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Setback to Resilience: 3 Lessons from the Unsigned Contract

Contract

Building community pre-monetization
We launched our product in September of 2009 and while we of course had a variety of monetization ideas in mind, we decided to begin building our audience and fine-tuning the site before testing out various concepts.

Cash-flow positive: the unexpected
So imagine our surprise when less than two months later a large publisher (perfect for our demographic) reached out to us asking to work on a collaborative project that would have immediately made us cash-flow positive. Now, my partner and I both have a lot of experience working with large companies and know how these things can go. But after a few weeks of back and forth on terms, we got the green light to start.

It was an exciting moment.
Not only were we happy about the financial terms and all the potential future possibilities, but -

- we were also thrilled to have such immediate validation of our business. There may even have been a little jumping up and down. What there wasn’t…was a written contract.

Of course we knew not having this deal inked was a risk.

But we had emails and calls and excitement all around – they even asked us to accelerate to get the project done asap. We started quickly. They promptly backed out.

Lessons learned:

1. It’s not personal when large companies shift priorities.
After a morning of heavy emotion, a 2 mile run on the treadmill and some general sulking, I realized I could sit there and let this situation drag me down into a swirling vortex of negativity and doom for our business, or I could use it as motivation to figure out bigger and better possibilities. I went with the latter. After all, they loved our idea but as we all know, priorities at large companies can shift like the wind and it’s not a reflection on us. To be honest, I’m proud of how quickly we were able to mobilize and respond.

2. Balance the cost of protecting yourself with the potential loss you would have if your potential partner backs out.
Knowing how priorities change, I should have known better and at least had them sign a simple contract. It may not have changed the outcome but at least it might have forced them to think about the deal a bit more carefully before giving us the green light.

That said, I know first hand how difficult this can be – the last thing we want as a small startup is a lot of back and forth with lawyers. I say this because having worked at AOL for over a decade, I know that legal departments can do a number with those red lines and startups don’t have the cash to burn on legal fees. In the end, you need to balance the cost of protecting yourself with the potential loss you would have if your partner backs out.

3. Learn to bounce.
The success of your business is dependent upon your ability to bounce back from adversity and learn from it. It was a major disappointment but there will be other companies and other deals. And along with those, there will likely be other disappointments. But that’s the risk and cost of doing business and you can’t let it stop you.

So, we continue into the season of gratitude
…growing our audience and while I wish our project would have happened, I’m also thankful to that publisher for helping us see additional possibilities for our business, learning early lessons and about our own resilience as entrepreneurs.

Would I do business with them if they asked in the future? Absolutely. With a contract.

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Image I’ve Contracted an Agreement by JK5854, Creative Commons

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Guest contributor Jen Consalvo writes the Women Grow Business series on all things related to launching product (pre and post launch). She is co-founder of Shiny Heart Ventures, a new technology startup focused on building community driven products that remind people of the joys of life. For almost 14 years, Jen has led teams in a range of product areas such as digital imaging, social platforms and personalization. The majority of her career was at AOL, planning and building products used by millions of people globally. Also find Jen at jenconsalvo.com, bodysoulconnect.com and twitter.com/noreaster.


    1. I say this because having worked at AOL for over a decade, I know that legal departments can do a number with those red lines and startups don’t have the cash to burn on legal fees.

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