The Way of the Entrepreneur

Recently, I made a mistake. It was not my first one obviously but one I shouldn’t have made. Essentially, I completely misread a situation and put Westward Homes in a bad position on a few deals.  

But one of the most important things I’ve learned from entrepreneurship is that  it’s ok to make a bad decision so long as you are willing to acknowledge it to yourself and then get busy dealing with the consequences.

Like most truths, this sounds simple enough but, in practice, in real life, it’s not always so easy. Even just admitting an uncomfortable truth to yourself—that you have actually made a mistake—can be psychologically challenging. Believe me, most people don’t get past this part and waste their precious energy and time denying and/or blaming others. But in accepting responsibility for a mistake, there’s always an opportunity—for growth for sure and often for redemption. 

This is exactly what happened for me last week.

For several months, we had been negotiating with a savvy but mercurial billionaire about doing a big partnership in the Palisades. The talks went really well out of that gate and it wasn’t long before we had a verbal agreement, or so I thought.

We started interfacing with the lawyers and got the legal structure all buttoned up in just a matter of days. There wasn’t a single material issue or term we hadn’t resolved and our potential partner was talking about wanting an exclusive arrangement for at least the first 5-10 homes. I was feeling really good about things.

But then some questions started coming in—nothing unusual or existential just inquiries about how we’re handling insurance, fire mitigation systems, the design of the house, and so forth. Somehow days turned into weeks and the internal alarms of my intuition started to ring. My partners were feeling the same actually and we started talking about the possibility that the deal might not get done and what we might do if that happens. 

Instead of addressing these concerns head on, I hesitated and put my hope and trust in the general good nature of humanity. “Are they really going to walk away after all this time? Who would do that anyway?”…

To be fair / kind to myself, this whole time the investor was communicating with us on a pretty regular basis, either directly or through his representatives, and giving absolutely no sign that the deal itself was at risk.

About a week before we were supposed to close on our first lot, I got a call from his lawyer saying he was pulling out with nothing more than a “He changed his mind” as the rationale. For the briefest of moments, I let myself feel the anger and disappointment coursing through my veins. “You’ve got to be kidding me!”

But having been in this crazy, capital-intensive business for so long—the ultimate school of hard knocks!—I’ve seen this one before. A deal is never done until it’s done. 

Should I have trusted my instinct and those of my partners when things were dragging? Absolutely.

That was my mistake here and, unfortunately, it’s one I’ve made many times. I keep learning over and over that you have to trust your gut and you have to trust it enough to actually listen to it. What else do we have to rely on in this crazy and wildly uncertain world? 

Thankfully I’ve been trained by the fires of entrepreneurship to be resilient and resourceful and knew exactly what I had to do. I certainly wasn’t going to feel sorry for myself or stew in anger at the investor. I was going to get busy dealing with the consequences.

The first thing I did was reach out to the seller to try to get an extension. Time is the key to salvaging a broken deal like this. Thankfully, our seller was willing to accommodate without too much brain damage and my faith in humanity was almost instantly restored. Then my partners and I just started making money calls. We reached out to our lender Arixa Capital—a trusted partner we’ve borrowed hundreds of millions from over the years—and of course, they came through with some extra loan proceeds at closing. 

Then we started sending emails and making calls to family, friends, industry colleagues and other connections and I was reminded again of another important entrepreneurial truth: it’s amazing what happens in life when you just ask for what you want or need. It only took about a week to find the equity we needed to close our first deal and now we are over-subscribed and have several new large investor groups at the table willing to commit to a larger program. Of course, all these new investors will make better partners than the first guy. Such is the way of the entrepreneur! 

For Palisades fire victims looking for a trustworthy, cost-effective homebuilder and any Los Angeles homeowners who need help with renovations or ADUs – Westward Homes

For Los Angeles real estate owners looking for sophisticated, professional property and asset management services — DNY Living

For investors interested in proprietary RE investment opportunities – Metros Capital

For RE developers who need flexible capital / savvy partners – Westward Capital