As an entrepreneur, you will come across unforeseen challenges. Listed below are six steps on how best to meet them.
Just how many entrepreneurs can say that one morning they woke up to news reports that their big idea may be suddenly crushed by regulators?
Few, I’d wager. At least not beyond the legal weed industry, which includes been living in some sort of legality limbo since Jeff Sessions was named Attorney General.
But, here I was, a software developer and self-professed geek (about the furthest thing possible from a cannabis trafficker) building an open-source platform for corporate IT software, and for just one morning come early july it seemed my big project may be dead on arrival.
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You see, my co-founders and I were planning a short coin offering, or ICO, where we plan to improve the largest open-source software fund. ICOs have grown to be a popular way to cover new businesses via offerings of cryptocurrency “tokens” enabled by blockchain technologies. Without getting too technical, we planned for an ICO to improve the funds to aid a community of developers to create another generation of cloud software for large enterprises.
So when the Securities and Exchange Commission suddenly issued guidance in July that suggested many of these ICOs would be seen as securities, it struck in the centre of what we were building.
And — this is the kicker — the first reports said these “unregistered offerings could possibly be at the mercy of criminal punishment.” I still feel hook gravity drop as I write those words.
We’d anticipated the SEC would weigh in on the problem at some time, but we’d no idea what these were likely to say. This appeared to be the dream-killing scenario.
It proved that the media report was overly sensational. After per month of research and discussion with lawyer, we are launching our ICO in September with some confidence we will never be locked up for this. But, had we panicked and mishandled the problem in those critical first hours, the complete enterprise may have been sunk. It became a learning experience, one which, in all honesty, we’re not even a bit grateful for.
In those first moments and hours of crisis, our project’s survival and the financial well-being of our investors and employees depended upon decisions we’d to create quickly and wisely.
In retrospect, it feels if you ask me and my co-founder that people had luckily picked our way through the crisis with techniques that could provide ideal for any entrepreneur swept up in an emergency. Perhaps that is a roadmap on crisis management that may help others when lightning strikes.
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When the story hit my email, I was on the telephone with my co-founder discussing a presentation we were likely to make to potential investors. I scanned the story, which said — at least from my immediate impression of it — all unregistered ICOs were hereby banned, with violators facing criminal charges.
“We must break,” I told my co-founder, “because I simply got a contact that may have ended everything.” I now regret saying that, because I clearly didn’t have every one of the facts. But, it really demonstrates just what a jolt the news headlines had delivered.
Jumping to the conclusion was a blunder, one that might have been costly if I’d experienced mixed company or talking with investors. I recovered my composure, and we stayed at risk. Even if your first reaction is to perform and hide, it’s easier to find your closest confidant when chaos strikes. We sorted through it together.
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Reacting to rumors, third-party reports or, as inside our case, early news reports, only muddies the problem. It had been the SEC’s ruling we had a need to read, not really a first-take story from a reporter scrambling to beat your competition.
At night Chicken Little headline and scary lead paragraph was a web link to the SEC document. I forwarded that connect to my partner, and we stayed at risk together silently reading the state report — all 25 pages of legalese — that could rule our future. It had been incredibly tense.
After absorbing the document and having a calm discussion, we decided we were of 1 mind: The SEC wasn’t discussing us. Putting it simple, the SEC had ruled some companies issuing tokens may in doing this create securities, but others don’t. The cryptocurrency Ethereum was judged to become a currency, not really a security, for example. The SEC even cited a test that may be used to determine if an ICO was issuing securities, and — taken at face value at least — we were in the clear. We felt marginally better.
Only marginally, though. Our conclusion was predicated on experience with cryptocurrencies like Bitcoin, and also knowledge of the ugly demise a couple of years ago of a blockchain company that ruined several investors and which attracted the SEC’s attention to begin with.
We needed advice, from our lawyers to begin with, then from people we realize and trust who cope with regulators and these specific issues professionally. We were fortunate to have such people among our advisers, our directors and other women and men we’ve met through our professional networks. We could actually reach them within hours.
They made a compelling case to go forward. There are numerous legal risks that we’ve had to get more comfortable with over the next couple of months. This is a fresh bar.
Since our particular case wasn’t the main one the SEC addressed, and the regulator left the areas murky, we remain in a gray area. Our lawyers and advisers can all advise us, and can even give us a written opinion our project isn’t likely to be looked at as issuing a security. But they are still opinions. Ultimately, we will be the ones creating a project we believe can benefit a large number of users, and we’re in charge of bringing in to the world.
In ambiguity, it’s your conscience that delivers direction. Without that gut check, proceeding could have been reckless. We’ve employees who depend on us, and a tech community that may lose the advantage of our project without us.
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The very next day we sent a contact to your partners and employees to handle the story, the SEC’s decision, our interpretation of it and our roadmap forward. Had we not reached this aspect within the first a day, our team could have assumed we either weren’t along with the problem or were somehow trying to duck it.
We also didn’t want to oversell our confidence. After providing our analysis of the problem, we wrote: “This doesn’t change our plan. This doesn’t mean we aren’t in ambiguity, so please give us feedback.”
What we didn’t do was act passively. I couldn’t just forward this article to everyone on Day one and say, “What do you consider?” That’s not adult behavior. The best way to handle it was to show that people were handling it, however, not before we’d a way of measuring insight to talk about.
The last piece was to iterate from there. When questions were raised, we followed up and followed through. We’ve maintained transparency on our position, and continued to acknowledge what’s still unclear. We talk with any expert we are able to find, and narrow the risks.
In virtually any ambiguous moment, you might not be able to decrease the risk to zero. You may want to make decisions when you still have a broad margin for error. You may instinctively want to cover up or be overly transparent. It truly is a balance.
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