Lessons Learned From a Failed Ivy League Entrepreneur

A "Case Story" By Chris Cononico
 

Chapter Twenty-Seven

It looked like our first new card program was going to be with a large school in Nevada. We had been introduced through our equipment supplier, CMC, who sold equipment to the university. After meeting with a number of people at the school and giving a formal presentation, we submitted our proposal to manage their off-campus system. The big joke amongst us was that casinos would accept our card in addition to off-campus restaurants.

George was optimistic about our chances and CMC was just as eager for us to get mandated, because it was an opportunity for them to sell more equipment. While the school did eventually give us an offer to manage their system, it wasn’t what we hoped. We were not only asked to work for free, but they requested we donate all of the necessary equipment too. The school figured we were desperate enough for business that we’d spend several hundred thousand dollars to use them as our showcase. The problem was that we didn’t have that kind of balance sheet to invest if we had no hope of getting back our money. While the visibility would have helped our business, the situation could have also backfire on us. Conceivably, the school could have been unhappy with the system no matter how much we bent over backwards. We’d be right back where we started less a few hundred thousand bucks.

Also, there was a risk the school would disclose the terms of the agreement to other universities. If that happened, other prospective customers would demand similar economics and we could have difficulty negotiating profitable deals in the future. We already knew administrators at different schools spoke to each other. In fact, we were almost certain someone from this school contacted Ed at Penn to discuss QuakerCard.

If we could have covered our costs, we would have gladly taken the deal. Unfortunately, the offer made no business sense. Turning it down must have been a huge disappointment for George, who had invested countless hours on the project. The whole situation shook my confidence in our chances of forming meaningful partnerships with the universities in a time frame that was acceptable to me.

After our difficulties with Penn and Drucker, the collapse of our deal in Nevada unnerved me. Clearly, we were having a tougher time marketing our company to schools than we had anticipated. George had been pursuing dozens of other “leads” and RFPs, but we couldn’t tell if we had better chances. If this was a glimpse of what lay ahead for us, I feared we needed to rethink our business model.

It was a defining moment, because I started to doubt our future. When I considered the hard work and sacrifices we made, I started to feel sorry for myself. In my mind, I had graduated Magna cum Laude from the Wharton Business School, but I lived at home with my parents or slept on the floor of my office. I was sleep-deprived, overworked, underpaid, and I felt like I was no further along with my company after almost 18 months of working myself around the clock.

They say most new businesses fail within the first two years and I can understand why. I was frustrated because friends of mine, who were no smarter than me, lived in nice apartments that I couldn't afford. They ate dinners at fancy restaurants and took vacations, while I slaved away at my office eating fast food. Every dollar I spent was on one of my 7 credit cards, the balance of which I couldn’t pay back any time soon. I began to question whether I should have taken a job instead.

When I compared my situation with those of my friends, it only made me feel even more anxious, because they appeared to be making forward progress with their careers. It was possible that after all of my efforts, I would have nothing to show for it. My company was having difficulty paying the bills, let alone thinking about going public. Suddenly, the future began to scare me.

It was frustrating to consider, because I'm a competitive person and I don't like to admit defeat, but I wondered if quitting my company might not be for the best. I put so much pressure on myself to be successful quickly that I wasn't having fun and I began questioning whether or not entrepreneurship was making me happy.

One of my professors at Wharton used to say, “Fail quickly and fail cheaply!” He meant an entrepreneur should not waste a lot of time with new products that weren’t going to be successful. Rather, he should keep his investment to a minimum until he tested the concept. If it didn’t work, he could walk away having minimized his losses and his opportunity costs.

Unfortunately, we were poised to fail slowly and expensively. I also found it difficult not to be emotionally involved in every outcome. I began blaming the people working at the universities for blocking us out of the market. Suddenly, I felt a lot of pressure to turn the business around. If we couldn't partner with the schools, then our only choice was to compete with them. We needed to find an effective way to offer our services directly to students.


 

Copyright  2005 by Chris Cononico
All rights reserved. No part of this manuscript may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the author, except by a reviewer who may quote brief passages in a review.