Tachles Series: Benzi Ronen shares insight, anecdotes, and expert hacks for entrepreneurs looking to grow their business in the US.
Find out how to:
Navigating layoffs/pivots while earning the respect of the team
Provide resources to help teams through layoffs
Head off destructive rumors by controlling the narrative
Nu, get to the point:
Last week, I had the pleasure of sharing Farmigo’s acquisition victory — this week, let’s dig into some of the less-fun stuff that happened along the way.
It was the summer of 2016. Everything was looking good; after months of pitching, Farmigo had a new investment term sheet for $20 million. Then it all went south — one of our original investors backed out of the new fundraising round, questioning the economics of the business.
We could still get the deal done without them...but did we want to? I sat down with my co-founder and CTO, Yossi, to take a hard look at our situation. Farmigo had become a highly logistical operation that relied less and less on technology as its core competency. We would be losing money for many years to come, without any certainty that mass consumer behavior would shift to value locally-grown produce over cheaper, more convenient options and allow us to scale.
So, would we have started the same business today, knowing what it would become? Our answer was immediate: no. Even with the new investment, money would dry up before we could achieve a way to sustainably support 130 employees, tens of thousands of customers, and hundreds of partner farms.
Our only hope was to shutter most of the company before we completely ran out of funds, and save our original offering — a Community Supported Agriculture (CSA) software service for farms. These were, without a doubt, Farmigo’s darkest times...but, operationally, I think we made the most of a terrible situation. Below, I’ve outlined a few of the ways we managed to navigate through it all.
Hacks:
You Failed. Now Own It.
I used to think that maintaining a confident facade was critical to being a good entrepreneur. Who wants to join — let alone invest in — a startup where the founder isn’t completely certain about the future of the business? However, I’ve learned that the surest way to earn the loyalty and trust of your team is to treat them as equals and share your concerns. By letting them in on what’s at stake, you empower them to rise to any occasion with a full understanding of its gravity.
My experience with Farmigo was the first time I’d ever failed at such a large scale, and in a way that impacted so many people’s livelihoods — and I wanted them to know why. I shared our decisions, our assumptions, and our mistakes. I shared how much money we had left, and how we were going to do our best to close the business with as much respect for their efforts as possible.
Actions Speak Louder Than Words
Ultimately, though, what we did probably held more meaning than what we said. We organized an offsite to help employees strategize their next steps and update their CVs and LinkedIn profiles. We created a spreadsheet designed to help everyone network: people would list companies they were interested in working with — anyone with a contact would offer to make an introduction. I worked with our investors to identify organizations looking to fill relevant positions.
To the best of our ability (given our dire cash flow situation) we designed severance packages for every employee. Everyone was able to keep their laptops, and even take home the office furniture we no longer needed. The point of all of it: no one was alone. Farmigo had built an incredibly strong community, and it was that strength that would see everyone through the challenging time.
Over Communicate
Crisis management is critical — rumors spread fast. The Farmigo team was located in three different time zones 10 hours apart; we wanted everyone to hear the news at the same time. To keep things personal and foster a supportive space, each VP shared the news out in smaller groups. Once everyone had been given a chance to digest the news, we hosted an all-hands for follow-up questions.
Of course, Farmigo wasn’t just accountable to its employees; we shared the news of the closure with our farms as soon as possible, too, opening up the option for a dialogue. Many of our farms had relied on the business as a significant source of income — it was important for us to help them to transition to other distribution channels in whatever way we could.
Good luck!
PS — Following Farmigo’s implosion, we began the work needed to salvage the situation and turn things around. More on that next week.