Executive recruiting, take 2 continued

February 22, 2007

Read the first two parts of this story at Executive Recruiting, part 2 and Executive Recruiting, part 2 continued

So we’ve been working with Mr. Banker for about 5 months by now. It started out pretty well. We had a bunch of great strategy talks on where we should take the business. We also met a bunch of Mr. Banker’s wealthy friends who made start-up investments to discuss our business and get some feedback on our investor presentation. Unfortunately, this was the extent of Mr. Banker helping us raise money. We had about three of these such meetings and received some decent feedback on the materials. It felt a lot like giving your 10th grade English paper to 3 different teachers. We received 3 different answers on what was important and what was not, etc. The changes were mostly to the financial forecast, since they felt that our numbers were too high, not ridiculous, just unrealistic.

In between business and strategy meetings, we’ve been working with our lawyers in CA to finish the contract with Mr. Banker. This has been quite an ordeal, since our lawyer out there has been sick, traveling and out of the office on-and-off for about 3 months. Needless to say, I was very frustrated with the turnaround on our changes to the agreement. There’s been a lot of back-and-forth, and quite a large legal bill. I hope they will allow us to defer the charges until we actually raise some money.

Over the past month especially, Seth and I have grown a bit concerned with the direction the contract has been heading. We’re trying to compromise on many issues but feel we’re just not reaching agreement on many things. About two weeks ago, Seth and I had a long talk about this and spoke at length with a few of our advisers. While we felt that it would benefit us to have some “gray hair” on the team for credibility, it was becoming increasingly frustrating to get things done. We felt that Mr. Banker was pulling us in different (i.e. the wrong) directions and that many of these distractions were actually slowing us down from pursuing our vision for OnCard Marketing. There were obviously many other reasons that Seth and I discussed but I won’t share them here. In the end, we couldn’t come to terms that we thought were reasonable and fair (i.e. in our best interest), and the way these negotiations were going just didn’t seem right.

About two weeks ago, we put a contract in front of Mr. Banker that Seth and I (and our lawyers) were comfortable with, one that gave us adequate protection in case things ever went south with Mr. Banker. We realized that it was a reversal from previous drafts of the contract. However, neither Seth nor I were comfortable with this deal. We were about to give up just way too much for what we felt was a huge potential headache. In short, we had a change of heart. Things transpired over the past 5 months that just made us uncomfortable with the original deal, and we weren’t going to settle. We sent the revised contract to Mr. Banker about two weeks ago, and he wrote back two days later with a lot of interesting language and emotions. I won’t disclose the contents, but feel free to use your imagination. Seth responded with what we thought was an “olive branch” email, and we haven’t heard from him since. Seth and I are still upset with how things ended, but like everything else, we believe it’s for the best. Despite our initial amazement at how fast things sizzled out, we are happy that we did not make a huge mistake by signing that deal. We think that it will be the best for us, the company, and our shareholders. In just the past week, we realize how much faster we are moving again with all the things that need to get done. We’ll just keep rolling with the punches…

Bottom Line: Don’t sign a deal if it doesn’t feel right. We got caught up in the excitement of signing our first deal and didn’t step back to think about the repercussions of what we were signing until the last minute. If you are the founders of your company, keep it that way. Don’t give away equity or kudos too easily. We thought it would be a good trade-off for what we were getting but realized in the end we should have had more faith in ourselves to run the company. Make sure you get advice from advisers and lawyers before signing any deal that involves giving equity away in your business. If you have a good idea, people will try to convince you to give them a piece. Like one of our advisers told us, you can’t take equity back once you’ve given it out…

JT

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