When you start a new venture, everything is shiny and new. There’s excitement in the air. All you want to do is focus on the tasks at hand and make the company successful. Sure, there’s a lot of stress, and you’re going to have some sleepless nights. But in the end, you’ll have the reward of knowing that you did your best and created something special.
But in the process, there are going to be a lot of very smart people telling you what to do, and most of the time you should listen to them. They are the experts, after all. But they get wrapped up in the excitement of it all just like you, and when that happens, mistakes can be made. Sometimes, they’re critical ones. Things that can tank the company if you’re not careful.
I had some great advisors on my team when we started 24/7 Media in 1997, but one piece of advice they gave ended up being something that almost killed the company—and also saved it in the end.
The Stakes
Back then, the internet was mostly college kids and the people who used the free AOL disks that came in the mail. However, there was a lot of potential. There was already advertising at that point, though none of it was done very well or standardized. We wanted to change that model, so we did, creating all sorts of new ways to sell ads. We created a division named Petry Interactive and launched an internet advertising business.
While there was a lot of potential, the owner of Petry didn’t have the ability to sink in as much funding as he liked. Instead, we worked out a deal. I would buy Petry Interactive and spin it off as its own company, and he would become one of the shareholders. It was a great way to get us off the ground, and it gave us some runway to succeed.
All we needed then was some more money.
Funding with a Cost
Over the next few weeks and months, there were many moving parts as we tried to get this new company together. In the end, thanks to meeting some great investors, we would combine multiple companies to create a new organization: 24/7 Media. I would be the CEO.
24/7 Media went on a buying spree. We picked up companies for their technology, their server stacks, lines of business—anything that could help us grow a foundational enterprise. We got big fast, expanding into new countries and continents within just a year. We had over a thousand employees in 52 locations worldwide by 2000, and our IPO had done pretty well. Our stock was at $69/share, and our market cap was $1.8 billion. Everything was looking up.
But when the dot-com bubble burst in March of 2000, all of a sudden, we needed to figure out how to stay alive. And that’s when the cost of growing had an interesting side effect.
The Bill Comes Due
While we had spent all this time growing, we hadn’t focused on the business itself. We weren’t profitable because that wasn’t our goal. But now we needed to get profitable and fast, otherwise we would have to shut our doors for good.
Had we aimed for profitability instead, as some of our competition did, we might have entered the bubble pop in better shape. Instead, we had to do the opposite thing we did to get there, which was start selling assets.
In this way, our failure became our gain. We sold every business we could to just keep payroll going for another month. It was hard, and we took some heavy losses. Still, we somehow made it through, and in 2007, we sold the company for just shy of $700 million to WPP.
Were I to do this all over again, I would try to find a middle line between profitability and growth. Some of our acquisitions could be more profitable and help our bottom line. We needed to be more strategic in our acquisitions and avoid doing too much at once.
That’s not what we did, obviously, but we did make it out of the other side of the crash. Today, however, if you’re starting a venture of your own and your advisors tell you to grow above all else, maybe take a moment and consider what that means before you dive in headfirst.