Shownotes
Erik Bergman started his career as a professional poker player while still a teenager. At the same time, he founded his first companies. At age 24 he started in 2012 Catena Media, a company that only three and a half years later would be listed on the Stockholm Stock Exchange with a US$200-million valuation. He left Catena Media a few years ago and today is just starting up his latest project, Great.com, a company where the name alone cost $900,000. But this time around, he wants to do everything differently, which means giving away 100% of the profits to charity.
“We invested so much emotions and so much pride and ego into not failing, something that should have failed long time ago.”
Erik Bergman
Worst investment ever
Cash losses were never as bad as this
In thinking about his worst investment, Erik said he had lost a lot of money in a variety of ways. He did a lot of damage with a raid into crypto almost. He has done quite a few “shitty” start-up investments. But he realized that his worst investment cost a lot more than money, and that was when he lost his health, harmed his friends, and lost relationships.
First mistake was thinking ‘it’s gonna be easy’
In 2012-2013, he was busy starting several different companies at the same time, including that of a venture capital firm. One company was working with payday loans. His team were running a marketing company that had a lot of payday-loan clients. So they decided that if they could do the marketing, they could do it all. Of course it turned out to be much harder than they had ever anticipated it would be, and that was the first mistake they made: thinking it will be easy and then jumping into a business area with almost no understanding and with far too little research.
‘It’s never easy’
So they started building the company and hiring people to run it. However, very early they realized that it was so much harder than they had predicted. Nevertheless, they soldiered on, and Erik hired one of his closest friends and a few others to help run the company and a couple of others. But this company just never found any traction. They had many technical issues and many struggles. Erik’s old friend was in charge of the technical side, which kept facing major challenges due to the size and complexity of the big system they built. By the time the system was up and running, they ran into troubles with the bank, which didn’t want to co-operate because they were competing with them. Thus, they couldn’t finance the operations and they needed to find other ways to fund it. Whenever they managed to solve one snag, they would be hit by the next one. It took a year before the venture became somewhat sustainable.
Legal environment changes, adding huge workload
Having already lost a lot in time and having spent a lot of money, there was then a change in the legal requirements that forced Erik and his team to change all of their back-ups, all the systems behind their sites and they had big problems getting access to more data. So they had to change the entire back-end of everything. Erik’s friend and business partner was already overworked and he and two others were in charge of running this. Right in the middle of the regulatory changes, those two people resigned. One, his girlfriend, got pregnant, and other other, just wanted to leave Malta and move back home.
Friend left holding the bag
So Erik’s friend had to do this three-person job alone. He had to rebuild everything and worked day and night for weeks. Erik was unable to help because of his lack of tech expertise. The friend put one system together but it had been put together quickly. Because his friend lacked the time and energy perhaps to do it properly, the system crashed within around two weeks from being made operational.
Exhausted business partner collapses after system fails
So Erik and his friend had struggling for so long and just when they could see the light at the end of the tunnel, the legal requirements changed, his friend the entire system alone, and then it failed. Erik’s friend had a complete breakdown out of physical and mental exhaustion. Erik, being busy with other projects, was unaware of the shape his friend was in or the pressure he was under and his friend, who had not slept for weeks, didn’t come back to work. Erik admits being too distracted looking at the numbers instead of being there for his oldest friend, who would take three years to fully recover.
‘Small side business financially’ takes huge toll
This was a small side business financially compared to the bigger companies he and his team put together. But they had invested so much emotion, pride and ego into it not failing – something that should have failed long time ago. They just kept focusing on it, and it cost them a lot more than money. They never got it up and running, and had to sell the remainder of the database and other things at significant losses. It also took Erik a long time to recover from such strong emotions as well, because he felt that his friend would not have cared so much about the project if Erik had not pushed himself and his friend so much.
Not a big money loss, but big losses in every other way
This was one of the darkest chapters of Erik’s business career and life so far, during which he admits being “way-to-narrow minded to deal with it”. So the financial loss was insignificant, he says. But he has never since done something that could put someone else’s health at risk, and especially not the well-being of one of his closest friends.
“So a lot of his physical health and his emotional health was at stake because of my stupid ego, pride, and greed … I still feel a lot guilt and shame over this and really found a good way of dealing with it.”
Erik Bergman
Some lessons
Kill your darlings
Erik hastens to add that he’s talking about the company, not your friends, when talking about what to do when reaching a crossroad decision of whether to forge on, or walk away from a start-up company or an investment. When things go wrong, step away and think: “Would I really think this was a good idea now as totally new investment?”
Relationships are so much more important than the money
Think about the other people involved and put yourself in their shoes, especially if you are pushing people into something. Ask yourself: “How is this experience through their eyes?” Be better at assessing what’s going on and what kinds of things are happening to all people involved.
“I don’t regret the loss in terms of money, but I really regret how I dealt with my friend.”
Andrew’s takeaways
Never forget that real people and emotions are involved
It is fun to talk about the numbers, growth, opportunities and the “agile, lean” exciting things when investing in a start-up, but people’s livelihoods, futures, families, health and state of mind are all effecting by the decisions we make, or refuse to make.
Stay vigilant about overconfidence
The solution is being open, and it is difficult. When you’re in in the middle of a situation, it is not easy to go into your company and say: “You guys want to give up? Should we stop?” But it must be done, even if you individually have to step back and, without necessarily sharing it with the others, look at what you’re doing. There is empathy needed and that is something Erik also has taken away from this story.
Zero-based thinking tool
Ask yourself at crunch times: “Knowing what I know about this situation (whether it’s an investment, a start-up, or even a relationship), would I enter it now if I wasn’t in it already?” And if the answer is no, some serious thinking and researching needs to be done immediately.
Actionable advice
Just try
If anyone listening to (or reading this) has a business idea, whatever it might be, start it. If it doesn’t work out, it’s much easier to quit once you’ve started than it is to quit before you started.
No. 1 goal for next the 12 months
Job opportunity
Erik has the domain name, Great.com, for which he is building its lifelong company intention, and that is for 100% of its profits to go to charity. His number one goal for that enterprise is to find someone to help build the project with his team, someone who can be CEO, CTO or whatever title they want, who really resonates with the ideas that he and his team have. He needs someone who is technical, emotionally intelligent and has long-term strategic vision. Anyone interested can listen to his podcast, Becoming Great.
Parting words
“I’m happy to be here. I really love the approach of tackling the worst parts of investing and the worst parts of being an entrepreneur.”
You can also check out Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr. Deming’s 14 Points
Connect with Erik Bergman
Connect with Andrew Stotz