Work with friend on seed funded start-up

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I have a good friend, colleague, confidant and mutual wannabe entrepreneur, let’s just call him, Stephen Gates (real name not included due to the sensitivity surrounding his departure from his current employer), who I roomed with while attending the Haas School of Business from 2000-2002. Stephen and I are an ironic twist of similarities and differences. Stephen obviously has the same name as mine (If only he would get rid of the “ph” from his name and spell it properly), we are the same age, both from So Cal, both Jewish, both have worked at an Andersen company (I worked at Arthur Andersen, Stephen at AC), both attended Pac 10 Schools (I am happy to see the power of Pac 10 basketball has moved back to its rightful place of LA and faded from Stephen’s Tucson alma mater), both have a passion for adventurous travel, both were married within 1 month of each other to gorgeous blondes and we both have serious intellectual egos.

On the other hand, Stephen prefers working out and developing a chiseled physic to my own preference for cooking, eating well, and developing a 6 pack the old fashioned way, drinking some Sierra Nevada. Stephen prefers “Natty” Light or Miller beer to my Guinness and he has a preference for taking dates out to Fuddruckers instead of the newest trendy sushi spot, like myself. Stephen is just about the cheapest person I know, though I do have other friends, like Alan Kleinman who would give him a run for his money, while I see myself as a bit more of a spender (Though, if you ask my wife, she thinks I am cheap!!) Stephen also decided to climb his way up the corporate ladder, albeit at an incredibly rapid pace, with a large telecom and now serves as their VP of Strategy and Business Development, while I chose to plug away for two years doing my own thing and venturing out as “the deal guy” at Shopzilla for three years. Not to mention, Stephen decided to go ahead and one up me by getting an additional masters in finance during his free time.

Roughly 7 moths ago, I decided to kick-start our path to working on an entrepreneurial venture together and organized a trip back to our roots of innovation, a weekend away in the hills of Berkeley. Though some time had passed since the last since we engaged in any meaningful start-up debate, it took only a single “Strade Bianca Mocha” until we were back to our original form. Stephen was focused on identifying existing BILLLION $$ industries and developing innovation to take market share, ala Skype and Joost. I was focused on identifying currently underserved markets and developing a business that catered to it, ala EmporiaLife. As had become standard form for our debates, we were both relentless, while absorbing and respecting the others point of view. Both stubborn to the core and strong in our conviction, though able to understand the flaws in our assessment based upon the others feedback. As is usually the case during our debates, we were as honest about our positions, a unique circumstance in today’s corporate environment of watching what is said due to the political ramifications. We have found in each other professional confidant’s, able to share and exchange ideas in a free format, not subjected to our own egos, politics, or other such ramifications that might otherwise alter our feedback with one another

Though may concepts and ideas came out of the weekend, we only chose to follow up on a couple of them for further pursuit. We spent the next months working together to build a business plan for a mobile coupons company, similar to Cellfire’s model. (Though with some significant difference that we felt could ramp the business at a much faster clip.) However, there was one other consumer oriented concept that Stephen was incredibly passionate about that I had a difficult time understanding the consumer value. We went our separate ways and Stephen decided to continue developing the concept without me along for the ride. I then decided to seek out greener pastures, took the plunge and quit my position with Shopzilla.

While time had passed and I was planning for my trip to China, Stephen raised a seed round of capital that will kick-start his business. The initial round will most likely get the product developed and rolled out over the next 6 months, with a limited development team and only a couple of business folks aboard. I got the news while in Shanghai. Stephen said he was waiting until he had the $$ in the bank until he reached out to me to get a sense of my interest in playing a role with the company. I welcomed the news and was excited to see my good friend move forward with his entrepreneurial dreams. At the same time, I had mixed emotions about getting involved since I thought it too difficult for the business to gain any significant traction, given the proposition. I decided to commit myself to conducting my own field research and talking with consumers about the product. The feedback was incredibly positive and I have since altered my view of the concept/ company and believe that Stephen has a real opportunity for success on his hands.

So, it seems that I finally have an opportunity to work with a good friend, who I have thought for so many years that I would work together with on building an innovative consumer oriented company, yet find myself in the unfortunate position that I may have to take a position with another company first, since according to Stephen’s plan, my services would not be required on a full time basis for at least another three months, all the while the CASH in the Sesar kitty continues to dwindle. Unfortunately, I had never prepared myself for such an extensive period of time without any meaningful CASH FLOW!! This presents obviously a very interesting dilemma. Such is the entrepreneur’s life.

June 8th, 2007