How I found a CTO by (almost) taking over a $3M business, and (almost) buying another startup
A Chinese farmer gets a horse, which soon runs away. A neighbor says, "That's bad news." The farmer replies, "Good news, bad news, who can say?" The horse comes back and brings another horse with him. Good news, you might say. The farmer gives the second horse to his son, who rides it, then is thrown and badly breaks his leg. "So sorry for your bad news," says the concerned neighbor. "Good news, bad news, who can say?" the farmer replies. In a week or so, the emperor's men come and take every able-bodied young man to fight in a war. The farmer's son is spared. Good news, of course.
Here is what I learned after a huge rollercoaster of events: don't panic. Sometimes crazy things happen. Maybe they are good, maybe they are bad. You don't know so hold your horses and just do your best moment to moment.
I recently told the story I am about to tell you to one of the founders on GrowthClub, a community where entrepreneurs help each other in 1-on-1 video calls. He said I should definitely write it up, so here we are.
Hackathon turned acquisition
My startup Panda Training signed up to participate in a hackathon. €5,000 prize and a potential collaboration with the sponsor if we nail the way to improve their product. After signing up for the hackathon, we get a call from the owner. The CEO is retiring and they are looking for fresh blood to take over. Why not ask the startup entrepreneur kids? Oh, and they liked our profiles, perhaps our startup team could be a good one to take over the business. We start learning about this €3M revenue business. It generates good profit. The product is boring, but hey, it's still a huge opportunity. They have tons of clients, perhaps this could be our chance?!
We came to the hackathon. We were seen as being too academic and not thinking simple enough. What we suggested was too expensive for their scale. That being said, we heard their feedback midway and changed the product. Our solution is probably so-so, but they didn't care, they came to evaluate us as a team.
We discuss the details. It would be great to get to know the company and everyone in it, we agree on the dates to visit the offices. The paperwork should come soon. After the meeting, I realize that 3 founders will be there for 6 days, which totals 18 workdays. For a startup, that's quite a bit. I ask for minimal pay. We agree on them paying only if they back off from the deal. I agree and wait for the paperwork.
Paperwork never arrives. I call. They changed their minds. If we ask for money for our visit it means we don't understand the opportunity presented to us. But, they say, there might be another opportunity. They are trying to recruit founders of another startup team that is in our space. Perhaps we want to take over their startup?
My startup Panda Training is operating in the corporate education and change management space. We are making business coaching cheaper by doing it via text instead of F2F or on Zoom. We have long thought about using chatbot technology to automate parts of what we do. And now we can suddenly acquire a startup with exactly that technology.
I find a friend who could help us to evaluate the technology. There is a lot of challenges we could face with acquiring a legacy code. "What if I build it from scratch? I actually have a failed chatbot startup with a solid backend ready," - asks my friend. We say "no" to the acquisition and hire him as the CTO. What the hell just happened?!
I am still wondering if asking for money for our visit is the biggest mistake of my career. Many friends say it was fair, but the truth is, I will never know. What is crazy is that this chain of events led us to consider the chatbot seriously. Now, a year later, we have since tested it with clients like Universal Pictures and SAP and it became a major part of our product mix. More than that today we are releasing a fully automated chatbot focused on goal-setting and prioritization available to anyone. Bottom-up software (selling to employees) is hot and without the chatbot, we would have never got to the point of successfully making coaching 10 times cheaper so fast.
If there is one thing I learned through this experience, it is, quoting Douglas Adams' Hitchhiker's Guide to the Galaxy, "Don't Panic".
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