Seed Round, Part 1

Act 2: Launch

Brad McGinity, Chris Humphres, Scot Catlin and I were all in. We’d committed to a year with no salary. We cobbled together a whopping $25,000 of our own money and tucked it at Square 1. We were four knuckleheads with a powerpoint deck and a dream. Chris and Scot were doing what engineers do… they were coding our first prototype to prove that we could pull ecommerce data across our hub, standardize it and push it into an email platform. Brad and I were doing what business people do… calling everyone we could think of looking for our first client.

And then an unexpected thing happened.

I was catching up with Bruce Boehm for a coffee in the spring of 2011. Bruce had been a successful venture capitalist at USVP in Silicon Valley, and had circuitously landed in Chapel Hill where he’d joined UNC Kenan-Flagler as an adjunct professor to teach Entrepreneurship. While I hadn’t taken Bruce’s class, he and I had met several times along the way and this was the first get together since I’d left Bronto and jumped with both feet into the new venture called Windsor Circle.

I described what we were doing, and that I was working on a problem that I knew intimately… and that we had a team of four committed to a year without a salary… and that we had incorporated as a Delaware C-Corp (investor ready)… and that we’d already set aside an option pool for eventual employees (good for securing future talent).

And then an unexpected thing happened.

Bruce said that he’d be interested in investing. It kind of took me aback because I wasn’t really in fundraising mode. We figured that would come later when we’d won some customers and proven our technology. I came to learn over time that Bruce is a decisive (fearless?) person. He sets the chessboard up, makes a firm decision, and then makes the move. There were times in the journey when that decisiveness played in our favor. There were times when it didn’t. But in this moment, that brilliant analytic mind and quick decision making led to a pre-product, pre-revenue seed round.

Testing the Fundraising Capability of the CEO

I’m going to use the next post to describe how the round came together, but it’s worth noting here that Bruce did an amazing and intelligent thing as he proffered the terms. He stated that he would keep the terms simple (because they would get messy as we progressed through multiple rounds of fundraising), he set a valuation that was reasonable given our progress, and then he committed to a minority part of the total amount required to close the round.

I didn’t understand at first why he was leading the round and setting the terms if he wasn’t taking a leading position in terms of actual dollars. What he was doing was testing the fundraising capability of the CEO (me). He’d given me the tools needed… I had a term sheet and a commitment. I had a market-based valuation that was fair and acceptable to anyone that would get involved. I had a straight-forward set of terms.

Now it was on me to see if I could get others to join in! (Spoiler alert… we pulled it off).

You’ll Always Be Fundraising

Somewhere along this part of the journey, before we consummated the round, Bruce said to me, “note that once you take this investment you’ll always be fundraising.” This turned out to be very true. I know that there are exceptions, but people and firms who are in venture capital are in the game of putting money to work, and as long as the risk-adjusted reward is proving itself out, there will be pressure to grow as fast as possible. I’m not complaining… we knew what we were getting into. And I don’t fault those deploying venture dollars… they have a model that works for them and entrepreneurs who opt into that model have to pick up both ends of the stick.

But Bruce was right (as he often is). A huge portion of my 7 year journey was spent pitching investors, through good times and tough times. I was, indeed, always fundraising.

Setting and Hitting Early Milestones

To read the Green Pants Chronicles from the beginning, click here.

Act 2: Launch

If you remember back a few posts, I’d rationalized in my mind that I wasn’t going to die, destitute and alone, if the Windsor Circle thing didn’t work out, and that the worst that could happen was that I’d go back and get another job. Part of that calculus was naming incremental steps that would prove that we were on the right track, and to provide opportunities along the way to stop the process if we didn’t have the basics down.

Egregiously Comparing Ourselves to Astronauts

Miss Baker, Unwitting Spider Monkey Astronaut

Think of it like the Gemini and Apollo missions to get into space and land a man on the moon. First we had to get a rocket to fly into space and come back. Then we needed to stick some living thing in the rocket, and hope that we could get poor Miss Baker back alive. Then we needed to put a human in the rocket and hope to get him home alive, and then get to the moon, and then land on the moon, etc, etc. Each successive step reduces risk and frames the knowledge required to get to the next step.

Windsor Circle’s First Milestones

For Windsor Circle, I remember our risk milestones in those early days as being something akin to:

  1. Get a Team to Commit by February 28
  2. Build a Working Prototype by April 30
  3. Sell it to Someone by June 30
  4. Sell it to 50 Someones by Decemeber 31
  5. Raise venture capital by December 31

If we didn’t make it anywhere along the way, we would stop and recalibrate or exit.

The Bruce Boehm Rule

This is chronologically out of order, but one of the most important lessons of the journey was something that local angel investor Bruce Boehm taught us (paraphrased):

At any given moment, ask yourself what the biggest risk to creating enterprise value is, and what the least resource intensive way is to prove that you can solve for that risk.

This doesn’t mean not to invest resources heavily when needed. It just means that for each given risk, fire a few bullets to see if you’re on target before firing the cannon. This came up over and over again in our journey, and not just at the beginning stages.

Generally, I think we did this well. We had a corporate value of taking calculated risks and learning from failures, so when we failed this maxim, it was either because of a lack of creativity or energy.

A Caveat: It’s Your Job to Take Calculated Risks.

One caveat, however. An entrepreneur’s job has a lot to do with taking calculated risks and being decisive. We had moments as a team where we were too diligent. Clearly, your risk increases when you move too quickly, but I think at times we found ourselves seeking too much data. For example, we could have made the market segmentation decision faster and moved more quickly to our pivot based on early observations, but we were digging too deeply for data to justify the moves. So, be careful about wrapping yourself up in “testing” and “gathering data.” If you know, you know, and it’s your job to be decisive and take calculated risks.

The First Thing I Ever Sold

To read the Green Pants Chronicles from the beginning, click here.

Act: Backstory

People often wonder if entrepreneurial leanings are nature or nurture. Are some folks just born “that way?” I don’t know. I’ve certainly met a lot of folks that had a creative project or side hustle that just wouldn’t stop growing. I’ve also discovered a lot of people that seem wired in a way that lends itself to entrepreneurship. I’m probably in the latter camp, and for me, it started early.

Denny and the 100 ABCs

I was in 5th grade at Hillandale Elementary School in Durham. My penchant for taking on too many projects was already showing. I was in the chorus. And played the recorder… poorly. And played YMCA sports. And I was writing articles for the school newspaper (which is funny to think that we had one in 5th grade… I’m sure the content was lacking and even more sure that no one read that thing). Oh, and I was a student. There was that.

At any rate, as all classes do, we had a few knuckleheads that were always getting into some sort of trouble. Mr. Wolfe’s standard punishment was to assign 100 ABCs, due the next day. It occurred to me, watching Denny quickly approaching 1,000 ABCs, that he probably wasn’t super keen on writing ABCs, and that I had a lot of spare time in the afternoons after school. I was a latchkey kid for awhile after the divorce (more on that later, maybe) and like most kids I’d sit and watch cartoons while eating Doritos until Mom got home. And I was fidgety, in a way that often led to rather constant sketching or doodling.

So, that afternoon, while watching Barney’s Army, I wrote 100 ABCs. Not because I was in trouble, but because I thought it’d be of value to Denny. The next day when we got into school, I asked Denny if he’d remembered to do his ABCs, and as a dark cloud of panic swept across his face, I said, “I’ll sell you mine for a quarter.”

Denny then stuffed me into a locker and took my ABCs. Hard life lesson.

I’m kidding. He dug a quarter out of his knapsack and procured a fine set of expertly crafted ABCs, with authentic Dorito stains painstakingly placed in the margins.

Without knowing it, I’d taken my first entrepreneurial leap. I’d found a need in the marketplace. I discovered that people were willing to trade financial value to fill that need. I discovered that I could use available resources (my time and labor) to create solutions, and that I had to find the courage to promote it to the marketplace (asking Denny if he needed them). I had to ascribe a value to it (pricing… which I got wrong… he would have paid more).

This played out over and over again as I went through my early life. I sold candy to kids in Mrs. Neely’s 6th grade (although my competitor John Jacobs was a dominant Amazon to my struggling Sears). I started mowing lawns in 8th grade, and quickly learned that the skill of asking neighbors on either side of my current customers was a lucrative asset. As I progressed through highschool, I ended up with 20-30 lawns and a leaf raking business in the fall, endeavors which provided a value in the marketplace, created employment (I paid other students who came out with me), and ultimately, put a fair amount of money in my pocket.

The Need for Self Sufficiency

As an aside, I was deeply, deeply proud of having my own money. I was becoming aware that there were others with more money than my family had. Other students had sweeter rides, for example, but very few students had procured their own vehicle with their own money. When I got in my Datsun B210 (the color of which my brother accurately described as “diarrhea brown”), didn’t have air conditioning or power anything and was propelled by a two-stroke weed eater engine… when I got into that car, I felt pride. It was mine. I paid for it. I was not dependent on someone else for my outcomes or my stuff. That pronounced drive (that need? that hunger?) has stayed with me all these years. It has both helped and hindered me in my progression through life and career, but it has been a powerful and central gravitational force.

And it all started with 100 ABCs in 5th grade.

Lawyers and Legal Mumbo Jumbo

To read the Green Pants Chronicles from the beginning, click here.

Act 2: Launch

From the very beginning, we wanted our professional services partners to be more than just knowledgeable experts who would transact with us. We wanted team members.

The Road Trip Test

I’ve long believed that you should follow your gut… it’s usually right. When it comes to people, an easy way to get your gut thinking about a long term relationship with a person is to ask “would I enjoy doing a road trip with this person?” If your immediate reaction is “yeah, that’d be fun. I’d enjoy finding some mischief to get into with this person,” then you’ve probably passed the first test. On the other hand, if the prospect of grinding through long hours of eating up highway with this person makes you shudder, you should stop right now. Your gut is right.

Picking the Right Lawyer for Windsor Circle

I started with the obvious and started asking people in my entrepreneurial circles about the lawyers they knew. It became clear that the attorneys who were really focused on Entrepreneurship had launch kits that got the basics nailed down, and deferred payment until later (typically after the first fundraising event).

We met several attorneys that would have done well for us, but Neil Bagchi of Bagchi Law had a unique and scrappy determination that attracted us to him. A road trip with Neil would be fun (something that I should actually test now that I’m on the other side of the entire experience… Neil, you in?!).

Launch Package. One Price. Deferred Payment.

If I remember correctly, the startup package had a small fixed amount associated with it, and that the rest could be deferred to later.

It included:

  • Incorporation and Charter
  • Employment Agreements (including Invention Agreements, Non-Competes, etc)
  • NDAs
  • Basic Cap Chart and docs

It’s not that one couldn’t find form letters for all of this stuff online (you can, and the reason the startup laywers can do this on the cheap is because they are using all templated stuff and just modifying it for you).

That said, I found it immensely helpful to have Neil available for questions and coaching about why certain things were the way they were. It also ensured that all of the docs tied together as they are interrelated and connected…. Changing something in one doc can ripple into others, and those connections aren’t always apparent to first timers.

Incorporation: Delaware C-Corp

One of the biggest decisions we made early was to go ahead and incorporate as a Delaware C Corp. Let’s break it down quickly.

You want to incorporate because it provides you personal protection from legal and financial issues arising from the business. If the company goes bankrupt, the buck stops with the company. If the company is sued, the organization is the target, not you personally (unless you’ve done something untoward personally). On a cheerier note, if a company wants to buy the value you’ve created, they can’t very well buy YOU, but they can certainly buy all of the shares of a corporation.

The next consideration is what kind of corporation you want to be. There are a ton of resources out there that have already documented the kinds of corporations that exist (LLC, S-Corp, and C-Corp are the most common), so I’m going to let you Google it instead of rehashing it here.

I will state that we chose to become a Delaware C-Corp for one main reason. We wanted to swing for the fences and try to build a really big company, quickly. We knew we would be fundraising, so we wanted to be ready for that.

Neil guided us to consider that future state of fundraising, and that when that happened, it was most likely that we’d need to be a C-Corp (as it is best suited to taking on investment, managing shareholders, etc). Delaware is known for having a well-defined and straightforward corporation statutes and low corporate tax rates. Over half of Fortune 500 companies are incorporated there for this reason.

So, while it was slightly more expensive and time consuming, we decided to incorporate as a Delaware C-Corp right out of the gates as a matter of signalling. When the time came for fundraising, we assumed that this would show that we came ready to play and knew the ropes… that a fundraising event wouldn’t be impeded by a switch in corporation type.

Setting Up Shop With No Money.

To read the Green Pants Chronicles from the beginning, click here.

Act 2: Launch

Recap of the Inception Phase. No Axe Murderers.

Alright, so let’s recap… It’s fall of 2010. Brad and I had an idea that crapped out (BuzzBox), then circled around for the next one (RFMConnex). Adam Covati called me a coward, only in not so nice terms (don’t worry Covati, I’ve got nothin’ but love for ya baby), which forced me to confront the fact that I had to just jump if I was ever going to be an entrepreneur. Lovely wife, Laurie, supports me in the decision to recklessly throw myself into the abyss.

Scot met Brad while looking for an “in” at Bronto, they geeked out about the fact that RFMConnex was in theory close to what Scot and his former boss, Chris, did at LSSIData, just in a different industry, and that in contrast to Brad and I, may know how to actually build this thing out. We all had lunch at Ted’s Montana Grill at Southpoint, where Chris turned up the heat and grilled us cheesy sales guys more vigorously than the cooks were working the bison burgers in the back, but came to the conclusion that Brad and I were probably alright and the idea wasn’t half bad. We wrestled our way through the founder’s equity conversation (which I now call the “Hearts and Wallets” talk) and declared our corporate values, culminating in a family dinner to make sure that none of us or our children were axe-murderers.

Ask, the Worst They Can Say Is No

This next bit is one of my favorite parts of the entire journey because it speaks to the generosity of the human spirit, and the tendency of big hearted people to pull for those who are up against the odds. As “day zero” approached, I knew I was going to need a place for us to work. My boisterous and lovingly-lived-in (read “shoes all over the place and crumbs on the floor”) house wasn’t going to be conducive to the effort. So, I invoked a lesson that my [best ever, number one, one in a million] Mom, Carol Chelette, incessantly drilled into my brother, John, and I throughout our trajectories:

“Ask…. The worst they can say is “no.”

I just started asking everyone I could think of if they knew of free space. I got a bunch of “no’s” (which didn’t bother me at all), but within a few days, I’d generously been given two “yeses! “

Free Office Space

The first was Adam Klein who was working at the Durham Chamber of Commerce at the time, and who was passionate about stoking the fires of entrepreneurship in Durham. He was going to square away an empty cube or two for us in the Chambers offices, and I was so appreciative. The second was Michael Kerr of Edge Office. I’m not sure how I even got connected to Michael, but the net of it was that he had sublet the middle third of the 1st floor of the Penny Furniture building (owned/renovated by none other than the talented and ambitious Cynthia Hill), and was using it as his Downtown Durham showroom. It had internet, nice office furniture that could seat 6-8 people, a conference table…. The works! He met me at Beyu Caffe (whose founder/owner Dorian Bolden is now a good friend) and after chatting for a few moments, said that he had been involved in a few startups, knew what the grind was all about, and offered to let us use the space, and the furniture, and the electricity, and the internet…. For free. No strings attached.

Just Don’t be a D!&k

As he led me across the street to the office, I remember feeling a little dumbstruck, and in awe of this guy’s easy generosity. We’d just met. He didn’t know me from Adam. Well, not the Adam that I just mentioned. Nevermind, you know what I’m saying. He didn’t know me at all, and he was about to let me use the space for free.

As he gave me a key and showed me the security code, I asked… “do I need to sign anything?” to which he replied, “No, just don’t be a d!&k.”

I’m mostly good at not being a d!&k (although I’m sure Laurie would say I have my moments). So, I giggled a bit (not very cool) and confirmed that I could live up to that expectation, and away I went. Full office cubes, awesome rolling chairs, and the spottiest internet Frontier had to offer in Downtown Durham at the time. Beggars can’t be choosers.

(Not to get ahead of ourselves, but Michael had the sublease through early summer, and by then we were rocking and rolling, so we eased into a shared lease as we went through 2012, and in 2013 we took on most of the sublease but then let him continue to use our space. As we later moved into the American Underground in mid-late 2013, there was a competing furniture group that had everything locked up, but we insisted that Michael get the furniture contract for our space as we moved in, or we wouldn’t do the deal. Generosity begets loyalty. Michael took a chance on us when he didn’t need to, and helped propel us forward at a time that we had absolutely nothing, and for that I’m supremely thankful. If you’re reading this, and are in the Triangle, and need office furniture, please contact Michael and tell him that I sent you. Much love, friend.

Free Parking

So, the next thing was that we needed to park somewhere. While parking was significantly easier to find in Downtown Durham in 2011-2012, it wasn’t free, so the team and I scouted out all the little side streets and actually documented on our intranet where you could park your car all day for free within 2-3 blocks of the office. Those days are long gone, but it spoke to the hustle.

We were going to figure out how to launch this thing, and do it on the resources we had. It was the true definition of scrappiness.

Inception: Values. Family Dinner.

To read the Green Pants Chronicles from the beginning, click here.

Act 1: Inception

Values Matter

Before we all got on board, it was important to all of us, but perhaps most to Chris, that we express our values so that we knew what kind of people we were going to be together. I didn’t know it at the time, but we were laying a foundation for a very, very strong culture in this shared expression of what we thought was important.

Family Dinner

I’m sharing the values below, but before I do so, I’m going to capture one more very important event that happened before we all truly committed. Chris suggested that we all get together for a family dinner. This was a bit unexpected, but I like hosting, so… game on!

What transpired that night was that the four of us founders, and all of our families, got together at my house for a bit of a coverdish. (If I remember correctly, I think I made sliders). But the important thing that happened was that we got a few hours as families to interact and assess one another. Did the families and spouses interact in respectful and loving ways? Did the kids get along? Were we gracious to one another within our families, and in our interactions with each other?

It was an important lesson. A founder’s entire family is taking the risk. A founder’s family hears and sees the ups and downs that the founder is going through. Chris was right to make sure that we all meshed together well. And, we did.

Windsor Circle Values

Without further ado, here are the values that deeply defined us for almost a decade.

Mission Statement

Windsor Circle makes data-driven life-cycle automation simple, actionable and measurable for all marketers.


We are revolutionizing retail marketing by giving every retailer incredibly simple access to the rich data stored in the retail ecosystem. In doing so, we will build a world class software company employing 300 creative class professionals in Downtown Durham!

Principles / Guiding Thoughts


Openness and Transparency in All Cases.

Above all things, people want to trust one another. People are strong enough to handle the truth. We speak openly about things, and have the courage and conviction to trust one another with difficult topics. This is true regardless of who’s involved (employees, customers, investors, partners or others).

Facts, Not Claims.

Our communications, both as individuals, and as a company, should be rooted in fact. If you say it, be able to back it up.

Fairness Starts with Objective Data Points.

Do your research. Be open to others’ research. Trust each other not to skew or obscure the data.

Two Ears, One Mouth.

It is a human tendency to speak first. It is far better to “seek first to understand, then to be understood.”

Start by listening.

Single Source of the Truth.

We strive for a single source of the truth, and make sure everyone can get to it. At Windsor Circle, “truth” regarding our clients and our sales will reside in our CRM system. The “truth” regarding internal operations will reside on our Wiki (not floating around in email, etc). Everyone should dedicate themselves to communicating through these mechanisms so that everyone can get to the Truth quickly, and with confidence that we’re all singing from the same hymnbook.


All Employees are Shareholders.

The best way to achieve alignment between employees and their goal of maximizing value to shareholders is to make them shareholders. Everyone at Windsor Circle will have equity and/or options as part of their compensation plan.

Teams Survive Longer than Individuals.

A common team building exercise involves a hypothetical crash in the desert or in the arctic. You can only take 10 items as you try to survive. You do the exercise first as an individual. You do it again as a group. You then compare the results to those of survival experts, like Navy Seals, who theoretically could survive the best. The group almost always gets more items right than the individual. Lesson: teams survive longer than individuals.

Employees Grow the Business. Leaders Grow the Employees.

Both roles are accountable to excellence.

Lead from the Front.

Do what you expect your team to do.

Make Mistakes.

It’s ok to be wrong and it’s ok to make mistakes. Admit them, learn from them, and move on. People not making mistakes are either not taking enough risks, or they’re not admitting them, or both.

Dish the Ball.

Delegate responsibility and then get out of the way. Your teammates are as committed and capable as you.

Efficiency and Focus

Pareto’s Law rules.

80% of the value will come from 20% of the effort. Focus on the most important things and execute on them relentlessly.

The Goal of the Firm is to Maximize Profit for Shareholders.

Windsor Circle is not a non-profit. It’s not a social change agent. It is not a club. We are a for-profit entity. It is in our nature to be good corporate citizens, but while at work, we should be executing together with a single purpose in mind, and that is to maximize profit for the shareholders of Windsor Circle. And remember, all employees are shareholders.

The Paying Customer Dictates the Truth.

This is more than “the customer is always right.” This is an orientation, throughout our company, that we build products that people pay us for. If there is a question about what direction to take on a specific issue, ask what the paying customer thinks. That will be the answer.

Everyone is in Sales.

Those who think that sales is someone else’s job should find another job. Everyone should be asking, at all times, “What problem are you trying to solve?” If we can help, then we should forthrightly say so, and ask for an opportunity to explain why we think so and to seek the opportunity to win that business.

If You Can’t Measure It, Don’t Do It.

Things that cannot be measured cannot be improved. Things that cannot be improved are rarely worth doing.

The Art of the Possible

The “art of the possible” is a tremendous form of problem solving because it checks all of the “why nots” at the door. Focus on the desired result, name 100 ways to get there, and then choose the most viable option.

Don’t Think Outside the Box. Shred the Box.

It’s just business. The only rules (and they are of utmost and paramount importance) are honesty, integrity, and legality. If you can check those three boxes, you can and should break all other rules in the pursuit of maximizing profit. Question assumptions. Challenge the status quo.

Those Who Say It Can’t Be Done Should Not Get in the Way of Those Doing It.

The biggest accomplishments in human history are the ones that seemed impossible. But someone did them.

Ask. The Worst They Can Say Is “No.”

This is the execution part of “art of the possible.” When you think someone might turn something down, ask. Let them turn you down. On the off chance that they say “yes,” you will receive benefits that no one else thought possible.


No Substitute for Ownership and Fair Compensation.

Foosball and free sodas are poor substitutes for fair financial compensation and ownership in an exciting, growth-oriented business. Doesn’t mean that we won’t have fun. And we’ll very likely have free soda. But we won’t confuse the fact that our employees’ well-being, and that of their families, are of paramount importance to them. The nice-to-haves are just that. Nice to have.

Play to Your Stars.

Wow your top 10%. Excellence is hard to find. Once you’ve found it, secure it.

Risk * Execution^2 = Reward.

We’re building a world class software as a service company. As a startup, we need people taking risks. The more risk one takes, the more reward is embodied in the upside. That said, we must execute against our plans to mitigate the risks, or the reward will never materialize. So, risk times execution squared will be the lens we peer through as we think about financial compensation for members of our team.

Founder’s Equity. Hearts and Wallets.

To read the Green Pants Chronicles from the beginning, click here.

Act 1: Inception

This is a little out of order chronologically, and I think there may be some debate about how this all went down, but I’m going to write how I remember it, and if Brad, Chris, or Scot want to tell their version, I’ll post those, too.

Founder’s Equity

The net of it is that we were playing company again… Spending time on nights and weekends, and enjoying the feeling of entrepreneurship without the risks, but unfortunately without the progress and the focus either. Brad was still in the MBA program at UNC and interviewing for MBA-type jobs (including at GE… how corporate could you get!). Scot was consulting for Credit Suisse and had a good gig going, but was ready for a change. Chris was still at LSSiData, and getting paid well for a pretty low risk effort post acquisition. I had made the decision to leave my job though, so for me, the risk was about to get really real.

Brad and I had come up with some split for the purposes of incorporating as an LLC, but it was a placeholder until we could get something in place formally.

So, the question arose about sharing equity amongst the four founders, and we hit a bit of a chicken and egg problem. No one wanted to commit without knowing that they’d get equity. I didn’t think it was fair to assign equity without commitment to go full time in the venture. So, I built the simplest of cap charts in Google Sheets with 10% set aside for an eventual employee pool, and then 90% for the founders. And for the founders, I wrote 87%, 1%, 1%, 1% (see Chris’ note below) and then shared the spreadsheet. It met with the expected consternation from my fellow founders. “You can’t expect us to leave our jobs for 1%!”

Hearts and Wallets

I was happy to share, but I needed people to get in the game. I said “I have your hearts… I need your wallets, too. I need you to commit.”

So, we started having conversations about what was fair. I won’t share the specific numbers, but the levers that moved things around were:

  • Who had the original idea?
  • What kind of money where we leaving on the table by leaving our respective jobs?
  • What did market research give us in terms of norms that we could point to?
  • Who had the handsomest ears? (Me, clearly).

We also needed some startup capital. I put in $10k. Chris put in $10k. Scot put in $5k. Brad was in his second year of business school (ie, 2 years w/out income) and about to face a third. He didn’t specifically put money in, but he did get us into the UNC StartUp Challenge, where we won $7,500 (1st place, tech track). This all shifted the equity shares around a bit as well.

With everyone seeing a full view of the numbers, and no back-room dealing or obfuscation (extra points for the use of the word “obfuscation”), we had achieved our first full expression of a critical corporate value (Openness and Transparency), and we arrived at a set of numbers that felt fair (or at least fair enough) that we could all get on board for a year of no salary.

As I remember it, Scot committed first. Then Brad arranged it with his family. Chris worked it out with his wife. We had to make accomodations for Brad to finish out business school and spend all available time outside of it with Windsor Circle. Likewise, Chris had to finish out something at LSSiData, but in doing so, he was going to draw down his PTO and work nights and weekends.

Suddenly, we were sailing past our first milestone of team formation. We still had to formally commit it in legally, and technically, Chris, Brad and Scot had to formally turn in their notices, but we were now committed to each other, and honor and integrity were now in play.

Not Everyone Could Commit

There were actually a few more very capable people who wanted to join the founding team, and we wanted them there. But, as the day came when we needed the full commitment to jump in with both feet, not everyone could commit.

Some couldn’t convince a spouse to join. Some couldn’t quite get around whatever financial risk didn’t feel right (school loans, or mortgage payments, or healthcare, or whatever). I’m not demeaning that… in fact, I’m actively making a decision right now to join a team instead of starting my next company because I’m choosing some things in my personal life over my desire to start my next company.

Mark Suster calls it a time to learn, and a time to earn. The net of it is, that the stars have to align a bit. For some of the initial interest group, the stars didn’t quite align, and we had to keep moving forward without their contributions.

The next post will be about our values, which we committed in writing before formally committing as a team.

Chris’ Perspective on the Value of Openness and Transparency

I’m excited about incorporating the first of the memories and views from the outside in these posts. I asked the founding team to comment on this post before publishing it, and Chris shared this perspective:

I don’t actually remember [the 87%-1%-1%-1% splits to force the conversation], but I do remember the equity wasn’t at a point that I could commit to the risk and that we ultimately got there. The one thing that both encouraged me and surprised me was how open we had these conversations. All 4 of us knew what was happening for all 4 of us. That was a key not only for our relationships, but for the company surviving the ups and downs of a startup.

Rationalizing the Risk. Stop Worrying, Start Living. The $15k Deductible.

Act 1: Inception

To read the Green Pants Chronicles from the beginning, click here.

Stop Worrying and Start Living

Dale Carnegie has two books that achieved outsized recognition. The one that everyone knows is “How to Win Friends and Influence People” and I think it’s still wildly relevant even today. The other, perhaps less well-known tome is “How to Stop Worrying and Start Living.” I bring it up here because it was directly influential in how I rationalized the risk of leaving my job to start a company.

The basic gist of the book is that most of our worry comes from the unknown. All of the bad stuff that could happen to us starts swirling around in our minds, and as the permutations multiply exponentially, we find ourselves in a panic, unable to control all of the many terrible things that could come to pass. Carnegie simply provides a routine to get that stuff organized and then rationalize the worst case scenario.

Roughly speaking, it goes like this:

First, name one of the things that you are worried about…. Then, ask if it’s the worst outcome. Usually, your frightened mind says “no” and takes it down another level. So you name that one. So on, and so forth, until you realize the actual worst case.

And then you do two things:

  1. Recognize that it’s pretty unlikely, and,
  2. Work out what you’d do in that situation.

For me, it went like this:

Irrational Me: OMG, I’m leaving a high paying job with a successful company. What if I wreck our family’s financial situation and we end up destitute?

Rational Me:Ok, that’s not realistic. I’m a well known VP of Sales in the area. I could easily get a job as a VP again. Laurie is a well connected MSW. She could easily get a job as a social worker again.

Irrational Me: Yeah, but what if we can’t find jobs!

Rational Me: Ok…. If needed, I could start a regional or national job search and open up the opportunities.

Irrational Me: Yea, but what if I still can’t find anything!

Rational Me: Ok… well, that’s pretty unrealistic, but I’m not afraid of hard work, and I could always step back into being an individual contributor, and a skilled sales person can make a lot of money.

Irrational Me: Yeah, but what if you are too old, or too experienced, or too whatever and you can’t even get that job?

Rational Me: Ok… now this is getting silly…. But on the very low chance that I can’t find any job related to sales whatsoever, I’ve never been afraid of hard work. I ran a lawn service in high school. I could easily do manual labor to make ends meet.

Irrational Me: Ok, but what if it’s not enough money!

Rational Me: I’ve saved a bunch of money in my 401k and in my kid’s college funds. In the ultra-low-chance that all of this terrible chain of events did actually somehow occur, we could liquidate that until we get on our feet again.

Irrational Me: Yeah, but what if that runs out!

Rational Me: Dammit! This is silly! Ok, well, I have very little debt, I could use credit cards for awhile to cover my bets and dig out of the hole.

Irrational Me: What if you don’t! What if you go bankrupt and lost the house!

Rational Me: OMG. Won’t happen, but ok. Let’s say that happened. I’m very close with my brother, my mom, my step mom, my wife’s family, and my step-sisters. I also feel very fortunate to have several close friends. If the absolute most catastrophic things came to pass, someone among these many close connections would allow my family to move in for awhile until we got back on our feet.

Rational Me: And if that didn’t happen, Laurie ran a homeless shelter. We would at least know the ropes.

Rational Me: And if that didn’t happen, I camped for two months in my early twenties on a bit of a road trip. I know how to camp and could do that for awhile with my family if this absolute most terrible financial situation played out for us.

This seems like an infinitely silly exercise, but it mattered to me. I really did reconcile myself to the fact that no matter how bad it got, I wasn’t going to die, and I was pretty sure I wouldn’t lose my family. I could figure it out, no matter how far down this ladder of increasingly unlikely events I fell.

Which led me to a very freeing conclusion:

As long as I had my wife, my kids and my dog, everything else was gravy.

Walking around everyday thinking that everything you have above and beyond your immediate family is icing on the cake is a wildly liberating sensation.

It was going to be ok. This wasn’t going to be a risk of survival…. This was going to be a risk of comfort. We might not get to go on expensive vacations for awhile (and we didn’t). We might not have fancy cars (I drove a used Honda Civic for several years). We might drink boxed wine and eat a lot of beans instead of fancy dinners (yep, did that too). But it was all gravy. And we were going to be fine. And I was free.

Setting Milestones and Trying to Fail Fast

Another part of the rationalization was setting milestones that were weeks or months away, and being committed to shutting down the effort if we didn’t hit those milestones (or have a reasonable path to hitting them). The very first milestone was getting a team to commit to the journey with me. The next milestone was getting a prototype built. The next milestone was getting a single paying client to commit.

In my mind, those first milestones of team formation, incorporation and prototype had to be wrapped up by April, or we’d hang it up and I’d go back and get a “real” job. (Spoiler alert: We hit those milestones).

The $15,000 Deductible on the Catastrophic Insurance Plan

If there was one thing that crystalized the risk the most for me, it was the catastrophic insurance plan that my kids and I were on in those first months. We were pretty healthy as a family, and I needed to just get several months of attempting RFMConnex under my belt. Extending my COBRA insurance from Bronto was a scary amount of money, and joining Laurie’s plan at United Way wasn’t much better. I had money saved in my 401k and my credit cards had high limits and low balances. So I chose a plan with a $15,000 family deductible for Jack, Cora and me, with the assumption that if we were all in a wreck together that I had the money to cover that bet, and that these next months of no salary was all about day to day cash management.

So, we rolled the dice and it worked out (but, yeah… scary!).

Committing to Risk. Stop Being a Coward. Just Jump.

To read the Green Pants Chronicles from the beginning, click here.

Act 1: Inception

All You Do Is Talk. Stop Being a Coward.

At some level, I owe the entire entrepreneurial journey to friend and fellow entrepreneur Adam Covati. I’d worked with Adam and Eric Boggs at Bronto, and they’d decided to turn a URL shortener that Adam had built into a full fledged Social Media Management platform called Argyle Social (refer to #UNCArgyle… go Heels!), and they were living the dream. High growth, excited customers, venture capital, white-knuckled fear of the velocity they were traveling… the whole enchilada. I was so hungry to do what they were doing. (As an interesting aside, I said as much to them about joining their efforts, and they both thought I was kidding, so a follow up a conversation never happened. Ah, what might have been…).

At any rate, Scot Wingo had created a StartUp Showcase at the ChannelAdvisor Catalyst annual user conference, and Argyle Social was one of the young companies selected to showcase their solution. The conference was being hosted at the Washington Duke (pretty swanky, with a nice golf course), and Adam, Eric and I were enjoying a beer on the putting green just outside of the restaurant. I was headily discussing BuzzBox, RFMConnex and about six other ideas.

And then, Adam dropped a load of bricks on me. “Matt, you have a bunch of great ideas, but when are you going to actually quit your job and do something. Stop being a coward.” He actually used an unsavory word that I won’t repeat here, but man did it hit me hard. I laughed it off in the moment, but my head was reeling.

I’m Afraid That I’ll Wake Up One Day and Never Have Been More Than A VP for Someone Else

My wife Laurie will tell you that I’m one of the hardest and deepest sleepers around (don’t ask her about the snoring… sheesh). I’m out like a light the moment my head hits the pillow. But not this night. I tossed and turned, and finally she said “what’s going on?” I recounted the story for her, and then laying there in the darkness, said “I’m afraid I’m going to wake up one day when I’m 60, and never have done more than be a VP of Sales in someone else’s company.” There’s nothing wrong with that…. It’s just that I really, really wanted to be an entrepreneur, and unless I jumped in with both feet, I would always just be that guy with ideas.

Laurie, to her credit, whispered that if it was that important to me, that she’d go back to work so that I could quit my job and make a go at it. So that night, with Laurie’s support, I decided to leave the safety and security of Bronto and make a run at it.

At Some Point, You Have to Decide: Just Jump

I started this series with the goal of just capturing the story, and not boiling it down to platitudes. I’ll keep faith with that mission, but here’s something I learned that is probably worth passing along. There is some very finite point in every entrepreneur’s journey where there’s a seminal, terrifying, and wildly freeing moment in which you decide that you’re just going to jump, damn the consequences.

This was my moment. Laying on my back, in the darkness of the early morning hours, with my mind racing and my heart thumping…. I decided to just jump. It was different than planning, or contemplating, or considering. It felt like the same thing that happens when you jump off a cliff into the lake below… you fret, and think, and shuffle, and then suddenly, the moment of abandon hits you and off you go.

Actually Jumping

I don’t remember the exact timing, but having made the decision, I started to set my affairs in order to make this happen. I reframed our budget (which Laurie and I later called the year of boxed wine and beans and rice). I did an assessment of all things that would potentially throw me off. I set up every medical, dental and eye appointment I could think of so that I could square it all away while I was still insured (and “ensured” so to speak…. That if I discovered something, I’d be able to ride it out while I was still employed at Bronto). I’ll spare you the gory details, but let’s just say that if it could be poked, prodded, cleaned, updated, or examined, I had it done. I was all clear and ready to rock and roll.

In about mid-November, 2010, Chaz Felix (Bronto co-founder) and I went for a walk and talk (something that we did often and which I enjoyed doing with him) and I shared my decision to leave Bronto and start a company. He respected my need to try because he’d felt that call too, years before. With that conversation, I was committed. I would enter January 2010, recklessly unemployed, with a catastrophic insurance plan, no salary and no full commitments from my team to follow me off the cliff.

And I was as excited and free as I’d ever been in my professional career.

In my next post, I’m going to briefly discuss the rationalization of the risk, because it was an important part of the decision.

Finding Our Founding Team. Sales Schmoes and Geeks.

To read the Green Pants Chronicles from the beginning, click here.

Act 1: Inception

Finding the Founding Team

I wish that I could claim more than luck on this front, but ultimately, it was luck. Or divine providence. Or something. Here’s the story…

Brad and I were playing with the concept of RFMConnex (oof, what a bad name), but we were two business guys with coding skills roughly on par with our proficiency in ancient Sumarian… that is to say, that we couldn’t code a single line and needed help.

As it turned out, Scot Catlin was in the hunt for his next job, and was eyeing an open position at Bronto Software. Scot was connected to Brad McGinity through LinkedIn, and reached out for an informational interview and a possible reference. Brad was in UNC Kenan-Flagler’s Full Time MBA Program at the time, and while he couldn’t blindly refer someone he didn’t know, he was happy to get together for lunch and chat.

As they sat together, it became obvious that what Scot had done at LSSi was similar in concept. In that business, LSSi was aggregating directory information for the purpose of directory assistance and marketing. You know when you move and change addresses, how you get that little flood of mailers that says “welcome to the neighborhood, here’s 20% off of lawn care…” They were one of the leaders in maintaining that type of database.

So Brad shares the start up concept we’re working on with RFMConnex, and Scot says “wow, we should get my former boss Chris Humphres involved!” Excitedly, Brad and Scot set up a lunch for the meeting of the minds.

Ted’s Montana Grill – Sales Schmoes and Geeks

I’m not sure how we picked it, but it was decided that Ted’s Montana Grill at Southpoint Mall was where this epic meeting of the minds was to take place. As we all arrived, we assumed the positions… Sales Schmoes on one side, Geeks on the other. One side leaning forward and jabbering excitedly. The other side contemplating intently, with a subtle hint of cynical suspicion clouding their eyes.

It was the first time we’d met Chris. As anyone who knows Chris would attest, he’s a hard interviewer. Let’s just say that the collaborative, generous spirit that we know and love Chris for doesn’t shine through in a first meeting (unless you’re a rabid Crimson Tide fan, in which case you get fast tracked to pure love and devotion). Brad and I are both Tarheels, so we got pointed questions about RFMConnex that highlighted the inconsistencies in our logic, and clearly demonstrated our need for some engineering talent. In spite of the tough inspection, Chris said he liked the idea, but that he had something else brewing, and if it worked out that he’d be pursuing that with someone he already knew and trusted.

However… and this was a big moment…. If that didn’t work out, he might be interested in exploring further. Within a few weeks, the other thing didn’t work out, and RFMConnex suddenly became a real possibility for Chris and Scot.

Playing Company, Again

So, we were back to “playing company” again, but with a new idea and a new cast of characters. We met at my house a couple of Saturdays. We had a few other folks that had expressed interest engaged as well… so there was perhaps 5-7 of us poking around on this concept. Powerpoint slides started forming. Sketches of the first tech concepts started to come together.

But no one was on a payroll, no equity had been decided, no articles of incorporation formed. Just guys futzing around in their free time.

The next couple of posts will be important ones as they set up one of the most important early stage moments of commitment to “just jumping” and to defining the equity splits.