Everyone Has a Plan Until They Get Punched in the Face

“Everyone has a plan until they get punched in the face.”

-Mike Tyson

After we launched the GroupMe Beta at TC Disrupt in September 2010, we inadvertently stepped into another round of fundraising. It was never our intention to raise money at that time, but there was considerable interest from several VC firms on the West Coast, and so it seemed like the prudent thing to do. The opportunity to raise another round of financing was appealing as competition in the space was heating up, and we had a chance to step on the gas. So we went for it and initiated the process with two firms.

We had full partner meetings which could not have gone better. I was 50/50 that one company was going to give us a term sheet, and with the other I was 95% certain. That’s absurdly high certainty, naive certainty, but that was the case. After some very strong meetings, we flew back to NYC and waited for a term sheet to come in. The 50% firm was in touch for two weeks, and ultimately came back with a “No” because of an issue in diligence (which we solved down the line). The 95% firm went relatively silent for two weeks, and ultimately circled back with a “No” due to a conflict of interest.

What happened? The plan was to quickly close with one of these firms and then go on and grow our business. That was the only plan, and it seemed to be a sure thing at the time. When the “No’s” came in, it was a blindside knockout punch to the face.

Word had leaked that we were raising and we were convinced that we had to continue onwards. Up until that point we weren’t running a process, the process was running us. There was no backup plan because we never thought one was necessary.

Fortunately, we were able to get back on our feet fast, recoup, strategize, and quickly talk to some more firms we were interested in working with. We were lucky that several of them wanted to work with us. I’m grateful for the way things turned out with that raise - I don’t think they could have been any better and I couldn’t ask for better partners than the ones we had. Should we have had a Plan B? Yes. Was it a rookie mistake? Most definitely. But if it didn’t happen then, it would have happened somewhere down the line, and with more severe consequences.

As Mike Tyson said, everything is good until you are knocked down on your ass. This happens all the time at startups and takes many different forms. Sometimes a financing falls apart. Other times a new hire you and the team love bails at the last minute. Some features and products you pour your heart into don’t scale or gain traction like you think they would when they launch. I’ve seen plenty of sites unfortunately go down on their launch days after months of preparation. And sometimes that epic distribution deal falls apart. It happens. It’s always important to think through and cover your possible failure cases and have a backup, but inevitably we’re all blindsided at some point. When that happens, there’s nothing left to do but get back up and get revved up for the next round.