Updated: Jul 10, 2019
Tolerating a Dysfunctional Business Partner; for too long...
At the end of 2018, I joined an organization as a partner with a business model focused on digital asset mining combined with renewable energy, particularly wind energy. Upon joining the project, I raised funding and based on what I was led to believe was more than enough to get the product operational. We rose against every external challenge; however, it was the internal disarray that ultimately resulted in my decision to resign from the company, we’ll refer to as Kruger Industrial Smoothing (remember that classic Seinfeld episode?).
After initially meeting the founder, we’ll call King Arthur, I was genuinely happy to join KIS. Applying renewable energy to digital asset mining was an opportunity to innovate and make an impact on an industry where conventional energy consumption significantly impacts profitability. If you’re not aware, BTC consumes 434 KWh per transaction and consumes enough electric energy from mining to power 5.4M U.S. households. Needless to say; implementing a renewable energy strategy to the BTC mining equation is environmentally responsible and worthwhile.
When you start a business, you have so many external challenges that sometimes you miss or chose to ignore the internal red flags and those are the ones that are typically the biggest threat.
The First Red Flag: KIS’ initial founding team resigned from the project, leaving King Arthur alone at his round table. The king’s response; it was them not me… “They didn’t know what they were doing, they were difficult to work with – business meetings turned into shouting matches, they were trying to take my dream away and in the wrong direction…etc.”
Lesson learned; it behooves anyone not gather all the facts particularly from former business partners who resigned with noticeable hostility. Trust is earned not given.
The Second Red Flag: Product delivery and revenue claims with the first investor. During our pitch to the first investor, King Arthur stated that he could have one system operational and producing revenue for less than half of the amount the first investor was willing to commit with delivery by the end of December 2018. Mind you this was the end of October; short time line. Unbeknownst to me at the time, this was a gross misrepresentation on budget and capability.
I should describe the mining system; in the simplest of terms it consisted of a shipping container, ASIC mining systems and a vertical axis wind turbine. King Arthur had a vision to mine with wind energy utilizing a vertical axis wind turbine (VAWT).
Despite assurances, December 31st came and there was no operational system. Consequently, the target date was adjusted to the end of January. When the January date seemed like it might be slipping, I decided to put together a GANTT chart to measure the project’s status. To my surprise or perhaps not surprise, less than 10% of the tasks required for having an operational system had been completed; despite continued assurances by King Arthur that the project was on track.
Lesson learned; put every project on a GANTT chart to continually measure status and productivity – ALWAYS! I had previously worked for two engineering organizations one in the UK and one in Germany where everything was measured; I knew better especially after working with Germans, with whom I came to highly admire for their efficiency and order.
The Third Red Flag: No emotional intelligence and unwarranted hubris. Once I put the GANTT chart together and discovered that King Arthur had accomplished almost nothing toward having a system operational, he became personally hostile toward me in weekly meetings. He displayed a genuine lack of self-control. Oddly enough, every rage fit would be followed with an apology and “that’s never going to happen again.” But unfortunately, the emotional fits continued; just about every other week. King Arthur on a few occasions even stated to me and the other partners; “I want us all to be friends; best friends.” I followed that with the fact that my primary focus was building a business; if friendship happens great but I didn’t join a social club. This infuriated King Arthur and he told me in an angered tone that he "had better never hear me say that again.” Moreover, one these fits turned into King Arthur wanting our attorney, who was also our business partner, reported to the Texas Bar for ethics violation. Reason: for being late with a contract. That's it; late with a contract, really? You want to harm his career for that?
Lesson learned; emotional fits of rage, personal insults and a general lack of emotional self-control have no place in the board room or business. If your business partner’s primary objective is build a friendship and not a business…run!
The Fourth Red Flag: Engineering quagmire. This one wasn’t ignored and resulted in my decision to resign. We hired an engineer to evaluate and scope the project. We’ll call him Mr. Scott. Mr. Scott worked for around 6 weeks and all the while had been advising King Arthur on a number of recommendations that King Arthur in his hubris to build his own wind energy system never shared with the board. Mr. Scott strongly informed that KIS focus first on a proof of concept. Mr. Scott, advised that we purchase a proven production wind energy system to prove our concept and then focus on the process of engineering King Arthur’s proprietary VAWT. Mr. Scott stated that he further advised implementing safety measures for the VAWT towers due to the extended height, anchoring the towers to ensure worker safety. Mr. Scott informed me this was standard engineering safety practice for tower installations. King Arthur actually rebutted according to Mr. Scott and informed that was unnecessary cost. Moreover, Mr. Scott advised that King Arthur build a prototype for testing in a wind tunnel, which King Arthur voiced opposition to. Further, Mr. Scott stated that a battery bank would be required; King Arthur first stated it wouldn’t be needed then later stated he would purchase used golf cart batteries. Not exactly a “best practices” approach to system design.
Nearing the end March 2019, we had a launch party – a happy hour of sorts around a NASCAR race we were sponsoring at Texas Motor Speedway. During that evening, Mr. Scott came up to me and stated that he would like to talk with me. He expressed all of the above recommendations and concerns. I informed him this was the first I was hearing any of this; King Arthur had failed to report Mr. Scott’s advisement to the KIS board. Mr. Scott informed me that he thought King Arthur was just “spitballing” his way through this process and didn’t have a plan to actually build an operational system. Mr. Scott said the project will require a complete design process, which was going to be costly. Mr. Scott told me something that stuck in my mind that evening and that was King Arthur’s turbine might be better but what is better? Will it give you 1, 10 or 20 more kWh’s of power? Or perhaps it will NOT deliver any better performance. Just because you believe something is or will be better doesn’t ensure it, particularly if you’re not willing to build a prototype for testing. It’s costly to build a full scale system to only find that it’s marginally better or not better at all. In which case, don’t reinvent the wheel – purchase a proven system.
Lesson learned; always build a prototype first. If you can’t build a prototype, you probably can’t build a full scale system. Without a proof of concept; your chances of raising funding outside of friends and family is unlikely.
As a result of these issues, I resigned from KIS to move in a new direction. Mining systems technology is at a point now where low wattage systems power high performance algorithmic processing for alt-coin mining – more is being accomplished on a software level to increase efficiency and reduce electrical power consumption. Likewise, with Texas being a deregulated energy market; energy contracts for power are easy to secure at a low kWh cost to manage cost.
I’m more interested in building a technology company as opposed to building a hardware company for VAWT’s and having to manage manufacturing, production…etc. Let King Arthur build monument to his hubris and I’ll build a productive company. Our team now has an executable plan, a pathway to scale and a vision for the future. If you’re an entrepreneur, failure is part of the process and learning from that failure is an equal part of the process to build better.
Not having a prototype nor a proof of concept cost us the ability to raise considerable funding with KIS; it was a significant time and opportunity loss for me. Nonetheless, I’m thankful we had neither a prototype nor POC in the end otherwise I would be enduring King Arthur’s nonsense well into the future.
Lesson learned; all obstacles aren’t challenges to push through – some are red flags. Find an exit, re-calibrate the plan and then push forward.
As a friend of mine informed me recently, when you get into the arena you're going to get hit. You just don't expect some of the most unexpected hits to come from someone on the team. As much as you want to push through an obstacle to build business; all obstacles aren't meant to be pushed through, or so I've learned.
Perhaps I’ll share a part two or three? Unfortunately, there's more; I haven't even skimmed the surface on the social dysfunction...
Some names and identifying details have been changed to protect the privacy of individuals and organizations.