Saturday 21 September 2019

What it's like when a business starts to collapse

Watching your company fail is a gruelling experience but one that may help business owners learn valuable lessons. Three entrepreneurs tell us how they picked themselves up and started again after major setbacks.

Norman Crowley (now at Crowley Carbon)
Norman Crowley (now at Crowley Carbon)
Mike Fitzgerald (now at Cross Atlantic Productions)
Gerry McGovern (now running Customer Carewords)

Paul O'Donoghue

When some companies collapse, it is a gradual process. Revenue goals are missed for several months in a row, the cash reserves slowly start to run low, investors begin to lose confidence.

The end, while always inevitable, can take months or years as the firm stubbornly lumbers on before finally letting out its dying breath.

That wasn't the case for Altobridge. "It was an overnight event. We realised we couldn't compete, we held a board meeting at lunch and there was a receiver in the building that evening," recalls Mike Fitzgerald, the company's founder and former CEO.

"All of a sudden you walk in the door of the building where you have been working for the past four years - and it's all over."

The mobile technology company is one of the more high-profile recent examples of a promising Irish firm going bust, shutting its doors last June as it found itself unable to battle with its larger multinational rivals.

The idea of "learning from your failures" is one that is regularly trotted out by US entrepreneurs, so much so that it has now become a well-worn cliche. It's not without all merit though. Several business figures have seen their companies or ventures go down the tubes and have gone on to have great success anyway.

GoPro founder Nick Woodman saw his first two attempts at building a business, e-commerce website and online marketing company FunBug go belly up before he struck it rich with the GoPro personal camera. Virgin's Richard Branson has seen several of his Virgin lines fail, including the ill-fated Virgin Cola - and even legendary Apple visionary Steve Jobs was ousted from the company he co-founded after the firm discontinued its poorly selling Lisa computer in the 1980s.

Closer to home, however, and it's a different story. Failure in business is bad, and it's not something that you talk about, let alone embrace.

Organisations such as the Small Firms Association are trying to break down what they refer to as the "fear of failure", arguing that entrepreneurs involved in companies that go under should be given another shot, even going as far as to advocate a "second chance" entrepreneurial support programme to give a leg up to those who see their ventures go under.

For those who have had to see their business fold, the experience is devastating.

In Altobridge's case, Mike Fitzgerald says that rather than it being a situation where the company was missing deadlines and targets, one of the firm's biggest successes at the time proved to be its downfall.

Set up in 2002, Kerry-based Altobridge developed technology that was deployed in remote rural regions in developing countries that allowed for a steady mobile network connection. They were one of the darlings of the tech world, securing finances of $30m from major backers such as Intel, and in mid-2013 the company had just landed a valuable contract in Malaysia.

Having already installed their tech at 200 sites in the South-East Asian country, Altobridge inked a deal with a major national communications provider, Maxis Berhad, for 300 more. Although they had been aware of Altobridge for years beforehand, Fitzgerald claims that after this deal went through his competitors majorly ramped up their efforts to price them out of the market.

"Once we went from working in 50 villages to 500 they pretty much said: 'The gloves are off, we're going to try and wipe you out'", he said. "A eureka moment was when we proved to a potential client that we could save them $4m a year on our network, and then one of our competitors offered that as an annual discount. That type of financing was a bridge too far."

Fitzgerald stepped down as CEO towards the end of 2013 but stayed on the board until the end. Although there had been rumours that Intel had been unhappy with Altobridge's revenue targets and subsequent performance, Fitzgerald strongly rejects this, saying that Intel were supportive backers and claiming that the Altobridge had been prudently managed until its final days.

"You are always watching where you are, cashflow, wages, everything. Suddenly when the irrational financing competition kicked in, it came as a shock - but the response was immediate, there weren't minutes lost. We sought financial advice straight away and they told us this was the button to press. We held a board meeting and decided - and then there was a receiver in the building as soon as he could get there," he said.

"It was very difficult at the end as there are people involved, they have given over a decade of their lives to the cause. They were people with mortgages and families, they were the ones who suffered."

The firm appointed a receiver on 30 May 2014, with 45 jobs gone overnight, and its assets have since been bought by US satellite firm iDirect.

Despite the hardship of the firm shutting, Fitzgerald says he has no regrets.

"I put 12 years of my life and $1m into into Altobridge, I gave it everything I could," he said. The entrepreneur has now set up a theatre production company, Cross Atlantic Productions, as well as a string of coffee shops in areas such as Killarney. He says that getting back into business was a natural course of action for him, summing it up by saying: "I've had some winners and some losers, it's what I do."

Someone else who also has experience in both is Norman Crowley, the founder of the dotcom Irish tech giant Ebeon.

Co-founded by Crowley, the company was one of Ireland's leading lights during the dotcom era, valued at €26m in 1999, the same year that Eircom bought a 51pc share.

Employing a staff of 170 with 100 employees in Dublin and offices around the globe, the e-business company was soon valued at €120m and was tipped for great things, expanding rapidly during the late nineties. However, after the dotcom bubble burst, funding dried up.

Crowley says that the tech crunch played a huge part in Ebeon's fall. "It was fine when it was sold, the reason it went bust is because the plan was to keep expanding and raising money, and in 2001 everyone stopped investing in tech companies.

"The entrepreneur, who was sitting on the board of directors at the time of Ebeon's demise, describes the situation as his "worst nightmare" as the firm's executives scrambled to secure funding and save the firm.

"It's a life-sucking 24-hours-a- day process that is the equivalent of hell as you're trying to keep it alive," he said. "I remember calling my dad the night before it was going to be announced and saying: 'This is going to happen tomorrow, I'm ok, it may be in the papers but don't be disturbed.'

"Even though I had sold it, it was still associated with me, that Norman Crowley equals Ebeon equals failure. It was quite difficult to get over."

Yet get over it Crowley did, going onto found multiple companies including Inspired Gaming which was taken over for £74.4m in 2010, and now heading up successful energy firm Crowley Carbon.

Looking back, Crowley says that his experiences with Ebeon helped to give him additional business insight, saying: "I think if you were never in that situation you're not as understanding, when you've been through it you have an understanding of what people are going through."

Another entrepreneur who says he learned from his company going under is Gerry McGovern, the founder and former managing director of website developer Nua.

Set up in 1995, McGovern admits that mistakes were made: "We were young and naive. I remember this big financier, I don't know how he found us, telling us about all the people he knew in Wall Street.

"We got really carried away and thought he would put money into the company, but he pulled out at the last minute and we could hardly pay our rent."

Despite the early setback, Nua was soon on a rapid growth path and in 1998 Eircom invested $8m in the promising startup. Talk of a billion-dollar IPO followed, with McGovern saying that he could see the company going public by 2001.

He recalls "We had three people at the beginning and more than 100 by 2000. At one stage a private equity firm valued us at $200m - and at the same time Aer Lingus was being valued at $250m. It was ridiculous."

By 2001 Nua was bust.

In the heady days of the dotcom bubble, Nua made a foray into the area of content management that didn't pay off - and by 2001 it was struggling to pay its bills.

Desperately needing a £5m cash injection, a last-minute deal to secure funding from Garnham Corporate Finance fell through.

McGovern recalls: "You are dealing with financiers, people you owe money to, you have to talk to your staff. The final months were spent trying to raise investment and you were talking to people that you were almost 99pc certain wouldn't help you, but you had to try every last oppurtunity. It was excruciating - but we tried the best we could," he said.

By March 2001 it was all over and 35 people were out of the job. While he admits that Nua's collapse was "unpleasant", to put it mildly, McGovern maintains that it taught him valuable lessons for the business world.

He has since founded Customer Carewords, a company which helps organisations optimise their customers online tasks, and says: "Maybe one of the things I took away is that you should keep things under control, make sure you can pay your bills," he says."What I have now is working very well."

And does he regret his experience with Nua?

"Persistence is essential in life," he says. "It's kind of a backwards and forwards, you make progress and you go back again. And after all, no-one died. In short, it was a great experience with some rough patches - and I feel privileged to have been around for it."

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