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Take the Money and Run: A Personal Startup Story

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IT WAS JANUARY, and the weather was bleak. It’d been freezing and overcast for as long as I could remember. Sometimes during winter in Akron, it feels like the sun sets in November and doesn’t rise until March.

It was late afternoon, and I was taking a break from hacking on some now-forgotten piece of code. Looking out the window of our “office” — really the second bedroom of our apartment where we’d crammed my desk — there was a foot of snow on the ground. Someone was trying to drive through the parking lot, their tires skidding back and forth on the thick layer of ice under the slush.

Taking a moment, I tried to remember when I’d last been out of the apartment, not counting trips to the grocery store. I couldn’t remember.


We’d started our first company, AgileZen, in late spring the previous year. We launched in July — July 7th, actually, for luck — and things had been going pretty well. We landed solid traction out of the gate, and people loved the product.

I was still pretty tired after grinding out the first version of the software, but I was having a great time. I grew up idolizing id Software and Nullsoft, and ever since I was a teenager, I’d wanted to start a software company. I’d spent the six years since finishing college working as a developer at various companies, but I was tired of executing someone else’s vision.

Zen was something that Niki and I had built by ourselves, without anyone’s permission, trying to cure a pain that I had personally felt. We were pleasantly surprised that it actually seemed to be valuable enough that people were willing to pay money for it. In fact, it was now making enough money that we weren’t burning any more of our savings.

To avoid spending money, we’d been subsisting on a diet consisting largely of soup. (Ramen, the stereotypical startup food, is dried via frying, making it pretty bad for you. Soup is cheap, healthy, and easy to make in large batches.) But now, we’d gradually started to feel like we might be able to afford to eat at restaurants again. I even bought some beer again, which we had considered an opulent luxury.

Anyways, things were looking good. We were still very small, but growing quickly. We had all kinds of crazy ideas on what we could build next. It was hard work, but exciting. A little bit of sunlight would have made me happier, but I couldn’t complain.

My computer dinged a familiar sound, letting me know that I had a new email. We didn’t have any employees, so an email typically meant that there was either a customer support request or a new sale. By now, the ding elicited a Pavlovian response, and I walked over to my desk to check.

Instead, it was an email from a corporate development guy at Rally Software. He wanted to schedule a meeting to discuss how we might be able to work together. Interesting.

I walked across the apartment to Niki’s desk. The office wasn’t quite large enough for both of us to comfortably sit, so she had set up camp in a corner of the living room.

“Did you see that email?” I asked.

Niki looked up and spun around in her chair. “Yeah, what do you think they want?”

“Dunno. Probably just want to talk about building an integration.”


We never built Zen with the idea that we were going to be acquired. We’d talked about it of course, but never more than half-seriously. It always seemed so far down the road that we didn’t give it any real thought. I just saw project management as a problem that needed to be solved, and it was frustrating that no one else had figured it out.

Just a couple of weeks before Rally reached out to us, we were at CodeMash in Sandusky. At the bar after the conference wrapped for the day, a colleague joked with us that the company he worked for (a major player in the project management market) should buy AgileZen. We laughed it off, but it was the first time I realized that selling the company might be a real option.

A few days after they contacted us, we had a conference call with the people from Rally. To our surprise, the CEO was on the call. I remember muting the phone and saying to Niki, “I don’t think this is about integration.” It quickly became apparent that they were interested in acquiring the company.

The idea that someone would be interested in buying our little company was flattering. We hadn’t even been in business for a year yet, and a multi-million dollar market leader thought what we were doing was good enough that they wanted to pay us a bunch of money and stock to have us do it for them instead.

We talked for an hour, and they bought us plane tickets to visit their headquarters in Boulder the following week.


On the way to the airport, we dropped our dogs off at Niki’s parents’ house. We were running a little late, and were in a hurry to make our flight. Walking back to the car, Niki slipped on the ice outside and fell, tearing the knee of her pants and scraping herself pretty badly.

This was strange; I’m usually the one getting randomly injured. Since we’ve been married, I’ve fallen down the stairs three times, once managing to spill coffee on the ceiling. When exercising, I’ve manage to twist my knee, ankle, elbow, and punch myself in the face not once but multiple times.

Kneeling on the ice, Niki looked at her knee and then to me with a look of sheer terror.

“We’ve  got this,” I said, helping her up. We rushed back home so she could bandage her knee and change clothes before racing to the airport. Fortunately the roads were well-salted, so by setting some land speed records — without drawing the attention of the state highway patrol — we made our flight.

We landed late in Boulder after dark, and the corp dev guy picked us up at the airport. We made small-talk as we drove from Denver to Boulder, and it was during this conversation that I first heard the phrase b-school spoken without being drenched in sarcasm.

We checked into the Hotel Boulderado, a restored historic hotel in downtown Boulder. After pacing around our room for a bit, we went downstairs to meet with Rally’s executive leadership team for dinner.

I was pretty nervous. We were just two kids from Akron that built this little web app to help people organize their work. Collectively, the people from Rally had something like 100 years of experience. Several of them had previous acquisitions, netting them significant personal wealth. Mostly, I drank a lot of wine and tried (unsuccessfully) not to sweat through my shirt.

We spent the entire following day at their office, meeting with a never-ending series of people from Rally. They explained to us what they thought the potential future of Zen could be, and we were struck with how similar their vision was to ours. They were smart, determined, energetic people, passionate about what they were doing, and driven by a higher purpose. I liked them quite a bit.

One thing that struck me as amusing is that throughout our conversations, they consciously avoided using the word acquisition — it was always merger. A clever attempt at flattery, which I appreciated in spite of its transparency.

After all of the meetings, the CEO came back to say that they wanted to meet, but that they wanted to make an offer to buy our company. We would hear from them in a few days once they put together the numbers. He thanked us, and we left for the airport.


A few days after we got back from Boulder, I was scheduled to visit Microsoft in Seattle. Just before I left, they called with the offer. It was reasonable — nothing ridiculous, but respectable, particularly considering our ARR had just barely cracked $70K. The payout was split between cash and a grant of stock up front, good compensation in terms of salary and two years of stay-pay bonuses for both of us, as well as stock options on a three-year vesting schedule.

By this point, Rally had raised $90 million or some exorbitant amount of venture capital, and were clearly near exit velocity where they could go public. We met with their CFO, who quickly won our confidence with his frankness and transparency with their finances and future plans. Between the salaries they were offering (starting at $135K for each of us) and the potential value of the stock, it was hard to look at our meager bank balance and not want to sell.

Not insignificantly, it also meant we could leave Akron. We knew we would miss our families back home, but after 27 years of Ohio winters, we were ready for a change. We weren’t keen on moving to Colorado, but strangely enough, they had an office in Raleigh, NC, where we already had several friends. It felt like serendipity.

All the financial incentives aside, we started Zen because we wanted to help people work together more effectively. We were convinced we were on to something with Zen, but we weren’t sure that we could take it to the next level. Getting access to Rally’s resources and reach meant that we might be able to get our product in front of more people, and increase our impact.

With all that said, one of the main reasons that we decided to sell was: quite simply, there were times when we felt like we had no idea what the fuck we were doing. We couldn’t shake the feeling that we were just a couple of kids in an apartment, buried somewhere under lake effect snow. These people were big time. They had deep pockets, lots of experience, and a strong understanding of the market.

So, we sold our company.

Due diligence took a month, during which I spoke at Microsoft’s MIX conference in Las Vegas. I was more than a little distracted, and my talk was a trainwreck. To my chagrin, I’m sure there’s visual evidence of it somewhere. I’ve never really apologized to Phil Haack, who was nice enough to ask me to speak at the conference, only to be presented with a huge shitshow. Sorry, Phil.

On the day the deal finally closed, we bought a $50 bottle of champagne and drank it together in our little apartment-office as the snow continued to fall outside. Just a couple of kids from Akron, but we were real-life entrepreneurs with an actual acquisition on our resume. We got calls from the press asking us questions. Investment bankers called us asking to manage our assets (which weren’t nearly as impressive as they undoubtedly thought). We felt like we’d made it.

Eventually, we’d come to learn how wrong we were, how hard the road ahead of us would be, and that selling the company would mean the end of what we’d worked so hard to build. But that night was for celebrating.

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About the Author

This article was written by Nate Kohari, a software engineer and an entrepreneur who co-founded AgileZen. 

Entrepreneurship

Will Financial Liberalisation Trigger a Crisis in China?

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The People’s Republic of China (PRC) has been liberalizing its financial system for nearly 4 decades. While it now has a comprehensive financial system with a large number of financial institutions and large financial assets, its financial policies are still highly repressive. These repressive financial policies are now a major hindrance to the PRC’s economic growth.

The PRC is at the beginning of a new wave of financial liberalization that is necessary for supporting the country’s strong economic growth. The country’s leaders have already unveiled a comprehensive program of financial reform, which includes 11 specific reform measures in three broad areas: creating a level-playing field (such as allowing private banks and developing inclusive finance), freeing the market mechanism (such as reforming interest rate and exchange rate regimes and achieving capital account convertibility), and improving regulation.

But could financial liberalization lead to a major financial crisis in the PRC? What would be the consequences for financial stability as the PRC moves to further liberalize its financial system? If the PRC repeats the painful experiences of Mexico, Indonesia, and Thailand, then it might not be able to achieve its original goal of overcoming the middle-income trap.

International experiences of financial liberalization, especially those of middle-income economies, should offer important lessons for the PRC. In our new research, based on cross-country data analysis, we find that financial liberalization, in general, reduces, not increases, financial instability. This powerful conclusion is valid whether financial instability is measured by crisis occurrence or by fragility indicators, such as impaired loans and net charge-offs. The only exception is that financial liberalization does not appear to significantly lower the probability of systemic banking crises, although it does lower the risk indicators for banks. These results have higher statistical significance and are greater in magnitude for the middle-income group than for the entire sample.

The insignificant impact on banking crises, however, should be interpreted with caution. One of the possible explanations is that under the repressed financial regime, the government supports banks with an implicit or explicit blanket guarantee. This reduces the probability of an explicit banking crisis, although the banking risks may be even greater because of the moral hazard problem. In fact, government protection of banks could also increase the probability of a sovereign debt crisis or even a currency crisis before financial liberalization.

If financial liberalization significantly reduces the likelihood of financial crises, especially in middle-income economies, then why did some middle-income economies experience financial crises following liberalization? We further investigate whether the pace of liberalization, the supervisory structure, and the institutional environment matter for outcomes of financial liberalization.

We obtain three main findings. First, an excessively rapid pace of financial liberalization may increase financial risks. The net impact on financial instability depends on the relative importance of the “liberalization effect” and the “pace effect.” In essence, what the “pace effect” captures could simply be the prerequisite conditions and reform sequencing that are well discussed in the literature. Second, the quality of institutions, such as investor protection and law and order, also matter. International experiences indicate that investor protection can significantly reduce the probability of financial crises. Third, the central bank’s participation in financial regulation is helpful for reducing financial risks during financial liberalization. This is probably because central banks always play central roles in financial liberalization, especially in the liberalization of interest rates, exchange rates, and the capital account. If a central bank is responsible for financial regulation, its liberalization policies might be more cautious and prudent.

Our research findings offer important policy implications for the PRC. (1) Further financial liberalization is necessary not only for sustaining strong economic growth but also for containing or reducing financial risks. (2) Gradual reform may still work better than the “big bang” approach, and sequencing is very important for avoiding the painful financial volatilities that many other middle-income countries have seen. (3) The government should also focus more on improving the quality of other institutions, especially market discipline, to contain financial risks. (4) It is better for the central bank to participate in financial regulation. The new regulatory system should focus exclusively on financial stability and shift from regulating institutions toward regulating functions. It should also become relatively independent to increase accountability.

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About the Author 

This submitted article was written by  and  of Asia Pathways, the blog of The Asian Development Bank Institute was established in 1997 in Tokyo, Japan, to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in the Asia-Pacific region.

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Entrepreneurship

Women on Top in Tech – Chrissa McFarlane, Founder and CEO of Patientory

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Chrissa McFarlane is the Founder and CEO of Patientory, a patient-centered enterprise solution on the blockchain to store, secure and access healthcare information in real-time. She is a leader and an entrepreneur with a passion for creating cutting-edge healthcare products that transform the face of healthcare delivery in the United States of America and abroad.

What makes you do what you do?
I am passionate about helping people, especially when it comes to their healthcare. This is my daily motivation for pushing forward in one of the most challenging industries to innovate.

How did you rise in the industry you are in?
Through my networks and maintaining a strong advisory board, I am able to make an impact.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I took on the role and decided to start this startup primary to follow my passion and be an inspiration for other women who are seeking to start their own business.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have multiple mentors. I met them through my networks.

How did you make a match if you did, and how did you end up being mentored by him/her?
Through introductions and after speaking with them I saw a character alignment that prompted me to ask them to by my mentor.

Now as a leader how do you spot, develop, keep, grow and support your talent?
Through one on one meetings, and team building.

Do you consciously or unconsciously support diversity and why?
I consciously support diversity because a diversity of thought breeds success in the workplace. It is important to have different lenses of thought to be represented. Our company is a representation of the people we serve.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
A great leader in healthcare is equipped to serve the people. Unlike many other industries, healthcare is centered around sustaining the health of the human being. You certainly need to encompass a passion for seeing individuals live and lead healthy lifestyles.

Advice for others?
In building emerging technology, education is always key to success.

Our first Inaugural Blockchain Healthcare Summit will take place on May 31st in Atlanta, GA where we will discuss the current state of blockchain projects and opportunities for the future.


If you’d like to get in touch with Chrissa McFarlane, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/chrissamcfarlane/

To learn more about Patientory, please click here.

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