This episode was recorded on March 20, 2023
In the 90s, technology stock valuations soared rapidly in the US. Investors were pouring money into Internet-based companies, and the value of equity markets grew exponentially.
In 2000, things started to change. Between 2001 and 2002, the dotcom bubble burst, causing many tech companies to go bankrupt.
Monty Schmidt is a serial entrepreneur and CTO who co-founded Sonic Foundry, a music tools startup that grew to $50M+ in revenue. After taking it public at the peak of the tech bubble, Monty was worth $200M on paper, but when the bubble burst, his net worth plummeted to ~$0.
From hyper-growth to a market crash
Monty helped create some of the first audio software for Windows in the early-mid 90s, which eventually became Sonic Foundry.
Between 1995 and 1998, Sonic Foundry experienced hyper-growth and went public, raising ~$25M. By 2000, Sonic Foundry was valued at $1.2B, had an annual revenue of $30M, and about 400 employees.
After the market crash, they only had six months of runway. Monty and his team took a few weeks to strategize and then laid off half the company to extend runway. They then took on some high-interest debt and cut more employees, and were able to sell the media part of their business to Sony in early 2003.
Check out this episode of Crossing Borders to hear the story behind Sonic Foundry.
Surviving unexpected market downturns
Monty found himself in a tough spot where he had to make the difficult decision to lay off half of his employees. Despite his optimism, the market failed to improve, and Monty made further cuts.
After the deal with Sony, they had just 30 employees and $12M in the bank. However, thanks to their decisions, the company was able to continue operating to this day and employed hundreds of people over time.
Monty learned during this time the importance of having 18 months of runway to weather any unexpected market downturns. He also believes that a more conservative approach during tough times is vital to ensure a company’s survival. These decisions are not easy, but they can ultimately make the difference between success and failure in the long run.
Check out this episode of Crossing Borders to learn more about Monty’s lessons learned during market downturns.
Outline of this episode:
- [01:02] – About Monty
- [08:04] – Growth after going public
- [13:50] – The market crash
- [15:37] – Market behavior during downturns
- [20:33] – Closing a deal with Sony
- [22:23] – Lessons learned
- [24:30] – Going from 3 to 400 people
- [28:06] – Advisors during the downturns
- [31:08] – Recognizing bubbles
- [37:12] – The drip of bad news
- [42:13] – Surviving a market downturn
- [37:12] – Lay-offs
- [52:24] – Founders’ most precious assets
Resources & people mentioned:
