My Very Honest Letter To A Potential Investor by Joseph Heller July 2, 2015
One of my goals for 2015/2016 is for The/Studio to get funding. We have a great team in place, our revenue has grown consistently over 30% per year in the past few years and we have stumbled across a very strong business model. From talking with friends that have successfully closed a round of funding it takes full time effort for between three to six months. I have only started to put fillers out there, and without much effort we got our first hit from a group of investors. They have agreed to funding us the amount we are looking for at the valuation that we were seeking, but I’m not 100% satisfied with all of the terms. This is the letter that I wrote back to them. It made me realize how far we have come as a company, and reinforced to me the importance of being patient for the right deal.
Sorry for the late reply. I wanted to give myself the day to think about this. I hope you can understand that I put the last 9 years of my life into this business. I feel that things are going in the right direction with the company now, but I suffered for so many years to make this business successful. I started the company with $1,000 USD. Nobody even gave me $1. For the first year that I started the company, I was the only person in the company. I worked for the first year by myself in the night time to correspond with the US time. I started to hire more staff, but for the next three years I worked in the night to work with my team and customers. I had to learn how to do everything on my own. I had no idea how to properly register a business in China, I didn’t know how to negotiate with the factories, and I didn’t know how to hire staff. But through making a lot of mistakes, I learned how to do all of this.
Before I had American staff that worked in the night time with me. However, this was not permanent. They only wanted to be in China for 1 to 2 years and then return back to the US. I went on the Internet and recruited a team in the Philippines and I brought them to China to train them to replace my sales staff that wanted to leave. Only one of the Filipino staff was good enough to be part of my company (she is still in our company today). I went back with her to the Philippines, and again I had to learn how to do business in a new country. Together with her, we found a small place to put our office, and we started to recruit a Filipino team.
We opened our Philippines office in 2010 and this was by far the most difficult year of my life. I was having problems with the factories in China, because one of the factories that we worked with suddenly went out of business. Furthermore, it was Chinese New Year so we couldn’t find a new factory to do our orders. We had hundreds of orders to complete, and we didn’t have a factory available to complete the order. Of course our customers were angry, and because my Philippines staff was new they didn’t know how to handle the orders or customers. Every month I was losing money, and it was a complete nightmare trying to run an office in China and the Philippines at the same time. I fired my foreign manager and I fired some of my staff in the Philippines who were not performing well. My foreign manager sued me in Hong Kong court and my Philippines staff threatened to sue me for wrongful termination.
I was losing money every month, the factory situation was still not under control, my staff didn’t know how to deal with the customers, and I had a lawsuit. I had only 3 months left of cash before I literally would have $0 in the company’s bank account. Furthermore, I literally would have no money to pay my staff or the factories, which means I would have huge legal problems. So I had two options. Option #1 – Continue the business and face the risk of not even having the money to pay my staff or factories in 3 months. Option #2 – Pay my staff their last salary, and pay the factories and shut down the company.
Obviously I chose option #1. Everyday I had to walk into the office with a smile on my face, and try to encourage my team, but I had no idea if I could pay their salaries in 3 months. For 3 or 4 months I literally worked 20 hours everyday. I didn’t do anything but work and sleep 4 or 5 hours everyday. Finally we found a factory that would produce our back orders (we still work with them today), and our team in the Philippines slowly started to learn how to sell to the customers, and learned how to deal with customer service. Finally, in September we had our first profitable month and we turned the business around. I didn’t have the money to hire an attorney, so I studied how to defend myself in the courts in Hong Kong. I counter sued the guy that sued me and the judge ended up siding in my company’s favor. I won the lawsuit!
Since 2010 things have of course been difficult, but everything has been easy compared to 2010. For years I was looking for a great IT team and after years of searching I finally found one. I have a great and loyal management team.
I truly love The/Studio. I love what we are doing, and I truly believe in the company.
I just wanted you to understand why this is such a difficult decision for me. The/Studio represents my life’s work and I owe it to my company, my staff and to myself to make the right decisions. I know you are looking for a quick decision regarding The/Studio accepting the terms to proceed with funding, but unfortunately it won’t be a quick decision. I need the time to investigate all options to ensure that myself and The/Studio are getting the best terms possible.