Published in the San Diego Union-Tribune, November 6, 2023
by Neil Senturia
This is potpourri time. Or said another way, tales from the crypt.
Recently I took my favorite CEO, Bobby Brannigan of Mercato, to lunch. He has a simple problem. He needs some money. Why? Because a lot of his revenue comes from a government entity, and it is their inclination to pay slowly. They will definitely pay but he could starve to death waiting for the check.
One answer is to factor, to borrow against receivables, which in this case are golden. He finds a lender (even in these tumultuous times) at a high-interest rate. But he says he wants to shop around.
Over the lasagna, I put him in a headlock and explain that he needs to take the money and run. No shopping around. All the crooks charge the same. The good news is that another major city contract will fund in March 2024.
Two days later, he calls and says, the deal is done, and the March revenue has been moved up to January. Never argue about a few basis points when the main problem is to stay alive.
My next lunch is with a charming investment banker. The issue here is a classic one. He needs to fire someone that he should have fired earlier.
I ask him when knew that he had made a mistake and should have pulled the trigger. He says 90 days after the hire. OK, why did you wait almost a year? What I got back was mumble jumble. Now the guy is gone, and ironically, the company has not missed him at all. Revenue is up, payroll is down.
Another lunch. (Look, I know it would be cheaper to buy the joint, but I can’t quit Fabio and Simon). This time, another similar story, with another CEO. When did you know and why did you wait so long?
The real question to ask ourselves is: If we know the rules, why do we ignore them? The answer is that admitting we were wrong is hard to do. And having to send someone packing is hard to do.
CEO-ing was going to be easy. When your courage wavers, re-read the absolute best book on startups, “The Hard Thing About Hard Things” by Ben Horowitz.
Now a sad tale. I have a favorite investor. We have made money together, he never wavers, the check always clears. He calls to tell me that he is selling his company. Big money on the horizon, just a bit shy of nine digits. He is telling me this because he wants me to find deals for him to put all that money to work again.
His deal has been cooking for just under a year. It is set to close on a Wednesday this month, and I get a call from him on Tuesday. Either the Lambo is on order or bad news bears. Yup, bears. They changed their mind. They say it was because of XYZ, which had previously been disclosed from day one. I told him to lock his knife in a drawer.
Next up, let’s take a short look at the infamous Midway redevelopment project in the Point Loma area. The developers, Midway Rising, make a deal, the City Council is worried about them re-trading it at a later date, they promise they would never abuse the public trust in that way, and then, of course, they suddenly find a sewer easement, and the deal changes before your very eyes. Any preliminary title report would have shown an 8-foot-wide sewer easement running across the middle of the property. Huh. Time to renegotiate.
Watch “The Burial” on Amazon. Lots to learn about bad behavior and negotiation.
I backed a company a couple of years ago, the VC was going to close series A in seven days, and then of course, they changed their minds. I have done a lot of deals, and I know that period of time when you are waiting for the check or the signature — which you know is coming, but it has not arrived.
The takeaway here is to anticipate the storm, hope you are wrong, but always structure the company as well as your life to be anti-fragile, able to withstand disappointment.
Rule No. 783:
The check is in the mail. Hah!