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Share This Article With Anybody Who Owes You Money

People don’t get mad because you don’t pay them back, they get mad because…

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Sorry I can’t pay you back, I can’t even afford an iPhone — photo by author, yes, in 2024

It was 1992, I was graduating from Cornell with an MBA, and I needed money for my first entrepreneurial venture — a home video delivery service. Fortunately, the halls of the Ivy League are laden with potential investors (aka, children of wealthy parents).

When I tracked him down, Earl Sunderland III was wearing tight black leather pants, with a large gold belt. Hardly the image of a wealthy British scion, but perhaps exactly the image of someone who has so much money he doesn’t give a damn. I hadn’t really talked to Earl in a year and a half at Cornell. “Hey, Earl, nice, um, pants! Can I borrow $70,000?” wasn’t going to fly, but I did go up and say, “Hey, you’ve probably heard I’m starting a business?”

He replied in an accent that I had been assured was very upper-class Brit, “Mmm?”

I dived into this clear expression of interest. “So, uh, would you like to invest?”

“Send me a business plan, old chap, and we’ll see.”

I gave him my business plan, asking for $70,000. A few days later, he handed it back to me, saying, “Sorry, old chap, I can’t do it.”

I was disappointed and started to say, “Well thanks for — ” when he interrupted.

“I can’t do $70,000, but I can help you out with $20,000.”

Six months later.

“Hi, Earl, it’s me, Sanjay, from Cornell?”

Earl didn’t immediately place me. “Sorry, old chap, didn’t quite catch that. The international connection’s a bit fuzzy.”

“Earl, listen,” I said. “I’m sorry, but I’m afraid the business you invested in hasn’t worked out. I can send you paperwork for the bankruptcy and for tax filings.”

“Oh, it’s you! How are you doing?”

“I’m not doing well, Earl, and I’m really, really sorry, but I’ve lost all your money.”

Earl brushed it off. “Not to worry, keep a stiff upper lip and all that.”

That’s the conversation I imagined. Earl’s actual words were closer to, “Bugger me, really? You lost it all, then? Christ, well okay, send me the paperwork. How are you holding up? Don’t worry about the money, I said good-bye to it the day I wired it to you.”

The call to Earl was one of many. I was feeling pretty low, but I called every investor to let them know personally what happened.

To my surprise, they were uniformly more worried about me than about their money. That was a valuable lesson in communication with investors, because it was hard making those phone calls.

The only one harder was to my former entrepreneurship professor. I called and said, “Hello, Professor BenDaniel? I’m sure you’ve heard by now that I started my company, and it failed miserably.”

“Yes, I heard,” he said. “Well, congratulations on starting the business. Most students don’t actually do it, you know.”

He hadn’t been a supporter of my idea, but he didn’t say “I told you so.” In fact, nobody said anything negative at all. Everyone was reassuring me that it was ok, and that I’d succeed the next time.

But there wasn’t going to be a next time. I wasn’t cut out to be an entrepreneur. I was never going to start another company.

Four years later, I started another company.

This time I was so confident in my idea, a mobile device that could send and receive email, years before the Blackberry came out, that I managed to get $500,000 from investors, business partners, my personal savings, and a half dozen maxed out credit cards.

Six months later, the business was out of business. I had driven it into the ground through a combination of bad cash management and lack of focus. I was ashamed and depressed. I had so bungled the company that instead of making those calls and apologizing, I simply went into hiding.

It didn’t work. There were non-stop calls from rude collection agencies and angry suppliers. There were legal letters threatening lawsuits. There were former employees sending hateful emails. All because I had disappeared instead of manning up and having some difficult conversations.

No matter how rich or how principled we are, we’ve all borrowed money. Getting investors for your new business, getting a loan from a friend, or just saying, “Hey, I’ll send you my share for that bottle service table in Ibiza when we get back home.”

When someone gives you money, they may or may not expect to get it back, depending on how sophisticated they are as investors or lenders. But the one thing everybody expects is communication.

I loaned $25,000 to a guy starting a software sales business. After making one payment, he disappeared. I was so angry I went after him legally, even though he was now working at McDonalds. If he had just called me and apologized, I would have left him alone.

I never got my money back, but I made his life difficult for years, because stupidly, I wanted to teach him a lesson. The lesson I hadn’t learned. They say what you hate most in others is what you fear most in yourself. I hate that I didn’t make those phone calls when my second business failed.

The lesson?

Open, honest communication is the key to any good relationship, and never more so than when taking money from others.

Most recently I took on $2mm in investments from friends for a cannabis business that went south almost immediately. But I communicated with my friends continuously through the process. The result? People are disappointed, but nobody is mad at me. Or they’re hiding it really well.

Business accelerators teach their companies to send an update every 3 months to investors. When I get updates that aren’t going well, I feel bad for the entrepreneur. When I don’t get an update at all, I’m angry, even when the company is doing ok. Of course, if the company is doing spectacularly well, I’ll choke down my disappointment and cash the check.

The worst thing is when you owe somebody and they have to call you to collect.

“Hey buddy, did you send that transfer to me for the table in Ibiza?”

First you spilled half a bottle of vodka, then you didn’t pay me back, and now you force me to put in extra work to get my money.

If you lost your banking password, or you don’t want your other girlfriend to find out you were in Ibiza, I get it. Just tell me. Just communicate.

If I give you money, it’s because I like you and I trust you. You can lose or be late with my money, but there’s no reason to lose my trust. Communicate early and often.

Nowadays I’m usually the lender and investor in this equation and I often have the opportunity to say, as Earl said to me so many years ago, “Don’t worry about it. I wrote that money off the day I wired it to you,” and most of all, “Are you ok?”

I still have great relationships with people whose money I’ve lost and people who’ve lost my money. But if you’re that guy who I had to chase down for the money for the nightclub?

Sorry old chap, but you’re dead to me.

  1. If you paid me back my money, I wouldn’t need an Amex Black card

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