This is going to be intensely personal. You should switch off now if this isn’t your thing.
Anthill asked me to blog for them, and I really struggled to decide what to write about. Most functional areas are covered on their site. Let’s not kid ourselves, entrepreneurship is ultimately meant to make us money (if you want to spout off about social goods and making the world a better place, we are not going to get on) and although I have certain areas of expertise, I have yet to make a cent.
I needed to get that out of the way. I am not here to preach. I don’t want to come across as the voice of authority on anything. People who are a lot more stupid than I am will probably make heaps more coin than I will ever see, and people who are a lot smarter than me can give you all the intellectual fluff that makes me fall asleep.
So why should you read me? How is this particular blog going to be any different to any other? Perhaps now the 10 second CV is in order. The intention here is to make me sound interesting. Keep in mind that I am broke.
Sahil Merchant. Age 35. Three kids. Law/Comm degree. Four years at McKinsey & Company. MBA from Insead in France. One year at the World Economic Forum in Switzerland. Got to sit in a room with the top 30 CEOs in the world and act as the note taker for their private conversations three years in a row. Me and Gates are tight! Left McKinsey without being pushed (somewhat rare). Decided to sell magazines! Started up mag nation.
This is where the entrepreneurial cred comes in. I have raised over $7M across multiple funding rounds from sophisticated private and professional investors for a business that retails a boring and saturated product and has yet to turn a profit (we are getting there). I have built a consumer brand that has a cult following among the growing urban savvy demographic. And I have jointly overseen (I have a partner) every success and screw up that mag nation has lived through.
I know marketing, management, the detailed ins and out of a multitude of capital raising structures and issues, branding, social networking, investor management, corporate governance and a host of other useful things. Every one of these with perhaps the exception of capital raising is already amply covered on Anthill’s site. (I digress for a second – capital raising is well covered on Anthill, but very few Australian entrepreneurs actually have experience of a multitude of VC/PE-type funding mechanisms and legal structures, despite many claims to the contrary). Unless you want me to put you to sleep by talking about tag and drag, cumulative convertible prefs and anti-dilution formulae, I have nothing new to blog about.
Instead, what I am going to write about is my ongoing journey as an entrepreneur. Not the mag nation company line. You can read about that on the mag nation blog. This will be story behind the business.
Who is out there telling us about the intense personal sacrifices that starting up your own business can entail? Sure, lots of people warn us, but does anyone really share the ups and downs of it all?
Most of the stories we hear are from the glamorous successes – oh how wonderful and smart they all are and what a great job they did. Hasn’t anyone ever heard of the success bias? How many of the 99 percent of people who start a business only for it to fail within a year write their memoirs around their experiences? Imagine what lessons we could all learn from those stories.
As I said at the start, this is going to be intensely personal….
- How do you feel when nominated for Young Entrepreneur of the Year? Pretty good perhaps, but is it worth anything when all your friends are earning a steady living, going on holidays, putting money aside for their kids’ education, and working half the hours you are?
- Is it better to jump head first into a business, putting in all your heart and soul, or do you take small conservative steps and protect your downside by maintaining your existing income until success is more likely?
- How do you balance giving away more of your company to investors upfront vs taking less money and keeping a greater share?
- How important is your husband, wife, lover, mother or pet hamster when it comes to starting a business?
- Do you need to love the area your business focuses on for it to be a success? Does starting a business mean you lose your friends?
- When presenting your financial projections, do you put down realistic numbers to establish credibility, knowing that funders will automatically dumb them down and then find them unattractive, or do you show the optimistic case so that the dumbed down numbers become realistic but you risk your believability?
- What is the difference between knowing when to cut your losses and stop flogging a dead horse versus persistence and strategic renewal?
Lots of questions, and I have no answers.
What I do have is my experiences and personal perspectives as I have tried to deal with all of these questions and more. And given that they are my experiences, they are unquestionable. They can’t be viewed through the lenses of right and wrong. They are simply my entrepreneurial truths.
I promise to give you a hand-on-heart, blow-by-blow, personal account of a continuing struggle to build a successful company. This won’t be an attempted “look how smart I am”; I will give equal coverage to the personal highs, lows and genuine dilemmas. And when I don’t know, I will say so.
Consider this an entrepreneurial “Dear Diary”. Your candid thoughts, contributions and experiences will only make this richer. Perhaps we can all learn something.
Sahil Merchant is founder of mag nation. Follow him on twitter: @sahilmerchant
16 Comments
Sharmin
July 9th, 2009 at 5:37 pm
A nice start and a good read. Well done.
Looking forward to the next one…
[Reply]
Cat Matson
July 9th, 2009 at 5:39 pm
I want to jump up and down and clap my hands with glee…. and let out a sigh of relief at the same time. This style of blog is EXACTLY what the entrepreneurial community needs…. and well done Sahill for being the one willing to write it. I look forward to future posts with antipation.
[Reply]
bronwyn
July 9th, 2009 at 7:49 pm
So true. I’d love to read the memoirs of all the failed businesses out there.
I’d learn so much more than from the the millionaires and their hard covered business books.
[Reply]
SusanB
July 9th, 2009 at 9:22 pm
The writer sounds like a w*nker – ‘yet to make a cent’ and ‘broke’ but an expert in raising and spending other people’s money. We could all have a ‘cult following’ if we spent $7m on unprofitable but fun ideas.
[Reply]
Sahil Merchant
July 9th, 2009 at 10:45 pm
Hi Susan,
Sounds like you have an opinion!
A good friend of mine runs a business valued in the hundreds of millions. He has partially cashed out so the valuation is more than theoretical. Two years ago, he too was broke and his business had not made a cent. He was on a journey and kept on investing in capabilities and infrastructure to get ahead of the curve. I am doing the same. Our revenues have grown massively, but we are investing to do this. New stores and online capabilities all cost money, and there is a lag before we can recoup this investment.
Not all business models are the same. Take 42 Below, the NZ vodka company that sold to Bacardi in the vicinity of $170M while making an EBITDA loss of a few Mil. This is not to say that all businesses can tap in to “strategic value” but there are very few overnight successes in my experience. I don’t know of many young businesses that cream it from day one. Using your logic, no one running a young business could possibly have any expertise in anything.
It is not easy to raise money from VCs and PE firms. Nor is it easy to build a brand to evoke passion even with lots of money. Take a look at the problems Borders and Angus & Robertson are having in relation to engaging younger audiences. Yet they have lots of money behind them.
I don’t really need to convince you of whether I am a wanker (yes – you are allowed to spell it) or not. However, I think it is important to recognise that expertise can be found in many places. Keeping an open mind never hurts.
[Reply]
Con Frantzeskos
July 9th, 2009 at 11:17 pm
Good stuff Sahil – looking forward to the blow by blow… Don’t hold back.
SHAMON!
[Reply]
Gary Wall
July 10th, 2009 at 8:52 am
Hi Sahil
I will be looking forward to hearing more about your secrets to raising capital. In my experience the procedure goes very much like the “Dragons Den” where a bunch of blood sucking parasites sit around and rip you to shreads before offering you nothing for 100% of your company. It is a difficult call to make and I look forward to hearing any tips you have as to the issues you mentioned in your blog. Keep at it. Jump in head first. Dont give away more than you have to. Your wife/ partner and especially hampster are vitally important – it costs a bundle to pay them off if you make the big time. Love what you do – bugger your friends they will come around once you start to make it. Show optimistic numbers – nobody believes anything you say anyway. Persistence is every thing.
Good luck
[Reply]
Claire
July 10th, 2009 at 9:28 am
Wow, this is different! Looking forward to reading what you have to say,
Claire
[Reply]
Ross Hill
July 10th, 2009 at 11:47 am
You guys might also be interested in a podcast we recorded at a Hive event with Sahil You can download it from http://rosshill.me/sahil-merchant.mp3
[Reply]
Mike Boyd
July 10th, 2009 at 12:13 pm
Nice work Sahil, Keep it coming!
[Reply]
Raz Chorev
July 10th, 2009 at 5:38 pm
Sahil, great and wonderful and brave(!) initiative. Don’t take too many pages of Guy Kawasaki’s book, or you’ll become a wanker
Don’t sell yourself short. Others will do that for you, and probably better. concentrate on your positive attribute. Nothing to do with transparency – once you make it, many people will LOOK for faults they can expose. You don’t have to make their job too easy…
I would love to hear about your experience, and the lessons you’ve learned along the way. Failure is the best way to really learn – this short video will explain better – http://bit.ly/1862aR.
Keep sharing…
[Reply]
KevinR
July 10th, 2009 at 5:46 pm
“When presenting your financial projections, do you put down realistic numbers to establish credibility, knowing that funders will automatically dumb them down and then find them unattractive, or do you show the optimistic case so that the dumbed down numbers become realistic but you risk your believability?”
Absolutely true! Put in realistic figures and they are too low. Put in blue sky figures and they are unrealistic. Put in low figures and they are unattractive. So Best/Expected/Worst offered and the worst are looked at!
Any excuse will do!
I listened to a ‘panel’ of VCs talking at a recent conference. How they all would have liked to invest in Facebook etc etc. Yet of all the panelist from personal experience I knew none had the balls to invest in anything that was not cashflow positive. All wish/talk/BS but no balls.
[Reply]
Scott Kilmartin
July 10th, 2009 at 6:30 pm
Thanks Sahil,
As ever raw honesty in a world where it is a rare commodity.
I’ve asked myself many of the questions you pose in your post. Especially the ‘Persistence vs Blind Faith’ question.
My experience building haul bares many similarities to your MagNation journey. Different businesses & different paths but many shared challenges and ‘fork in the road’ decisions.
Keep on truckin’
http://twitter.com/scottKilmartin
[Reply]
Ross Hill
July 10th, 2009 at 11:59 pm
@KevinR I love that comment about the VCs. Youtube was the same – leaking money all over the place, then they sold for billions and everyone wishes they were on board. Twitter will probably be similar again. I love the irony!
[Reply]
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