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Why Wesabe really lost to Mint

October 3, 2010 · 7 comments

Reading the story “Why Wesabe Lost to Mint” made it seem the co-founder didn’t realize that business survival in and of itself was an opportunity for them. He states “we were not far off from supporting a small company indefinitely on revenue” without elaborating on that. He does, however, elaborate on almost everything else. He seems to have failed to understand the opportunity that a business survival crisis presents, and how to re-orient objectives to get through it. Running a business isn’t a sprint, it’s a marathon.

Most successful businesses will face multiple “going out of business” crises in their lifetime. Business leaders must be prepared for this reality.

Business leaders need to realize that business survival in and of itself is crucial.

How you handle a business survival crisis determines more than simply whether your business lives or dies. It determines whether you will be around to reorganize around unforeseen opportunities. Most businesses that succeed do so in ways very different from their original blueprint. So the business needs to survive, even its original goals do not.

To get through a survival crisis you need at minimum some way to get through one more day without failing, and ideally a short- to medium-term plan for staying in business. Reading that Wesabe was “not far off from supporting a small company indefinitely on revenue” and then hearing nothing more about it makes it seem clear the co-founder was focusing on the wrong things near the end. The article is primarily about the things that led to the survival crisis, and defining the path of potential survival (supporting a small company indefinitely on revenue). What is completely left out is why they failed to choose or succeed with the “indefinitely on revenue” plan.

Successful businesses often reinvent themselves for greater success in ways completely unanticipated beforehand.

In most businesses, it’s easy to see some survival options as not worthwhile, such as drastically scaling back the business simply to break even, asking key employees to work without pay for a period of time, borrowing much more than expected against an uncertain future, etc. Also, case studies of survival crises show businesses succeeding in ways that would have been impossible had the business ended, and then tried to restart. The kinds of opportunities unlikely to be seen had the original business gone under and tried to restart are often fortuitous events, attempts born of desperation, doing things you would never likely try except for the need to keep the business afloat, etc. Many businesses eventually succeed due to luck and acts born of desperation during survival crises. So for a business to survive…the business must survive, even if its initial goals do not.

The longer your business survives, the more chances there are to find new ways to thrive.

This is one reason many successful entrepreneurs are seen as “unrealistic” and “obsessive” to outsiders: they succeed because they refuse to let their business die. That said, it doesn’t mean dramatic over-borrowing, drastically scaling back, etc. guarantee success or are worthwhile actions. What is worthwhile is changing your mindset to find a way to not go out of business. You don’t simply want a “stay in business at all costs” mindset leading to considering unethical actions or dramatic risks that should probably be rejected.

Importantly, investors love leaders that won’t let their businesses fail. It might not seem that way at the time of a survival crisis, since you’re typically nowhere near providing a return on their investment. Just getting through another day without closing the doors is not glamorous. But having a resume of guiding your ship through repeated crises successfully will open a lot of future doors for you…because it demonstrates you have one of the most crucial skills of real business leadership.

Postscript: Here’s a classic contemporary story of keeping a business alive: Tesla and the electric car (Wired) …which includes this great quote:  “I’m not staring into the abyss of death anymore,” Musk says. “I’m just eating glass now.”

The Postmortem : Invest My Money
October 27, 2010 at 2:33 am
Postmortem: Wesabe | Hustle & Know
April 10, 2014 at 3:18 pm
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2 fubar October 4, 2010 at 7:37 am

Sometimes, you just have to recognize that it’s time for a company to die, and let it go. Clinging to life at any price just causes pain for all involved.

One you’ve expended millions of dollars without reaching traction, there’s no point in continuing at a low level. Even if the cash flow will support the business, it will never generate a return for the current investors. New investors don’t want to support a pivot by pouring more cash into a heavily encumbered enterprise. Everyone’s time is better spent working on something new.

There’s disappointment but no shame in this. If all your startups succeed, then you aren’t taking enough risks.

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3 Dave Larson October 4, 2010 at 9:35 am

I agree. And what you say of course seems intuitively true. Yet the history of successful entrepreneurs and successful businesses often seems counter-intuitive, chasing “life” at all costs when no one agrees, radical changes of course, multiple bankruptcies, etc. I think one of the keys to balancing the wisdom of folding against clinging to a lost cause is to accept that business survival contains hidden potential only obvious to those steeped in the history of chasing after it.

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4 Oliver October 3, 2010 at 7:39 am

Is this just saying “To survive, Wesabe would have needed to give more priority to surviving even at the expense of its original vision. It didn’t, so it failed. Many companies change what they’re doing, instead; some of them survive. The co-founders post didn’t explicitly acknowledge this choice,” in business-speak?

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5 Dave Larson October 3, 2010 at 3:24 pm

Yes—a good tl:dr—although for true business-speak I would have called changing goals “pivoting” :) A lot of businesses don’t pay attention to this problem, even though most will face it eventually, so I thought I’d use a few more words to discuss it.

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