Last year Smart OES was acquired by Ingenero, one of our corporate strategic investors! I’ve been meaning to blog about this momentous event but the acquisition itself and then major moves in other areas of my life (More on that soon!) have kept me busy. Finally I have a chance to reflect back on Smart OES – the good, the bad, and the ugly!
Success(?)
I cofounded Smart OES years ago and what a journey it was! Through many highs and lows we raised three rounds of funding, secured paying customers, earned a patent, and validated our novel approach to reducing energy use in nonresidential buildings 20+%. By many metrics – revenue, job creation, acquisition – we were a “success.”
By other metrics, though, we were a “failure.” We set out with Smart OES to change the entire behind-the-meter energy chain, to turn every load in every building into a virtual battery. If we had met our epic, global ambitions, we would have reduced global energy use by more than 1% and built a 50 GW [virtual, globally distributed] power plant. In the end, we didn’t come close to that scale of impact, which is a disappointment.
As much as I would love to pat myself on the back for a job well done and do a victory lap, the climate crisis needs solutions of epic scale urgently so I’m wont to reflect back on Smart OES through the lens of, “What could we have done better to increase our scale of impact?”
- Lesson: “Success” is complicated. It isn’t binary and it can be measured differently across different metrics. It is critical to be clear (with others but, most importantly, with yourself) about what “success” means for your venture.
Right Business, Wrong Team
I have learned through previous leadership roles that I thrive when working at the big picture level, which means that I necessarily need to surround myself with detail-oriented “doers” for the venture to succeed. In partnering with my cofounder to launch this venture, I mistook his detail-orientation for a propensity for getting things done. My mistake cost us double:
- Many detailed tasks fell onto my plate, where they languished because, again, that’s not my forte.
- My cofounder was so obsessed with details and micromanagement that everything took much longer than it should have.
My cofounder was also supposed to handle fundraising but very little of his older network from more traditional energy turned out to be a good fit for our early stage IOT venture. As a consequence, the vast majority of fundraising fell to me.
- Lesson: Know thyself – and know thy cofounders! It’s easy to unwind a relationship with an employee who isn’t working out but much harder to divorce a cofounder.
To fill the gaps in our management team, we brought on a top notch operations exec. He was great – exactly the kind of “doer” I needed. But he, like my cofounder, came from the world of large business, not of startups. They were both very risk averse and it slowed us way down. They didn’t get the concept of an MVP and would hold up product releases for months trying to squeeze in more features that were critical in their minds (not in the minds of our customers). They would edit down marketing and pitch materials, worried about overhyping our offering, until they were so neutered as not to be very compelling at all.
- Lesson: Be entrepreneurial! It seems obvious but it really is incredibly hard to build a bold, disruptive startup from a position of risk aversion, fear of failure, and timidity!
Part and parcel of the big company ethos they brought was a tendency toward seeking consensus that also slowed us down. Myriad iterations meant it took months every time we updated our financial model or pitchdeck and weeks just to agree on the wording in informal investor updates. Often, by the time the document was finished, it was already out of date!
- Lesson: Be fast! A startup is a temporary organization searching for a scalable, repeatable business model. Its process requires rapid iterations of testing hypotheses in the market and adapting as new information comes to light. Execute those iterations too slowly and it cogs up the entire system.
Although the rest these two members of the management team were smart, talented, and experienced, they didn’t understand our problem space or our product very well. They viewed our venture as an opportunity to build a successful, lucrative business, but fundamentally weren’t excited about the work we were doing. This limited their motivation to find creative solutions to hard problems and caused a disconnect with the rest of our staff, who were very mission-motivated.
- Lesson: Startups need passion at all levels. Passion gets startups through tough times and pushes everyone to achieve great things.
Finally, one of our officers was very toxic. He believed everyone else was wrong and would blow up without provocation or notice. Often he was perfectly well behaved but the times he wasn’t were inexcusable. I spent a lot of time protecting the rest of the team from him, which obviously wasn’t productive. I kept telling myself that, as we grew, he would become more marginalized and his toxic impact would be reduced; that turned out to be a fantasy.
- Lesson: Eradicate toxicity! Starting up a company is hard enough without out it – kill it with fire!
- Lesson: Address tough decisions now! Kicking the can down the road just exacerbates the problem.
Fundraising Challenges
We raised $2M over three rounds but it all came in incredibly slowly. That meant we were always fundraising, rather than raising a discrete round then shifting into execution mode. It’s hard to run the product, operations, marketing, etc. of a business when you’re always fundraising. I wasn’t as present as I needed to be for the rest of my team and it showed in our productivity.
- Binge on fundraising. Rip the bandaid off, be done with it, and then move on – even if that means raising less. A founder has to be able to focus on the rest of the business.
- Raise smart money. Our investors were great and they really believed in us. The vast majority of them, though, didn’t offer us any additional value beyond their money. Seek out money that comes with additional connections, advice, and especially the ability to provide follow-on funding.
Final Thoughts
Smart OES was a wild ride and I’m really proud of what we accomplished. My heart hurts a bit, though, for the potential that we didn’t realize. At the end of the day, I am personally responsible for those shortcomings. The team I built wasn’t the right fit and, once that fact became clear, I didn’t react quickly enough to address it. Some of the lessons presented above are obvious and some are lessons I already knew – it goes to show how even experienced entrepreneurs can fall into familiar traps.
Stay tuned for some exciting news about my next adventure – and do call me out if you see me making any of these same mistakes; the climate cannot afford missteps that slow the progress of innovation!