Who: Jon Nordmark, 37, cofounder, president, and CEO of eBags.com, Greenwood Village, Colorado
Mistake: "Focusing too little on how to fund our idea."
Payoff:"You don't really have a business until you turn a profit."
"When we started searching for investors, we had incredible faith in our idea. But we were a little naive about the dynamics of raising money."
"We started this venture by relying on our savings, and we worked without paychecks for eight months. Finally, an investor came forward, and we landed a $10 million infusion. But after four months of negotiations — during half of which we were bound to a "no-shop" term sheet prohibiting us from talking to other potential investors — the investor bailed."
"We owed nearly $200,000 to our employees and our landlord. I'd spent my savings, my 401 (k), my two mortgages, and $60,000 on credit. But my cofounders and I rallied. We called everyone we knew. Within a week, we had lined up enough resources (using convertible debt) to breathe. Eventually, thanks to Benchmark Capital and other major investors, we turned that debt into equity."
"What did I learn from all of this? It's true what people say: Cash is king. As one investor told me, you don't really have a business until you turn a profit. We pay much more attention to financials now. A good idea is the base of a successful business. But without proper funding, an idea won't go anywhere."
A version of this article appeared in the September 2000 issue of Fast Company magazine.