Thinking about your mistakes can be a disheartening exercise, an experience in self-denial, or an event from which you grow. Here’s hoping this next series of blog posts is the latter.

But let me preface this with some working assumptions. There are good mistakes and bad mistakes. And there are little mistakes and big mistakes. For example, sometimes you make a mistake in the short term that ends up working in your favor. That’s a good mistake. A bad mistake might be repeating the same mistake twice or not heeding someone’s sage advice. A little mistake might be choosing the wrong logo or mantra or something. But, honestly, none of these types of mistakes really matter.

The ones that matter are the BIG mistakes. I know, no surprise there, right? But you’re going to make every type of mistake along the way, so hopefully the big ones will be few and far between. Why? Because BIG mistakes can kill small companies. In this post, I’m going to focus on the BIG mistakes I’ve made along the way. Hopefully, you can avoid them and if not, at least you’ll know you’re not alone when making them.

When do the big mistakes matter? They matter when you don’t recover from them. The beautiful thing is I’m living proof you can recover. How do I know? Well, because I’m still here, that’s why. So, let’s see what happened and whether these things can be avoided; and perhaps most important how we managed to survive.

Mistake #1: Losing your biggest and only customer

After we were funded at Virginia Tech by Merrill Lynch to build power management software with performance guarantees for critical servers, we started a pilot with ML and our newly incorporated company. Though it was slow going, it went great. We hit all our numbers: 15% energy savings with virtually no loss in performance for tough simulation workloads running on ML servers. They ran the software on analyst machines and no one complained. Everyone was happy, what I refer to as a regular “love fest”.

Enter global economic disaster. ML basically went bankrupt by the end of 2007 and ultimately got bought by Bank of America, but before that, like animals running from a fire or rats leaving a burning ship, everyone on our project at ML got new jobs elsewhere. The project was first put on hold and then canceled entirely. We never got a cent. We were left with great results we couldn’t talk about to anyone (under NDA) and no more champions. We actually eked forward on the project for about 6 months just because the results were so compelling, but then it just fizzled.

One customer is not enough

The BIG mistake was that we put too much stake in one customer. One customer is not enough. No matter how big they are or how deep their pockets, you must branch beyond them. You must create something that lots of people will buy. I would shoot for 3-4 people that want to buy what you will make. Two is too few. But more than that and you just might be on to something that you can sell to masses of clients for hundreds of millions per year.

We designed what ML asked for (a Linux-based solution) which it turned out few really wanted. We were early as a company. We didn’t have the chutzpah to tie cost discounts to timely completion of the pilot and so (not surprisingly in hindsight) without a forcing function on ML, the pilot went on forever (mostly in delays from their side).

It’s not that they didn’t love us, we were great together. But, we started out with the leader of their R&D acquisition team (our champion) and when we got to the pilot we were assigned an intern. Yeah, that’s right, an intern from some name brand school that they hired for a semester. And guess what (another big surprise), he knew next to nothing about system administration. It wasn’t his fault, he was only in his second year undergrad or something – he may not have even been a CS major for all we knew. Also, we designed software we could install; not software to be installed by a second year undergrad with little experience. We went to great lengths to get the pilot done quickly including sending one of our technical folks to London (yeah, the one in England) just to help them through. Epic failure.

So, you must tie your pilots to milestones or create a pilot workflow that is not on your critical path. For example, our latest software is designed for anyone to do their own pilot on their own time. They get value from obtaining their free energy footprint (i.e. incentive) and we get the benefit of more people using our software and more chances at upsell opportunities to the pay-for version. A pilot now costs my company next to nothing aside from the random telcon or support email for bigger potential clients. We made the software incredibly easy to install, by anyone, even our 2nd year undergrad friend (BTW, he was a really nice guy and learned fast — the real issue was ML gave him 10 projects like ours to do in just 3 months).

Time Kills All Deals

Another mantra you should commit to memory: Time Kills All Deals. That’s always been true – especially when dealing with big businesses. Champions move around and you will lose them over and over again if your pilots take too long to convert. Keep that in mind when you start out.

So, how did we recover from the loss of our biggest and only client? The results had come back promising. So, we used them as evidence of the viability of creating intelligent power management software and we closed a small funding round with a venture firm, some angels and a state-sponsored VC. Luckily we closed that quickly and just before the big economic bust. So, we had capital to keep us afloat while we figured out what to do next.

… Windows programming … “steaming pile of crap”

It was initially a tough time for the team since we felt like we weren’t creating software people wanted. So, partially with some thought and foresight mixed in with a little bit of desperation, we decided to (gulp) create a Windows product for consumers. Now, this is a team that lived and breathed Linux. No one knew how to write Windows code and everyone dreaded it. People have referred to Windows programming as a “steaming pile of crap” and we held that opinion at the time. Frankly, it was a scary proposition.

But, as Alexander the Great said “Fortune Favors the Bold” and my co-founder and I knew we needed to get people to use our awesome software. The results were too compelling to be ignored — energy savings with no noticeable performance loss. And people were 1) screaming for more battery life from their laptops, 2) looking for ways to be green, and 3) looking for ways to cut costs in their IT infrastructure and data centers. So, we went for it. It took us 6 months to write and release the first version of Granola… but, we got 100,000 downloads in the first 100 days. Wow. We could breathe again. And that took us from castaways from the worldwide economic depression to the makers of the world’s most popular power management software, Granola.

What was Mistake #2? Failing to raise the capital. More on that in the next blog post.