MassRoots is a technology platform for cannabis consumers. One of the first cannabis-centric companies to go public, MassRoots boasts more than 900,000 users. The company, which is based in Denver, was reportedly growing by 30,000 users per month in the fall of 2016.
We were living beyond our means.
Earlier [in 2016], I took out a convertible debt round. We took out about $1.5 million in debt. There were various fees and penalties associated with it, so we were required to repay $1.95 million within six months.
So during that time, we were focusing on the business and making improvements, but not nearly as fast as we thought. We ended up not being able to repay that debt in September, and our company went into default.
A whole bunch of press picked up on that fact. They thought we were going to go out of business. It was certainly a failure; it’s never a good thing to have that. But, we were able to get that debt repaid by further cutting expenses, cutting our own salaries and really just scrolling back to the fundamentals of the business.
[Two weeks after announcing the default and $1.8 million in second-quarter losses, MassRoots had cut its Denver workforce from 33 to 19 and announced a new infusion of $1.1 million in backing from mostly new investors.]
That was definitely one of my most challenging times, but it made us stronger. We were spending too much money and we weren’t focused enough on revenue. That created conditions for the default.
I should have cut expenses sooner and gotten our house in order sooner. That was my mistake.
I should have cut expenses and gotten our house in order sooner.
We just have to get the company to cash-flow positive.
Honestly, the whole affair turned out to be great. When the press picked up on it and said we were about to go out of business, the sophisticated investors who read that knew that a default like ours, with convertible debt, is not necessarily a precursor to bankruptcy. It created an opportunity for them.
In hindsight, if you had become a shareholder in September of MassRoots during that time, you got great value. That was our all-time low, but in the next three and a half weeks, our stock more than doubled and ran up to close to a dollar per share.
Also, I’ll say, the terms of financing are everything. If you take a loan like we did, you have to be prepared to get to cash-flow positive and to get it repaid.
At one level, it’s simple. You just have to avoid situations like this.
For us, we’ve been able to recruit some incredible talent over the past few months. When you have great people on board, and they are working toward the common mission of the company, they are able to execute on high-level objectives with a limited budget. It’s great when you get a team like that in place.
Photo courtesy of Massroots