Mixergy: Don’t Be Bullied By Your Board And Other Lessons From A Funded Startup. – With Brandon Watson

By Andrew Warner

Have you noticed how some entrepreneurs look at getting funding as the ultimate sign of success? Not only is funding not the finish line, but the mistakes you make when you get investors can cost you when you finally do get to the finish line and are ready to sell your company.

Brandon Watson came to Mixergy to talk about how he raised money for his startup, how he grew it, and why he had to sell it. The two most powerful points of this program for me was when he told us how his investors made money from his internet business, but he didn’t, and how having investors led him to decisions he wouldn’t have made otherwise.

Edited excerpts from the IMSafer story

The vision was to keep kids safe
IMSafer is a product to keep kids safe online. It’s designed for parents, by parents and it was meant to tackle the problem of kids building relationships online. Parents didn’t really have any tools to understand what their kids were doing on MySpace or chat rooms. Most of the product controls on the market were targeted at keeping kids away from pornography and they really weren’t focused on helping parents understand what their kids were doing online in chat rooms.

They were told the business won’t work
Parents like to talk about security products but they don’t want to pay for them. So we were told over and over again “No one’s making money here. No one can make money here. It’s a segment that’s languished forever, forget about it, walk away.”
Sure enough, after doing some research, we saw that no one had made any money. And so as a truly analytical business guy, I had to look at this and say, “Wow, no one’s making money. The market’s really hard to size. Kids are much more savvy about the products than their parents.

So they can install the things and the kids can turn it off. It’s kind of a useless product.” That creates challenges.
But they thought there was an opportunity
My VP of Engineering, Tommy, he looked at me and said “Well I’m not really sure I buy that thesis. I would argue that if there’s no money to be made there, then the IQ isn’t there, and if it’s been ten years that this market’s been around, call it ten years since NetNanny got bought, no new IQ has come into this space in a very long time, so I think we can run this place over.”
And so it was kind of that old statement, that bravado, that said, you know, I think we can make some real progress here. Let’s go see what problem we want to solve and see if we can do something new here.

They decided they needed investors
From the start we knew we needed to pay salaries. We looked at our wives dead in the eyes and said, “Yeah, we’re making money somehow.” We need to raise some money. And before Tommy and Jason and David would join they kind of required that I be able to pay salaries. So we knew I’d go out and do some capital raising. (more)