Starting Your Own Business with Successful Entrepreneur Erica Douglass

My journey through Silicon Valley has come to an end. Now, I relive it for you, including full details of some harrowing experiences I haven’t yet shared publicly, and explain what’s next.

The Beginning

In August, 1999, a few months after I graduated from high school and having just turned 18, I packed my car full of everything I owned and drove to the promised land — California.

I was young and naive. I moved from a small farm town in Indiana to smack in the middle of a huge, 1-million-person-plus city (San Jose) and chose to live in the dorms at San Jose State, where, needless to say, I stuck out like a sore thumb.

I found a job, and got fired in record time when they found out I was 18. (They were not happy they had just unknowingly hired a college freshman as their Marketing Director.)

I found my calling doing desktop support at Cobalt Networks, a young startup company. I made friends, had boyfriends, and watched my beloved employer rocket itself to the 4th-largest IPO in history. I used all my extra money to invest in the Cobalt employee stock purchase plan. The stock doubled; I cashed out and bought a car:

I took part-time classes at San Jose State and failed several of them. I was more interested in working in the computer industry. School bored me. Even in high school, I knew I would probably never finish college. My teachers tried to talk some sense into me…all except one. I’ll never forget what happened.

All business majors were required to take a class called Business 10. It was basically the “Do you really want to be a business major?” class. My teacher took an instant liking to me.

One of our first assignments was to get together with a few others and create a business plan for a fictitious business. Our ragtag group decided to create a plan for a nightclub. I did a website for the nightclub in HTML and presented it to the class. Everyone else was using Powerpoint, but I was more comfortable using HTML.

A Teacher Gives Me Strange Advice

My teacher pulled me aside after class and asked me what the heck I was doing. I said “What do you mean?” I thought he was angry that I had decided against Powerpoint. It turns out he was mystified as to why I was in college.

He said, “This is an unprecedented time. Kids your age are making millions.” He asked me why I had moved to the Valley. I said I wanted to be in computers. He said, “Go. Drop out. Don’t waste your time in college. This is the golden age for people like you.”

I was shocked. I spent days pondering what he had said. A teacher, telling me to drop out! I took his advice under serious consideration because I felt he was being honest and not just pushing a party line.

A year later, I dropped out of college. I was flunking accounting, and the constant push and pull between school and work was aggravating me. I had watched Cobalt IPO, but had missed out on the stock options, as I was a part-time contractor. Many of my friends within the company were now paper millionaires. I was jealous that many of them were just a few years older than me. Oh, how I longed to have been born in 1978 instead of 1981…

Cobalt was acquired by Sun Microsystems and I quickly snagged a full-time job at Sun by virtue of having dropped out of school. My boss at Cobalt, who considered me one of his surrogate kids, told me I had made a decision I would live to regret. My mom started crying when I broke the news; she told me dropping out of college was the worst decision of my life. Somewhere inside me, though, I knew I had made the right decision.

The next day, my parents cut off all of my financial support. I was truly on my own, and I had a lot of bills to pay.

Contract Work to Pay the Bills

I scraped by, working contract jobs as well as full-time at Sun. After a year of being demoralized by working at a big company, I quit. It had been my dream for years to start a web hosting business. By this time, I had moved into a 1-bedroom apartment 35 miles east of San Francisco. It was all I could afford. Soon, my boyfriend at the time would move in with me because I couldn’t pay the rent there by myself.

I found contract web design jobs to pay the bills. It was 2002; Silicon Valley was in a deep recession; I was 21 years old. When I presented invoices to my clients, I got scared. Sometimes I would talk myself out of invoicing them for weeks because I wasn’t brave enough to say they owed me more than $1,000. Often I’d throw in a discount on the invoice to make it under $1,000, because that number just seemed unjustifiably large to me.

Somewhere in there, I had started a small web hosting company, and was slowly gaining customers. I agonized over the website, wrote my own shopping cart, and had my uncle program an invoicing system in PHP. I figured I would be happy if I made enough profit to pay off my cable modem bill.

By the end of 2003, my fledgling web hosting company, Simpli Hosting, was making more than my consulting gigs. The problem was, I was spending 40+ hours a week doing web development, and maybe 5-10 hours a week on hosting. I figured I had nothing to lose. I met with all my consulting clients and arranged transitions. I would be a full-time web hosting company owner in 6 months.

7-21: Intention Becomes Reality

I had one rack of servers at the time; I spotted an empty cage near our servers with four glistening empty metal racks. Each cage had a number; this one was 7-21…the same as my birthday (July 21). I knew it was fate; it was meant to be. We were going to expand into that 4-rack cage. I told my sales rep so. He was amused, but promised to save it for us.

On October 28, 2003, I signed the contract for cage 7-21 and we moved in.

2004 came and went rapidly. I hired my first employee, an eager fresh college grad named Brandon. He was nearly a year older than I was. He wanted to work for free. I told him I’d pay $14/hour.

Brandon came on board and was an amazing worker. I hired so many other amazing people throughout the years; Mooneer, a gifted college student who worked from home in Southern California; Cal, a talented PHP programmer turned COO; Wolf, a fire-eating, spiky-haired, spirited engineer; Russ, a great friend and geek extraordinaire; Ben, an 18-year-old who was Simpli’s first intern; Seth, my best friend and Simpli’s second COO, who helped me break down so many walls; Kolya, Simpli’s first office manager; Sohrab, one of Simpli’s most gifted and treasured employees and the hardest worker I’ve ever seen. There were many other great employees, too, who came and went mostly because there was always too little money and too much work.

Mental Breakdown and Breakthrough

In August, 2006, I reached a mental boiling point and broke down in the middle of a vacation. I decided then and there I would sell my company in a year for over $1 million. There was never any question that I could do it; that I would do it. I never doubted myself in terms of my ability to set goals. But what would happen next shocked me.

It was May 9, 2007. I had just hired a new employee and agreed to pay him a large salary when our datacenter, Market Post Tower, called and said they were locking us out of the datacenter for failing to pay them over $60,000.

In total, we had something like $160,000 in debt for a company that was on target to do a little over $800,000 in revenue for 2007. It was too much. We had maxed out all of our available credit (including all my personal credit cards) already. We had nothing left.

Mortified, I realized that my failing grade in my college accounting class had come back to bite me…hard. I had no concept of the numbers. Neither did anyone else. I called Seth in and had him negotiate with Market Post Tower. We delayed a tax payment to pay them $15,000 right away so they would open our cage again and we could resume business.

I laid off over half my staff that day. It was the worst day of my life. May 9 seemed to stretch on toward infinity. The day just would not end. And my tears would not stop.

With my tears still flowing, I called another one of our upstream providers, to whom we also owed money. Since the owner was a friend, I candidly explained the situation. He made a blunt offer. He said once our customers found out that we were locked out of the datacenter, they would all leave. So he put an all-cash offer on the table; he would buy my company for $250,000 that day, as well as pay off all our debt to Market Post Tower.

I saw his objective. He wanted our equipment and cage space. Whatever customers would stay would be icing on the cake.

I Choose Hell

I chose Hell instead. I told him no. He said my company might die a painful death and someone would scoop it up in bankruptcy for pennies on the dollar. I said I would find a way to make it work.

Market Post Tower refused to hire a lawyer to write a contract for us because they didn’t want to waste the money on someone who wouldn’t pay them back. I got mad. My integrity was being called into question. My “I’m going to prove them wrong” instinct kicked in.

Four months passed like a blur. I can only explain it like this. Let’s say you’re in average shape, and you decide to run a marathon…tomorrow. Actually, now. You just get up and start running. Somehow, the miles pass, and you feel awful, like you’re going to throw up, die, or have congestive heart failure, or possibly all three at once. But still, you look down and your legs are running. Your support team is long gone. It’s just you and one other dude working together to save everything.

Some nights I got no sleep. Sometimes I broke down and cried in the office. I napped on the couch. We sold everything in the office. Whatever wasn’t nailed down went out the door. We doubled, tripled or more all of the rates of our customers — something I had been scared to do for years. I said nothing about our financial problems to our customers. I only said we needed to do this to stay in business. I figured if 50% of them left, at least our upstream provider bills would be cheaper, and we would still have the same revenue coming in.

95% of them stayed.

I was as shocked as anyone. But something changed in me when our customers pledged their continued use of our service. I started to take pride in what I had built. For the first time, I acknowledged myself and my role in building this company. I stopped believing that the web hosting industry was all about price, and I started to believe in myself.

The $100,000 Check

Things turned around. Just four months later, on September 7, 2007, I sold my company for $1.1 million to a competitor.

Before we signed, I wanted a contingency plan, so I called up the guy who had offered me $250,000 cash four months ago. He knew we were paying our bills on time now. We had signed new customers and were cash-flow positive.

I told him about the $1.1 million offer. He said stoically, “Congratulations.”

I asked him if he would match it.

He paused, considering. Then, “If it falls through with the other company, we’ll do it.”

It turns out I had a third web hosting company wanting to pay me $1.1 million, as well. But Bruce, the owner of Silicon Valley Web Hosting, was the winner and made the deal.

That day, I sat with a check for $100,000 (Bruce’s first payment) in my hands. Bruce grinned at me. “How does it feel?”

I just shook my head. What I was feeling was unreal. Unexplainable.

I paid off every penny we owed Market Post Tower. Shortly after sending the final payment, I received an email from Neil, a managing director at Market Post Tower. He wrote:

Erica,

I think I was the most outspoken cynic regarding the Simpli payment plan. My skepticism is the unfortunate result of having been in commercial real estate for more than 20 years, and in colocation management for the past five. The kind of integrity that you’ve shown in making payment is sadly uncommon.

I am at a loss, except to say “thank you.”

Neil

The End — And Now, A New Beginning

Now, I close the book on the final chapter of my life in San Jose. On July 1, Richard and I move in to our new house in Solana Beach, CA. (Of course, we are still renting.) But my move to Southern California means the era of living in fast-paced Silicon Valley and living the dream of building my own tech company is done.

Frankly, I couldn’t be happier. I proved, through sheer stamina if nothing else, that I could build a tech company from scratch and sell it successfully. Now I’m ready to prove I can build a business that doesn’t kill all my employees and that makes me a happier person. And I’m ready for new opportunities that come my way, like new friends, more public speaking opportunities, and more blog posts.

I am grateful to have lived in Silicon Valley through what was possibly one of the craziest times in history, and I am just as grateful to move on. As they say, it is time. It took 9 years and 8 months to write that chapter of my life. Now it’s time to write the next one.