The Knot Case Write-Up

When The Knot was founded in 1996, it was generating revenues of $79,000. Four years later, revenues had escalated to $24.5 Million. This exponential growth was achieved not only through the acquisitions of many smaller companies, but also thanks to the competencies and complementarities of the senior management staff.

Co-founder and CEO, David Liu, definitely had a strong entrepreneurial spirit, which helped him, and his team, grow the business rapidly. However, when he thought of a new line of business that he would like to enter, he was smart enough to assess the cost advantages of buying an existing company in that line of business instead of starting it himself. This practice also helped him strengthen his core management, as the new management, coming from the acquired companies, was fully integrated to The Knot’s existing senior team. David Liu also had sound managerial skills himself, which was not always the case of most start-ups of the “dot com” era. I believe that one of his major strength was his ability to delegate very soon in the process, sharing the workload and not running a one man show like we often see in new businesses (the QMI case for example.) Another force he had was to be bottom line focused, always having costs under scrutiny.

Nevertheless, The Knot’s growth was definitely precipitated. Fearing that competition would catch-up with him shortly, David Liu was forced to grow his business at a faster pace that he had probably anticipated, by continuously purchasing other businesses and developing new ones. This fast growth was the reason why the company was in constant need of capital and regularly living on the edge, to the point where David Liu was lucky enough to raise more capital just three month before running out of cash in 1998. The enterprise was not even 3 years old, and break-even not achieved, when he decided to take it public. The preparation to the IPO

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