I gave a talk on October 16 of last year at the KASE/KIN Entrepreneur Academy on “After Launch, Now What.” My answer was “What was once heroic must become routine” (podcast is here, it’s about 16 minutes if you would like to listen).
I was reminded of it when I came across the famous “This is Still a Start-Up” E-mail from June 2000 by Brendan Barnicle at MyLackey.com. Excerpts with my comments intermixed follow, along with some articles that detail how the story ended.
This Is Still a Startup
It is now 6:45 pm and there are only 12 people in our office. We have 65 people that work here in Seattle. This is totally unacceptable.
Barnicle is no stranger to hard work himself–he graduated cum laude with a B.A. in government from Harvard University and a J.D. from the University of Washington–but he seems unable to find the right words or policies to motivate his staff. Most importantly, he doesn’t put himself in the boat with them. It may be effective to criticize one or two individuals privately for poor performance, but when you start to berate the entire company via an e-mail it’s time to look in the mirror.
Measure Inputs and Outputs
Barnicle is measuring an input (time in the office) not outputs. To build a successful start-up team you have to hold the team accountable for results, when you get too much into the “how” you may preclude them from finding a better way.
This company has far too much very important work to do to have virtually empty offices at 6:45 pm. If anyone thinks that everything we need to do as a company can be accomplished within an 8 hour day, then I think they fail to understand the scope and complexity of our venture. Anyone harboring such illusions should seriously consider a career change. I am sure that I could point to tasks for every single person in this company that would merit working past 7 pm every single night.
This for me is where he goes seriously off the rails. Now that MyLackey has launched and is scaling, what’s needed are systems and a business model that generates a profit without constant heroics on the part of the staff. They need scorekeeping mechanisms that are visible to everyone and allow each group to integrate their efforts into a profitable whole: dashboards and a workflow system that pinpoint what each person needs to be doing.
You Need Systems
By the time you reach a headcount of 65 you can’t have the CFO/co-founder running around telling everyone what to do. If you are a founder and find yourself exhorting everyone to work harder you should stop immediately and figure out what’s gone wrong.
We have an amazing lead on an outstanding business, but it will not last forever and we must move faster. As some of you know, we are lagging behind our revenue goals. We need everyone in every department working every day to meet and exceed these goals. We have similar goals in development, sales, business development, marketing, operations and every other aspect of our business.
What’s interesting is that at the time he is writing this, and certainly in subsequent conversations with his venture capitalists, he is asking for more money for expansion when he can’t get his Seattle operation profitable. I know that we have all learned the lessons of the dotcom era: expenses follow revenue, nothing new ever works, you can’t lose money on a product or service but make it up in volume.
Effort and Risk Taking Are Necessary But Only Results Are Sufficient
This is not a bank; this is not Boeing. This is a start-up and we are all expecting to be rewarded for taking the risk of a start-up. But, there will be no rewards without exceptional effort.
There are normally only rewards for exceptional results. Effort and risk taking are necessary but only results are sufficient.
In transition from heroics you need a system that accumulates sustainable individual efforts in the same direction so that you actually get results. You can’t rely on heroics once you are scaling the company. If you are reading this blog you have probably left a big company where they had process, metrics, and dashboards and you are thinking to yourself “I don’t want anymore of that.” So as little of that as possible is probably a good idea, but just assuming that folks will do the right thing without guidance and feedback when there are more than a dozen on the team is a recipe for disaster.
Parts of the e-mail that was published were disputed as fabrications by MyLackey representatives. A provocatively titled article “Who Wants to Play ‘Which Dot-Com is Next to Die?‘” in the June 23rd 2000 Business Week (about a provocatively titled website) a paragraph was devoted to the MyLackey E-Mail, ending with:
A spokeswoman for MyLackey.com confirms that the e-mail did come from Barnicle, but says Kaplan’s posting of it had been “corrupted in some places.” She won’t elaborate on what that means.
An article in the June 22, 2000 edition of the Seattle Stranger entitled “The Boss’ Lackey”
A spokesperson for Mylackey, Howard Barokas, called the e-mail “bullshit,” saying it was a tampered version of Barnicle’s original message. Barnicle himself told The Seattle Times that forcing employees to work 10 1/2-hour days was not part of the original e-mail.
However, neither Barnicle nor Barokas disputed any other part of the tirade, including a warning that the company was “lagging behind” its “revenue goals.” Mylackey recently grabbed $6.5 million in funding to expand its operations in other cities.
A May 5, 2000 article in the Seattle Post-Intelligencer “MyLackey to use capital to enter 11 new markets” noted (Bold in original):
MyLackey.com competes against Seattle-based ServiceStop, Alexandria, Va.-based VIPDesk.com and Denver-based Concierge Confidant. Earlier this week, ServiceStop announced new vendor agreements with Wondermaids, Cookies By Design, Gordon Biersch, Malesis Flowers and White’s Mobile Detail, bringing the total number of vendors to 250. The company, which has 50 corporate customers in Seattle, also announced the opening of a new office in San Francisco.
MyLackey Realizes They Don’t Have a Business Model and Closes
Only VIPDesk.com survives today. Their business model allows educated people to work from home part time. A far cry from cleaning houses on demand. A Tue Oct 24, 2000 article announces the shutdown–probably inspired by some 9/11 induced sobriety since they hadn’t run out of money but realized that that didn’t have a business model that was profitable.
With a catchy name, an aggressive marketing campaign and $8 million in financing, MyLackey.com appeared to be a rising star in the Seattle Internet scene. But when it came time to make money, the online errand service fell far short. So co-founder Brian McGarvey made the unpleasant decision Friday to pull the plug on the business and lay off its entire staff of 85 employees. […]
MyLackey.com. The company, which raised a $6.5 million round of financing led by WaldenVC in April, could not persuade investors to provide more capital for the company’s expansion plans. So instead of blowing through the remaining cash, McGarvey and the executive team decided to close down.
“It has been a phenomenal ride,” said McGarvey, 32, who co-founded MyLackey.com just 16 months ago. “Of course, we could have done some things better. But who would have known. It had never been done before, and it wasn’t like there was a book you could open up for the answers.”
He said the company would not file for bankruptcy and employees will receive salaries for the rest of the month and benefits for the remainder of the year. “I still think this is a great idea and a great business,” said McGarvey, who is now consulting with Internet entrepreneurs. “But we just didn’t have enough time.”
Craig Weindling, owner of Smiley Dog pet food in Shoreline and a MyLackey.com service provider, said MyLackey.com is a classic example of a company that grew too big too fast. He said his 8-year-old company had opportunities to grow faster, but he refused to overextend the business.
“I don’t think the Internet companies are any different than other businesses,” said Weindling, whose three-member company is profitable. “If you don’t cover your bases, you ain’t going to make it.”
Don’t Forget the Lessons of the DotCom Era
I am sorry to spend so much time recapping a dotcom era failure, but I encounter more and more entrepreneurs who are either unaware of, or oblivious to the lessons we all learned the hard way from 2001 to 20004 or so. We are a ways from a bubble, but too many folks seem to think an infusion of new capital will solve all of their problems, or that it’s the only thing holding them back.