She was proud to support her husband's dream of building a great business. But five years is a long time to watch someone focus on his company at the expense of everything--everything--else.
We were on vacation at the lake when my husband decided to start a company. Our five-year-old, Lily, was napping, so we had some rare adult time to talk about the opportunity Bill was considering. He wanted to leave his job as general manager for an industrial laundry plant to partner with a guy who had invented a drink that was carbonated but also 100 percent juice. It seemed to Bill like the chance of a lifetime, given that he had worked for a number of entrepreneurial companies before, most notably a few beer businesses. And I agreed. As we aged it would only become harder for him to take a big risk like that. We had some money saved and had recently relocated from Boston to Richmond, Virginia--a pretty affordable town. Why not go for it?
I knew what we were in for. I had been a business journalist for a dozen years (five of them on staff at Inc.) and had written countless articles and a couple of books about managing start-ups. My husband was a smart M.B.A. with entrepreneurial drive, I told myself, and I would be the supportive wife with exceptional business sense. In five years, he would sell the company to Coke or Pepsi and cash out.
Of course you've already guessed it: I was dead wrong on nearly every count. Neither of us could have predicted the company's surprising trajectory. Watching Bill navigate the entrepreneurial life, I see now just how little I really knew about starting and building a business. In the five years since Bill embarked on his great adventure, I've come to realize the only thing I was right about originally is that my husband is, indeed, a smart M.B.A.--and he has more entrepreneurial drive, much more, than either of us knew.
Who Wants Another?
The early days were exciting. Bill's partner, Wayne, had developed a unique and sexy consumer product. Bill and Wayne spent the fall of 2000 working on the business plan--Wayne was to manage operations and Bill took sales, marketing, and fundraising, as well as the titles president and CEO. First, of course, came the money, and that wasn't easy. The dot-com bubble had just burst and nobody seemed to have spare investment cash lying around. As I watched our bank account dwindle and wondered when he would give up, Bill hit the venture capital breakfast circuit and worked his cell phone. For a man who professes to hate networking, he certainly knows how to make connections. In February he cobbled together $800,000 in angel financing. It was enough to launch.
We'd had a group of friends and neighbors over to taste-test and suggest names. We spent the day in our dining room, gleefully shouting out potential names and writing them on an oversize chalkboard. Licking Creek didn't make it (although the neighbor who shouted that out still has the mockup bottle Bill gave her). Neither did Knew Jewce, the original name Wayne had given it. A week after the meeting, Bill came up with The Switch, a skateboarding term for making moves more complicated by doing them backwards, or "switching" them up. His company would be the Switch Beverage Co.
Friends and neighbors asked us about investing, delighted by how Bill's adventure was unfolding. A few did invest, as much as $50,000. We had jumped into a glamorous and risky dream, one few others would chance, and they were all eager to live vicariously by hearing every detail. I would discover later that many of these friends and their happy questions would disappear when the company took downturns.
Bill developed packaging--he chose a retro look--and a detailed marketing plan, and bought a pair of giant Land Rovers, which he covered with metal racks and shrink-wrapped with colorful company logos. His first account came from a key investor who was part of the family that owns Ukrop's, one of central Virginia's largest (and still independent) grocery chains. The Switch made its debut at an outdoor festival in Richmond on Memorial Day weekend, 2001. Bill set up one of the Rovers to do a tasting, and Lily and I couldn't give away the samples fast enough.
Bringing the product to market had taken nine months, and I remember how thrilled I was to see it in the cooler at the grocery store. Ukrop's and Kroger stocked all five flavors, and the rows of bottles sat right next to Jones Soda and SoBe, just like they belonged there. I stood in the aisle and laughed. It was the moment I realized that Bill had actually done what I had written so many stories about. Consumers were buying his dream.
Every time we went to the grocery store we'd straighten the bottles and ask the manager to restock flavors that were running low. When Bill and I had lunch dates together we would always go somewhere that carried The Switch, and we'd use a little trick Bill had taught me when he worked for Guinness--turn the bottle so the label faces the rest of the people in the restaurant. When Bill had me doing that for Guinness I was annoyed that marketing was intruding on our lunch, but for The Switch I was delighted to do it, delighted to see so many others drinking it too.
Growth was steady. Distribution spread from Richmond up and down the East Coast. After Bill attended a natural-food trade show in mid-2002, natural groceries across the country clamored for the product and The Switch went national. In 2003 the company got caught up in a serendipitous piece of California legislation. The state banned sodas from schools, creating an empty space in vending machines and lunch lines. Bill put product in cans and hired a West Coast sales force, and California quickly grew to about 60 percent of the company's revenue.
But the growth burned through capital. The company was regularly on the verge of going broke, and every time disaster loomed, Bill would pull a deep-pocketed rabbit out of his hat. After the first $800,000, he raised $3.3 million in 2002, $1.5 million in 2003, and $2.4 million in 2004. He was promised another $2.25 million in 2005. His alma mater, Northeastern, asked him to lecture to the M.B.A. students about raising money.
Sales were also growing, from $800,000 the first year to $1.7 million in 2002, then $2 million in 2003 and $2.5 million in 2004. The company was on track for $6 million in 2005. The growth rate was impressive, but the company wasn't profitable.
Part of the costs were legal fees. For example, in the first year the company's design firm sued. Bill hadn't realized that it's standard practice for designers to own what they create and license it to their clients, unless the contract between the parties specifically says "work-for-hire." The design firm claimed ownership of not only the packaging design, but the name. It took nine months, lots of Bill's valuable time, and $150,000 in legal bills, but The Switch won. Bill had paid the design firm in part with shares, and the shareholder agreement the designers had signed said that all work done by shareholders was owned by the company.
