*This story has been updated to respect a pending legal situation between CellBreaker and a contractor.
When Jon Colgan stands before the likes of Dave McClure and Christine Tsai at 500 Startups today, he'll pitch for a lot more than $75,000 and a spot in the Silicon Valley accelerator's latest batch.
He'll pitch so he and his team can continue working full-time on a software to help save consumers hundreds of dollars on cell phone (and eventually other) contracts. He'll pitch to get past a bad business relationship that he says cost thousands of dollars in revenue and critical time CellBreaker should have spent piloting its product. And he'll pitch so he can continue to provide for his family, which will grow to three when his wife gives birth to their first child this summer.
Today's pitch—in the last round of 500 Startups' selection process for its next group from around the world—is critical to the future of CellBreaker. And it's a good reminder of the risks and bets entrepreneurs take daily in starting and building their companies—at some point, there's a 'make or break' moment. Today might be the day for CellBreaker.
"Our cash flow is basically zero," Colgan told me as he awaited his flight to San Francisco yesterday, adding that: "I'm super excited with where our product is at. I'm super frustrated with where our business is at. And I'm super sober about the fact that if we don't get funding here and now, it's not that we decided or discovered it won't work. What we discovered, because of this incident, is we personally can't afford to build this now."
Colgan last contributed to ExitEvent
in early February when he visited San Francisco to meet with investors and strategic partners. He'd recently given up on finding local investors to fund the business (He previously won a $50K NC IDEA grant and earned a $25K convertible note) and taken a national approach.
In an update to investors around that time, he shared goals to complete development of a free version of CellBreaker and to begin a beta test of the product. All along, the company was gradually increasing its customer base who paid Colgan and team to manually negotiate their cell phone contracts—revenue averaged about $4,500 a month.
But upon return from what he calls a successful trip, Colgan was confronted with a contract dispute with a previous developer that threatened the future of CellBreaker. Because no legal documents have been filed, we can't share details of the situation. But Colgan says CellBreaker lost customers and revenue. It was forced to lay off half its workforce. It lost all of the momentum that had been built over the weeks prior.
Enter 500 Startups.
Colgan applied for the program last fall but failed to make it past a Google Hangout interview. But he'd taken feedback from the interview team (including Poornima Vijayashanker, a former Duke professor and CellBreaker advisor), made tweaks to his business model and product (he hired two developers to rebuild it) and reapplied. In the meantime, he and the team took on contract work to pay the bills, and they grew the customer base about 21 percent month-over-month to add revenue.
Colgan found out recently he earned a final interview with 500 Startups. Determined to still meet his goals before the pitch, despite the incident, he set his team of developers on the massive task of completely rewriting the software, called Veeto
, that powered CellBreaker. They worked around the clock for three weeks to develop a product that Colgan says is drastically improved from the old version.
Though he wasn't able to complete the beta test in time for today's 500 Startups interview, Colgan says he's proud of the team's quick work and perseverance. And he's hopeful that 500 Startups can rally around the new Veeto and the business's rebound.
If not? Colgan and his team will have to take on additional contract work and spend less time on CellBreaker. And he admits he'll have to take a serious look at the business's future, considering the pending legal battle and his coming child.
I had a different ending planned for this story, but Colgan sent me an email just moments before I published piece, and I find it fitting to paste his comments below (They are true to Jon, if you know him):
I feel like a civil rights proponent in the early 60s. I've spent seven years of my life advocating for this cause—the CellBreaker mission: contracts without pain—including two full-time years since formally founding CB in May 2013. In the beginning, it was acceptable to advocate quietly and vicariously. But over time, the friction I've encountered from adversaries of the mission—which includes just the naturally occurring force of the resistant-to-change status quo—has grown more intense as we've approached close to actually turning the tide.
This is analogous to the kid in this picture. Advocating from afar, without assuming any risk or discomfort, was probably an option for him early on. Then 1960. 1961. 1962. 1963. The cause has run out of runway for making forward progress without stepping on some adversary's toes and without risking anything personally. The next step is non-negotiable. He has to go to D.C. to stand on the front lines and face his opposition face-to-face, to take the biggest risk imaginable for a young, black male pre-1964. Young, inexperienced, stared down by incumbent forces stronger than his credentials imply. But he doesn't flinch, because over their shoulders, he sees the future in two of our nation's most powerful symbols of change reflecting off of his lenses. This is his now or never moment. 1964.
500 Startups is mine.