Zirtual – A Startup Story Gone Wrong


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Unless you learn to get comfortable with failure, you cannot aspire and look forward to success.

By now, most of you have heard of Zirtual, an on-demand personal assistant company founded in 2011 that went out of business last week and laid off more than 400 employees. The employees received an email on Friday, 08/14 notifying them that the company was shutting down due to financial issues. And the clients received their notifications too.

According to Zirtual’s now, ex-CEO, Maren Kate Donovan, the business was on an $11 million run rate, and was burning $400,000 a month.

There were various causes that frothed up for what happened.

Maren Kate Donovan blamed it on “burn” which is more money being spent than what came in. She also regretted not having a full-blown board in place. Another reason given was the conversion of 1099 contractors into full-time employees without considering the implications of the 20-30% employment expense increase. The lack of a full-time CFO although the size of the organization demanded one, was another factor that came up as well.

The irony is that Zirtual raised about $3.2 million in just this past June and July. Although it might look surprising that a company that just weeks ago, raised funding went under, there is more to the truth than that. Zirtual’s SEC Form D filings show that they tried to raise $5.75 million in June and July – but got only $3.2 million in total. And mind you, this is debt with its own contractual obligations.

Startups.co, depending on how you see it, came to Zirtual’s rescue or gobbled it up post the disaster and acquired it. Startups.co CEO Wil Schroter, negotiated a cash-and-stock deal and added Zirtual to his company’s portfolio of online services for entrepreneurs. In fact, Zirtual, apparently resumed services this past Monday and Startups.co re-hired 60 former employees on a contract basis and looks forward to re-hire more. Startups.co has also initiated efforts on bringing back some of Zirtual’s clients, while the competition is also pursuing them.

Meanwhile, Zirtual has its own set of issues post going out of business. A few former employees filed a class-action lawsuit against Zirtual Inc. in U.S. District Court in the state of Delaware, questioning the company’s violation of labor laws by not giving effective notice of termination. The transfer of that liability to the new owner is still in question. On the other end, there are clients who are hurt by the breach of trust and are hesitant to go back or for that matter, doubt the industry as well.

Lots of lessons here for entrepreneurs. Here are a few:

  • Make sure you raise money way before you need it and raise enough so you and your team are not eclipsed with that worry while you pursue your vision.
  • Debt Financing is great with predictable cash flows; else it can very soon become a nightmare!
  • Do not penny pinch when it comes to finding the right talent and bringing it in when you need it. Find your savings somewhere else.
  • Check, double check and triple check everything. You can never go wrong with overanalyzing operational finances.
  • Proactive and quick decision-making is important, but be wise about your decisions.
  • Your customers and employees come first, everything else comes after them for without them, there is no business.

Learn from them and go find your success!

Image Courtesy of FreeDigitalPhotos.net

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What does success mean to you?


Yesterday, I called an old friend in India. His 6 year old son picked up the phone and we chatted for a few minutes. The kid was animated about an event at home from a few days ago and started relating it to me. His grandpa was felicitated by a group of people who came from different places. I asked him who they were and what did they felicitate him for. He replied that they were a group of 60, some seemed young and some older and they had come from different places in India. Some were from abroad too. They came together to honor his grandpa, their teacher from years ago. The little one was thrilled to see the happy crowd and a happier grandpa. My friend took the phone next, had an equally excited tone and talked about how thrilled everyone was to come together and honor his father! Sept. 5th was teacher’s day in India and these students of his dad from over the years, took the time to come over and meet his father and the family; reminisce about times they had spent together and thank him for shaping their lives. By the time, I let go of the line, I was excited too!

Isn’t it amazing? These erstwhile students made an effort to get together, meet and greet their teacher and show their gratitude. He must have been a wonderful teacher to have left such an indelible mark on these students that they came looking for him. I consider him a very successful teacher.

Success means many things to many people. What does it mean to you? Revenue, profits, bank balance, power, position, a luxurious lifestyle, large cars, bigger homes, etc.

When you really look at the core of any job done; there are two things that matter. At the point in time, do you enjoy what you do and are you giving it your best? Your ultimate goal might be to become a CEO and run your own company or more generically, is at the pinnacle of your career, but you may not be there yet. Right now, this moment, there is a job you do and you are responsible and accountable for it. Do you take that seriously? If you do, you ought to give it your best. Your best will translate into the best possible results on the job no matter how they are measured. With this affable demeanor, you will make associations that take note and these combined with the results you show pave the path to your dreams. Going back to the two things I mentioned, they are enjoying what you do so you can give it your best. That itself is true success! Everything else is an outcome.

The emoluments of a job and the perks that come along with it are outcomes, not success. Success lies in the relationships you make along the way, the lives that you impact and improve, the lessons you learn and impart, inspiration you provide and the respect you command. What one would consider as success in terms of material wealth or better lifestyle are all outcomes of the success you cherish.

Outcomes, as we discussed are natural results of a job well done. Is it a crime to aspire for outcomes? Not at all, but when you focus only on outcomes instead of enjoying what you do and giving it your best, the success measures get compromised and it all remains just that, aspiration and never a reality.

True success is in the relationships you build and maintain over time. There is an old saying that inspires us to count our blessings in the friends and supporters we have. Look for success in your friendships, camaraderie and in a job well done. Trust me, all else that shapes a happy and fulfilled life must and will follow through.

Yahoo! Turning a new leaf w/ Marissa Mayer…


While Marissa Mayer’s recent coronation as Yahoo’s CEO is still fresh in everyone’s mind, let’s take a look back at how Yahoo!, the “premier digital media company” has evolved over time and where it is/ should be headed. After all, the next best thing that you can do when not in Marissa’s shoes is to send her some unsolicited advice!

Yahoo.com was just another personal website that Jerry Yang and David Filo put together in 1994 when dotcom as a business model was still nascent. With a bit of ambition and dare, these young entrepreneurs turned this website into a brand name and made it unique by adding several feature filled updates. Soon, it grew to be the anchor of any internet traveler and was successful at becoming home for many such travelers, 700 million and counting.

During the dotcom boom and bust, competition grew and there were several other websites competing in the unique feature space with Yahoo. The business model had to evolve. Diversification set in and Yahoo tried to be everything to everybody. What initially started as the one stop aspirant for the internet traveler started looking at serving every niche they could get into, be it e-mail, search, news, finance, service provision, TV/ movie listings & reviews, games, personal and so on and so forth. As a result, growth and acquisition of complementary and non-complementary businesses set in. Yahoo looked at creating feature rich additions to the already burgeoning Yahoo list of properties hoping to ensure user stickiness and more ad revenue while in actuality it seemed to lose direction of its core business and as a result started slipping in the numbers game. Recently, 5 people have traded places as the CEO of Yahoo, with Marissa Mayer in the driver’s seat now.

Today, Yahoo is a big pile of properties, some viable and with promise in a highly competitive internet world that is changing so rapidly that by the time you take a breather and refocus, the focus that was there has shifted way beyond.

Marissa Mayer has her task cut out for her and based on the first couple of baby steps she has taken; free food and Apple iphones for all employees, she is beginning with rejuvenating employee morale while weaving the fabric of camraderie and pride in Yahoo among them. This will eventually have long term benefits while setting direction toward the future for developing Yahoo into an organization that is prepared for 2015, 2020 and beyond.

First things first; in order to rebuild a world class company, it’s imperative that every contributor viz., employee and associate has a sense of ownership and pride of belonging to the best of the breed. With her first steps, Marissa is headed that way.

The most fundamental principles of getting a company back on track are at work here. The need to refocus on core competencies, identifying and embracing them and having teams work with their heads down to produce results in the next several months is vital. A strategic refocus as to where the future of the internet is headed with cloud computing and mobile technology at play in the virtual world is set to happen.

At the same time, the vast majority of Yahoo properties have to be sifted through with due input from the employee & customer base; to identify what should stay and what should go. This needs to be in alignment with the strategic focus of the future, which again has to be in step with the core competencies at the heart of the company. It is to Marissa’s advantage that Yahoo is sitting on a huge cash pile to dispense as needed; one less thing to worry about as planned execution begins.

Next in line, is the constant need to innovate; to gain strides over the competition. Disruptive innovation in a cash rich environment seems attractive but evolutionary focus can help too. Not to say that moving away from current core competencies is a bad idea if they are archaic, but it will eventually happen as the focus on future term strategy gets clearer. This is especially true of a company that is surfing a highly dynamic environment and is on the downward trend of the bell curve. New core competencies will evolve and embracing such will only allow the organization to flourish. History has shown what happens with divergence unrelated to core interests. Reinvention is common among organizations poised for growth but it needs to occur after strategically defining the reinvention path as the new path that the organization will adopt as its core. I believe it’s a fundamental law of business in order to succeed.

Yahoo’s business model has been primarily dependent on advertising revenue. As Marissa Mayer takes it from being just an internet information provider into the intricacies of being the internet juggernaut of the future (with predictable sprinklings of cutting edge mobile & social media offerings coming in the future), we can expect Yahoo to gain back some of its online advertising ground that it had previously lost as well as can look forward to new modes of revenue generation.

If previous reputation is anything to go by, Marissa had a reputation of getting things done and inculcating her own sense of style at Google. She is seen as a highly independent & efficient person who pays special attention to detail and is very involved with aesthetics as well. Dealing with Yahoo’s day to day management is one thing and pushing the Board of Directors to get on her bandwagon will be another that currently, she seems to be in control of.

With her background in Computer Sciences and her hands on experiences building over 100 products at Google, I am sure there is much she can do in terms of providing that technical edge to steer the Yahoo ship in the right direction.

Lastly, to reiterate the obvious, the most important thing is to keep the employees and customers close to the heart. What are they saying? Where are they headed? What do they want to see different? Where are the new markets? What does the new market want? This feedback will play a pivotal role in shaping the Yahoo! of the future.

Here’s wishing Marissa Mayer the very best as she steers her employees to say Yahoo! at work, her customers to say Yahoo! for all that they deserve and get; and her Shareholders to say Yahoo! all the way to the bank!