The Messy Path to Startup Success: How Two Entrepreneurs Built and Lost Fortunes

Cass and Mike Lazerow reveal the brutal reality behind building companies, from losing everything in the dot-com crash to selling Buddy Media for nearly a billion dollars to Salesforce.

Key Takeaways

• Even successful entrepreneurs face catastrophic failures that wipe out investor money and threaten relationships
• The ability to "keep shoveling" through disasters separates successful entrepreneurs from those who quit after setbacks
• Working backwards from customer feedback during pivots proves more valuable than sticking to original plans
• Radical transparency with boards and investors builds trust even when delivering bad news consistently
• Strong operational partnerships allow visionary founders to focus on strategy while ensuring excellent execution
• Understanding what you don't know and hiring to fill gaps determines startup survival more than initial brilliance
• Large platforms plus AI plus no-code development create unprecedented opportunities for new entrepreneurs
• Stress-testing relationships through business failures reveals whether partnerships can survive long-term challenges

Timeline Overview

• 00:00-15:00 — Introduction and setup of Cass and Mike Lazerow's appearance at South by Southwest, background on their relationship with Jeff Burman and their company Buddy Media's billion-dollar sale to Salesforce
• 15:00-30:00 — The devastating call in March 2000 when Chipshot, their acquirer, went bankrupt just months after buying Golf.com, leaving them with no money and angry investors including family members who sued them
• 30:00-45:00 — How they met as teenagers, reconnected at a wedding, and started their first company together while dating, plus Mike's early entrepreneurial background building campus newspaper networks
• 45:00-60:00 — The birth of Buddy Media concept in a hospital recovery room after their third child's birth, Facebook platform announcement timing, and initial pivots from failed business models
• 60:00-75:00 — Board management philosophy, importance of written communication, radical transparency lessons, and operational role division between the couple as co-founders
• 75:00-90:00 — Building company culture, hiring key salespeople from competitors, acquisition process with multiple suitors, and their investment approach for over 100 tech companies

Surviving Catastrophic Business Failure

• The March 3rd, 2000 phone call that destroyed their first major exit came while they were working from their bedroom office above their living space. Chipshot's president delivered news that Sequoia had pulled funding and the company was bankrupt with no money for payroll or acquisitions.
• Their immediate concern focused on employees rather than personal losses, demonstrating leadership priorities during crisis moments. "I immediately went to oh my God how am I going to tell these people this is their livelihood what's going to happen," Cass recalled about her first reaction.
• The decision to restart rather than retreat came from Mike's instinctive response: "We're going to start this again we're going to just start it again we're going to do this." This mindset of persistence through catastrophe became foundational to their entrepreneurial identity.
• Family and friend investors responded poorly to losing money, with one close family member suing them and threatening to kill Mike. This experience taught valuable lessons about choosing investors who can afford total losses.
• They raised $1.2 million over a single lunch meeting in Chicago with Keith Bank, demonstrating how quickly fortunes can change when entrepreneurs maintain momentum despite setbacks.
• The company survived seven lean years as "mostly dead but barely alive" until Tiger Woods and Phil Mickelson's rivalry drove golf interest, enabling a $25 million sale to Time Warner that relocated them to New York.

Partnership Dynamics Between Spouses and Co-Founders

• Their relationship began in childhood when Cass hung out at Mike's house as his older brother's friend, requiring bribes to get teenage Mike out of the basement. "We would always have to bribe Mike to get out of the basement so that we could all hang out and I would take any dollars that I had from allowance," Cass explained.
• The romantic connection sparked at a mutual friend's wedding in 1996 when they delivered an impromptu toast together. Guests assumed they'd been dating for years based on their natural chemistry and ability to finish each other's sentences.
• Starting a company while dating violated conventional wisdom, but Mike's perspective was practical: "I was 25 I'm like you know she's really smart she's hot she's like loves the internet I'm all in." Their shared internet business passion created stronger bonds than traditional relationship foundations.
• Role division emerged naturally with Cass handling all operational functions including legal, accounting, teams, employees, HR, finance, and marketing while Mike focused on vision, sales, strategy, board relations, and fundraising.
• Mike acknowledges that Cass received insufficient credit despite doing the heavy lifting: "I got all the credit like Ernst and Young entrepreneur of the year all these things Cass does all the work and she made me look incredibly great."
• Their partnership succeeded because operational excellence supported visionary leadership, with both recognizing that "these companies only work if they're operated incredibly well it's not the ideas you have to have like a big market and like differentiated product."

The Art of Strategic Pivoting and Market Feedback

• Buddy Media's conception happened in the hospital recovery room after their third child's birth when Mike recognized Facebook's platform opening represented a massive opportunity. "I know what we're going to do next I said are you kidding me and he goes no this is it this is it you have no idea what's about to happen," Cass recalled.
• The initial business idea was "probably the worst idea I've ever come up with in the history of ideas" involving something called "Ace bucks" that HBO executives literally laughed at during pitch meetings.
• Market feedback drove their pivot toward software solutions when multiple potential clients asked if they could help deploy content on Facebook rather than pursuing the original advertising concept.
• The willingness to abandon sunk costs and ego investment in original ideas enabled rapid iteration: "We pivot really fast we love throwing away stuff" became their operational philosophy for testing market assumptions.
• Rather than searching for product-market fit, they allowed customers to tell them what product-market fit looked like by listening carefully to consistent feedback patterns across multiple prospect conversations.
• The four business model iterations before finding success demonstrated that successful entrepreneurs must expect fundamental changes rather than assuming initial concepts will survive market contact.

Board Management and Radical Transparency

• Mike's epic board letters took full days to write but forced clarity about strategic thinking: "Here's what we said we would do here's what we're doing here's where we're going here's why and that forced me to put it down in paper."
• The "don't shine the turd" lesson came from board member Matt Sovich screaming at them during a Golf.com meeting when they tried to sugarcoat poor sales performance. This harsh feedback transformed their communication approach forever.
• Radical transparency became their standard after learning that "people in general are okay with bad news especially these days but even then like they're fine with bad news people hate surprises."
• Board relationships work best when treated as partnerships rather than hierarchical reporting structures, with founders maintaining equal footing while seeking genuine collaboration on strategic challenges.
• Written communication proved superior to slide presentations because "if it didn't make sense to me it would never make sense to anyone else" and forced deeper thinking about strategic direction.
• Clear thinking about top three focus areas and their importance became essential for moving boards forward effectively, requiring founders to articulate not just what they're doing but why specific priorities matter most.

Building Exceptional Company Culture

• Cass's childhood experience of feeling excluded from teams motivated her intense focus on creating inclusive environments where "there were no alliances where there was none of this clicks" and mean behavior resulted in immediate termination.
• Team bonding happens through shared experiences in both difficult and celebratory moments, requiring intentional culture-building activities including scavenger hunts, costume events, and celebration of small wins together.
• Leadership team resistance to culture-building activities met direct consequences: "I had leadership team who did not want to do it and I basically said I'll fire you" demonstrated the non-negotiable nature of cultural participation.
• Transparency serves as cultural glue that connects team members through honest communication about challenges and progress, creating trust that enables collective problem-solving during difficult periods.
• The hiring of Susan from Salesforce required extensive courtship and generous equity grants, but demonstrated commitment to upgrading talent even when it meant convincing stars to leave established companies for uncertain startups.
• Creating atmospheres where people feel supported rather than ostracized requires active management intervention when negative dynamics emerge, including direct confrontation of problematic behaviors before they spread.

Strategic Exit Decisions and Acquisition Process

• Google offered $100 million more than Salesforce's eventual winning bid, but strategic fit and cultural alignment proved more valuable than pure financial optimization in the long-term acquisition decision.
• The relationship with Marc Benioff developed through personal connection when Mike visited his house with targeting data and both got excited about the technology possibilities: "Mark is like me in the sense said like you can't we can't control our like excitement."
• Due diligence intensity increased dramatically after the Golf.com disaster, with Cass working "all night all day for three months making sure that everything was looked at" to prevent another acquisition failure.
• Facebook's decision to eliminate intermediaries between themselves and advertisers made the timing perfect for exit, as Buddy Media had become "the biggest one between them and their customer" managing over a billion dollars in ad spending.
• Shared values and charitable commitments between leadership teams influenced the final decision as much as financial terms, with Salesforce's sales expertise complementing areas where Buddy Media struggled to keep pace.
• The acquisition solved scaling challenges for a company growing too fast to maintain quality while providing Salesforce access to social media marketing capabilities they needed for competitive positioning.

Investment Philosophy and Future Opportunities

• Their investment framework centers on entrepreneurs who "love to shovel" and demonstrate unstoppable determination to work through obstacles regardless of how many pivots become necessary during the journey.
• The "go gauge" framework evaluates six critical elements: what's the product, why is it different, who's the customer (and how many exist), how will they find out about it, how will you deliver it, and do the financials make sense on a napkin.
• Team assessment focuses on founders who "know what they don't know" and actively hire to fill their gaps rather than letting hubris prevent them from building strong leadership teams around their weaknesses.
• Current market opportunities combine three powerful forces: large platforms with aggregated audiences, AI capabilities, and no-code development tools that democratize engineering for non-technical founders.
• Successful investments like Scopely (sold for $5 billion), Liquid Death, and others resulted from identifying entrepreneurs who found their purpose and demonstrated willingness to evolve their approach based on market feedback.
• The combination of massive productivity gains from AI plus unprecedented consumer access through platforms creates opportunities for journalism students to build applications that previously required extensive technical teams.

Cass and Mike Lazerow's journey demonstrates that entrepreneurial success depends more on resilience and adaptation than initial brilliance or perfect planning. Their forthcoming book "Shoveling: A Love Story" captures the messy reality behind startup success stories that often appear linear in retrospect.