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What I learned from growing a startup after going bankrupt

Interview with Maximillian Frimmer, CEO and co-founder of Likvido.

Going bankrupt with a startup is tough. Imagine you’ve spend all your time, money and energy on building a sustainable business and in the end you don’t succeed. Was the effort worth nothing in the end? Not necessarily. According to Maximillian Frimmer CEO in Likvido it’s possible to use the experience to increase your chances of succeeding as an entrepreneur.

It’s a widely known fact that the odds are stacked against you when you’re trying to succeed with a startup. Harvard Business Review estimates that as much as 90 percent of all startups do not make it into a sustainable business.

Therefore it’s critical, especially for first time founders, to learn how to deal with the high risk of their startup not making it in the long run. Most experienced entrepreneurs have tried to be part of a failing startup in one way or another.

The important part we can learn from them is how they manage to turn apparent failure into a valuable experience which can increase the chances of succeeding as an entrepreneur in the long run.

One of the young entrepreneurs who’ve experienced the risks of running a startup firsthand is CEO and co-founder of Likvido Maximillian Frimmer.

Back in 2015 Max co-founded a fintech startup called Monera. Within two years, he managed to rapidly grow the company from 2 to 45 employees, was featured in Børsen and secured funding of around 10 million DKK. 

 
Join this event and learn more about how to start a new company after going bankrupt

I think it’s important for first time founders to be aware that there is a pretty high risk in running a startup. We were aware of that from the beginning so it really didn’t come as a shock to us and I don’t think we saw it as a huge failure.

Dealing with bankruptcy

Seen from the outside, Max was a successful young entrepreneur with a promising startup. But in the world of startups things are not always as easy as it might appear in the media.
 
- Unfortunately, in the end we didn’t succeed and actually went bankrupt with Monera. The key reason was that we didn’t have the right process to manage our cashflow. We simply spend too much time chasing unpaid invoices from our clients. So at the time we went bankrupt we had more than 12 millions DKK outstanding.”

Going bankrupt with a startup that you’ve spend all your time and energy on is definitely not easy but Max never saw the experience with Monera as a failure. 

- After we went bankrupt we took a couple of months where we thought about what we should do know. Should we go back and take a normal job?

- We could easily find good jobs but we agreed that we really liked the idea of being independent and building our own company, and we really got the taste of the life as entrepreneurs during our time with Monera. So we decided to start again.

So how did you move on?

- We basically zoomed out and analyzed what went wrong to see what we could learn from our experience. What stood out to us was our problem with collecting payments. We tried to determine if this was an isolated problem, or was it a bigger problem that other companies also faced?

- We found that the most common reason for SMBs and startups to go bankrupt is the lack of payment from their clients. So this is a huge problem for a lot of different companies.

It’s important for young upcoming entrepreneurs to learn how to turn apparent failures into positive learning experiences can you elaborate a bit more about how you managed to do that?

- First, I think it’s important for first time founders to be aware that there is a pretty high risk in running a startup. We were aware of that from the beginning so it really didn’t come as a shock to us and I don’t think we saw it as a huge failure.

- A lot of people would maybe see bankruptcy as a failure, but if you are aware of the risks from the beginning I don’t think you should see it as a failure. In our case we grew very fast and we were really ambitious with the company and got more than 10 million DKK in external investments, so our plan was to expand really fast but that always comes with a huge risk.

Better your chances of success in the long run

It’s clear that Max has managed to use his experience to make him a better entrepreneur and he’s attracted several million DKK in investments from PreSeed Ventures and local Business Angels to Likvido.

- We still had the energy and the willingness to try again, and I believe that the chances for us to succeed with Likvido are much better than they were with the previous company. We did a lot of rookie mistakes in Monera, and it’s not something you can learn in school.

- When it comes to entrepreneurship I think you need to do some rookie mistakes. A lot of the mistakes we did were pretty basic things. It’s not like we are the first ones to run out of cash, it’s page one in the book that you need money to run a company. But still we made the mistakes and sometimes the only way to learn is from practice.

Can you give some advice to first time founders facing hard times in their startup?

- If you want a career as an entrepreneur you should look at it like a soccer player. One company is like one game. If you play a soccer game, sometimes you lose. All soccer players will lose at some point, even Messi. If you quit after losing one game, you’re never going to make it. A great soccer player will sit down with the team and manager and carefully analyze what went wrong. Then they’ll go back to the training field and practice for the next game.

- It’s the same with startups and entrepreneurship. Because statistically your chances of becoming a unicorn or a huge success is maybe 1 out of 10.  So you have to be prepared to lose. This is critical if you want to become a serial entrepreneur.

- Your aim should always be to succeed and you should always give a 100 percent in everything you do. But I think the only way of staying mentally well if you fail is to zoom out and look at the bigger picture. I don’t think it’s common when you start your first company to spend too much time thinking about the bigger picture. But I think it’s a good way of dealing with if you don’t succeed with your first startup.

If you can’t accept that you’ll work for maybe a year without a salary and you might not be able to pay for your kids school, then you shouldn’t be an entrepreneur. It’s not the right time in your life.

Start early while you're used to a low income

How can first time founders best plan for the life as entrepreneurs?

- It’s very important to discuss things with your spouse, your children and your co-founders. You should be very clear about that you’re going on a journey and chances that you will succeed in a big way are only 10 percent. You need to be very clear about this. If you can’t accept that you’ll work for maybe a year without a salary and you might not be able to pay for your kids school, then you shouldn’t be an entrepreneur. It’s not the right time in your life.

When is the best time to start?

- I think the best time to start is while you’re studying because you live on SU and you have time, energy and low expenses. It was a good thing for me to start out as an entrepreneur while I was still in school, so I never got ‘rich and fat’ and never bought a big house, a big car and so on. It’s pretty tough to get a salary of 50.000 DKK a month as an entrepreneur even if you are amongst the 5 percent who can convince investors.

How can you best prepare for the early stage in a startup?

- You need to be willing to make sacrifices, and you need to plan it. In my opinion, if you don’t have at least 6 months where you can live without a salary then you shouldn’t start as entrepreneur.

- Or maybe you should at least do something else. You could for example go out and do some freelance work and if you can manage to get a few clients so you can cover your expenses then you can quit your job and have more time to work on a startup. This would be a more safe way of doing it.

5 things to consider as a first time founder

  1. Aim to succeed but be aware of the risks involved in building a startup
  2. Learn from your mistakes and failures
  3. Start while you’re still a student
  4. Find a great co-founder so you’re not alone when things get tough
  5. Save up so you can work at least 6 months without a salary