Most of us have a misguided view of successful founders. We look at great founders like Brian Chesky (Airbnb), Neil Blumenthal (Warby Parker), and Kevin Systrom (Instagram), and picture perfectly confident, regretless people.
The reality is this: every successful founder regrets at least one major decision they’ve made.
Every founder, in their weaker moments, thinks about what greater heights their company might have reached if they’d done something differently.
Obviously, successful founders don’t let these regrets haunt them forever, and they don’t dwell on them endlessly. Nonetheless, the thought is there from time to time—”What if I’d done it just a little bit differently?”
I’m no different. My company, Snap Interactive, was at one point worth well over $100 million. Obviously, we got somethings right. However, I still have plenty of regrets over decisions I made, and one in particular stands out as the most poignant. It involves something many founders struggle with—fundraising.
You can read plenty of articles that make good arguments against fundraising when you don’t need it to be profitable, but I have a story from the other side.
I walked away from a $10 million check at a critical moment in our company’s history, and while we were still profitable and still successful, it’s hard not to think about what could have been.
The $10 Million Check I Left on the Table
Early on in our company’s history, we made a gutsy call.
We took our dating app, which at the time was a standalone website with modest traction, and tore it all down. We transitioned the app entirely to a new platform that had just begun to support apps—Facebook.
In hindsight, this was obviously the right choice. As one of the first Facebook apps, we were able to grow at a truly explosive rate, all without making major changes to our product’s core functionality.
In the midst of this period of Facebook-driven explosive growth, a venture capitalist approached me with an offer that I couldn’t refuse—but I did.
This venture capitalist asked me to fly out to Silicon Valley to meet with him, so I obliged him because this could have meant a whole lot of money coming our way.
When I got there, he told me he thought what we were doing at SNAP Interactive was great—we had a great product, we were growing very fast, and they wanted to be part of it. He was willing to make a very large investment in our company, and he went on to discuss the details of how such an arrangement would work.
“Let’s talk,” he said. “With my investment, you’ll become the largest dating site in the world. Based on what Match.com is currently worth, plus your projected growth, that would come out to a valuation of about $1 billion.”
The idea was to accelerate our growth by using his investment capital to pay to acquire millions of users on Facebook. By doing that, it was easy to see how we could get to fifty or a hundred million users fast. It was a simple hypothesis, the math was solid, and I definitely agreed with how it would work.
“The terms are going to be great, but there is one stipulation: you have to agree to move to Silicon Valley and bring the company with you,” he revealed.
I questioned him, “Why?”
“That’s where all the top-tier Facebook engineering talent is, and I want you to be directly linked with that. There’s no way a company in New York City can compete with a similar company in Silicon Valley,” he said.
Unfortunately, I completely agreed with his logic. We got extremely lucky to have elite professionals like Mike Sherov and Jim Supple with us from the beginning, but it was very hard for us to find more talent—there weren’t enough guys like them in our area to match the Silicon Valley talent pool.
I fully recognized that talent was everything in the tech world, but I also understood the roots of the key people who contributed so massively to the foundation and subsequent growth of my company. My brother Darrell Lerner (co-founder and serial entrepreneur) and my father, both based in the New York area, had been heavily involved with the business from the beginning as well and were invaluable to our success. There were also many other key employees to consider like Jim and Mike. In all likelihood, neither of them would move from their Long Island roots. It just didn’t feel right.
Regretfully, I told the investor, “No, thank you.”
What Happened After I Said “No”
“Just so you understand,” he clarified, “I have a $10 million check in my pocket, and I’m going to give it to somebody today. It’s yours if you want it, but if you don’t, it’s going to the next guy, who is already in Silicon Valley, which will instantly make them your biggest competitor.”
I gave him my final answer. “I get it, but it’s just not going to happen.”
I never told anyone about that conversation. It seemed too risky—I thought it might spook people. I didn’t want anyone to feel like they were on borrowed time in any way. It would have been very easy for people—even tremendously talented ones—to lose focus in that sort of working environment, so I kept it to myself for a long time.
Shortly thereafter, Zoosk (one of our biggest competitors) raised around $20 million in venture capital. They announced their growth plan, and it was unsettlingly similar to the conversation I’d had that day in Silicon Valley. Zoosk began spending money like drunken sailors on leave in a tropical island paradise. The company used their newfound wealth to acquire millions of users, which ultimately made them much larger than us.
What would have happened if I’d said yes that day instead? We certainly would have ventured down a different path. In the short-term, Zoosk became worth hundreds of millions of dollars, and at one point was on a path to having a massive Initial Public Offering (IPO). They eventually struggled because their product wasn’t as good as ours, but they’re still around and have revenues several times larger than ours.
What You Should Learn From My Regret
The funny thing is I regretted my decision to reject the $10 million almost as soon as the words came out of my mouth; taking the money would have been the best long-term decision for the company.
But my employees were everything to me at that point. I didn’t want to lose that connection and introduce a massive disruption while things were going so well.
My regret is that I didn’t even explore the possibility of moving the company—I just squashed the idea on the spot like a bug. I could have shared my views with the employees, and perhaps they would have been open to moving. Even if they weren’t flexible about moving, I at least would have explored the option and then could’ve have assured them we wouldn’t be going anywhere.
Founders are the gatekeepers of information and responsibility in a company. Any time you share information with your employees, you always consider, “How will this information affect them? Will it lower morale? Will it push them in the wrong direction? Is it essential to their work?”
That responsibility can lead us to be overly cautious, to make decisions without consulting our team because we’re afraid of what the information might do to them.
If you learned anything from the story above, it should be this: Don’t be afraid of your team’s reaction. Before making any major decision (like, say, turning down $10 million), open up to your team, and trust that they will help you make the right choice.
Article written by Cliff Lerner, author of Explosive Growth. The book’s website can be found here.