How a deal with Etsy fell apart at the 11th hour

and how to get through startup financial tsunamis

“Hey...um…honey…I need to get groceries for this week, is there any money in our checking account?” my wife Marisa said to me after nervously opening my office door.

I checked the balance, swallowed back tears, and said “no…just give me a 24 hours, I promise I’ll fix this, I promise…”

The balance was -$250 and the clock had run out.

It was time to shut our company down.

Rewind 6 months…it was 2017 and we were putting the finishing touches on a brand new design system for our DIY ecommerce platform Goodsie. We had also just signed a partnership deal with Gawker to power their merch stores for all of their properties including Deadspin, Lifehacker, Gizmodo, Kotaku, Jalopnik, and Jezebel. Things were tight financially, but we had discovered a new business model of on-demand printing and white label stores for brands like Gawker that was catching on.

However, one company we were dying to partner with was Etsy.

We knew that with their userbase of amazing sellers and our extensive experience with building ecommerce store design tools, we knew we could help them compete with Squarespace and Shopify.

Lesson #1: Persistence!

David, my other partner, had emailed Etsy many times throughout the 10 years we ran Goodsie. We would have a meeting, get pumped about a partnership, and then things would fizzled out and we would get the standard “keep us posted” line. But David kept emailing, every year checking in with their head of biz development.

“Keep us posted, keep us posted, keep us posted” we kept hearing, until one day David got this email from Morgan, Director of Business Developer at Etsy.

Persistence is what got us that meeting. Most would have given up after the 3rd no, but David kept asking.

Lesson #2: Culture is key

Within a few weeks we were at the new Etsy headquarters in Brooklyn. The office was amazing, catered meals, freakin kombucha on tap, and lounge chairs and couches everywhere. I attended a lunch and learn with a NY Times Design Director and then jetted on down to a giant conference room to meet with the Etsy Pattern store-builder team.

They were really great people, and we got along really well. We spent hours going over design ideas, doing white board idea jams, and nerding out on UI/UX.

In these acquisitions meetings, you can tell pretty quickly if the cultures are a match. If you have a culture that’s laid back and thoughtful, and you're meeting with a fast paced, ship-at-all-costs team, it will probably end in disaster. Usually these deals involve a 4 year vest, meaning you’ll have to work with these people a minimum of four years to get all your money from the deal, so if you can’t imagine yourself working even 4 minutes with them, walk away.

Lesson #3: Be ready to hurry up and wait

After the meetings were done, we said our goodbyes and headed home, anxiously awaiting the response.

Now is when patience is key, because these things do not happen overnight.

We finally got an email back saying, “let’s start due diligence” which is a fancy way of saying “show us everything”. We had 4 different accountants getting our financial data together, every salary, every credit card, every employee salary, everything must be documented and verified. The problem with this is that if you’re not wildly profitable or on a skyrocketing growth trajectory, you really don’t have any leverage once they understand your financial position. They know down to the penny what your company makes and what it’s worth.

The whole process took over a month, and I must have texted my partner Jonathan every 3 hours daily asking if we heard anything back yet.

Then it happened.

My family and I were at my friend Joel’s house that evening, hanging out with some friends from our church and letting the kiddos play in the back yard. I got a call from Jonathan and ran out of the room and upstairs where it was quiet.

“It’s a deal dude, we got executive approval and it’s done, we did it!”

I ran downstairs and told everyone the news, “IT’S A DEAL YA’LL!”. We all celebrated and talked about how I’ll probably buy a beanie and drink kombucha all day and wear skinny jeans now that I’m working for Etsy.

Either way I was pumped, we did it.

But then the next day, nothing…
the following day, nothing…
the following week, nothing…

This went on for what felt like years, and we would get an occasional email saying they were still discussing internally some things that had popped up. Either way it was not a good sign.

The rough thing was, we weren’t bringing in any new business, which meant no pay roll, which meant putting everything on credit cards. We even took out cash advance to pay our mortgage it was that bad.

But we weren’t worried, I mean the deal was going through right? We just needed a few more days and everything would be golden.

Then we saw the news…

Etsy had fired their CEO, their stock plummeted and they had just done massive layoffs. SON-OF-A.

Just like that, the deal was off. From what we heard, they had 2 or 3 others deals that were also obliterated.

We tried a few hail mary’s, like meeting with Anthony, Founder of Squarespace, and even tried to sell it to one of our big white label customers, but we couldn’t get a deal done, it was just too messy. We were exhausted, emotionally and financially.

Lesson #4: What doesn’t kill you makes you stronger

The day Marisa walked in and asked about money for groceries still haunts me to this day, and knowing how close we were to losing the house (within 72 hours of defaulting), keeps me laser focused on results, not talk, not if-come, not almost-there deals.

Eventually we climbed our way out of $50k in debt, and I’m still building new companies, because I can’t not do it. If you’re like me, you have an incurable disease called entrepreneurship. No matter how many times you play the game and get smashed and knocked out, you keep coming back for more…

…because that’s just what you do.

(even if I just read Etsy’s stock just tripled in the last 3 days, EVERYTHING’S FINE)

Till next time,

Jack


👩‍💻 Want to learn how to design pitchdecks yourself?
Equipped with the information in this masterclass, along with practice and application, you'll close more deals, raise more money, and make your story unforgettable.
Learn more

✏️ Want to write copy that converts like crazy?
Equipped with the information in this masterclass, along with practice and application, you'll close more deals, raise more money, and make your story unforgettable.
Learn more

⭐️ Want to save time and get your pitchdeck designed by a pro designer?
We help startup founders create professional, head-turning, fund-raising slide decks. Over $100m has been raised with decks we’ve designed.
Learn more

📱 Want an easy way to teach, train & coach people (@ scale) via text?
With DOHQ it's easier than ever to get attention, engage people, and train them through text messages
Learn more