join the club.” Indulge me while I ask you a few questions to lay the foundation:
· How much money can you afford to lose without it impacting your lifestyle, home ownership, and/or your family obligations, i.e., kid’s college funding?
· Are you prepared to fail? Can you live with yourself if your venture crashes and burns? Will your spouse or significant other and children forgive you?
· What is your backup plan, and how long will it take you to implement it? How long can you afford to work for free?
· What event in your business would trigger you to start looking for another job? In other words, what would drive you to quit your new entrepreneurial venture and return to the workforce?
· What is your motivation for starting a new business?
· Do you have qualified people whom you trust lined up for hire?
· What funding sources will consider your business plan, and why do you think they will prioritize your plan over the hundreds that they look at every month?
· How well do you know the market that you are contemplating going into?
· Are you really capable of running your own business? In all honestly, could you run the company that you are working at now?
· Are you disciplined and organized? Do you procrastinate?
· Can you sell . . . and I mean, really sell? Not only will you need to sell your product or service, you will need to sell your ideas, which can be even harder to sell.
· Are you prepared to work for several bosses, i.e., your investors?
· When you picture running your own business, how much time do you think you will need to work each week? Are you prepared to work long hours seven days a week for the first six to twelve months?
· How will you define success in your venture?
· Have you shared your plan with at least three objective parties who understand the industry you are targeting?
· Can you succinctly describe your business concept and the ROI opportunity to a potential investor in three to five minutes?
· Are your people skills top-notch?
· How well do you deal with confrontation?
This list scratches the surface of the qualifiers for becoming an entrepreneur. Before reading further, please objectively answer these questions for yourself and your potential investors. Pause and reflect. Repeat.
Chapter 1
Welcome to My Train Wreck
It was 2008 and I’d just hit a milestone—I’d turned fifty years old. Instead of reflecting on my successes, however; I was licking the wounds of the biggest failure of my life. Instead of celebrating with my friends and family, I was left feeling shattered, depressed, and worthless. Hell, with my stress-induced health problems, I couldn’t even hoist a martini to toast the future due to the medications that I was on. Sad sack, for sure.
“How can this be the case?” one might ask, “after enjoying thirty years of success in various business ventures by then, you had achieved a “well-to-do” status to be proud of, right?”
Right.
But that was old news by the time 2008 rolled around.
In 2005, I had decided to become an entrepreneur and go for the big win. I justified to my wife, and to myself, that life was too short not to take the risk of giving my true passion a shot—Come on, I could be gone tomorrow!
Tomorrow indeed arrived, almost three years later. I was still there, and so were the consequences of diving into my latest entrepreneurial venture.
Looking back, it still seems like it was a reasonable idea at the time. I was about a year into a thermal technology startup in New Hampshire, which required a lot of travel to Asia. I was the vice president of supply chain and chief information officer, and the company had just acquired two factories in China and operations in Taiwan. I was working for a great guy—a former boss, whom I respected a great deal—and making an excellent salary with lots of upside.
My then-fourteen-year-old daughter and professional singer/songwriter, Jillian, had recorded three albums by then. I was so proud of her and really into the whole recording process. I had been managing Jillian’s music career since she was twelve, and I served as the executive producer on her first two albums. I subsequently hired a professional manager and entertainment attorney to help me manage what looked to be a promising career for Jillian. I had always been a huge music fan and was beyond thrilled and awed that Jillian was excelling in it.
Jillian was getting ready to go out on tour to fifty summer camps in the Northeast with her band. My wife, Mary, and I were creating a schedule of who was going to accompany Jillian to each location over the course of the summer while the other stayed home with our older daughter. This was not a trivial exercise, as the tour would end up accounting for over 10,000 miles on our SUV that summer.
With this in mind, I approached my boss about taking some time off over the summer to travel with Jillian on about thirty-five of the camp dates. By then I knew enough about the music business to realize I had discovered my true passion. The thought of coupling touring with my daughter for the summer along with my passion for music was just too intoxicating.
My boss reluctantly supported my request, although looking back I can’t fathom why he did. When I think about making such a crazy request to the CEO of a frantic startup today, I just shake my head. I’m surprised the man didn’t ask me if I was having some sort of breakdown or midlife crisis. Truth was, by then, I was probably on my third or fourth midlife crisis!
Nevertheless, he said yes, so I reduced my work schedule and my income in half for the summer and prepared for the tour. During the weeks leading up to the tour, I hired musicians, led the rehearsals with Jillian and the band, planned our travel, bought new equipment, invested in merchandise, and worked with Jillian’s record label to plan marketing and promotion. It was an exciting time for all of us, but particularly for me. I felt twenty years younger and completely invigorated.
I was surrounded by young musicians and great music, and I got to witness my daughter blossom into a determined little performer that summer. The whole experience solidified my love of the music business and taught me a ton about running and promoting a tour like that one.
It turned out to be the turning point for me professionally and, frankly, financially for several years. It was also the impetus for my launching an entertainment-based business, Yellow Brick Road Entertainment LLC, in the late fall of 2005.