Harriott sized up the project—as he does all new business—by asking: “Do we have the right to win this job?” A third of Watchfire’s 330 employees work in engineering and R&D, bringing technical firepower to intricate projects like Fremont’s canopy. The 1,500-foot-long, curved circuit board—with 130,000-square-feet of digital screen—will be slathered with 49 million tiny LED bulbs, trimmable to shape and vivid in daylight. It will let air flow through the top while shedding rain, and tourists may be allowed to flash messages across it via smartphone app. “No existing product met the spec,” says Harriott. “That was a nice starting point.” Harriott’s other criteria: margin. “We weren’t going to buy the job” just for the marketing buzz, he adds.
Turned out Harriott’s hard call wasn’t to chase the deal, but to keep chasing it.
Fremont winnowed the field to five bidders. A month later, Harriott got the unofficial word that Watchfire was the favorite, but nothing in writing. “Every 60 days I thought we were 60 days away,” he says. Another five months later, a story in the Las Vegas Review-Journal reported Fremont was “contracting with Watchfire.” Still no contract.
Meanwhile, Harriott had to plead with his suppliers—thanks to a global shortage of electronic components—to hold his inventory until the deal was inked. His engineers, intoxicated by the scope and complexity of the project, were clamoring for a green light, while his private-equity investors were tallying “hundreds of thousands of dollars” in sunk development costs.
It took 21 months from the initial design work for Fremont to sign. (The canopy will be unveiled in December.) “The project touched a lot of people,” says Harriott, who made company t-shirts celebrating the team’s big win. “By the end of it, I had welders say to me:
‘Did we sign?’ It became a rallying cry.”
Will They Hate Me?
Cenedella, 48, launched Ladders with a partner in 2003. The Manhattan-based job site, which pairs seasoned professionals with six-figure salaries, quickly raised $7 million in venture capital. It opened a UK outpost with 35 people in 2006, and revenue was doubling annually. Clones had sprouted in Germany and Japan, and there was urgency to launch in continental Europe: “[Everyone thought] if we want world domination, that’s what we gotta do,” recalls Cenedella.
In October 2008, Cenedella gathered 14 members of his leadership team for an off-site meeting to decide if they should open a German operation. They had already spent a year preparing an assault: A dozen developers beavered away while Cenedella hunted for office space and a managing director.
Meanwhile the global financial system was teetering. By the day of the team’s vote, the subprime-mortgage crisis had claimed the likes of Bear Stearns, Fannie Mae and Lehman Brothers. Despite the scary headlines, Cenedella’s co-founder, who was French, and others wanted to push ahead. But Cenedella was losing resolve: The company already had “two or three million bucks” into the project, and the total initial investment would likely hit $5 million.
They voted. Result: 7 to 7. An hour later they voted again: another dead heat. “It was clear who was making the decision at that point,” says Cenedella. “It was all on me.”
Cenedella pulled the plug. “Everybody hated me for months,” he says. “The developers were like: ‘What did we spend a year of our lives doing?’”
Vindication arrived a year later with the Great Recession. Today, Ladders sticks to the U.S. and Canada, where compensation tends to weigh more heavily in career decisions. (Cenedella sold the UK division to its manager.) While the company is thriving, with nearly $30 million in revenue and 200 employees, world domination will have to wait.
“When I look back, it seems crazy to think you’d try to establish a new operation in Germany at that time,” chuckles Cenedella. “But internally, it was a close-fought thing. How was I even remotely persuaded? And clearly I was, because it was painful.”
What’s It All Worth?
In early 2015, Brian Reale was weighing the possibility of raising money for his software startup, ProcessMaker, which automates document workflow. Oklahoma’s Tulsa Community College, with four campuses and 2,700 employees, uses the software to share forms that require multiple signatures—like system-access permissions, staff-performance reviews and student-leave requests. Result: better productivity, fewer errors.
Reale, 48, started his company on the side while earning a living running an Internet service provider in Bolivia. Seven years, four name changes and many pivots later, the company had built a handful of custom workflow applications, using open-software to entice clients. By 2015 ProcessMaker had a scalable subscription model, $5 million in revenue and growth dreams.
Time for a cash infusion—or was it? “I felt we needed the money, but we didn’t have a clear path for success,” Reale recalls. “If you’re pivoting on someone else’s dime, you get into trouble.”
Another concern: As earlier-stage investments go, ProcessMaker was too big for angel investors but too small for growth-equity firms that prefer targets with $10 million to $20 million in sales. One distributor offered to invest, but after a few meetings, Reale demurred. “When you’re dealing with non-professional investors, it makes it even harder,” he says. “There’s no common language for valuation.”
The cap table was complicated, too. While Reale had majority control of the company, his two main investors—one a close friend from high school—together owned a significant chunk. Neither was involved in daily operations, and both saw a chance to cash out. On the one hand, Reale wanted new teammates who could add strategic value; on the other, he couldn’t afford to burn long hours brokering a deal for his partners’ shares—and risk getting sued if the company took off and they felt stiffed. “There were never moments of clarity,” he confesses.
After six months of soul-searching, Reale says, “I defaulted to what I knew well, which was running a business.” It proved wise. Four years later, ProcessMaker has 140 employees and over $10 million in sales. The growth-equity crowd is calling, but Reale has no plans to take on new money anytime soon.
“We think we make better, healthier decisions when forced to do it with less capital,” he says. “At the same time, you see other companies moving into nicer offices, outspending you on advertising. It’s always knocking at you.”
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