From the category archives:

VC

Every Day I Try and Get Rejected

by Ryan on April 12, 2011

Jack Welch and Suzy Welch Photo

Being an entrepreneur isn’t easy.  You get rejected a lot.  Whether it’s trying to chase down a new customer, pitching investors, recruiting new content providers, sending cold emails / cold calls to partners, journalists, and colleagues, there are just so many times when you’ll be rejected.  Rejection itself can take many forms.  A more polite rejection would be a terse “No thank you” response or the more frequent no reply.  Sometimes it takes on the more harsh form of  “Go f@ck yourself” or some variation thereof.

It’s certainly common to take a rejection as an indication of failure, and it’s the fear of failure that serves one of the primary reasons that people shun away from starting a business, engaging in a new relationship, or otherwise “hanging out their shingle”.  It’s this exact fear of failure that so that often prevents good people from being entrepreneurial.  They’re afraid of the daily moments of rejection that come along with creating something new and / or working for oneself.

To make it as an entrepreneur, YOU HAVE TO LEARN TO EMBRACE REJECTION.

I’m lucky in that somewhere along the road I developed thick skin.  Perhaps it was growing up with an older brother or maybe it’s something I just picked up along the road.  Wherever I got it from, I learned to embrace and welcome rejection.  Rejection started happening to me so often that instead of letting it get to me, I decided that I should use it as a motivator.  Allow me to give an example…

Back in late 2004 I wanted to be a photographer.  At the time I was working for the world’s largest celebrity photo agency, WireImage, as Controller.  But I wanted to do more than just crunch numbers, I wanted to shoot celebrity events.  Because I’m a CPA, it’s often overlooked that I’m creative.  Somehow the CPA designation (which took me just 2 years to get) overshadows the fact that I majored in Art History in college (w/ a minor in Studio Art) and that I’ve been studying and creating art (oil paintings, sculpture) since I was 10, and have received a number of awards and displayed in national museums. Nevertheless, when I asked the assignment desk at WireImage if I could shoot, they rejected me.

Instead of letting this rejection get to me, I used it as a motivator. I went out and found events that the desk wasn’t already covering.  At the time, no one was shooting book signings.  My first book signing was with Jack Welch, the former CEO of GE.  I went to Borders on Wall St, just down the block from my apartment in NYC.  I bought Jack’s new book and got in line for an autograph.  When I got to the front of the line not only did Jack sign the book for me, but he also let me take a few quick photos of him and his wife Suzy. Following the event, I showed the pics to the assignment desk that had rejected me, and they agreed that because I was the exclusive photographer at the event, I could load them to WireImage.

The images were quickly picked up by 60 Minutes who was in the process of doing an interview with Jack.  It’s the image you see at the beginning of this post.  I went on to photograph hundreds of events over a 3.5 year period and it got to the point where I’d routinely be requested by publicists to cover and in certain circumstances I even had better access than WireImage’s own staffers.

It’s in these moments of rejection that you can truly learn and grow.  That’s why EVERY DAY I TRY AND GET REJECTED.  I push the limits as much as I can and do things that have a high likelihood of rejection.  I enjoy the challenge of a rejection and I use rejection as a motivator.  When I get rejected, instead of feeling sorry for myself, I actually feel sorry for the person that rejected me and I yearn to change their opinion or otherwise win over their business.

Related Articles:

This post from Ben Horowitz (of Andreessen Horowitz) on CEO psychology

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Hop Off the Train at the Right Time

by Ryan on March 21, 2011

Time Watch Photo

Louis Gray recently posted a great piece about Digg and it’s founder Kevin Rose.  I’ve been a fan of Kevin since I first saw him on The Screen Savers on TechTV a little before Digg was even live.  I think that there’s really one over arching takeaway from all the talk about Kevin and Digg this week.

HOP OFF THE TRAIN AT THE RIGHT TIME!

What I mean by this is that a financially successful exit is a lot about timing. Just think of how many companies that are on the downswing or no longer even exist today, yet they made such great returns for their initial founders and shareholders because they sold out while they were on the top of their game.  On the flip side, there are many circumstances when companies have sold out to early, only to have their acquirers go on to grow the business 10x after the acquisition (still a better position to be in than having not exited at all).

Businesses and industry move in cycles and technological progress happens extremely quick these days. Companies, particularly those on the web, can so quickly fall in and out of favor. It’s crucial to exit at the right time.

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Back of the Envelope: How to Estimate the Annual Revenues of Any Private Company

by Ryan on September 15, 2010

estimate revenue

Have you ever wondered how much money a particular company makes? Perhaps you just wanted to know their annual sales?   The only problem was, the company was small (i.e. not publicly traded) so there’s no public financial information available on them.   So how do you calculate their revenues?

I created a simple, back of the envelope (i.e. quick and dirty), mathematical calculation that accurately estimates the revenue of pretty much any public / private company, large or small. It’s certainly possible that I’m not the first to come up with this calc, but for now, I’ll take the credit for it. Here’s how it works:

ANNUAL REVENUE = NUMBER OF EMPLOYEES X $100,000

That’s it!  It’s that simple.  Now let me briefly explain the logic behind this one.  The average American makes a little over $40,000 per year.  The costs of an employee to an employer is about 1.25x their base salary.  The additional 25% comes from payroll taxes, health insurance, worker’s comp insurance, office space for them to sit in, etc.  Therefore, the employer must bring in $50,000 ($40,000 x 1.25) for every employee in the company.  Because most companies have a gross profit of 50% or so, this means that in order to stay in business, the average company must have $100,000 in revenue for every employee in their company (($100k x 50%) – $50k) = $0 or Break Even).  The companies with more than $100k in sales per employee are more profitable (e.g. GOOG) than those that don’t (e.g. pretty much every startup company on the planet that takes VC / Angel money).

We so often hear about how well a company is doing based on their press releases, speaking engagements by their founders, etc.; however, no one ever wants to tell you exactly how much money their company makes. The next time you want to know how much revenue someone’s company is doing, don’t just ask them point blank. Instead, simply ask them how many employees they have. Every CEO will tell you how many employees they have. If they won’t tell you, just ask one of their employees how many people work in the company.  Once you have that number, simply multiply it by $100k, and you now have a quick and dirty (and in my experience, highly accurate) estimate of their annual sales.

A word of caution on startups…If the company is a startup, you can pretty much rest assured that they are doing way less than $100k per employee.  For now, assuming the company has a business model where they actually sell something), take their number of employees and multiply by $50k instead of $100k to arrive at the annual revenue estimate.  In a later post, I’ll explain how you can more accurately nail down the exact revenues of a cash burning startup. In addition, I plan to explain how to accurately estimate a startup’s market cap (i.e. how much the company is worth) in a calculation just as simple as the one you’ve read about here today.

UPDATE: I’ve been reading in the comments about how the calc needs to be adjusted upwards / downwards depending on the industry (Duh!  It’s a “back of the envelope” ESTIMATE, hence the title of this post!).  Therefore, I’ve come up with a simple adjustment such that it works for nearly any industry.  The revised formula is  as follows:

ANNUAL REVENUE = NUMBER OF EMPLOYEES X AVERAGE SALARY OF AN EMPLOYEE IN YOUR INDUSTRY X 2.5

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