Back To The Garage
In hindsight, we started Pocketpass at just the wrong time. The DotCom boom was already starting to meltdown behind the scenes which was making it nearly impossible to raise the money we needed for expansion.
Pocketpass had the usual problems for a start-up trying to develop new technology: programming obstacles, personality conflicts and that all-important goal: finding the first paying customer. Even though we had engineered a working payment system and run the company for almost two-and-a-half years on just over $1 million (not the usual DotCom burn rate), by the end of 2000, the company had run out of money.
Even more significantly, some of our strategic partners were hitting the wall and leaving us without capabilities we had counted upon. One of the most important was eCommony (later known as Verai) which allowed direct transfers of money from one credit card to another. Pocketpass was their first partner and we engineered their PayToCard technology seamlessly into the Pocketpass system. Unfortunately, when they went splat! It left a big hole in what we had to sell.
Things looked headed for the final Board meeting in early 2001. I had already been working for no salary since the previous summer and there was no money to pay for rent or phones much less people. The only choice seemed to shut the company down in an orderly manner.
The only chance to stay alive was a deal I had been working on for months with a large Internet payments company called iBill which needed the micropayment system that Pocketpass was offering.
I had several other potential deals in the works at that time, but iBill seemed to be the closest to closing.
The iBill deal seemed to be taking forever, but I would later learn this was the result of resistance from some of the iBill technology people: partly because of the “not invented here” syndrome and partly because we were Linux-based and they were “Microsoft Uber Alles” people.
But I was confident enough by early February 2001 I created the “Back to the Garage” plan for the company which involved my working for free and fronting all the expenses necessary to keep the company alive. The only person paid would be our programmer, developer Eric Harold.
I sent out the e-mail memo on Feb. 8, 2001:
Subject: "Back to the Garage" Respirator Plan for Pocketpass
Regardless of what the final iBill offer becomes, we will need to cut burn even more while retaining enough engineering resources to make a comeback. I call this "back to the garage" because I believe that we can return to the beginning and re-build, only we have 200,000 lines of code, the first licensing contract, prospects for more contracts and for acquisition.
This allows us to maintain or increase value as we look to be acquired. Hopefully we can turn this around in a month or two while staying afloat on the iBill $$.
The board approved the plan and the first draft of iBill’s Letter of Intent (LOI) to license the Pocketpass software arrived on Feb. 26. The LOI was negotiated and a final letter signed on April 26.
While the up-front money was not as good as we had hoped, it would be sufficient to keep our doors open and the development continuing. It would also set the stage for the Readipass joint venture with iBill, an operation that would take us right up to the point of revenues and big customers before the Transfund investment group would abruptly throw the company into crisis again.
In hindsight, letting the company die in February 2001 might have been a better alternative. From where I stand now, it would have meant that I could get on with my life and not endure two more financially draining years, shelling out money for the company's expenses and working for no compensation most of that time.
It would also have meant that my two good friends, board members and investors -- Drs. Yaqub Mirza and Inder Singh -- could have cut their losses then and gotten on about their own lives as well.
But I felt duty- and honor-bound to go down swinging, to use every ounce of energy I had to make this a success and help them recover the money they had invested.
Besides, things were looking up with the iBill deal. I had no idea back in mid-2001 that new investors a year later would spell disaster for the company.
Pocketpass had the usual problems for a start-up trying to develop new technology: programming obstacles, personality conflicts and that all-important goal: finding the first paying customer. Even though we had engineered a working payment system and run the company for almost two-and-a-half years on just over $1 million (not the usual DotCom burn rate), by the end of 2000, the company had run out of money.
Even more significantly, some of our strategic partners were hitting the wall and leaving us without capabilities we had counted upon. One of the most important was eCommony (later known as Verai) which allowed direct transfers of money from one credit card to another. Pocketpass was their first partner and we engineered their PayToCard technology seamlessly into the Pocketpass system. Unfortunately, when they went splat! It left a big hole in what we had to sell.
Things looked headed for the final Board meeting in early 2001. I had already been working for no salary since the previous summer and there was no money to pay for rent or phones much less people. The only choice seemed to shut the company down in an orderly manner.
The only chance to stay alive was a deal I had been working on for months with a large Internet payments company called iBill which needed the micropayment system that Pocketpass was offering.
I had several other potential deals in the works at that time, but iBill seemed to be the closest to closing.
The iBill deal seemed to be taking forever, but I would later learn this was the result of resistance from some of the iBill technology people: partly because of the “not invented here” syndrome and partly because we were Linux-based and they were “Microsoft Uber Alles” people.
But I was confident enough by early February 2001 I created the “Back to the Garage” plan for the company which involved my working for free and fronting all the expenses necessary to keep the company alive. The only person paid would be our programmer, developer Eric Harold.
I sent out the e-mail memo on Feb. 8, 2001:
Subject: "Back to the Garage" Respirator Plan for Pocketpass
Regardless of what the final iBill offer becomes, we will need to cut burn even more while retaining enough engineering resources to make a comeback. I call this "back to the garage" because I believe that we can return to the beginning and re-build, only we have 200,000 lines of code, the first licensing contract, prospects for more contracts and for acquisition.
This allows us to maintain or increase value as we look to be acquired. Hopefully we can turn this around in a month or two while staying afloat on the iBill $$.
The board approved the plan and the first draft of iBill’s Letter of Intent (LOI) to license the Pocketpass software arrived on Feb. 26. The LOI was negotiated and a final letter signed on April 26.
While the up-front money was not as good as we had hoped, it would be sufficient to keep our doors open and the development continuing. It would also set the stage for the Readipass joint venture with iBill, an operation that would take us right up to the point of revenues and big customers before the Transfund investment group would abruptly throw the company into crisis again.
In hindsight, letting the company die in February 2001 might have been a better alternative. From where I stand now, it would have meant that I could get on with my life and not endure two more financially draining years, shelling out money for the company's expenses and working for no compensation most of that time.
It would also have meant that my two good friends, board members and investors -- Drs. Yaqub Mirza and Inder Singh -- could have cut their losses then and gotten on about their own lives as well.
But I felt duty- and honor-bound to go down swinging, to use every ounce of energy I had to make this a success and help them recover the money they had invested.
Besides, things were looking up with the iBill deal. I had no idea back in mid-2001 that new investors a year later would spell disaster for the company.
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home