All too often in the course of building my business, I bump into the existence of countless assholes. From dealing with aggressive and manipulative salesmen to investors offering term sheets a monkey wouldn't be dumb enough to sign. It frankly sucks. Sucks hard.
I really don't understand why.
So many people are straight assholes in business. Especially the more you climb the ladder. As my bootstrapped business reached $3M ARR, a wave of no-name investors approached us. Some of the term sheets more than insulted me. They sought to take control of the company without any payout for the co-founders or employees. They just wanted to capitalize a company they'd now own.
I don't understand why.
Now, I'll speak negatively of them whenever I'm asked. Hell, I'll shit talk them just in case someone runs into them. How do they ever plan to build a long term business if only idiots would accept their deal?
Let's make it simple. If you try to make money from someone's detriment, you're only hurting yourself. It's a short term play.
Smart successful people do not want to work with people they cannot trust. It's not worth it. The world's too big. You'll only ever whittle away your reputation until you're surrounded by mirrors of yourself. It's not worth it.
When you form a partnership with someone, you should sincerely believe the other person is benefiting. It should be fair. You both should make money. You should both want to continue the partnership. Relationships and reputations last much longer than your shitty new sales tool or your underwater fund.
I am not a nice person. I do not pretend to be. When I form deals, everyone makes money. Or at least, my attempts were sincere and I always share in the downside. Not everyone feels this way. Most certainly don't act it.
In business, there is a strong incentive to push risk away from yourself and onto others while retaining as much of the upside as possible. Different people have different lines and perspectives on fairness. Some people view it as a simple game. They seek to selfishly maximize their outcome with as little risk as possible.
The problem in business is that there is always risk. Most businesses operating now did not exist 150 years ago. The ones now probably won't make it another 50. Risk is everywhere. You can't avoid it.
You can be smarter. You can work harder. You can lower that risk considerably through sheer will. But it stops at a point. At some point, the temptation to pass risk onto others creeps in. Enter Finance.
Almost every single company more than 6 months old enters into financial agreements with other companies. Whether it's an investment or it's simple terms on purchasing inputs, companies engage in financial agreements all the time.
A financial agreement can generally be viewed as an investment of sorts. For example, let's say your company buys t-shirts, puts a logo on it and sells it through a website. If the company you buy t-shirts from offers 30-day net terms, you may able to grow your business faster with less money tied up in inventory and the t-shirt manufacturer gets to sell more t-shirts too. If you go bankrupt, both you and the t-shirt manufacturer suffer somewhat proportionally.
All good business deals share this trait. They expose both parties to upside and downside somewhat fairly given expected and possible outcomes.
An evil business deal does the opposite. It seeks to offload risk while retaining reward. Sometimes a particularly evil person will come along and pretend to present an opportunity when in reality, they're looking to steal part of the investment. These are the worst people. Stay away from them at all costs.
In general, I'd ask you to talk with yourself honestly and see what kind of deals you're making. Do they generally benefit both parties?
You should. You should work nonstop to ensure it does. Once you build a reputation for making your partners more money, success will come easier and easier.
Ever wonder why some people raise a $5M seed with an idea scribbled on a napkin? Generally, these people have a reputation for positive returns for all involved.
What's your reputation?