Are lessons learned? Does recovery happen? Diehard entrepreneurs don’t raise the white flag when they’re drowning in red ink. They acknowledge what they learned and use the knowledge to go forward, typically replacing huge leaps with smaller steps.
Most Victorians know the story of League Assets Corporation and the failed Capital City Centre project in Colwood. When League, a REIT (real estate investment trust), ceased to exist in early 2015, it had almost $370 million in outstanding debts with an array of creditors.
For League co-founder Adam Gant, 36, a Victoria resident, his company’s failure had its genesis in confirmation bias, the tendency to search for or interpret information in a way that confirms your beliefs while ignoring alternative ideas.
“We were a victim of it; once you start a project, it’s hard to break away from it,” he tells me.
As League grew, the decision to break ground in Colwood was based on the heady days of 2007 and belief that the good times would continue. But in 2008, the financial downturn hit, and by 2009, Gant was asking, how would the Colwood project remain viable?
In hindsight, he admits the project was too big. In 2013, League attempted to raise about $41 million via a Quebec pension plan. But League’s complicated bookkeeping system, for more than 100 companies it owned in Canada, caused League to miss the deal’s deadline, Gant says. The lesson learned? Excess legal entities create massive complexities. It took too long to produce League’s 600-page prospectus for the Quebec deal. “We ran out of liquidity,” he says.
Today, Gant runs his new company, REAfe Advisory, where he advises B.C. and Alberta companies on growth, real estate acquisition and how to start from scratch.
“People get to the point where they’re embarrassed. They feel bad, don’t believe it could be fixed and throw in the towel,” he says. “I figure I know something and can help some companies.”
Gerry Brimacombe’s business finances began to suffer in 2008. At the time he was CEO of Sector Learning Solutions, a Victoria tech-training company he’d purchased four years earlier. When the global economic crisis hit, Brimacombe’s employees dropped from 11 to two.
“I should have sold then,” he recalls. But taking a page from the Book of Perseverance, the married father of two chose to buckle down with the belief that cash flow would improve and he’d emerge stronger. That didn’t happen.
By October 2013, Gerry Brimacombe realized he had to sell Sector Learning Solutions. “We were bleeding money,” he recalls. The same month, he accepted a nine-month contract in Calgary as a business analyst for a federal commission.
He sold the company in March 2014, but Brimacombe’s troubles weren’t over — he still had to get a handle on his outstanding business debts. On the verge of bankruptcy, he made use of a support network, which included his longtime business coach, the advisory board he assembled for Sector, his lawyer, a debt counsellor and his wife.
He negotiated a deal to break his lease and avoid paying $77,000 in rent for space no longer needed, and he remortgaged his Gordon Head home and consolidated his debt. The BMW was sold. “I went through the process with shaking hands and terror,” he admits. “There were dark days. The antidote was action. But you can’t do it all on your own. It’s important to have support.”
In March 2014, Brimacombe launched Lightlever Systems, a consulting firm. Business is good, he says, but it will take three more years to clear Sector’s debt. He is frank in his analysis of where he faltered. “You need a really tight management of finances. That was an area of weakness before. I had a hard time understanding a balance sheet or income statement. I’ve now got a really good system to manage personal finances and credit cards.”
Today, Brimacombe, no longer seeks instant gratification, such as buying a new laptop even though his older one was fine. “Spending money made me feel like I had lots,” he says.
As one of the three gut-spillers at VIATEC’s first F*ckup Night in January, Todd Dunlop confesses that his woes came out of the blue. “I found myself involved in a lawsuit concerning a company I had sold years earlier,” recalls Dunlop, 36, who is now president and founder of Victoria’s RingPartner.
“A single word out of a 50,000-word legal document allowed a patent troll to sue my previous company. Then, in turn, the company attempted to sue me. In the end there were no winners, except the lawyers.”
For roughly half a year after the lawsuit, a demoralized Dunlop was very cautious in his business decisions. “Those who know me know that this is not my personality. It’s common for me to be heard around the office saying, ‘F*ck it, we’ll do it live.’ This new conservative approach did not serve me well and was soul-crushing,” he says. “It just wore me down. I’m an entrepreneur by nature.”
While the damage wrought by one word wasn’t exactly Dunlop’s doing, he took it as failure and accepted responsibility for not crossing the t’s and dotting the i’s. But one day he snapped out of it and realized that what he’d learned was more valuable than what the lawsuit had cost him.
“Now, if I have to deal with a couple of mosquitos, I swat them. It seemed kind of a big deal at the time, but it was an annoyance.”
Always pushing forward, RingPartner owns two patents, an area in which Dunlop now treads very cautiously. “We had deals, related to patents, that have fallen apart because they left us open to potential liability,” he says.
And he offers one more riff on the F*ckup theme: “During a visit to the 1-800-Got-Junk office, I noticed a meeting room labelled WTF. But it didn’t stand for what you would traditionally think,” Dunlop says. “Instead it stood for ‘Willing to Fail,’ which I believe is an empowering attitude when it comes to leading a team.”
Mark Grambart is former CEO of Contech Enterprises. In 2015, Contech, which designed and sold non-toxic products for the pet and gardening sectors, went bankrupt, an event that had its genesis in 2013 when Contech bought a company at the wrong time — right at the start of the ultra-busy gardening season.
It wasn’t that the company Contech purchased didn’t fit well with their established line of products. The new acquisition made raised garden beds, after all. The problem, which quickly became apparent, was that Contech’s distribution system couldn’t keep up with the big jump in orders.
“We should have waited one more year. We would have seen the flaw in the system,” admits Grambart, 44, a mechanical engineer.
At VIATEC’s first F*ckup Night, Grambart told the crowd that Contech, which had 75 employees (18 of them in Victoria), tried to manually fill the orders, but the company eventually had to shut down the online site.
The lost revenue made Contech less profitable so it secured financing with a New York bank, but the ensuing legal battles led to the dissolution of the company.
“I believed we could have managed it, but I didn’t foresee the problems working with our unsecured creditors,” says Grambart.
Grambart’s biggest take-away was that more time should have been spent investigating the deal, and that purchasing a company right at the start of its high sales season is not wise.
Like Gant, Grambart is now an advisor. As executive-in-residence at VIATEC, he coaches early-stage technology entrepreneurs to help them grow. “It’s a ton of fun,” he says.
If there’s a lesson in failure, it’s that the resilient learn from it and change course. As Drew Houston, founder of DropBox said: Don’t worry about failure. You only have to be right once.”