Passion and Perseverance: A Positive Feedback Loop

Excerpt from the book Unleash Your Inner Company by Guest Author John Chisholm

In the first half of 2001, the dot-com bust, I would often wake up around 2 a.m. with sweat-soaked sheets sticking to my skin. CustomerSat’s second round of financing, long planned for that January, had refused to come together despite a flurry of meetings as we ran out of cash. Those nights I would get up, shower off the sweat, and try to get back to sleep. When my executive team and I finally grasped that the Series B round was not going to close, we huddled to decide what to do. First, we cut our salaries, then several weeks later those of all our employees, by 10 percent; I cut my own salary and that of my CFO by 50 percent. Debating and agonizing over every individual, we laid off 40 percent of our workforce. In our all-hands meeting immediately after, as I explained to our remaining employees that this was the only way we could keep together and stay afloat, my composure collapsed and I broke down sobbing. Our employees stood stunned, sympathetic, and embarrassed.

After many consecutive quarters of profit and growth, our recurring revenues had dropped that first quarter of 2001 by a whopping 20 percent. Our first customers to stop paying were themselves dot-com companies, like highflier Webvan, who would file for bankruptcy in July 2001 just sixteen months after their initial public offering (IPO). Later, even Fortune 500 companies discontinued our online survey services or simply stopped paying. To help us get through, one of our Series A investors lent me $300,000—for but not to the company—meaning that I, the CEO and founder, would be personally liable for repaying the loan. The cash would last us ninety days. Later I would pay back the investor—to whom, despite the arrangement, I was deeply grateful—by mortgaging my townhouse in Menlo Park, California.

The next quarter our revenues fell again. To make payroll this time, we factored receivables, a costly maneuver, and cut salaries by an additional 10 percent. I reduced my salary to minimum wage, the legal limit. Our company moved into the second floor of our building and rented out the more attractive ground floor to another start-up. That company quit paying us rent after three months, came in late one weekend night, cleaned out their offices, and vanished without notice. The nightmare would not end.

After those fitful nights and drastic actions of the first half of 2001, we could finally see profitability ahead in the third quarter. Then, on September 11, terrorists viciously attacked US targets including the World Trade Center. Enveloped in smoke, dust, and debris, the twin 110-floor towers crumpled and collapsed. With much of the US northeast communications grid down, just accounting for all our employees took hours of emailing, phone calling, and pleading to know who had heard from whom. Our VP Sales Russ Haswell was marooned in London, unable to get back to the United States; our client invited him to stay at their home. The next day I was finally able to broadcast the message, “All CustomerSat team members are safe.” The US West Coast escaped the full brunt of the horror, but even in Silicon Valley, every company I knew had customers or suppliers who lost employees or family members in the attacks. Our client Akamai Technologies lost its brilliant cofounder Danny Lewin on American Airlines flight 11. Our salespeople were calling insurance and other firms in the World Trade Center; tragically, their phones just rang and rang. After the dot-com bust, September 11 was the final blow for many start-ups.

We broke even in the third quarter, a milestone and quiet relief. A very small profit followed in the fourth. The going stayed tough through all of 2002 and the first half of 2003, during which time we didn’t hire a single new employee. But we made it through. CustomerSat stayed profitable and grew nearly every quarter until the company was acquired in March 2008. Only a fraction of Internet companies survived; even fewer went on to successful exits. Why did CustomerSat do so when others did not?