Startups are supposed to have an innate drive to change the world. But not for me. I am 22 years old and one goal: to be a millionaire.
That’s my mindset in 2014, when my co-founder Lee Silverstone and I started Gymtrack, a startup that allows gym members to automatically track their workouts. It’s Peloton for the gym. It is “The future of fitness.” It’s cheesy, but it works.
A few months later, Dave McClure chooses our small Ottawa company to be part of 500 Startups, his famous SF accelerator. Before the accelerator starts, we raised $500,000, more than any other company.
Everything is on the right track. I’m going to be the next Steve Jobs. The next Mark Zuckerberg.
After the demo day, we received a call from a European gym equipment manufacturer. (A confidentiality agreement prevents me from naming them, so let’s call them EquipFit.) They love our vision. They want to lead our seed funding round. But we had already signed a term sheet with a VC. We had already done our due diligence and didn’t want to derail the round. So we told EquipFit we couldn’t take their money.
But they keep pressing. They sent their head of cross-world mergers and acquisitions from Europe to Ottawa. He takes us to dinner. He tells us he will skip the diligence and copy the exact terms the VCs offered us. And, if we prefer, they’ll even add a secondary $250K for each of us.
A minute ago, I was a broke student. Now they’re offering me $250,000 in cash, no questions asked.
But we discarded the secondary without blinking. I’m a 23 year old who doesn’t know how to spell hardware. They offer us what is considered trivial in the startup world, but in the real world is more than what 99% of 50-year-olds earn in a year. $250,000 cash for shares of an idea. And without thinking about it, we say no.
We are the next Steve Jobs, the next Mark Zuckerberg. They wouldn’t sell their shares so soon. Why do we?
A month after closing our seed round, we received another call. EquipFit still wants to invest. They tell us that since they missed our seed round, they will lead our Series A. Just a month after closing our seed round, we have a Series A led.
This time, we are invited to fly across the world to Europe. The night before the big meeting, Lee and I spent hours practicing how we would negotiate the valuation of our Series A. Our initial ask would be high: $25 million in valuation before we received any money.
Taking into account that we had just raised $6.65 million a month earlier, it was also absurd. We go back and forth on every possible tangent we can imagine. If they say X, we say Y. But what if they say Z? And so on. During hours. We were excited. But more than anything, we were nervous. Closing this round meant everything to us.
At 9 in the morning, we arrived at their headquarters, similar to Google’s, in a small town in Europe. We sat at the reception and waited. And we wait. And wait… Is it a negotiation tactic? Maybe. Finally, at 10 a.m., the head of mergers and acquisitions comes to pick us up. We take a 2-hour tour of his offices. Modern chairs. Ping-pong tables (none in use, of course). Nice cafeteria. At 1 in the afternoon, we entered a room. The CEO and CFO enter.
Normal Serie A negotiations are not that exciting. Someone makes an offer and the other party responds. If the founder has other offers, maybe there will be a bit of a bidding war. But this was not normal.
«Look, we just raised money. We don’t need the money. Our goal is to raise a series A in 12-18 months at $25M pre-money. If you want to invest now, great. But it will have to be at $25M pre-money «.
They tell us we’re crazy and open at a valuation of $8M.
This is the problem with early stage valuations: they are based on nothing, especially when the company has no revenue or products. There is nothing to negotiate. Nothing to give and receive. No meaningful arguments can be made to close the gap.
It’s a battle of wills.
We say a number and we “defend” it. They discuss it and respond with a figure. Then they ask for a 30 minute break. We go to separate rooms and come back to argue again. We spent hours and hours negotiating. If this were a scene from a movie, I would call it unrealistic.
But it’s real.
After many hours of discussion, they reached 12 million dollars and we reached 14 million. The billionaire founder of this company is standing across the table from me, a kid.
«Listen, I’m going to be honest (I wasn’t). The lowest I can go is $13.3M. “That’s double our last valuation and is the lowest the VCs will let us go.”
Thinking we were the next Steve Jobs gave us real and imagined confidence. I looked him straight in the eyes and held out my hand as if we were on Shark Tank.
And it worked – he shook my hand.
8 million dollars from one of the largest manufacturers of gym equipment in the world, just 14 months after its incorporation.
I will never forget the feeling right after that meeting. Lee and I were in the rental car, elated. I’ve had a lot of coffee and I haven’t slept at all. I’m barely awake. The whole situation is surreal. Are we living a movie? Did this just really happen? Am I the next Steve Jobs?
Once back in Ottawa, negotiations quickly break down. EquipFit asks for several control conditions, including some that our capital partners would not accept. We wanted the money, we wanted the association and, perhaps most of all, we wanted the publicity. We tried to convince our investors, but we couldn’t. So instead, we come back with a counter.
“If they want to control this company, they will have to buy it.”
Our “startup” was still more in our heads than in reality. We had a team, we had built an alpha, but we had no clients. The product was not ready. It wasn’t worth $14 million. A few weeks later, EquipFit calls us: they are going to buy our company for $14 million, all in cash.
It took us months to sign the new contract. They send several members of their team for in-person due diligence. We moved on to the final contract, going back and forth with the legal department. We draw up an employment agreement. I’m about to receive $1.7 million at signing, $200,000 a year in salary, a $1 million bonus in 3 years, and I still own stock in the company. I’m buying Teslas and condos in my head.
But then I worry. It seems too easy, too good to be true. So, just to check my sanity, I contact our attorney, who has seen hundreds of offers.
“Shane, how many deals go this far and fail?”
«99% of the agreements that reach this stage are closed.» Great, we are golden.
Except, as it turned out, we weren’t golden.
We were burning $250,000 a month with only $1 million in the bank. We had kept things tight to avoid appearing weak during negotiations. But the squad was up. EquipFit called and told me they were out. We had negotiated a termination clause to prevent this from happening.
EquipFit was not supposed to withdraw unless it had one of the few negotiated reasons. But then again, as a startup running out of money, what are you going to do… sue them? They gave several reasons, and none of them mattered.
The thought of laying off 66% of the team we had worked so hard to hire was too much to swallow. Did I go from billionaire to bankrupt in one phone call? The dream was dead. At first, he was angry. Then, I got sad.
Then I cried like a child who has had candy taken away from him.
This is what they mean when they call startups roller coasters. The highest of the highest, the lowest of the lowest. It only took one call. We kept going for two years after that. We tried several new pivots. We hired a new CEO. But the air had been sucked out of the balloon.
A few months ago, I met the founder and CEO of PUSH. I knew PUSH since we started Gymtrack. Same space, same harvest. Back then, I dismissed them as niche. They were going after sports and university teams, not conventional users. They measured specialized metrics that only mattered to serious athletes. Unlike us, they could never be a unicorn.
But as he told me his story, I realized he had done it right. He had worked his way to success from a smaller market. He wanted to create a product for the masses, but he started selling B2B to sports teams. Capital requirements were lower and customer value was clearer. When investor confidence in wearables changed, as it often does, it still had a business it could drive.
Instead of chasing the hype, he built a company. Instead of chasing unicorns, he brought real value. You may think he hasn’t changed the world, but – from his clients’ perspective – he has. It had real traction, real impact, and now, a real outlet.
He is a real millionaire, not just an imaginary one.
Founders are told to dream big, build big companies, and go for it. But it’s venture capitalists like me who sell those dreams. I win when all the companies in my portfolio take the plunge, even if only a few succeed. But if you put all your eggs in one basket, you better keep an eye on it.
Could the Gymtrack exit have been closed? Maybe, and then I’d be writing a different story. But a strategy is not based on hope. It is based on reality, on probabilities. And while anecdotal evidence tells us that great companies are created by young founders like Steve Jobs or Mark Zuckerberg, the data tells us otherwise.
What is the main difference between early-stage company founders and multi-million dollar company founders? Founders of multi-million dollar startups have founded a successful startup before.
Sometimes the biggest is the first. If that’s your case, great. But in the beginning, your goal with the first one should be to get a win, hopefully a big win, but at least a win. And the odds of a win are much higher when you focus on value versus hype, when you focus on customers versus TAM, and when you focus on building versus launching.
- They may take away my VC license for saying this, but if I had to do it again, I would scale back my ambitions. My goal would be to create a startup with real traction. I wouldn’t worry about the hype. I wouldn’t worry about the billion dollar story or the massive TAM. I would care about offering real value to customers. Maybe you get to $1 million in revenue, maybe $10 million. If I’m lucky, I might go further. But at least it works. At least you make real money, not paper profits and headlines. At least, for my clients, it changes the world.
- When they say startups are roller coasters, they mean it. Startups aren’t just tough; They are emotionally exhausting. I would tell you to be prepared, but nothing prepares you. Just know that even rockets feel like roller coasters from the inside. What you build is hyperfragile. You are often one employee, client or investor away from success and death. It’s what you sign up for. And the more hype is given to it, the bigger the unicorn being chased, the more it is amplified.
- There is no substitute – none – for solving real customer problems. Smoke and mirrors, massive rounds, PR and hype won’t save you if you’re not solving a top-of-mind problem for your customers. It could be ten clients or ten thousand. But if you ask your customers if you solve their #1 or #2 problem, their answer has to be “Yes.”
