The Most Critical Stage of Entrepreneurship: What Is It?

What is the most important stage of entrepreneurship? Originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

“The hardest part of building our company will be raising the initial funding,” I naively said to my fellow co-founders. Every one of them nodded their heads in agreement.

I continued on with my pep talk. “We’ll be home free once the funding closes. We’ve built businesses like this before. We know what we’re doing, right?”

I said those remarkable words to the team in January. It would take two more January’s before we closed our funding. That’s two years if you’re counting.

What Could Be More Difficult Than Your Initial Fundraising Taking Two Years?

I was brimming with confidence after we got through our fundraising ordeal. It was 2010. The Great Recession was ending, and I felt like we had the wind at our backs.

The first few months’ things seemed to going to plan. Our recruiting efforts were on schedule. And our product development efforts were on schedule too.

Our board meetings were a breeze. The investors were happy with our progress. And the bumps in the road were just that, bumps.

Six months into our journey as an operational company I had to fire one of my co-founders. “Randy’s” problems working with the rest of the team had become unbearable.

I let the board know I was going to terminate Randy. They were all very supportive. When Randy left the company, it felt like a black cloud had been lifted.

Randy’s termination was as rough as things got in those early days. I was bummed that things didn’t work out, but letting him go was the right thing.

Achieving Traction Might Prove More Difficult Than Your Initial Fundraising

I was meeting with one of our investors, “Raul”, in his Sand Hill Road office right before we released our first product. Raul said to me, “Our conversations will grow more interesting after you introduce your products.”

I smiled and nodded. Raul had a reputation as being really difficult to deal with. He’d been reasonable since we closed our funding, but I knew he was right.

What would happen if our products didn’t gain traction as quickly as we planned?

That’s exactly what happened. Our first product was a soft launch, meaning we didn’t do any marketing at all. That would come with our second set of 15 products we announced three months later.

The products sold, but not nearly at the pace we had planned on. Sure enough, my conversations with Raul did get more interesting.

Raul: “Why aren’t the products ramping?”

Me: They are, just not at the pace we expected.”

Raul: “I’m 79 years old. At this pace, I’ll be dead before they ramp. You’ve got to try something different. Maybe we should come out with lower priced products.”

It felt like a panic move to me.

Me: “That’s an interesting idea. I’ll look into how we can do that.”

It would take us over 12 months longer to get to where I expected us to be after six months in the market. And Raul kept on me until revenue finally turned the corner.

Raising Your Next Round of Funding and Fighting with Your Investors Might Prove More Difficult Than Your Initial Fundraising

We started raising our next round of funding about two years after we closed our first round of funding. As part of the process, Raul asked me to present an update to his partners.

However, I sensed there might be trouble because Raul had previously told me the funding was approved and I didn’t need to present to the partnership.

I wondered what had changed, so I asked Raul.

“Brett, this should be fine. Make sure to emphasize the low pricing aspect of the business, and don’t spend much time on the proprietary business.” Raul commanded.

We did implement the family of low priced products that Raul suggested. It’s essentially identical to another family of products we have, but with reduced specifications and prices.

It was an idea worth trying, but we had just put the products in the market, so we didn’t have any evidence it will work.

“OK, I understand. I’ll review the presentation with you later in the week.” I didn’t feel comfortable with what Raul is asking, but he knows his partners better than I do.

I still didn’t feel comfortable with the direction, but I rehearsed, rehearsed, and rehearsed some more until I felt OK about it. I still had this lingering feeling that something was wrong, but I kept plowing ahead.

I talked to my advisor, Dave, about it, and Dave’s advice was to follow Raul’s instincts because he knows his partners. Dave had been a VC, so I thought this was good advice.

When I got the office of “Donald Ventures” the morning of the presentation, I was escorted into the main conference room. Raul joined me a couple minutes later. We started talking.

“Brett, remember that Donald doesn’t care about gross margin. Donald only cares about the top line, so emphasize our new low price strategy.”

My doubts about emphasizing price again popped into my mind, but I pushed them back. It was too late to change our focus.

Raul and I continued chatting. Slowly, but surely, the partners started filing into the conference room.

“Jim”, one of the only partners I recognize, has his assistant bring him his tea in a grand show of power. We are still waiting on Donald to enter the scene.

Finally, at 9:15AM, Donald arrives. His eyes are darker than usual, and his face is bruised. As usual, Donald sits, slouched as always, directly across from me.

I begin my presentation. “Just to update everyone, since I see a lot of new faces here (one of the unique dynamics of Donald Ventures is the revolving door of partners, and that is unusual for a Silicon Valley VC firm), Touchstone is a high-performance analog company. It’s a great business model with lots of customers in lots of different markets….”

Before I can continue, Jim cuts me off. “Brett, what is your revenue plan for the year?”

“$1 million.”

“What was your original plan?”

“Um, $3 million.”

“Wow! One of Raul’s companies, not on plan!” You could hear the sarcasm dripping in Jim’s voice. In the moment, I thought to myself, “what have I gotten myself into? An internal squabble between Jim and Raul?”

It only got worse from there. It was an ambush. It was, by a wide margin, the worst investor meeting I’ve ever had.

The funding we had been promised went away in an instance. Instead, Raul and Donald Ventures became obstructionists, trying to force us to sell the company.

The next 12 months proved to be the most difficult of my career. Raul blocked every term sheet we received from closing. It was a nightmare that I would have never expected.

The Reality Is You Just Don’t Know What Will Be the Most Difficult Part of Building Your Company

I remember saying to myself, “I just want to breathe.” What I meant was that I want to feel like I could relax, exhale, if just for a moment.

The reality is you can and you should exhale a lot. Meditation helps. Sleep helps too. So does having someone to talk to that you can trust.

Because the reality is there’s always going to something difficult you’re dealing with. Even when your company is profitable. Even when your company has made it. There’s always something difficult.

Contributed by Brett Fox,  Fmr CEO @ Touchstone Semiconductor