Bend, Not Break

by Ping Fu

  Another six months flew by. At that point, we had blown through nearly $6 million in investment capital, had borrowed $1 million in equipment leasing, and yet still had negligible sales to show for it. The board members asked about the reasons for this predicament at the next board meeting.

  “Well, the salespeople have proven track records,” Jon explained. “The problem is that the product is premature. It’s hard to sell a product when people aren’t clear about how to use it.”

  He didn’t say it to put me down, but it felt as if Jon had just punched me in the gut. Could it really be the case that our inventions were so undesirable? That certainly had not seemed to be the case early on when I was testing the concepts. At conferences where I presented or spoke, it seemed that audiences responded positively to our technology.

  Looking back, I can see there was much truth to what Jon said. What I didn’t understand was the difference between technology and product, and product versus market. I was still a technical founder who thought that superior technology was all that a company needed in order to succeed. Still, I took Jon’s feedback seriously. As CTO, I buried myself in improving the product, asking the sales team for feedback about what customers liked and disliked, and making the recommended changes.

  Our biggest problem, however, was not an inadequate product. It was the market. We were operating on the cutting edge of technology within a small market segment that had no visibility. We learned later that it always takes a long time to create a new market in such cases. Our software depended on 3D scanning hardware to collect data, and yet there were not many units sold each year. Three-dimensional scanners were difficult to buy, hard to get support for, and overpriced. It would have been like Microsoft trying to sell its software packages before many PCs had been sold. For the time being, we were stuck without many potential buyers. I continued to watch from the sidelines as the company plowed forward with what I considered to be wasteful spending, garnering only limited results.

  —

  In December 2000, Jon asked me to meet him at a coffee shop in Durham, close to the Duke University campus. It was a gray day, chilly and windy.

  “Ping, I have bad news for you,” Jon said, clearing his throat. “We have only six months of cash left.”

  “What do you mean? We raised $6.5 million eighteen months ago and took out a $1 million equipment loan. Is all that money gone?” My head spun. I should have known our situation was so bleak. I would have, if only I had read the quarterly financial statement.

  Jon continued with a calm, matter-of-fact tone to his voice, watching me carefully for my reaction. “It gets worse, Ping. We also have to lay off half of Geomagic’s employees. The cash will support us for six months only if we operate at 50 percent of our current expenses.”

  I was speechless. Our eyes locked.

  “I will help you with the layoffs. But there is only one thing I can do now to help you with the cash situation. I suggest that I accept a job offer at Align Technology, which will save you my severance pay. Do you agree with this approach?” Jon asked carefully.

  “You are leaving us? You are leaving me now, with no money and only half our staff?” I asked in disbelief.

  Jon stared into his coffee mug. “Yes, I think it is the right thing to do. You should speak to the board about this. I will resign as CEO and from the board of directors as soon as you do. I am sorry, Ping.”

  Why don’t you talk to the board yourself? I wanted to say. Then I remembered that I was the chairman of the board. I slowly nodded.

  I sat for several minutes in silence, sipping my tea with vacant eyes. I was so shocked by Jon’s words that I couldn’t think straight. I wanted to hate him, to shout at him, but I knew that ultimately I was responsible for what had happened. I had made the choice to step down, I had hired Jon, and I was part of the executive team who had agreed to his business decisions. I felt ill. Geomagic was about to go under, and many of the people who had trusted me enough to uproot their lives and move to North Carolina were going to lose their jobs.

  As I considered Jon’s remarks, my mind could find no other way out of the current situation than what he had just proposed. Jon had been working closely with Align to form a business partnership. The company was interested in using Geomagic technology to manufacture clear custom orthodontics devices—just as I had envisioned in my very first investment pitch. It made sense for him to accept their job offer. I told him to let go of the people he absolutely had to cut and then leave. I left the coffee shop in a daze.

  That night I didn’t sleep a wink. Anxious thoughts raced through my head: What about all the employees who were about to lose the careers they loved? What would they tell their families? How would the investors respond? What about my sister and her husband, who had provided the initial seed money to found Geomagic? How would I ever repay them? I ran the numbers and realized that I couldn’t make enough money in my whole lifetime to pay everyone back. I had a panic attack, soaking my bedsheets with cold sweat.

  One potential female investor, Sonya Wang, had warned me before I hired Jon that while he had experience selling a start-up, he had no experience building one. She had predicted that this could be a major risk for Geomagic. She had insisted that I remain CEO or else she would not invest. Why hadn’t I listened to her? Why had I stepped down when no one had forced me to?

  At some point during the early daylight hours, I had an epiphany: I had given the leadership of Geomagic away because I had been scared of taking responsibility for the $6.5 million we had raised. I simply hadn’t had enough confidence in myself. On the surface, I had been proud of myself for putting my ego aside to step down as CEO, but what really had been guiding me was fear. Borrowing that kind of money and realizing that you might not ever be able to pay it back can be terrifying for anyone, but this was especially true for me. I had grown up in Communist China with mere pennies to spend and in a culture that taught me about how having money was wrong. It dawned on me that my fear of managing such a large amount of investment capital was rooted deep inside me because of my past. Instead of confronting my fear, I had let it win, subconsciously. Everyone has blind spots—this was one of mine.

  Feeling nauseated and disappointed in myself, I walked into Xixi’s room and watched her as she slept. I had given birth to her. My responsibility to her was unconditional and I was fully committed. Yet, while I had given birth to Geomagic as well, I had abandoned it in a moment of insecurity. I felt that my integrity was being tested. I was not a quitter. Now I must take responsibility for Geomagic as I would for my daughter.

  When I wandered downstairs the next morning with deep dark circles under my eyes, Herbert tried to comfort me. “You can always go back to a university job,” he said.

  “No, I can’t,” I said. “I already backed down as CEO. I can’t retreat twice.”

  Hong and Anselm, as well as our other financial backers—those who had believed in us from the start—hadn’t just invested in a company, I realized. They had invested in me. Our employees who had followed me from Illinois to North Carolina were like family. I would not let them down.

  When I was eleven, I had fainted rather than drop out of a marathon race forced upon us by the Red Guard. At its core, this situation was no different. I felt grateful for the traits I had been forced to cultivate as a child: fierce determination, curiosity, and kindness had served me well in the past. I hoped they would come to my rescue once more.

  —

  The first action I took was to call a meeting of the board as chairman. I had to inform them at once that Jon was leaving and that the company was in dire straits financially. The board members knew about our cash flow problem, so they were not terribly surprised. But they were shocked to hear of Jon’s decision to leave for a job at Align Technology.

  I took responsibility for being part of Geomagic’s failure and their disappointment. Once I had answered their init
ial questions, I asked the board to give me a chance at saving the company. “Let me return to run Geomagic,” I said.

  One board member put a question on the table. “You’ve had a very experienced management team and capable CEO at the helm of this company for the past year and a half,” he said. “What makes you think you can succeed where they failed?”

  For a moment, the phrase I was made to repeat as a child in China so many years before flashed through my mind: I’m a nobody. My instinct was to back down. But I pushed that thought away by reminding myself of my more recent mantra. No, I’m not a nobody, I said to myself. I am somebody.

  I took a deep breath and said calmly to my board, “I’m not asking for your complete faith in me. But I am asking you to give me a fair shot at this. Anyway, I’m the best bet you have. Jon is gone, but I am here.”

  I requested three months to get Geomagic back on track. With little to lose and some respect for my tenacity, the board agreed. I was CEO once more.

  Next, I gathered all of Geomagic’s remaining employees into the large conference room in our office. Standing there before a staff half the size of what it had been a few days earlier, I knew they were all wondering whether our company was a sinking ship. I was also aware that my facial expressions were like a weather report, and that everyone was watching closely for signs of a hurricane. When I was a waitress, I learned to calm impatient customers with open communication and a caring attitude. So while I was nervous and uncertain inside, I kept my demeanor steady and relaxed. I told my employees the truth: yes, the company was in trouble. My first loyalty during this time of crisis was to them, I explained, and my second to our investors.

  Then I said, “I need your help.”

  Without sharing the details of my life story, I told them that I had lived under conditions of torture, poverty, and abuse during my childhood in China. “I can handle pressure,” I said. “In fact, I thrive under challenging circumstances.” I also let them know that I was willing to make the necessary personal sacrifices—including putting up my house as collateral and working without a salary—in order to save the company.

  With determination, I said, “We can execute a survival plan. We have enough cash to pay everyone a salary for three more months. It will take the next month to go after three potential deals. We should aim to get two to three million in cash in the door. If we can get just one of those three deals closed, with Align Technology, then we’ll have sufficient cash for at least six months. If we can secure all three deals, then we can survive for at least a year.” I paused.

  The employees sat in tense silence.

  I continued: “I’m asking you to give us one month. If we are 90 percent there, I’ll ask you to stay on for another month. If we’re nowhere close to any deals, then I’ll pay you one month of severance and let you go. I don’t want to get down to the wire and not be able to pay you at all.”

  In conclusion, I stated an important fact. “Without you, there is no Geomagic.”

  One of the employees raised his hand. I nodded for him to speak. “That sounds like it will take a miracle,” he said.

  “Yes, and you are all part of that miracle,” I replied. “Cash is king. We need two million to stay alive.”

  Silence.

  My heart pounded. Would the Geomagic family abandon me? I wouldn’t fault them if they did—they had families to support, and in a sense I had already abandoned them when I had stepped down as CEO.

  “I can’t do it without you,” I said. “Who will stay?”

  Every hand went up.

  —

  The financial situation at Geomagic in early 2001 was worse than I’d thought. We had offered employees who had been let go three months of severance pay, which came out of my personal savings account. The bank was calling in a $1 million equipment loan and demanding our patents as collateral. If we gave the bank what they asked for, it would not only force us to close Geomagic’s doors, but also render the company valueless in the eyes of potential acquirers. To add insult to injury, the Internet bubble had burst and investors everywhere were losing money. The markets were turning sour on start-ups.

  I told Herbert that I wanted to use our house for collateral rather than the company’s patents. I also said that I needed almost everything we had saved in our bank account—$250,000 at the time. Herbert didn’t bat an eyelash. He agreed to whatever I wanted throughout the crisis.

  The challenge wasn’t just money. The fallout atmosphere at Geomagic was heavy with anger and resentment. People were mistrustful and pointing fingers. The managers who had joined the company at its inception were capable, passionate, and had great track records in large corporations. Most of them were failing for the first time in their lives and having difficulty handling the stress and strain. My job, in part, was to limit collateral damage, avoid lawsuits, and show compassion for those employees who were bitter about being forced out of the company.

  In addition to three months of severance pay, Geomagic guaranteed all the laid-off salespeople commissions for a full year on product sales for customers that they had entered into our sales database. That deal seemed more than fair to me, and I assumed that they would be appreciative. They certainly appeared to be, walking out the door with heavy hearts but also amicable best wishes for our company’s success.

  There was one employee in particular, Karl, whom I considered a friend. He was one of the first two salespeople we’d hired after moving to North Carolina. One time many months prior, as I was walking into the office, I had fainted due to a terrible migraine and nearly cracked my skull open on the sidewalk. Karl, a former marine, had raced to my aid, carrying me into the office, bringing me back to consciousness, and dressing my wounds. I dreaded letting him go. But Karl, like the newer sales folks, seemed to take the news relatively well. He told me that he’d always enjoyed working for Geomagic—it was the best job he’d ever had.

  A few months later, Karl asked me to meet him for lunch at a restaurant near our office. I leapt at the chance to see him and find out how he had been doing. As we ate, Karl shared news with me that he had a lead on a new sales position. Relief washed over me—one less burden to carry on my shoulders. I told Karl about three deals that we were pursuing, which I hoped would save the company.

  I received a letter from an attorney a week later demanding that I deliver Karl’s unpaid commission or face a lawsuit. Karl had informed the attorney that one of the deals Geomagic was pursuing was with his client, a contact that he had entered into the database. Karl was wrong. He had not delivered this contact, and so we would not owe him any commission on the deal, even if it were to go through.

  I felt as though Karl had stomped all over our friendship. First of all, he hadn’t asked me over lunch, when the subject had first come up, to clarify who the client was. Why hadn’t he just spoken up then? I could have eased his mind within minutes. Second, if he felt he was being wronged, why wouldn’t he approach me about it face-to-face? Finally, why would he try to destroy me with a lawsuit when he knew how hard I was struggling to keep the company running?

  Saddened by Karl’s betrayal, I was about to respond with an equally harsh letter from my attorney. Then I caught myself: If I didn’t like what he did to me, why would I behave in the same way? Why wouldn’t I ask him about the situation directly? I recalled the time when I had passed out at Geomagic and Karl had cleaned up my bloody face and knees. I had observed him acting with the utmost integrity in sales negotiations. Decent people sometimes could do terrible things when undergoing great stress. Karl is a good guy, I reminded myself. It is simply not his true nature to hurt me so. For as long as I had known him, he was a man of principle.

  I picked up the phone and called Karl at once. “What’s going on here, Karl?” I asked. “If you had asked me, I would have been happy to let you audit the deal so that you could see for yourself this isn’t your client. I am really hurt by your
actions.”

  “Ping, I’m so sorry,” Karl replied. “I went out for drinks with an old buddy from the Geomagic sales team and told him about the deals you had mentioned over lunch.

  “He said, ‘Geomagic owes you a commission!’

  “I thought he might be right, but I was too embarrassed to ask you about it. So he offered to have his neighbor, who is a lawyer, write a letter. I agreed to it, but— Ping, I didn’t even get to see the letter before it was sent to you. You’ve always been so good to me. I feel terrible about this whole situation. I’m really sorry.”

  I accepted Karl’s apology and he withdrew the attorney’s letter immediately. If I’d had a lawyer contact his attorney, I never would have found out the real story behind his actions. I would have continued to feel betrayed. In that case, I wouldn’t have trusted other employees as much going forward. And of course, I would have wasted time and money on a lawsuit. Instead, Karl and I remain friends to this day. I even wrote a letter of support to a Chinese orphanage where he and his wife were adopting a baby girl.

  As I dealt with various employee issues during those dark hours, I kept reminding myself: it’s all about love. Blaming others, being fearful and angry, acting vengefully, building resentment, destroying trust—these negative responses to trying situations suck us into a downward spiral and sap our energy, like water spinning down a drain. The only way to triumph in business and in life is to love what we do, and love our customers, our colleagues, our investors, and our community. Love even the people who drive us crazy, those who undermine us, and those who fail us, offering them compassion and forgiveness.

  —

  I have never been good with spreadsheets. All those rows of numbers make me dizzy. Maybe it’s because I didn’t go through normal schooling, and so I never did memorize the multiplication tables or properly learn long division. However, I knew that Geomagic needed $2 million to survive. My top priority was securing that cash as quickly as possible.