Socrata

Chris Campbell, one of the founders of Wufoo, wrote a great post earlier this week about the importance of deadlines, especially in software engineering. Deadlines are forcing functions to get a team to think about what’s critical and what’s nice to have. Chris does a great job of boiling down how important it is to launch a product with the must-haves and to wait and see on all the other nice-to-haves.

Deadlines have worked in the newspaper and magazine business forever. Chris’ great post reminds me that deadlines work in mergers and acquisitions too.

In the summer of 2004, when I was CEO of my first company MessageRite, we were negotiating to be acquired by FrontBridge Technologies. We received a letter of intent in mid June. The LOI had an expiration date of July 31, 2004. From the moment both companies signed the LOI there was a flurry of activity related to due diligence. Satisfying due diligence requests is time consuming and a major distraction on the business. Around July 28th I received a call from FrontBridge’s CFO saying there was a little problem but they should be able to take care of it quickly and close the transaction.

The problem was with revenue recognition. MessageRite’s business was archiving email as a service, mainly for compliance reasons. Typically we’d archive email for 3-years or more. We charged our customers monthly, based on how much email we captured on their behalf during the month. In that we had an obligation to store that email for 3 years into the future, we couldn’t recognize all of the revenue at the time we invoiced our customer. For example, if a customer’s invoice was $2,000 for the month we could only recognize about half up front and then we’d recognize the other half in even amounts over the remaining 35 months. FrontBridge was a revenue generating, VC backed company. They really wanted all of MessageRite’s cash receipts to be recognized as revenue, but you can’t.

July 31st came and went. Their CFO called. We’re almost there he assured me. Just give us a day or two. August 2nd came. Almost there. August 5th. Almost there. August 7th. Almost there. It was unbelievably stressful. I think the cliche “pins and needles” was coined by someone going through due diligence. Did I mention that my wife was expecting, with a due date of July 31st? We thought it was ironic that the due dates were the same. Finally on the morning of August 8th I called FrontBridge’s CFO and gave him an ultimatum “You’ve got until this kid comes out to get the deal done or it’s off! I’m not bluffing.” And I wasn’t either. The best time to be acquired is when you don’t need to be, and MessageRite was doing great. I gave him my bank routing numbers and told him I’d know the deal was done when my bank calls to alert me of an incoming wire transfer.

Late on the night of August 9th my wife went into labor. We went to the hospital. On the way I called FrontBridge’s CFO and left a message. I told him he’d better hurry up. Things at the hospital started out well and progressed nicely at first. Then they stalled and baby Merritt dug his heels in. Finally mid-morning on August 10th the doctors told us they wanted to perform a C-section. Our baby was 11 days past due and looked like he was pretty hefty. They didn’t want to take any chances. I called my bank and gave them my cell phone number with instructions to call if a wire transfer came in.

We went in to the operating room. My wife was on the table. The doctor was having his mask tied on by a nurse. Then my phone rang. I told my wife I needed to take this call and it would take only 10 seconds. “Hello, this is Kevin” I said. “Mr. Merritt?” the woman asked. “This is the transfer department at Charles Schwab. I’ve been asked to let you know that a large wire transfer was just deposited into your account”. I thanked her and hung up. 15 minutes later Troy Merritt was born, a healthy 10 pounds 8 ounces. August 10, 2004 was a great day in the Merritt home.

Never underestimate the importance of a deadline.