In this episode of Startups For The Rest Of Us, Rob talks with Adii Pienaar of Conversio, about his life changing exit, when and why he decided to sell, and what the whole process was like.
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Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob, and today with Adii Pienaar, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome to this week’s episode of Startups for the Rest of Us. I’m Rob Walling. Each week on this show, we cover topics relating to building and growing startups in order to provide a better life for ourselves and our family but also to improve the world in a small way.
This podcast aims to highlight folks that are winning, highlight folks that are struggling, highlight folks that have one but let them talk about the struggles along the way because frankly, a lot of the media seems to whitewash it and the TechCrunch articles we read and Inked magazine and such, I don’t know, they paint the picture that maybe this is easy or that we should have millions in revenue in the first couple of years and that if you sell for less than a billion dollars, that’s somehow a failure, but it’s not.
We talk on this show about building businesses, building real companies instead of building slide decks. We don’t ask for permission to start companies. We go and start them and we build real businesses with real customers who pay us real money.
Starting a company is hard. More than half of building a successful startup is managing your own psychology. We’re going to dive into that today with Adii Pienaar as we do a breaking news interview with him after he exited from his company Conversio. Now, Adii Pienaar was a co-founder of WooThemes many years ago which later sold to WordPress (parent company Automattic). After leaving WooThemes, he started Conversio, which in the beginning was called Receiptful to SaaS app and it was essentially an email service provider that catered to eCommerce companies. They integrate with Shopify, BigCommerce, a few others, and he built it up into a multiple seven-figure SaaS app.
Adii and I have known each other for years. He’s a three-time MicroConf speaker. I was super happy for Adii that this exit went through and that he was able to have this moment especially with Campaign Monitor which is a company a lot of us know and respect. Now, he and his team are working for Campaign Monitor and they’ve rebranded Conversio to CM Commerce.
Before we dive in, I wanted to remind you that the TinySeed batch two applications open on November 1st. Head over to tinyseed.com and you can get an email when the applications open.
In this interview, Adii and I walk through it all. We talk a little bit about growing Conversio but we dive in mid-story, as I like to do, to cover when did Adii decide to sell, why did he decide to sell, what that process was like, how painful or not it was, how it took, how the transition’s been, and a couple of things that he bought shortly after the exit closed. I hope you enjoy this conversion with Adii Pienaar.
Adii Pienaar, thank you so much for joining me on the show.
Adii: Thanks for having me, Rob.
Rob: I’m so surprised. This is the first time that you’ve been on Startups for the Rest of Us. I just thought somewhere in the back of my mind, I had invited you on before but apparently, as you just told me, this is it, this is your premier.
Adii: Yeah. I’m just going to say, The most politically correct thing to say is absence makes the hardcore founder. I know I’m here just because of all these years of absence.
Rob: That’s right. What an episode to be on, man. We could have had you on years ago to talk about WooThemes, we could have talked about when you started Receiptful, renamed it to Conversio. The agony, the victories, and everything that it takes to build a seven-figure SaaS app, but here we are, we’re able to talk about essentially what I’m calling a life-changing exit. Does that sound reasonably correct.
Adii: Yeah, it does. That’s the way I describe it as well in more ways than one, but yeah, definitely life-changing. Even on the ground, saying that and thinking about, that you hear me say that […] into that new normal. That’s all I know that is life-changing because I don’t get settled into that new normal, I just know that it’s on the horizon.
Rob: Yeah, exactly. Can you take me back to the moment that the docs were signed and were you like me refreshing your bank account just to see when the wire came through? What did that feel like when you saw that many zeros in your bank account?
Adii: I think the […] Rob is that I saw the first cash from deal. I got paid last. Everyone else is all about I get paid first. I don’t know why some British legal thing. Then the money also went to our family office and they didn’t really have got to me in South Africa. By the time it got here, I’ve already just dipped into bit in South Africa just to buy a few things to reward myself. The money itself was odd. You think about that now, actually just receiving the money, it ended up not being the predominant experience that I seem to remember from recent weeks.
Rob: Yeah, that’s interesting. It never ceases to amaze me how something that you can chase your whole life, you can achieve it, and then within days or weeks, it suddenly becomes a new normal, as you said.
Adii: The way I think about it, money itself has never been a good motivator for me. I know that to many people that sounds weird because I have […] adult life, at least I’ve been an entrepreneur and I’ve been working my own things. There is that pursuit of money, but money itself is never a motivator. To me, it’s the kind of things that I attach the money, the kind of life I can build in a way.
To that extent, the thing that both Joan (my wife) and I said to each other beforehand was that we already had a really good life before and we didn’t need a single event, especially not one of this magnitude to change the fundamentals of our lives. We aren’t going to change our family values just because we had more money. That’s part of why I’ve probably just not enjoyed or indulged on the financial aspect of the exit just get.
Rob: I find that very common with makers. You’re a developer yourself and a lot of the makers I know, most of them start the companies not for the money but for the freedom that money can potentially bring them. In the same way, I just wanted to be able to go build interesting things. I found that working for other people, I couldn’t do that. I built really boring things that I didn’t like and I didn’t have any equity. Then at the end, finally starting your own thing, it’s like, “Wow, I just won enough time to build fun things and cool things that I’m interested in.” How do you get there? I think starting a company is one way to do that.
Adii: Exactly. We’re a little beyond two months now since the transaction closed. In those two months, my team and I had been hustling in terms of evolving the product, rebranding the product, trying to focus our attention on doing more good work because I just gravitate towards that. Everything else is a distraction to what I actually want to do. I just like to create value, do cool stuff, whether it’s my own or otherwise. I only have experience on working my own things, so I think going into a new parent company, that’s […] and it’s something I will evolve into, but that’s at least has been the focus for those two months. As I said, just getting back to doing good, focused work.
Rob: Folks who are listening know that you started Conversio, which essentially is an email service provider and you mentioned to me that you started it in 2014. Now, selling it here five years later, you grew it into a seven-figure SaaS app and then you had an exit, that’s “only” five years. When I say only, I either literally mean that or I mean it in quotes because sometimes, five years of running a software company and growing it can be very painful. How do you feel about that? Do you feel like, “Wow, this was a quick victory for me, a Cinderella story,” or do you feel like it was a grind and five years was really tough, “I feel good to have made this next step into this next stage of my life”?
Adii: I think on average, Rob, we started the […] this is life-changing and I do think positive at the whole exit like in that […], It is life-changing and the fact that I’m really happy about the new home that we found for both product and the team. The cool thing there is there’s some personal affinity with Campaign Monitor, our new parent company, in the sense that I […] user forever, like firstly a customer. We were still customers of theirs at the point of acquisition and that’s always been by choice, but also when I started working on WooThemes back in the day like 2007, those are the wild, wild west of software, online software, SaaS, et cetera. From afar, we always looked at Campaign Monitor and we would ship or […].
I can remember, for example, when they put up their fancy Sydney office. Magnus, Mark, and I were looking at that and drooling. Not that we needed a fancy office because we had a mostly-distributed team, but there’s always been that personal affinity and when you get almost your heroes, a hero company where you come in and express interest to buy this thing that you’ve built, that’s a great feeling as well.
That’s predominantly the lens that I look at the exit and depending on how deep you would get. Ultimately the flipside to that is we were operating in a pretty competitive space and I also knew that to compete, we had to either accelerate our growth organically or sustainably with our own means or we had to raise more money because we had well-funded competitors that were definitely making moves within the industry.
You look at that five years and say, “Could we have done more to grow it further and exited at a year or two, three, four down the line for some exponential model?” and yes, I think that is possible. But you sometimes just get an opportunity to get a really good exit which is what we got and you can actually see that. I want to see that moment because you never know what changes beyond your control the next 2–3 years.
Rob: Yeah, I’ve seen folks ride their business over the top, so to speak. Once that growth stops, suddenly your multiple is not 4X instead of 5X multiple. It becomes 1½X instead of 5X. It’s a huge change once your stop growing. Given the potential for recession that folks are talking about, it’s easy. If you’re in it for another 5–10 years, go for it, but if you’re at the point—like my mental model—where you’re burned out, or you’re thinking about doing something else, or “Hey, having enough money where I can ride off into the sunset,” is starting to sound appealing and you can get that, what’s the difference between having that and two times that? You know what I mean? I talk about this in a MicroConf talk after we sold Drip and it was the same model. It’s like, “Yeah, I can keep riding this stuff,” but I don’t want to be that person that winds up having a major regret about it.
Last year, you spoke at MicroConf Europe in Croatia and if I recall, your talk was pretty raw. You talked about running Conversio and some of the challenges that you’re facing, both emotionally and just with the business, that there were competitors. There are all kinds of stuff, as you said, in this space that make it difficult. When did you decide to sell and why? Was that part of it?
Adii: Yeah, definitely. I think many people look at—I hate the term, by the way—serial founders and they figure, “Oh, the second, third, or fourth time is just so much easier.” I actually found it was completely the opposite for me. The second time was much harder possibly because the first part was partly […] way than the extent of our success was you […] lack in timing et cetera. Coming into Conversio, it was just harder than that. We also started off growing wildly. Then the growth plateaued and it was harder.
The other thing that made Conversio really much harder for me over the years was the fact that Adii Jr. was born, I believe, two years. He was two years old by the time that I left WooThemes and sold out WooThemes. By the time I had started working on Conversio, I had a six-month-old baby in the house. Having dependent and two dependents, as well as Joan, that always seem to aggravate my fears, my awareness of risk, those kind of things, so the second time was just much, much harder.
By the time we had gotten to MicroConf, my talk was mostly sense of being tired. The short story there was about a year before, we thought we had revenue which we didn’t have and it contradicts with the message. We literally lost due to reporting. We lost about $25,000 MRR. We’ve been pretty frugal and keeping revenue and expenses close to break even, some months just over, some months just under, not a big cash reserve. Then, this revenue just disappears. The revenue we thought was there and there was a lag from our payment process […]. I had to lay off two team members. That’s November 2017.
For the next year, all we had to do was really be brutal in terms of turning the business around and making sure it was profitable. We did that on almost, not zero, but minimal. We probably did around about 10% revenue growth in that whole year, start to finish in that process, but we turned profitability around drastically. It was just a hard year. For me, just given an overall overarching experience of the second time being harder and then going through a tough year like that, I was just tired. At least for me, when I feel like that I don’t feel as energized and ambitious, then I start looking at options, which meant that throughout that year, for that lost year, I at least started putting feelers out there to see should we raise more money—that was one option—or should we actually look for some kind of strategic partnership or acquisition.
Rob: Those layoffs must have been really tough. Was that the first time you had to lay people off?
Adii: Yeah. I’ve had to let people go before due to performance or something, but this is the first time that a big reason for them leaving the team was just we couldn’t afford to keep them, and that was on me and that sucked.
Rob: Yeah, it’s really hard to be doing your best and trying to take care of everybody and to make a mistake like that. I know how that feels myself. A lot of people don’t realize how close to the margins so many of these successful SaaS apps actually run. You have an app doing $1 million–$3 million dollars a year and that sounds like this amazing windfall.
Of course, when an app stops growing, it will plateau and you can have this amazing profit margins. 50% is the net margin I hear thrown around for SaaS, if you need a team to do it and if there’s this special Cinderella SaaS where HitTail had 85% net margin or something.
You can get a lot out of it, but when an app is growing, you’re driving, you have a bunch of competitors, you’re building features, and you’re basically trying to keep your head above water as you’re growing, most of these apps will run at breakeven for a very long time. I don’t think that a lot of people realize that.
What that means is that one small misstep with cash or as you’re saying with an accounting snafu can really mean some pretty drastic stuff. I bet at that time, now we say like, “Oh, you have to lay two people off.” That was tough. At that time, did that feel catastrophic? Was that a huge weight on you?
Adii: Yeah. I can’t remember, Rob, at least in terms from day one of starting Conversio, going through a darker period of my life because part of that is I’m also a solo founder, nobody was as invested in this business as I was. Even if I consider Joan from a family perspective, she has that financial exposure but it wasn’t her decision that influenced what happened in the business.
It wasn’t on the shareholders either. They were passive ever since. They obviously had their capital exposed in that risk, but it’s not the same thing. It very quickly became a very, very lonely thing both in terms of taking responsibility for what happened but also, literally, the next steps in terms of telling two people, “Listen. You’re unfortunately redundant. Here’s the situation…” You’re doing that, handling the you’re being there for the rest of the team. Often, they lose friends to friends, for example. That’s hard.
Thinking about it now, the hardest part is going through such a tough experience also at the end of the calendar year, when one tends to be a little bit more tired probably than in January, having to rally the troops because the business needed to be turned around. It wasn’t just about letting two people go. We needed to shift momentum drastically. I probably walked through 2018 just feeling this immense, immense weight on my shoulders like I’ve never felt before, not with WooThemes, not with Conversio before, and probably not with anything else that I’ve done in my life.
Rob: How large was your team at the time?
Adii: Fourteen, I believe, we went down from 14 to 12.
Rob: To 12, yeah, that’s a big hit. Obviously, we can hear it in your voice and just in the events you’re talking about that why you would start thinking about other options? You mentioned raising funding and you actually dropped me a line, I believe. You sent me an email and asked about the Drip exit. Did you and I jump on a call? Remind me of what happened because I remember introducing you to Einar and this is before TinySeed, I believe, and then the two of you got in a conversation about what it would look like to exit. Remind me the process because I’m guessing you’ll remember better than I do.
Adii: Yeah. I don’t think we spoke enough after that, by the way. The last time before this split was a couple of weeks ago just after the exit.
Rob: Got it. Was it in MicroConf Europe?
Rob: Okay, so that was it. That would have been almost a year ago now.
Rob: You must have asked me about what it would look like to exit and I think I said, “Hey, I know this guy.” We’ve probably just announced TinySeed, literally, a week before that and I knew that Einar had hopes. Part of what he’s done over the past several years is helping seven-figure and eight-figure SaaS founders exit and then run a process and sell their companies to really strategic buyers is what they do. I intrude you there. Now, did you follow other leads as well or once you talked to Einar, were you like, “This is something”?
Adii: Yeah, I actually stuck to Einar. I’m a big believer, at least, both in life and business but in business, too. You need to tie and consolidate relationships as much as possible. If I find someone that resonated with me and there’s a fit for my personality, then I’m all in.
Rob: Einar is the founder of Discretion Capital and you worked with him to essentially run a process, is what it’s called. Folks who’ve done it know what that means but for folks who don’t know what that phrase means, can you talk about what that looks like? I guess from a high level what it looks like, but also I’m curious to hear your individual story as you went through that process.
Adii: We ended up having quite a simple process, but it’s also the first one that I ran. What that meant was Einar and I worked together to put together a prospectus of some kind for the business and then identify potential acquirers, both strategic or just financial sponsors, which was a new term that I learned as well. Then, the ultimate goal with any exits is once you have that, try and get multiple parties interested. If you have multiple parties interested, you can probably pay that interest off each other to make sure you get the best possible bid. In saying that, the best possible bid isn’t necessarily the one that has the highest variation. It could be related to payment terms, some restrictions or warranties, or just almost a cultural thing.
I know a friend, for example, that ran through a process. There’s one friend […] that has sold multiple businesses and he told me that in his last business, he didn’t choose the one that had the highest valuation. He chose the company and team that he thought would really make progress with the product because that was more important to him at that stage. I think that’s what that competitive bidding process looks like in terms of getting multiple interested parties and then hopefully multiple bids on the table.
Rob: Yeah, that makes a lot of sense. I’ve never been through a process and I’m not super familiar with it, but my understanding is when you work with a broker or an investment banker like this—they do run a process—they essentially take all your financials, they put them together, they crunch them, they run numbers, they put spreadsheets together, they put a 1–5-page teaser together that is totally anonymous and they circulate that out to folks that they think would be interested strategically and financially, as you said, and then they circulate that confidentially. Folks will respond and say, “Oh, I’m interested,” and then they sign an NDA. Then, they have a deck that they’ve prepared in essence and talks go from there. As you said, the key here is to get multiple offers because it’s a market and it’s the way to get the best price.
I’m curious, when I went through the Drip sale process to Leadpages, it was not that. We didn’t run a process. They approached us. It was still very, very painful. It was agonizing for me. It was a 13-month process total, but it was really hardcore for about 6 months, where it was maybe 10–20 hours a week for 6 months for me of negotiation, getting to the letter of intent, and then all that stuff. How long did it take once things started getting moving? I don’t just mean getting your financials together and doing other stuff, but actually when you started doing calls? Because it becomes real once you get on the phone or get on the Zoom call with a potential acquirer who’s like, “We’re going to write you a big check but we have all these hurdles to go through.” From that point when it started getting real, how long did it take until the deal closed?
Adii: Timeline from the first email indicating interest to transaction closing is less than three months.
Adii: It definitely has its advantages. Objectively, this wasn’t something as necessarily was top of mind for me, but having such a short close is generally beneficial to the seller because if for whatever reason the deal falls through, you can quickly get back on the market. If you had multiple interested parties before, you can pursue them.
That’s the objective benefit of a shorter close. I wasn’t concerned about that at all, and this is what we say in hindsight because my boss and colleagues are listening, that was just never a concern for me. I like the fact that there was momentum because it became a forcing function to get through tedious due diligence things, which was crazy. Ultimately at the same time—as I said, I’ll elaborate on all these benefits of the short close— I now just know what it felt like drinking from a firehose. I just had to learn so many different things like a legal documented compliance standpoint. I was exposed to new things at an incredible rate. That definitely took its toll just for me, personally, and again, because I’m a solo founder.
I was lucky to that extent. I had Einar who we’ve chatted about. I think his experience was really helpful in just guiding me through that process and also just running interference on certain things, so that was helpful. The other thing that I know it did, even though it cost me a lot of money, it shaved a couple of years off of the […] that would have had to, stressful that I would have had to pay, but as soon as we had lifeline, Einar advised me and he said, “If you don’t have your legal counsel that has M&A experience, find the best legal counsel you can find and get them involved.” We’ve got a fantastic firm in the UK that assisted us here with this and that’s I said, “It’s not cheap. It’s almost when you eventually bite the bullet. It feels like the grudge purchase thing, but objectively I know that there was no way for me to navigate this transaction without that experienced and expert help.
Rob: Yeah, it’s a big deal when this much money is thrown around. I went through the same mental process when Leadpages approached us to acquire Drip. It was like, “Do I hire someone to represent me like a broker? Do I hire a lawyer?” I hired both and you’re right, it’s not cheap, but I think it saved years of my life, I think, is what you were saying. It reduced so much stress because I just felt like I was dotting I’s and crossing the T’s, and I’m going to sell a couple of companies in my life probably.
Whereas on the other side, acquirers have often acquired 5, 10 15, 20, and the lawyers know way more about it than you do. Not having an expert on your side is tough. I do know some folks who have done it and they are better people than I in terms of being able to put up with the uncertainty.
Ninety days is short. I said wow when you said that. I hear a lot of acquisitions take a lot longer than that. Did it feel quick to you or did it feel like 90 days of agony, uncertainty, pain, due diligence?
Adii: Due diligence wasn’t that bad. I went into it expecting much, much worse and it wasn’t bad. My gut feel is it wasn’t that bad for two reasons. First is the parent company were trying to do almost—this is obviously not a term—malicious due diligence. They were not just doing due diligence for due diligence’ sake. I think that’s the first part.
The second part that I am actually proud of is that I ran a really clean business. I say that in the way that I’m not a tax advisor, so don’t take any of my words here as a tax advice, but I think most founders know how to find a few tax deficiencies in their businesses by interlacing personal interests, business interests, and whatnot. I just never did that. Even though I was a solo founder, even though I had more than 70% of the equity by the time this transaction closed, there just wasn’t stuff there and our accounts were up to date.
We tried to run, in terms of our […] back to solutions we used with a software or some process within the business. Everything, we tried to simplify things and that greatly assisted us, that due diligence wasn’t that bad. But the uncertainty was still there. For me, it was a tipping point and it was very early on where I know I shouldn’t get attached to things and then your mind pulls a trick on you where it says, “Don’t screw this up now because this is significant and potentially life-changing,” and then that uncertainty kicks in like, “What happens if I get onto one of these calls and they find some kind of skeleton in the closet that I wasn’t even aware of and the deal falls through?” Up until close, that was something that at least pulled a few mental strains for me in the way that wasn’t unnecessary pleasant or helpful.
Rob: As founders, we always find something to worry about, don’t we?
Adii: Yeah, because if we didn’t have that, we will also wouldn’t apply the same kind of mental gymnastics to conjure up creative valuable ideas and bring them to life.
Rob: Indeed. Exiting the Campaign Monitor is awesome. To be honest, Campaign Monitor may have been the first ESPI ever used even before Mailchimp. I’ve always had a lot of respect. It was an ESP for designers is what I thought of it. I was guessing it was started by a couple of designers based on the UX that they’ve had over the years.
You had a huge transition now and you were able to sell the company. Your whole team now works for Campaign Monitor that have actually rebranded Conversio to CM Commerce. What is it like to go from a team of a dozen or so people to working at a company that large? How many employees does Campaign Monitor have?
Adii: Almost 650, I think.
Rob: That’s a big difference. Talk us through that. How is that felt?
Adii: It definitely has its challenges. The way we used to work has to change. That’s the simple reality because the things that we did as a completely distributed team, small team, an intimate team at that, that doesn’t translate well to such a big corporation. I think part of that as well is we are the smallest conservation in terms of people volume. We were 11 people that ultimately went a long acquisition and those 600 people there that are already more settled. Some of them have been there for 10,11,12, or 13 years. That has to change and for us at least, we went through that change very quickly because we wanted to get to the improved rebranded version of the product pretty quickly.
We had to literally make relationships on the fly with our new colleagues which I think is just challenging because relationships take time. What struck me most is the fact that most people on my team—doesn’t matter which role they were hired for—wear multiple hats in terms of doing things that just needed to get done. I know that was true for me as founder and leader of the team as well.
The biggest change that I’ve noticed is that most people are more narrow in their definition of how they add value to the organization. This is my skill set, this is my expertise, these are my responsibilities. At least for me as a founder, that’s a hard natural jump to make. I think that’s the biggest challenge that I have, but it also brings along with it quite a bit of excitement where I can probably do some things that are a little freer, more creative, more suited to a particular strength of mine instead of having to unnecessarily worry about all these things.
I did conversions, bookkeeping, all the way up to […]. I could do it, they were perfect, and as I mentioned they […] flag them. Due diligence, for example, and taxes got paid, et cetera. But that’s probably not my magic. There’s probably better bookkeepers, accountants, and whatnot in the world, but I think that opportunity and that change is bittersweet to some extent because I am someone that can wear multiple hats. But as I said, I’m mostly focused on seeing where being a bit more of a specialist and focus on the specific area of business and seeing where that takes me in the future.
Rob: What was the hardest moment of the acquisition process? Remember a time during those 90 days when you just thought, “This is brutal”?
Adii: I guess the last week or so, the discussion seemed both sides as legal teams. It seems to extend and seem to get into […]. I literally had the sense of, we just have to wrap this up now. We are getting into semantics and I’m also just generally a very trusting person. That part of it felt very unnatural to me, but I can’t remember a single event, like a single email, or a single call, or a single issue that popped up, that I felt would threaten everything. The only thing that comes to my mind is the last week or two where it feels like we got 90% of the deal done, and then we literally have to cram that last 10% into that last week.
What made it worse was, I was actually on a trip in Europe, a pre-planned holiday with Jean and our best friends. I was literally having to jump on calls and answer emails in between those things, which just extenuated that. By the time that we got, literally Friday afternoon 6:00 PM kind of thing, got to a point where both parties had agreed that we put pencils down and we’ll be signing […] as it was in that stage.
The first thing I did was I literally broke down in Jean’s arms. I just cried and I don’t want to call it sadness, but it was just things pure outpouring of all of these pent up emotions and thoughts that culminated over the preceding weeks.
Rob: I have totally been there and shortly thereafter, I cracked open a bottle of whiskey. I literally remember the night that I closed, when we sold […]. It’s funny how many parallels that even though our experiences are different in terms of you running a process and me having a strategic or whatever, so much of what you are talking about is bringing up a little bit of trauma for me.
You’re right. The last week feels like a month’s worth of work. It’s like,”There’s no chance that we are going to close. Are you kidding me?” Then everyone is arguing about this sentence and that word, and what it means, and it’s infuriating. I was so frustrated, angry, and stressed because I’m like, “This has to go through.” That’s what you said. You’re mind is playing tricks on you and it’s like, “I don’t want to get attached to this, but really I’m kind of attached to it. I want this to happen,” and yet you can’t just give in. You can’t just be, ” I want this to happen,” so okay go ahead and do what you want. It’s an incredible mental battle.
Adii: Exactly. That’s the thing, Rob. For me, that part of selling a business is very unnatural, at least for me an entrepreneur. I suspect that it’s probably the case of most entrepreneurs. That most entrepreneurs are bigger picture people and negotiating an acquisition like this is going on to those very, very fine details. Those details where you know there was an email thread about three weeks ago, but for the life of you, you can’t find that exact line in that email anymore because that email thread is now a novel. Gmail has magically decided to split this up into multiple threads.
I just think that’s a very unnatural state for me, at least, you are getting to that level of […] and specially so late in the transaction because you get to the point of attachment where it is point of no return, where I know that I need to push through now because trying to turn this back and for this thing not to go through, that outcome is so much worse.
Rob: Are there one or two things that you bought after the acquisition that you bought to celebrate, that you wouldn’t have bought before? Do you now have a tesla in your driveway, for example?
Adii: No, I do not have a Tesla. Mostly because I figure there’s not, by far, any public charging stations. It’s not a vital purchase. If that wasn’t the case, then I might have. I’ve done two things. One is totally juvenile and the other one is pretty cool.
The juvenile thing is I’ve never bought as much wine as I have in the last two months and I already have too much wine. I’m a bit of a collector. I’m mostly a wine drinker, but we have too much wine. I definitely enjoyed taking out on wine and probably making purchases that I would not have made before.
The more significant thing for me, this is the biggest reward, direct reward at least, that I am also giving myself from the exit. I still wish I could claim that this was my idea, but it was Jean’s idea. We are actually taking my whole family—my parents, my sisters and their spouses, my one sister has two young kids I raised as mine—on a Disney cruise which has been pre-booked and planned for the middle of next year.
We are doing that. The reason I look forward to it is because getting the extended family to get together for any amount of item is already hard and getting to experience something like that with them is just something that I really look forward to. Those are the things I have for myself and […].
Rob: Love it. I often talk about freedom purpose in relationships and it’s like you’ve now achieved a level of freedom. I’m guessing 20 years ago, you would have pinched yourself to have. You did it while diving into a deeper purpose of starting a company doing something to improve your corner of the world.
I love the capstone comes back to relationships because one of the things you start spending a bit of money on is being with family. I guess it’s very poignant and I’m super happy for you in all honesty. I just wanted to say congratulations and thank you so much for taking the time to talk us through.
Folks actually wanted to hear more about it. I guess I got scooped. I thought that this was the first interview you were doing about the acquisition, but it turns out about four days ago on Friday, Zenfounder, my very own wife, scooped me. I know you didn’t go nearly as much detail but you did talk a little bit about that on her show so folks can certainly go check that out if they are interested.
Adii: The other thing that you should know, Rob, because I didn’t know how much I did share with you is that we also scooped a newfound interest in poetry. I’m curious to see how that’s going to play out for you well in the future, whether I’m going to see tweets about what kind of poetry from you.
Rob: Alright. I would love to hear it. Speaking of Twitter, you are @adii on Twitter. That’s an awesome first name. Anywhere else you like folks to follow you online?
Adii: It’s either @adii on Twitter as you said or adii.me which is my blog. Now that this massive live event has passed, I have more time and I’m back to weekly writing discipline. If anyone wants to hear what I’m thinking, then that’s where the place to go.
Rob: You did a really nice write up about this just about a week and a half ago. Folks can go to adii.me if they want to check it out. Frankly, if you have questions for Adii and you like to see him come back in the show and answer questions—I totally did not pitch him on this beforehand—you can email questions at startupsfortherestofus.com or tweet at @robwalling and if we get enough questions, we’ll get Adii back on to answer those assuming he’s up for it and can carve up the time.
Adii: I’m definitely up to it. I’ve been up for these kind of things. Ever since, as a teenager, I read Richard Branson […] where they said, “There’s no such thing as bad publicity.” Whatever kind of spotlight I could get, I will be happy to take. If there’s questions, I’ll be happy to pop back into the show.
Rob: Sounds great. Thanks again, man, for coming into the show.
Adii: Thanks for having me, Rob.
Rob: Thanks again to Adii for coming to the show. As I mentioned, if you have questions for him, tweet them at me, email me. You can email us questions at startupfortherestofus.com or you could call our voice mail number (888) 801-9690 and leave a voicemail. I would bring Adii back on the show if we have enough questions for him to run through those in a future episode. This podcast’s theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. You should subscribe to this podcast. You can do it in iTunes, Stitcher, Spotify so that you don’t miss any episodes. Visit startupsfortherestofus.com to get a full transcript of each episode. Thank you so much for listening. I’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob interviews Jeff Epstein, Founder of Ambassador, about building and selling his multi-million dollar startup as a non-technical founder. They dive deep into the details of the acquisition and the toll it took on him.
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Welcome to Startups for the Rest of Us, a podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first one or you’re just thinking about it. I’m Rob, and today with Jeff Epstein, we’re here to share our experiences to help you avoid the same mistakes we’ve made.
Welcome back to Startups for the Rest of Us. On this show, we talk about building startups in an organic, sustainable fashion that allows you to focus on your personal freedom, purpose, and relationships. We have different show formats and this week, I sit down with an accomplished, impressive founder named Jeff Epstein. I’ve known Jeff for around eight years and watched in awe as he built Ambassador—it’s at getambassador.com—into a $5–$10 million ARR SaaS company, and all the trials, the tribulations, the struggles of what he went through to get there. He exited about seven or eight months ago.
What I like about Jeff is that at heart, he’s a bootstrapper. He bootstrapped Ambassador—which was, at the time called Zferral—for a year and he had to pay a developer essentially out of his own pocket. Then he raised a very, very small round between $25,000 and $50,000 just to basically keep the product moving forward. He’s a scrappy founder. He was doing sales calls constantly in the early days, really, a founder who was ambitious.
One of the interesting things we dig into today is how he has a kind of what a bootstrapper mindset had to raise funding to keep the company growing and we talked through his decision to do that. We also talked about the toll that the company took on him over the course of this time. He said he didn’t sleep very well, he did feel stress, he put on a lot of weight that this company took a toll on him, and we walk through any regrets he has. It’s really a fascinating story.
The latter half of the interview focuses on the acquisition because I find that level setting people’s mindsets of what a real acquisition looks like. The fact that Instagram was supposedly sold in a weekend for a billion dollars is like, (a) we don’t even know if that’s really true or if that’s just kind of a myth and the story around it, and (b) even if it is true, that’s like a once-in-five-year thing or once a year, once a decade, whatever, very, very, very rare.
The other thousands and thousands and thousands of companies and startups that are acquired happen much more like what you’ll hear Jeff talk about today. Again, the latter half of the interview focuses on that. Then it’s fun to talk through with Jeff to hear what he’s been doing for the seven months since he was able to leave the company. I always enjoy sitting down talking with Jeff, really enjoyed the conversation and digging into his victories, his struggles, his failures, and everything that came along with it.
Oh, and one side note before we dig in, it was an absolute comedy of errors trying to get this recorded so I’m actually impressed that we’re even able to ship it. I was in a Starbucks—which I normally don’t work from coffee shops—I especially don’t record interviews from coffee shops but due to extenuating circumstances, that’s where I was. Fire alarm started going off an hour before the interview then stopped, then went back on, then went off, then went back on.
Eventually, I went out to get my car and take off and fire trucks had blocked the driveway so I literally could not leave so I sat in my car, I hooked up my hotspot to my phone and this entire interview was recorded using that USB headset plugged into just a laptop sitting on the passenger seat so it was a funny moment. I couldn’t cancel the interview because the episode wouldn’t have gone live on time. But the show must go on, we ship every Tuesday morning. I hope you enjoy my conversation with Jeff Epstein.
Thanks so much for joining me on the show this week, Jeff.
Jeff: Yeah, great to be here, Rob. Thanks. I appreciate it.
Rob: We go way back. We were in a mastermind with Ruben Gomez for a couple years, if I recall back, when I was doing HitTail, 2011–2012 timeframe.
Jeff: Yeah. It seems like a long time ago but it was a lot of fun and I know, at least for myself, it was a really valuable time to chat with folks. Also, there wasn’t a huge community and we’re all in interesting areas where there weren’t startup communities and it was really important back then and, obviously, so today. It’s cool that we remained friends for so long.
Rob: I agree. I see you at MicroConf every so often. You made it this year. It is cool that we ran across each other. I remember you and I originally met. I came and spoke, I believe it was in Grand Rapids and you live in Detroit, Ruben was in Florida, and I was in Fresno, California so we were all in these places where there wasn’t a huge startup community around us and we found each other through these channels.
Today, I want to walk people through your story because, as I was saying right before I hit record, your story of growing Ambassador as a non-technical founder is so compelling, it almost writes itself. We just cover the points and it’s like, “Oh, man, that was amazing.” “Oh, man, that was brutal. How did you get over that?” These are the best kinds of stories where there’s a lot of adversity and struggle and it was probably pretty painful at the time, the different things that happened with co-founders and whatever, fundraising, and working 24/7 for a few years, but I do think the folks are in for a pretty good ride today so thanks again for sharing your story.
Jeff: My pleasure and I’m excited to tell it. It is interesting and there’s certainly a bunch of highs and lows, so hopefully I can help some people avoid some of the stresses and struggles that I had but definitely interesting for sure.
Rob: To summarize, so we don’t have to spend 10 minutes going through details, you started Ambassador in 2010, you exited, sold the company in 2018 to a company called West Corporation. Ambassador was originally called Zferral and you did raise a few rounds of funding, I believe. You started working on Zferral/Ambassador in 2010 and you raised a small angel round between $25,000 and $50,000 in 2011. You’ve been self-funding it since then.
You mentioned to me that your wife was making money and you were pumping the money out the back door into the app. What was the impetus to raise the angel round? Because I think of you more as a bootstrapper. You just have that capital-efficient, you’re not the Silicon Valley go-big-or-go-home billion dollar valuation, you’re ambitious, but you don’t fit the mold of, “I’m going to topple Salesforce and become the next Dropbox, Facebook, and Airbnb.” What was the impetus for taking outside money in 2011?
Jeff: Good question. For me, it was really in a sense kind of bad, but it was almost desperation mode. I didn’t act like that—I don’t think—at the time, but for me, I had done pretty well, I guess, for being an adult without having an actual job, I was investing in real estate, I was doing some odd things, I had just come out of law school, and I had sold a small business that helped me pay off my loans. I didn’t have that much money saved up or capital, and again, it was coming off of the 2008 financial situation, so there weren’t a lot of jobs.
I basically self-funded Zferral and it was maybe $4000 or $5000 a month to pay for developers to build the product. A couple of things led to me raising money. One was there wasn’t this playbook that exists today in terms of how to bootstrap even. Bootstrapping at the time, was just grinding it out and getting money wherever you could. I kind of exhausted all avenues. The problem for me—I mentioned this earlier to you—was I couldn’t stay up late and get the app done. I wasn’t able to just do the work because I couldn’t write code. I had to basically pay for it.
At the end of the day, I had an opportunity to raise $25,000 and I took it because I got married in 2010. So, right before this money came in 2011, I had to think about my wife in terms of, “Hey, it’s not just my money I’m risking now. It’s our partnership.” She was kind enough, she believed in me, and allowed me to do it but it was at a certain point, literally, the money was coming in and it was going right out. She wasn’t making, even maybe me, even more than what I was paying out. Our household was a net deficit, which is pretty tough to do when you’re just getting married and just bought a house.
She’s used to always joke, “I thought I was marrying an attorney and this isn’t what I signed up for.” She was a good sport. She’s joking about it, but I don’t know if she knew that was what she was getting into. It was a big relief at the time and $25,000 was probably six months of expenses. I was fine not getting paid, but money going out was tough when I wasn’t making anything.
Rob: And at that point, you had maybe a couple of grand in MRR, you think?
Jeff: Right. The other thing is, at that point, we probably just started getting customers. I don’t think the customers could fund the development and sustain the business. As that started happening, again, I probably didn’t take a salary until maybe after Techstars are around Techstars which was 2012, but again, just not losing money. I remember that was a big turning point in my family. It was like, “Alright, we’re not losing money anymore.” We’re just not making any money, but we’re not losing money. That was pretty big.
Rob: Getting back to break-even. It’s tough, man, in an early, I won’t say new relationship because you guys have known each other, but a new marriage and then trying to scramble and start a startup like that. Do you have any regrets around that, either raising the money initially or not learning to code at some point? Anything you would do differently? Or do you feel like no, you came to play, you showed up, and you made it happen?
Jeff: I don’t have any regrets about it. I do think it would have been smart for me to learn how to code. That would have saved a ton of stress and heartache. As you know, I’m willing to do the work so being able to do the work would have been hugely valuable for me instead of having to rely on somebody else. Even just being a control freak, which you think a lot of founders are, it would have been better if I could do it myself.
That being said, I think the value and what I was so lucky was that my wife was supportive and understanding about it, so as hard as it should have been, it wasn’t nearly as hard as it probably sounds. But overall, no regrets.
Rob: That makes sense, you look back today and you’ve had this successful exit. Everything worked out, but at the time, when you’re grinding it out for a year and you’re at $1000 or $2000 MRR, you just started taking customers, and you’ve spent tens of thousands of dollars, I’ll assume it’s hard. That’s not an easy place to be in, I can imagine.
Jeff: Absolutely. It was super tough. It was a perfect storm of being naive and young enough where it would be a lot harder for me to do that where I am in my life today in terms of age and expectations. Fortunately for me, I was willing to do it. It is hard and looking back, you’re like, “Wow, I can’t believe I did that.” But you also don’t know any better. That’s part of the beauty of it.
Rob: I know you’re under NDA for the acquisition terms, but I’ll ask it in a more vague way that I feel like people have asked me on the record about the Drip acquisition as well. You sold the company last year. Did you make enough money that you don’t have to work again if you don’t want to?
Jeff: Yeah. For the most part, we definitely can live a comfortable life based on how things went. We could survive and be pretty well-off. The reality is we both want to continue working. My goal is really just to focus on things that I’m passionate about and just have the cab of more fun. That’s a big change going forward and has been already.
Rob: That makes a lot of sense. I’ve done the same thing. The passion is like TinySeed’s what I’m excited about and it’s nice to have the luxury of basically not getting a paycheck for a year or two, or three or five. Einar and I got our first paycheck from TinySeed last month and it was like, “Yay,” but I couldn’t have done that 10 years ago. You can’t just not take a check for a long time, so it is nice to have the luxury.
I know how much of a hustler you are and when you find that next thing, while I hope you don’t go as all-in as you did on Ambassador—because you’re right, and I walked through a year or two of it with you when I saw the toll it was taken on you—I do think that you’ll find that spark again and you’ll go mostly in on something that you’ll be working on.
Jeff: Yeah, it’s funny you say that. It’s something that I’ve even talked to my wife about is that I’m concerned that I won’t be able to do 80% or whatever the number is. That’s a healthy amount of all in this because I always tell people, “I’m not all-or-nothing kind of guy.” I’m not good at, “Oh, yeah, I’ll just work for X hours a week.” Even if it’s 20, or 40, or whatever it’s supposed to be, or 60, if I say it’s that, I’m not realistically going to stop unless I feel like I did everything I could. It gets harder and you just get worn down. For me, it definitely had that happened.
I’m getting close to 40 years old so it’s like, “All right, I need to start reevaluating my life and looking at it a little bit differently than feeling like you’re a college kid,” which is what I felt like for the last 10 years, probably.
Rob: It seems like one of your goals with the next one should be to control your work, to work 35-hour weeks, or 40, or some reasonable amount.
Just to wrap up the intro story so that we can dig into some of the points, you mentioned you went through Techstars in Austin, that was mid 2011, that was back when Techstars wrote really small checks, so it was like $18,000. It was just a stipend. Then I think the next year, they started giving $100,000 notes which probably sucked for you to not get that. I’m imagining you could have used that money at the time.
Jeff: Definitely, and we were in New York so it was even more expensive to live. But yeah, it was during the class, they announced the $100,000 note and it was super big bummer for us because we were one of the few B2B companies, and at the time, 2011, that also meant we were completely unattractive to investors especially in New York. We had a really hard time raising money while all of our cohort, basically all the B2C apps, all the mobile apps, they easily raised money. I don’t think any of them are around now, but they had a much, much, much easier time raising money than we did. It was really tough.
Rob: Then you raised a couple of hundred grand in a note in 2012 and then you did raise a Series A in 2015. So total over the course of several years—that’s almost five years—you brought to about $2.75 million. I know you mentioned earlier, you needed that early money to fund development because you couldn’t write the code itself. In 2015, when you raised $2.4 million, what was the thought there? Was it that you’d hit product-market fit, you’re growing super fast, and you need money for bodies? Talk me through the logic.
Jeff: Yeah. It’s funny thinking about this. Someone asked me the other day and thinking about my thought process, I didn’t run a process, which is a little bit different than most people. It was an opportunistic fundraise. I had—and you probably know this personally—at the time, fundraising wasn’t on my radar.
We were mildly cash flow positive. I would say five figures cash flow positive and then maybe the team was 10 or 11 people. There were certainly people there. It was a ragtag group of folks. I would say most people weren’t experienced startup or tech people, it was like you’re hiring people that would be willing to work with you even though you could offer them almost nothing in terms of benefits or comps. That’s always tough.
One of the reasons why we raised money and one of the goals that I had before I even started Ambassador was I really wanted to help build the community in Michigan, I wanted to create an environment where these companies survived and thrived, and where people wanted to go to work every day. That was what I wanted to build. I realized that incrementally adding one person at a time and being really, really lean, I mean, I was super lean. I was paying myself $40,000 a year. Our office was all IKEA furniture. It was just really hard to create that environment with such a lack of resources.
When Arthur Ventures came along and pitched me on a partnership where they said, “We’re not going to make you step out of your comfort zone and try to grow at all costs. We do respect the way that you’ve built the company and that,” I think the director said, “you wouldn’t die. You should have died, but you didn’t because you were willing to just fight.” I just saw this alignment there and I said, “You know what? This could be really good.” We had great people and we got lucky that the people that we hired early all ended up being amazing and grew into amazing pieces and teammates. Even more awesome to begin with, but being able to spend ahead of where we were, it was a big accelerant for us that we needed. It allowed us, again, to give people benefits, to up comp, and do some of the things that I wanted to do. There was no money to be had before that, so really that was why I raised money.
Rob: It sounds like you found money on terms that made a lot of sense for you to raise and didn’t come, perhaps, with a lot of the strings attached that maybe a lot of the Silicon Valley money would come with. Whether it still does today, it’s still evolving, it’s becoming more founder-friendly. But is that accurate? You found someone willing to give you a couple of a million bucks in a way that made sense for how you wanted to grow the company and didn’t negatively impact your optionality down the line.
Jeff: Yeah. I have a ton of respect for Arthur Ventures and Pat. They were awesome and it was a really great fit. Did we want to build a $100 million company? The answer is yes. The expectation was we were going to try our hardest to do that, but what I always said to him is I don’t want to leverage the business to be successful. I don’t want to get to $100 million or die. I think that’s something that many VC’s, if they hear that answer, they’d be like, “This isn’t the person for me,” which is fair and in some cases, they want you to take that swing and if you miss, they’re okay with it and they can go to bed at night. I didn’t want to sleep at night and saying, “Everyone could have had a really great career and a really great experience,” but I selfishly went for it and we all went home and that was it.
I think there was an agreement there. I know for a fact we weren’t the best outcome for Arthur’s. I definitely do feel bad about that and I know that I tried my best to be both smart enough and calculated to maximize the outcome without killing the business. We got pretty low, to be honest, in cash multiple times, way lower than we agreed to get because we were trying everything we could to continue to grow as fast as possible to get to the next stage. But yeah, it was definitely founder-investor fit for sure and we have nothing but great things to say about Arthur and Pat who’s awesome. When they offered, we negotiated a little bit and that was what we did.
Rob: That makes a lot of sense. Something that I want to dig into is the fact that you said you got pretty low on cash multiple times. You and I both mentioned that you were all-in and you were basically working 24/7 for several years. This all sounds like not fun. That sounds very stressful. Was it that in the moment? When you were doing it, were you thinking to yourself, “Oh, my gosh this is brutal”? I would have been stressed, let me put it that way. There are people who just absorb that and they just don’t feel the stress about this stuff. Talk me through. It’s an eight-year period, so it’s hard to nail anything, but I’m just curious. Were there moments when you were like, “I don’t think I can keep doing this. I’m going to explode”?
Jeff: To be honest, not really. I like stress for the most part. I used to always tell people—maybe this is a bad advice—I would say if you care about something, there’ll be a level of stress. To me, that shows that you care. There was, looking back, more stress than I would have liked, but I’m also the kind of person who loves to dive in and obsess over something. When it doesn’t go exactly as you want, then it becomes what I would consider to be stress. Whether that, at one point in my life, was playing poker, or another time in my life, it was wondering to play sports or whatever, those things were, at a certain point, super stressful to me but in a way that it didn’t bother me that much.
To me, it manifested in things like gaining a lot of weight, not just being exhausted, not working out or not being able to sleep, things that I reasonably should have been able to do but I just couldn’t focus or prioritize for those things because I was so concerned about doing everything I could for the business.
There were very few times where I’m like, “Oh, my God I need a vacation.” I always thought like, “Man, I’m really stressed,” but day-to-day, I really enjoyed it, especially post-Series A when we had a little bit of money in the bank and I was surrounded by more people that felt like peers. Some of the early employees became good friends, so it’s not that but people that had experience.
For a long time I felt like I was doing everything myself. Of course, my CTO and co-founder, Chase, was an amazing help, but when we added a couple of more folks and we had a leadership team, so to speak, that took a lot of burden off of me. The problems became different problems. It never got less stressful, but it became a little bit more fun for me and allowed me to keep going despite some of those other challenges.
Rob: I know you applied to Techstars one year and you didn’t have a co-founder. You had an agency or was it an offshore developer and you got rejected. One of the things they said was, “We don’t really want a non-technical single-founder type of thing.” So, you came back the next year and you applied with a technical co-founder but he was almost like employee number one, is that right?
Jeff: Yeah. The next year I had applied to Techstars. I had done some networking in between the two applications. I had a reasonable feeling that I might be able to get in the next time in New York. I had known some people that were in the prior class and they’re like, “You need to have a technical person show up with you,” so I hired somebody who, again, technically we’d called him a co-founder and certainly he deserves that title, but he was basically hired a couple months before TechStars New York, to just basically help rewrite that code base from the original Zferral one, which was what I applied with into Ambassador, which we ended up leaving with, so to speak. So, we had rewritten the code base.
Rob: That was your first to rewrite of the code base. Didn’t you rewrite it again in 2012–2013?
Jeff: Yeah. We rewrote it again. Soon after when Chase joined—he’s still part of the team and actually onto bigger and better things at West now—one of his first projects was really to undertake start migrating the code base to something a bit more scalable and in a more modern technology. We were previously PHP and then we moved it over to Python and Angular, which became React eventually. It was a big undertaking. We probably started that 2013 and it may have taken a year or so, but we did it in a compartmentalized way. We didn’t really slow down the site too much, but there’s a lot of extra work probably to do it that way.
Rob: And the reason that you wound up leaving the mastermind is you, Ruben, and I were like, I had HitTail and maybe was just starting Drip, no employees, Ruben had two contractors or three—I don’t know—two employees, and you were hiring your 20th employee. You were putting out culture and vision documents, trying to get everybody on the same page. We’re like, “Look, we like each other, we’re all ambitious,” but you’re just at a different place. That’s what wound up happening.
But during that time, I remember, that rewrite was not super fun. You just had a team of developers trying to rewrite it and then you had folks trying to add more features. You were basically building the parachute after you jumped out of the plane. I don’t know what there is to say about that, but do you remember that as being super painful? Because that was my memory of it. Or do you remember it as, “No, we handled it and we got it done”? I guess the fact that you rewrote it twice was the real brutal thing.
I remember when we talked about it, I was like, “Gosh, do not rewrite this code base.” Coming from a developer, my own perspective whenever I come into a new code base, I’m always like, “Oh, this is a whole piece of crap. I’m going to rewrite this whole thing,” and then I eventually resist the urge and I push the business forward instead. But you made a very, very hard decision to do that.
Jeff: Yeah, it’s funny you say that. I remember even when Chase joined, when he was thinking about joining, and he had done some diligence, we agreed like, “Hey, let’s not rewrite it.” I think even you said something like, “The first thing he’s going to want to do is rewrite it.” So, one of the things we talked about was, “Okay, let’s try to keep it as is and we’ll go with PHP.” I remember we hired a PHP dev and we hired someone else who was competent in PHP but also knew Django and Python as well. After a couple of months he’s like, “Dude, we got to rewrite this. I’m sorry. There’s too many issues with it.” Like you said, it was building the parachute on the way down or he used to say it was like changing the tires on the highway while you’re going 70 miles an hour.
At that time we had $20,000 a month maybe in customers, so we made $250,000 ARR maybe. Your customers don’t care if you’re rewriting it until it’s done. At the time, we might have had even T-Mobile or we were getting a customer like T-Mobile, so it was super stressful. Knowing that you’re building something that’s going to get ripped out eventually was way more stressful for them than it was for me.
As you know, anything technical always takes a lot longer than you hope and that probably happened, but what went well and what I learned from Chase—I knew even then—was he was super money when he recommended we do something. It always seemed like it was the right move. It was one of those things where he was like, “We have to do it,” and I said, “Okay, let’s do it.” It wasn’t what I wanted to do because obviously, it doesn’t feel like you’re moving forward.
We were rewriting it this year, too. We rewrote a lot of the front end, we rewrote some of the back end in terms of scalability, going from a few hundred thousand or a few thousand people on your site to millions of people on your site, the growth in terms of requests was insane. They were 10X-ing the site every year just to maintain it. It was pretty insane.
Rob: Yeah. I’ve been a part of one of those. Insane is the right way to describe it. So, you grew it. I remember in the early days you had a lot of focus on sales. You were doing a lot of one-on-one demos and that’s how you’ve landed, or one of the ways you’ve landed to customers like T-Mobile and these big enterprise deals. I was super impressed with that.
At a certain point, you and I lost touch for a year or two. I was doing Drip and you were really digging into growing Ambassador. When you sold the company in 2018, how big were you, guys? I don’t think you’ve been public with revenues so I won’t ask that, but employee count or some other indication?
Jeff: I’ll tell you a couple things. We were between $5 million and $10 million in revenue and about 40 some-odd employees, give or take.
Rob: What was the acquisition process like? Were you getting approached by people who wanted to buy you? Did you have to go out looking for interest? How long did it take? Talk me through. There are folks listening to this who don’t get to hear a lot of inside stories about these because a lot of them are so opaque. “It’s a TechCrunch post of X company sold for Y million dollars.” “Wow, isn’t that great?” and you feel like it happened in three days. The Drip acquisition from first email to close was 13 months, and 6 of that was me working 20 hours a week on it. It was incredibly stressful for me, so I loved if you can walk me through bits of it so people can hear what it’s like on the inside of something like this.
Jeff: Sure. It was definitely intense and it was probably close to, like you said, a year of planning total at least. For me, because we were funded, because we had a board, the first part of the process really came about through board discussions of, again, when you have a board, you always have to look at multiple years out. One of the things that we were doing was trying to figure out how can we get to where we want to be and what are the strategic options, and that includes either fundraising or essentially selling or buying somebody.
Once you raise money, you’re on the clock. So, the worst thing you can do is grow slowly or decelerate. Not say that it was happening, but I think it was a concern. We were kind of in-between a Series B, it was possible we could raise to B and that was one option. Then all the factors you have to think about if you raise a B between dilution, and lots of times people want new leadership teams. That was one path potentially and another path was, of course, selling. Another path was going to stay in the course, but having to figure out a way to accelerate growth instead of decelerating, which happens to most companies that usually don’t grow faster the year after.
We came up with the idea that we’d kick the tires and see if it made sense to explore strategic partnership which really usually means a sale, but it could have been different kinds of investments, too. We’re pretty open and we’d also looked at other types of alternative financing. So, we were looking at all options.
As I mentioned, money was getting lower than we had planned. Again, we were with 40, 50 people, we weren’t burning a lot, and some years, we were cash flow positive, but the swings with 40 people, payroll was several hundred thousand dollars a month. So, the swings are pretty big. You need to have enough cash-on-hand and again, relying on checks from companies and things like that.
That was going to begin the process. We didn’t end up hiring a banker, which basically was much more work from my perspective, for me personally, to get ready for working with a banker than working for fundraising. It was like putting a whole fundraising deck together but then including everything, even things that you would normally maybe not tell or you wouldn’t want to advertise, but you need to be really open about and just get everything together so that you can share everything, and that they know everything so that things go well and they give you an accurate idea of the value of the business.
When working with a banker, one of the things is the process. First, of course, they speak directly with the companies, companies are interested. Then they reach out to the team and they have what’s called a management meeting. We probably had a couple of dozen management meetings which are basically calls with the entire management team, giving them an overview of the business. It’s extremely stressful. For us, we had to do them and keep them private.
I like the idea that we were talking to potential acquirers, couldn’t be that obvious to the company. It was really stressful and we did probably a dozen or more of those. Some companies were some of the biggest companies that everyone’s heard of, some of them were known, private equity companies, and range across the gamut. We did that for several months and then eventually you get IOIs and LOIs. Eventually, once the LOI is signed, there’s a lot of work to do, you actually meet with all the folks, and try to really talk about get down to brass tacks in terms of integration and real items.
It was incredibly stressful. For me, I played a point person on most of the stuff. Obviously, the banker did a lot, I did a lot, it’s a lot more stressful than I anticipated, and it’s a lot harder, like a few times investors be like, “Why don’t just wait like two years and just sell?” I was like, “Man, it’s not as easy as it sounds,” but people always say that.
Rob: But you’re eight years in it at this point and it’s like, “This is eight years and it’s been really hard.” I imagine you might have been feeling some burnout. There’s a certain point where I feel like you start to hear that there’s an opportunity to not have to continue doing what you’re doing. I don’t get the feeling that you hated what you were doing. I think you were still into it, but at a certain point, you start to think about the next phase as well as, “When is this going to pay off? All this hard work, my whole life’s work, and my net worth is tied up in this company.”
Jeff: Yeah. That was one of the things where I felt bad because truly, my investors, some of them would have been excited if we would have kept going. The business was in a good spot. It wasn’t the best deal ever. We did well and generally, everyone was pretty happy, but it also wasn’t a no-brainer. You always hope for a no-brainer and everyone’s on the same page. The reality is, investors are smart. If something’s going well or something’s going good enough, they want to keep going. They’re only making so many bets or investments per year and if it’s working and there’s a pretty clear path to the next milestone, they don’t want to sell, which makes sense.
We got mixed feedback. Lots of people were happy. No one was mad, but people were like, “Hey, have you considered continuing on and going?” Like you said, Rob, I got to the point where it was so close, you could taste it, you see the outcome, and a lot of us have worked hard for it. They knew a year before that we were going to try to do this. It was one of those conversations that I had with them was like, “Guys, I know we’ve been working hard, but I need you to work twice as hard this year. Hopefully, they’re going to pay off and here’s all the incentives and reasons why we should do that.” I think everyone was pretty burnt. I think we were fried. As what we used to say, “We were totally fried. It was tough.” From that perspective, it was really hard to just walk away.
Knowing that, it obviously makes it a little bit more stressful because at any point in my time in Ambassador, I always felt like I had a lot of optionality where I didn’t need a specific outcome. This was one of those situations where I was like, “Alright, if we don’t sell here, we’re going to have to start looking to replace people because I don’t know if they’re going to be able to handle it.” That’s my analysis of it and, of course, we never got to that point. I’m really good friends with everybody, so if I would have also said, “We need you,” they would have stayed, but I just felt I would have been doing everyone a disservice by pushing. We pushed really hard for a long time.
Rob: I know the deal closed last October of 2018. When did you tell your employees and how did they react?
Jeff: We told them that day that we signed the deal. We had done all the diligence up into that point and had not told them. The reason for it was, based on everything that I heard, you really don’t want to tell people. I know that with big companies, with really big transactions or public companies, as soon as the LOI is signed, they tell the companies.
For us, we had the LOI signed a lot earlier. It wasn’t 100% that it was going to get done. That was just like in bigger companies, there’s a lot of shareholder pressure and things, like when you make the announcement, the expectation is that you’re going to close the deal. We had a lot of deal points that were not ironed out yet. Actually, multiple times during that period, I thought we might not close.
We told the team early October. I would say 95% of the people were super pumped. A lot of them were way more pumped when they heard what they would get out of it. I like to say that I prided myself on really trying to build a great culture, especially over the last couple years. Really, that was my main focus.
I think a few people were sad that, that might be happening and the uncertainty with an acquisition is scary for a lot of people. We were super transparent and we immediately had like a town hall Q&A. Everyone felt good after, but there were some things that we couldn’t control.
Right after closing that, I think West didn’t do very well and that got everybody unsettled again. Luckily, things went as smooth as they could have been. Behind the scenes, it was a lot of scratching, clawing, and tough conversations. I’m really proud for the leadership team and for what we did to hopefully make things work out as well as they did, but I think I’m very happy with how things turned out.
Rob: I know you’re someone who takes a lot of personal ownership over things, obviously, over your company but over the culture and over the well-being of your employees and such. The deal closes, you’re obviously relieved, probably pretty happy that went through. It’s a life-changing moment for you, but I know, as you just mentioned, over the next several weeks or whatever, a month or two, West maybe fumbled the ball a little bit and you weren’t in charge anymore. These weren’t things that you could fix. How did that impact you? Was it really hard to see it? Was it something that you knew would iron itself out so it didn’t stress you out that much?
Jeff: It was really hard actually. There were multiple times after the fact where I was like, “I wish we wouldn’t have done this, wouldn’t have sold.” A couple deal points weren’t fully fleshed out because West Corporate wasn’t able to disclose the particulars because they were still fluid. We agreed, “Okay, we won’t agree to this in terms of we won’t specifically memorialize it in the agreement,” and that ended up being a big mistake for me. I don’t want to say anything harmful, but what we got in that particular agreement was a lot worse than what we expected and it was again, to me, directly affecting the people and culture, and it really was a gut punch.
I did a couple of things that cemented my place with West probably and wrote some really aggressive emails and took some pretty aggressive stands that I hope paid off and set the tone for my team. Luckily, only a few people ever saw or heard it, but I felt good that I took a stand. I felt it was the right thing to do. Luckily, I know the folks who were going to stay there after me, I needed them to see that we need to stand up for the folks. Everyone was in agreement that we did.
Rob: Yeah, that comes back to that ownership piece, that’s what I was pointing at. That’s your personality. I figured you would do something like that. You mentioned that during that post-acquisition, you were struggling with it and that there were days where you regretted selling.
I guess I was lucky or whatever, I never woke up a single day after the Drip acquisition and thought, “I wish that we hadn’t done that.” It just worked out. There were some hard days, but it never made me think, “Oh, I would go back on this.” That tells me a lot. That tells me that it was hard, that it was really hard knowing you and knowing your psyche and ability to take stress and deal with it.
You were with West for about a month or two after the acquisition, really the first of the year, you were able to move on. It’s been seven-ish months, seven and a half months. Have you had any regrets since that point about selling?
Jeff: No, definitely not. A couple of things have changed those, I should add, the team, I would say, has worked really well with West. West just recently has put Ambassador in a position to be successful and that took a lot longer than we hoped it would, but even just as recent as last week, I still talked to a bunch of folks there, everyone’s doing well, I actually played in the softball team yesterday so it’s a lot of fun and everyone’s really excited, which is really great and that’s what we wanted to do.
West has really done a great job of correcting course and working with Chase, specifically, but other folks at Ambassador to try to continue to allow it to flourish and be successful. From what I’ve heard, things are going really well and people are happy.
Rob: That’s great to hear, man. It’s easy to have no regrets when it did work out in the end for your team. It worked out financially for you and several folks on your team, and then obviously life is substantially better for you at this point. I’m happy to hear that things are a lot better.
I think that leads us to our final question. Do you know what’s next for yourself yet or is that just something that you’ll wait and see? Because there’s no rush. That’s what I would tell you. Jeff, don’t rush into the next thing. There is no need to rush into the next thing.
Jeff: Yeah, I know. It’s funny. I’ve even told my wife, “Let’s be super intentional about what we do going forward,” because we’re fortunate enough to have that flexibility. I’ve tried to be really intentional. I’ve spent a good amount of time just advising, not formally, but I wrote a couple blog posts and just said, “Hey, if you’re in the area or you want to chat, I’m happy to talk.”
Rob: You’re a TinySeed mentor, thanks for that.
Jeff: Yeah, hopefully I can even do more but I’m excited to be on the Slack group, answer some questions, and be available for when it’s my turn to […] folks. I’m staying busy a little bit, looking to maybe do some lightweight consulting where I’m still keeping a lot of flexibility. I’ll be honest, I’ve talked to a couple of business brokers, just looked at what’s available, and tried to see what piques my interest.
I’ve floated out a couple of offers for companies that were maybe not the best offer for the founder. No one’s accepted anything yet, but I’m kicking the tires on a few things. But as we talked about earlier, my biggest concern is can I do it in a way that’s not all in and that allows me to be flexible? If I were to do something, I would really focus on that work-life integration or balance or whatever you want to call it where it’s much more flexible than the traditional company. I think that’s the future.
Rob: Thanks again, man, for coming on the show. I really appreciate you taking the time.
Jeff: Absolutely. It was great catching up again, Rob, and always good to chat.
Rob: If folks want to keep up with you online, where’s the best place to do that?
Jeff: Best place is probably Twitter, it’s @jeff_epstein. I’m on Medium also, but Twitter, I’m pretty active. If you tweet at me or DM me or something, I’m sure to see it and I can follow-up and chat from there.
Rob: Sounds great. Thanks again, man.
Jeff: Of course. Yeah, my pleasure.
Rob: Thanks so much for listening. As you can tell, I’ve been changing up the format over the past four or five episodes. Mike is on a temporary hiatus and an update on him, he took some time completely off. He was on vacation and he’s interested in coming on the show in the next few weeks to talk about his thoughts and his progress. So, we’ll hear from Mike soon.
In the meantime, if you have a question for me or one of my guest hosts, call our voicemail number at 1-888-801-9690 or email them to us at email@example.com. Thank you for listening.
If you haven’t left a five-star review, would really appreciate it. If you liked the change-up in the format and the fresh voices, fresh perspective, even just the fresh show format, I’d really appreciate if you could lend a five-star review, even tweet out particular episodes that you’ve been impacted by. It really does help to show me that what I’m doing here matters.
I’m spending a lot more time on the show. I’m dedicating time to trying to raise the bar. If it doesn’t make a difference and I don’t hear anyone talking about it—I’ve heard two or three people compliment me on, that was super appreciated—if it doesn’t move the needle, then obviously, I have to invest my time in places where it really moves them forward. So, I would appreciate hearing your thoughts, sentiments on Twitter. You can email us directly, obviously, firstname.lastname@example.org or five-star review always helps as well. I appreciate it and I’ll talk to you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike talk about GDPR, preparing to be acquired, and technical debt. With the regulations of GDPR coming into effect, the guys discuss how it will affect small businesses and what you should do. Also an in depth discussion on things to have in order before you get acquired.
Items mentioned in this episode:
- Mike’s Indie Hackers Article
- Mike’s Interview on Product People
- Sherry Walling Interview on Mixergy
- FemtoConf Recap
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching and growing software products whether you built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What is our word this week, sir?
Mike: Why is it in Zencastr it says Chronomustard?
Rob: Chronomustard, that’s my name this week. I think that’s gonna confuse our editor. I’m trying a new thing, creativity. I’m trying to enter a different name each week just to see if I can make you laugh.
Mike: They usually do make me laugh, I appreciate that.
Rob: For sure. What’s going on this week?
Mike: I did a demo yesterday for a customer who’s looking at switching over from a competitor and they have a bunch of different users for the product that are in the competitor. When I went through and was doing the demo, afterwards he’s just like, “Wow this is way more advanced than what we’re currently using.” I’m just thinking to myself, “Is that a good thing or a bad thing?” Apparently it was a good thing.
They were looking through and signing up for it. Next week they’re gonna reach internally. Hopefully they’ll turn into a fairly large customer for Bluetick.
Rob: It’s always good to get off a demo and get that feeling that you’re gonna be making more money, it’s always worth it.
Mike: What was really interesting to me was just the fact that they had said how advanced it was in relation to this competitor because the impression that I get from their website and all the things that it seems like it does is that it’s probably more advanced than Bluetick but I got the distinct feeling that that was not the case.
I knew that they were having problems with it but I wasn’t clear until the phone call and exactly what those problems were and how they were dealing with them and what they were looking to do.
Rob: That’s awesome, man. Do you have any avenue if you sign this guys up that you’re able to find more customers like them?
Mike: I do but I think it’s gonna be more word of mouth relationship than anything else. This one came through a personal relationship so it’s not as if they came in through a marketing channel or anything like that. I knew who the person was and contact them and went from there.
Rob: You could also think about going to build with your Datanyze. Since they are using this competitor pulling down the list to people who are using the competitor doing the cold email thing, we talked a little bit about that last week. It’s obviously time consuming but that can be an interesting avenue if you do know that you are better than a specific competitor.
Rob: Probably be worth a few minutes. You have been busy, man. I was pleased to see an article on Indie Hackers, Starting and Growing a Conference for Internet Entrepreneurs, got quite a few upvotes. You said you spent several hours doing this, it’s one of the most in depth Indie Hackers Q and A I had seen.
Mike: I spent a lot of time on that, probably close to a day and a half to two days. I threw in the word because I was curious since how long it actually was, it came in at 6000 words.
Rob: It’s like a book chapter or two. It has screenshots and everything, you did a really good job. If folks are interested in hearing about the history of MicroConf, what it was like starting it, how it runs today. There’s just a ton of insight stuff, although some of it is projected revenue, I think you gave this year. Some years don’t include MicroConf Europe, it’s not all exact but there are graphs and everything that I think that Indie Hackers folks put together.
Mike: They took the attendance numbers and extrapolated with the revenue was from those numbers. It’s off a little bit but it’s not really that big deal, it’s more of the trajectory, I think, that’s important to see.
Rob: It doesn’t include sponsorships and all which are big chunk. It’s fun for me to read because I could be like, “Oh yeah.” I was nodding along like, “I remember that. I can’t believe Mike remembers this.” You are pulling stuff out, all the anecdotes that I had long forgotten.
Mike: Some of the things I had to go back. I looked through my email to see when it was that we first started talking about MicroConf and I traced it back to the exact day which I don’t know if we talked about. We had a name for it before then and we were talking about it separately and just calling it a conference or we had the name and we picked it on the day and went from there.
I don’t remember how long we talked about it before we decided to register the domain name and start looking forward or if it was just like spare the moment thing.
Rob: I remember being very spur of the moment. It just made sense, it was like, “Why don’t we just do that?” That’s cool. There’s a lot of engagement, a lot of really good comments and in depth discussion going on and 36 upvotes, I get the feeling that’s quite a few for most articles. Anyways, if you’re interested in hearing that story, we’ll link it up in the show notes but you can obviously go to indiehackers.com and give it a search. You also went on Justin Jackson’s podcast, MegaMaker. It was a couple weeks ago.
Mike: I think that was last week as well. We recorded it and then it went live either later that day or the very next day. It was all about MicroConf itself and what Starter Edition was about. We’ve announced that Justin Jackson is going to be emcee for Starter Edition.
We did that last year, Starter Edition as well, with Jordan Gal from CartHook. He was the emcee for that, we basically turned over the reins to him and let him run the show at Starter Edition which was really cool because it’s nice to be able to sit back a little bit and enjoy the conference a little bit more. I don’t know how you feel about that but it’s nice to let somebody else take the reins for a little while.
Rob: That was something that Zander, our conference coordinator, encouraged us to do because since Growth and Starter are back to back, we’d be solo energy by the fourth day of trying to emcee and run the conference that I think he knew that it would just wouldn’t come off as well as it could. Jordan certainly knocked it out the park as the emcee that was really, really good and to give them their style up there on stage is fun.
You know, with Starter, Justin is such a good fit for it because that is really the crowd that he is talking to everyday and interacting with so he knows that crowd perhaps these days, you know better than I do in all honesty. It was years ago that I was really knee deep in all of the transitioning from developer to marketer and talking about all that stuff. He just has his finger on the pulse of that. I think he’s a good fit to emcee. This year he’s also doing a talk which is cool.
Mike: How about you, what have you been up to?
Rob: I’ve just been working, kicking back a little bit. I have a spring break coming in a week or two. We are heading down to Florida, starting to warm up in Minneapolis but still in the 30s and we wanna get some sun. It’s an easy flight down to Miami and we rented up Big Ol’ Airbnb off of 80 and we’re looking forward to that.
I was enjoying, I don’t know if you’ve heard it but Sherry was on Mixergy. It’s actually her second time on Mixergy. Her first time, it was when she interviewed Andrew Warner and put it on ZenFounder and he simulcast that basically onto Mixergy. But this time it’s called Keeping Your Feet Together As A Founder and it’s Andrew Warner interviewing Sherry about the book and about the stuff she’s doing in the entrepreneurial communities. It’s really a pretty intense interview but it’s really good. Have you had the chance to listen to it?
Mike: I have not, no. I don’t get a chance to listen to Mixergy too often. I’m actually about two months behind on most of my podcast at the moment anyway.
Rob: I listen to select Mixergy interviews just because there’s a lot of them and they are long but this is one that obviously I jumped on, I just wanted to hear the content. It’s a good one, we’ll link it up in the show notes but you can obviously search for Sherry Walling Mixergy and find that in Google.
Mike: Awesome. What are we talking about today?
Rob: We’re gonna answer a bunch of listener questions and see how many we get through. It was cool, we were down to one listener question. When we announced it on the show, I think we’re up to 12 or 15 now and so we can hammer through. I feel like this cadence every other week answering these questions has become something that I’ve enjoyed and I’ve gotten positive feedback about it.
Voicemails are even better because it shows people that there are all these different people with different businesses listening to the show. You and I know we have tens of thousands of listeners but as a listener, you don’t know that. It would be hard to know or understand your fellow listeners and your fellow entrepreneurs doing it. I have enjoyed this and I think we’ll keep doing it as long as the questions keep coming in.
Our first question today is for me, it’s actually from a guy, Louis. He said, “The question I have is what would Rob wished he had prepared in advance in going through the process of selling Drip? Imagine there might be things like intellectual property who may have purchased the use with his own name but now need to be transferred to the company, manuals and processes, bank issues such as PayPal not being able to transfer, etc. The list could be endless, maybe a good topic for a book.”
I’ve actually thought about this. There are two thing I wanted to say here. The first is I’m gonna make an announcement but not really an announcement, Mike, I haven’t even told you this. I’ve started writing what I think may become a book. That’s the exact right response. I don’t know if it will yet. My goal for this year is not to tackle any big new projects.
There’s a lot to tell, there’s a lot of story that has happened since the last book I wrote. Maybe it’ll just be about Drip and the trials and tribulations, the last year of personal finance hell and being unable to fund the business and then the year of the acquisition and then the year of moving. As I started thinking about it, I was like, “Isn’t this interesting enough? Will anyone care?”
I sat down with a notebook and I just wrote out what were the most stressful parts of my life both personally and professionally since 2011 in essence. The list was crazy long. Each of them just shaped into this narrative and they link together in this very interesting way. Even if I were to write about acquiring HitTail and not use it in the book, it’s still […] for me to write about the process of growing it and then selling it. There’s a bunch of stress that went along with that sale.
I started just thinking about all the stuff that happened growing Drip. I made this big list, when I looked at it I feel like it’s interesting enough, at least worth sitting down and hacking some stuff out. I had like three pages of just bulleted list. About a week and a half ago, I just sat down one evening, I started doing it on a weekend. It’s kind of writing itself because it’s a narrative. I’m pulling out actionable things but I’m trying to get the grit of what it was actually like.
I have emails, I have Voxers, I have all this, I have my MicroConf talk from last year talking about the sale and my thought process, I started to listen to that and transcribing pieces of it. It’s cool in this day and age, all the digital elements that we have because I can’t remember exact dates but Gmail sure doesn’t forget. It remembers the exact date of this email that I sent to Derrick about this topic.
I’ve literally just been doing it on the side almost as a journal but trying to be very honest about everything, trying not to sugarcoat things. I’m about 7000 words in and it has just poured out of me, it’s all out of order, I just picked the next thing on the list that I think, “Man, I really wanna write about that today,” and I’m cranking it out.
I don’t know if it will be a book, I don’t know if I will ever release it but it’s something that I think could have the potential to be that. It’s always funny, when I got this question I started thinking, “Maybe that should be a piece of this.” Because I don’t just want it to be a narrative, I actually want it to be in typical or a podcast style and MicroConf style. I want it to have lessons that people can take away.
Whether they’re acquired or not, even just the growing part of it, the mistakes that they can avoid that I made or smart decisions that we made that I feel like people can learn from.
Mike: There are two pieces of that because there are people who would read that just because they know who you are or they’ve seen you speak and they just want the inside baseballs so to speak. They’re interested in the story, I totally hear what you’re saying about having the lessons but I think you could do both where you’ve got the story itself and then after each chapter or after each section you have a list of things that you personally pull out and be like, “Here are the lessons that you could take away from this, here’s the story piece of it and then here’s the lessons that go with each of these.”
Some of them may not have any lessons at all, it’s just something happened and you got lucky or unlucky and you just had to deal with the consequences or fallout. There may not have been anything that you could do about it. Maybe that’s the lessons, you can’t plan for everything but I think that it’s still going to be interesting to a lot of people.
Rob: I appreciate that. I kind of think of it as I think of any MicroConf talk I’ve ever given or at least the best talks that I’ve given tend to be a story, like a hero’s journey and then pulling out super actionable tactical things. That’s how I’m envisioning it. I’ve read only a couple books like that, I like it because it’s different, it’s not just a narrative. I want them to be not obvious takeaways, it’s not like work hard and persevere and you will make it. It’s not stupid stuff like that.
I realized that I think I’m telling myself that I don’t know if it’ll be a book so that I don’t feel in pressure or anxiety. I don’t want to feel forced to write it, I don’t want the writing to feel forced. I’m telling myself no one will ever read this because I wanna tell the story honestly, because there’s obviously a lot that went on that no one else knows that was very internal, that was between Derrick and I or between Clay and I or whatever.
Eventually, I’m sure I’ll have to edit some of that out but I’m trying to get it all out and then evaluate, is this worth doing? Maybe it’s an ebook or maybe it’s a series of blog posts that I’ll release or maybe it’s an audiobook, I don’t even know. It’s an interesting project. Hopefully it’ll turn into something.
Mike: Man, if it doesn’t, you did it for yourself and that’s not a big deal either. There’s something to be said for just doing things for yourself once in a while.
Rob: Exactly. That’s what I said, it’s like what’s the worst that can happen, I should just write this out. If nothing else, my kids can read it someday or something.
Mike: All of these aside and back to the question, are there any top level things that you can take away that you wish you had done that were probably a major things that you either overlooked or hadn’t thought about upfront that needed to be transferred or you wish you had done?
Rob: The prep work that I think everyone should do that you don’t think about is it’s far more mental prep work than anything else. I listened to the book Built to Sell three or four times, I listened to Finish Big multiple times, I did a lot of journaling, I did a lot of thinking. You have to know what your deal breakers are, you have to know probably what your drop dead price is. There’s a bunch of stuff that you need to think about and that it the prep work that I would focus on. I’ll just put that out there, first and foremost spend more time doing that.
The examples that the guy brought up, the guy who answered the question, most of these were not an issue. He brought up intellectual property, I had already transferred all of that into an LLC. If I hadn’t done that, it would’ve been disastrous, it would’ve been a huge pain in the ass.
One big thing that I do think you need to think about as you’re building your companies to have a clean IP, meaning that all of your contractors who touch your code, all of your employees who touch your code, you need to have them sign in their employee agreement, it should say, “Everything I do, the company owns.” I had that, I had only missed one contractor. I went back and asked him nicely, we still have a good relationship and everything was fine.
Had I not had that, it would’ve been really tough because when we went through the acquisition, they needed that. This funded company is not going to pay a premium for my startup if there are IP holes that someone could come back later and sue them or ask for ownership with the code or whatever. It’s not something you think about when you’re two, four or five person startup but it’s something that you should definitely have.
I signed to the same employee agreement, and Derrick signed, even us cofounders. We had to have agreements that basically Drip, the S Corp that owned everything own everything, that Derrick and I couldn’t walk away with that. That’s one thing I would think about.
The guy mentioned manuals and processes, that was not an issue because we were an eight person team and they’re acquiring the team. They weren’t looking to automate everything. I think if the team was walking away, yes they would want manuals and processes to hand off to the next team but there was zero questions about that. There were more questions about what our vacation policy and HR staff and employment agreements looks like than anything like that.
In terms of bank issues, they didn’t acquire the company, if you think about it. They acquired all the assets of the company and that’s typically how it’s done because they don’t want any of the liabilities. They left an S Corp that Derrick and I still own the same amount that we’ve always owned, they just bought all the internal assets of it including the code and the goodwill and the recurring revenue and employment agreements and all that stuff.
As a result, the corp still owns the bank account, they didn’t acquire any of that stuff. Thankfully we never had to setup a PayPal account or anything like that. Same thing with domain names, we just transferred them over. They were all in the GoDaddy account and we transferred them over to their GoDaddy account.
The only other thing I could think of as I was going through this list that I think would be interesting to think about it they ask for, this is typical, the standard due diligence stuff, all corporate documentation, your articles of incorporation, every single amendment you’ve ever made to them, everything. Have that all in one place because going out and finding it and scanning it is a pain in the ass.
Having record keeping doesn’t seem like a big deal when you’re a three person startup or when you’re a solo founder. But if you’re ever planning being acquired, you probably want all of this stuff somewhere so it doesn’t take you weeks to put these docs together.
The next thing is having really solid books, basically having income statements for every month. For me it was literally just a Google Doc with revenue, expenses and that kind of stuff. I also had Xero, the accounting software that they could look at. When they were asking for high level numbers, top line revenue and that kind of stuff, I was sending them Google Docs.
They’re gonna ask every single service you use, what’s every SaaS app that you pay for? Hopefully they’re all on a credit card, you could just go to credit card, that’s what I did and just started listing those out. Copies of leases and every contract you’ve ever signed for every service. Transferring the Stripe account did happen because all the subscriptions were in there.
That’s the high level overview, I think it’s something that I hadn’t thought about. When there’s a technology transfer, you think more about, “Boy, the tech has to be good and has to be automated and you want processes in place.” When it’s a company acquisition, it can be different. When people bought HitTail just as a product, they didn’t ask for articles of incorporation because they weren’t buying the team, it wasn’t a strategic acquisition. Those are my high level thoughts.
Mike: I hadn’t realized that they did not acquire the entire company itself and they were just acquiring the assets from the company. That’s the way that my wife had purchased the fitness studio that was in town. She didn’t acquire the business, she acquired the assets of the business.
I was very clear to her about just because the records of the business were obviously a little screwy and the person who own the business before couldn’t really explain certain things and was a little cagey about certain pieces of it where I’m just like, “Do not acquire the business.” Because let’s say she’s got a car, for example, that is owned by the business, if you acquire the business, you’re also acquiring the debts that go with it and any liens or anything else that goes with it. You will be on the hook for those things. If you don’t know about it, it doesn’t matter, you still have acquired them which may suck.
Rob: If you buy the company, you acquire the assets and all liabilities. That’s why almost without exception, anyone who knows what they’re doing, when they buy a “company” they’re just buying the assets of the business, that’s the standard. When Facebook bought Instagram, you can bet, their lawyers did not buy the Instagram LLC or C Corp. They bought just the assets of it.
As a result, you have to then list out what all the assets are which is interesting because you have to list out your code and the database and this, it’s just a big long list of stuff.
Mike: With my wife, there was a tax bill that ended up coming in. It was sent to her and she’s like, “No, this isn’t me because I didn’t acquire the business.” There was stuff that came up afterwards that had she’d acquired it, she would’ve been stuck with it and there is nothing she would’ve been able to do.
The other thing I find interesting is that when I worked for Pedestal Software and they got acquired by Altiris, the Altiris acquisition team came in and they handed us, all the employees, these documents that we had to sign that were basically more or less a copy of what our previous agreement with Pedestal had been for all the IP rights and signing them over to Pedestal but it was their version of it.
We’d already signed all the stuff but they said, “Yes that’s fine and everything looks good but you also have to sign these.” I think maybe there are updated ways of covering additional holes or something like that, I’m not sure.
Rob: I guess our agreements were perhaps good enough for their lawyers, they probably looked at them and said, “This covers everything.” Because it was recent, it was within the last year or something and everyone had signed. I broke everything out, Numa Group which is my umbrella LLC that owns a bunch of stuff, it owned Drip until maybe 9 or 10 months before it was acquired.
I was already in the process of ripping it out of Numa Group because that was when Derrick was taking some equity in the company and he essentially became cofounder. I was already in that process which was painful and agonizing and took five months and more money than it should have. Drip was already in an S Corp. I was very, very thankful for that because if it did not, then it would’ve been a fiasco to try it doing during the negotiation and the acquisition process.
When that all happened, I basically fired all of us from Numa Group, we all got new jobs with Drip, S Corp, Drip Incorporated. We all signed agreements at that point again even though some of us already signed up with Numa Group. Then, essentially when Leadpages acquired us, we all got fired from Drip Incorporated and all got new employment agreements with Leadpages.
I think they probably had some IP stuff in their employment agreement as well which is fine because then anything you do for them they own but they didn’t have a specific additional stuff we had to sign.
Mike: I wonder if it maybe it was because Altiris was a public company and they had additional things that they had to cover themselves, I don’t know.
Rob: I can see that, it makes sense. Thanks for the question, guy. I hope that was helpful. Our next question is actually not a question, it’s some kudos for us and it’s a voicemail.
“I just listened to episode 838 with the questions. It was great to have that interactive […] podcast, I just wanna give you guys some feedback, a long time listener. My name is Chris. I really enjoyed the episode, just hearing those questions and getting some more of your perspectives and your background and experience. […]. Take care, guys. Thank you again. Keep up the good work.”
Awesome. Thanks for calling, Chris. I wanted to play that because it’s good to hear feedback and folk’s opinion. He said episode 838 but I think he meant 383 which was just another one of these Q and A episodes. I specifically mentioned in that one that I like doing them more often and that I like getting voicemails because it shows it has the interaction. Thanks for that, man. I’m always happy to hear from folks.
Our next question is from Mr. Andrew Connell about GDPR. “Hey Rob and Mike, this is Andrew Connell from Voitanos, that’s voitanos.io. I do online training and I do it for everybody around the world or developers around the world. With the coming effectiveness of the GDPR for data privacy and personal privacy data at Europe, I’m curious if you guys can comment a little bit, of course not being lawyers, I’m not a lawyer either. I just think about what kinds of things developers really need to be paying attention to? What kinds of things you need to be careful of?
I’m asking these guys because it’s also very much in the way of how we’ve all be listeners of your show worked on doing email based marketing and collecting email addresses and potentially phone numbers and other information about users. What kinds of things you need to think about, I’ve seen things about privacy statements that you need to have on your site, how you’re collecting the data, what talent is being used, how you’re protecting it, all those kinds of things.
I’m just curious, what things do you really need to be paying attention to? There’s probably the gold standard but also what’s the standard that you can do where you’re at least defensible. Maybe you’re collecting data and the user finds out, they decided they no longer wanna be tracked by you. Can you just go back to them and say, ‘Yes I track you by your email address. Here’s all the information I have about you. If you want me to delete you, I can delete you.’ I’m just curious, do you guys have some comment there or maybe even have somebody who is a lawyer who can jump on the show and maybe comment? Thanks a lot. I love the show. See you guys in Vegas.”
The riveting conversation topic of GDPR.
Rob: Everyone is thinking about it so it’s important, it’s just such a fiasco. I’m gonna use the word stupid a lot in this conversation insight. Big parts of it, I think, are really dumb. There’s a 250 page doc or whatever and Brandon, our senior director product, went through the entire thing.
The end result is gonna wind up being something like we have to rewrite a bunch of internal policies and we’re gonna add a checkbox to a form for our users. That’s very similar to what MailChimp is doing and Active Campaign, all the ESPs. I’ll stop there and circle back because I’ve been talking a lot this episode. I know that you saw a talk at FemtoConf about it and I’m sure you have other thoughts on this.
Again couching it that we aren’t lawyers, we are not giving personal advice to anyone and certainly don’t have an exhaustive understanding of this but this is just our general thoughts on what we feel like folks might wanna do for GDPR.
Mike: The talk that I saw on FemtoConf, there’s a linkable posted in the show notes from Aleth, she’s the one who gave the talk. There’s a link to an overview of her talk as a recap from Christoph. He runs FemtoConf with Benedikt. You can go out there, there’s an overview of it but I’ll say it glosses over certain details that she talked about specifically.
With GDPR, the thing that you really have to make sure that you’re aware of is that if you touched the data in any way, shape or form, you’re on the hook for it. You have to make sure that you are both protecting it and if you are able to personally identify somebody, that you are complying to those GDPR policies.
If you have metadata about somebody, like custom fields or something like that, that’s not considered personally identifiable information but there are certain pieces that are. For example, an email address would be personally identifiable, an IP address would be personally identifiable, first name, last name, address, those kinds of things.
Rob: How is an IP address personally identifiable? That’s stupid. It’s not personally identifiable because IP address, a, can change constantly, b, you could have a single IP address for 100 people at a company, there’s so many ways that that’s not. I will stop.
Mike: You just have to be careful about what it is that you’re doing with that data. A couple of big things that I’ve seen that you have to really pay attention to if you’re selling stuff is that one, people have to be able to request a copy of all of the data that is associated with them.
If you’re running a SaaS app and it’s collecting the information, let’s say it’s Drip ESP, your customers are gathering information based on that email address, the person who owns that email address has to be able to come in and say, “Show me everything that you collected about me.” You have to provide them with the mechanism to give them that data dump. I’ve seen this recently, Facebook is doing this, Twitter is doing this.
You can go and you can request a download of all the information that Facebook has on you, the same thing with Twitter, you can get a download of it. I haven’t done that with mine yet but my understanding is that it is absurd and I’ve seen the amount that Facebook has on you, for example. There’s obviously backlash in the news right now about the amount of data and how personal it can be in certain cases. That’s something you have to pay attention to when you’re trying to comply to these, you need to give that to somebody.
Rob: Here’s what I would say, if you’re a developer, you don’t have to have an automated way. They can email you and you can go run a sequel query. I would not go and build something consul or anything especially it’s a small company. You know that you can do stuff agile and just do it when it happens, do it just in time, whatever.
They can also request that you have to delete everything, then at that point, the first time, it’s gonna be a pain in the butt but you’re gonna write that sequel query to delete it out, it probably gonna break something then you’re gonna fix it and then the next time you’ll have the same query. That’s how I would think about it. If you’re Facebook, that’s not gonna work because it’s not scalable. The odds of you getting a request when you have 1000 users or 5000 users, it’s pretty low.
Mike: The downside of that, though—I was just about to mention that—with deleting the information because you do have to comply to the right to be forgotten clauses.
Rob: Which is the stupidest thing I’ve ever heard.
Mike: I think you said it in the middle of the other comment as well, we’ll say it’s three. The right to be forgotten says that somebody can say, “Completely forget about me.” The problem I have with this is that where do you draw the line for that? I know that there’s a timeline that you have in which you can say, “We’ll get this taken care of.” You have a certain amount of time or this 14 days or 30 days to get rid of the data.
The question I have in my mind is that yes, I understand that that applies to backups but does that mean you have to go into your backups or you are only allowed to basically hold 30 days worth of backups? For the sake of arguments, say that it’s 30 days, is that all you’re allowed to maintain because that seems scary.
Rob: That’s why this is insane. It’s a legislation, it’s government getting involved in something that technically is a bad choice for a company or a bad choice for a business. We know as IT people, as developers, as professionals, as DBAs, you wanna have weekly backups or monthly backups for literally years probably. It’s not so you can hoard and use a bunch of information, it’s so if stuff goes sideways at some point and you realized you have this big error, you always go back, it’s a safety mechanism.
Mike: The other thing that bugs me about this is the right to be forgotten. I get the intent and I understand it but let’s say that somebody comes to you and says, “Rob, I want Drip to forget about Mike Taber.” What happens in three days if my contact information makes it back into Drip? How do you prevent my information from going back into the system without knowing who I am and keeping track of that? That’s a total chicken and egg problem.
Rob: None of that, as far as we’ve seen, is in GDPR. That isn’t addressed. The example is you say you want the right to be forgotten, you sign up for Rob Walling’s newsletter and you, Mike Taber, say, “I want to be pulled out of there.” You’re pulled out. What if you’re in 10 of our other customer’s accounts, are you only forgotten out of that one account? Are you forgotten out of everyone? It’s not specified.
Like you said, what if you then go to sign up to a new newsletter tomorrow and XYZ person is also hosting on Drip. There are so many edgy cases. The problem is every version is gonna be this much of a pain in the ass. If they do V2 in a year, think of how many personal hours and how many dollars have been pissed away by companies that would otherwise have been productive building products, doing interesting things, creating jobs.
Marketing alone on the Drip team which is not a huge app, we’ve wasted hundreds of hours and thousands, if not tens of thousands, on legal fees just having our lawyer’s advice and stuff. That sucks, that’s money that could’ve actually been productive and instead it’s sitting here dealing with what essentially is legislation.
Another issue I have is that in the US, they often will pass things, they’ll pass laws like this but they will exempt small businesses. If you’re 25 employees or less, you don’t have to comply to certain things. They do that because they don’t wanna put an undo burden on small companies because small companies are the ones that don’t have the budget, that don’t have the analysis council and that don’t have the bandwidth to handle a 250 page doc that’s completely opaque and everyone is confused about and freaking out. I think there should be an exception.
Isn’t this really meant to be for Google and Facebook and Apple and Fortune 1000 or Fortune 5000 Companies. How much do they care about these tiny little 3 person, 5 person, 10 person companies. They’re just trying to run a business, they’re just trying to make a living. That’s where I think they overlooked having some kind of exemption for small businesses.
Mike: There are certain pieces of it that are exempt; there’s the security officer, a dedicated security officer. Stuff like that, I believe is exempt. If you’re a small business below a certain size, you don’t have to have that. But the reality, at the end of the day is if you’re a single owner, that’s you anyway. It almost doesn’t matter. I totally agree, they’ve overreached is really what it comes down to. It doesn’t makes sense for much smaller businesses to try and have to comply to that.
Rob: Again, you and I agree, we understand the spirit of what they are trying to do. I don’t disagree with any of that, I disagree with the amount of burden that they’re placing on all the small businesses. Everyone is talking about this right now. It’s a waste of everyone’s time. When I say everyone, in our circles, in the startup circles. Yes, Facebook should worry about it but it’s so much wasted bandwidth.
Rob: I have not come across that, I don’t know about that. That’s an interesting piece.
Mike: Let me give you an example, if on your website you have Google Analytics, a Facebook Pixel, and a Drip Widget for example, somebody can come and say, “I don’t want you to track me using Facebook Pixels but the other things are okay, just not that.”
Rob: I had a guy who read all 250 pages of it and that is not on our list. I would look to see if perhaps there’s an exemption or there’s something in there that says you can otherwise not do that because, again, I haven’t heard anyone else talk about that.
Mike: The thing is there’s a piece that revolves whether or not you’re a data processor or a data controller. That’s the part that revolves on it. You mentioned earlier that there’s a question in your mind about whether or not if somebody is asked to be forgotten, is it just for that one account or is it for all them? My understanding is it’s all of them.
They could go to Facebook, you don’t have control over but they could go to Facebook and say, “Opt me out of everything, don’t track me. Forget me completely.” That has a trickle down effect on you running Drip because if you guys use the Facebook Pixel to track people, then you can’t track me, for example. Facebook essentially blocked it. Again it goes back to how do you keep track of that unless you know who the person is to not track them.
Rob: To be honest, I asked someone who I know is familiar with GDPR and had spent some time looking at it. He runs a small business, less than 10 employees. I was saying, “What are you actually gonna do here?” He said he is gonna handle things as they come in in terms of the request, in terms of deleting and in terms of giving a report of what they know.
He is seriously considering not creating all the documents because they basically say you have to have these 10 policies or 12 policies, all this internal documentation you’re supposed to have, processes to do this. He was going to say that his company is compliant with the spirit of GDPR and we’ll live up to the request but they do not have all of those policies in place.
It was like some verbiage of we believe in the spirit of it, we will comply as needed type of thing with the thought in mind that he’s not in Europe so he’s not European business so it would be very unlikely that the EU is gonna reach across the pond and come and try to take some little 10 person company out. Like I was saying, this is really more intended, my understanding is more intended for these larger companies.
A checkbox and them checking a checkbox is gonna make a difference, it’s like agreeing to a ULA, user license agreement with Apple, no one reads those things. You’re gonna put a checkbox with the link and it’s just gonna become this route thing that everyone does. It’s not gonna change anything but that is what it says technically. Consider if you’re asking for keeping your customer’s customers data somewhere, it gets more complicated.
In Andrew’s case, he runs online training. He has an online training, video training, people can sign in. He’s not collecting his customer’s customers data so it’s very much more simplified. I would consider a just in time or a simplified approach if I were in his shoes. How about you, Mike? You wanna talk about how every aspect of your business is not gonna comply and open yourself up towards the EU?
Mike: That’s the interesting thing is that for businesses that are not based in Europe, they don’t have the jurisdiction to force you to do any of that anyway. There’s literally nothing that they can do, they can’t sue you and say, “You are not complying to this.”
Rob: They could sue you in US court, they could. The EU could file a sue in Massachusetts court. You would have to fight it out, you would have to settle or you would have to fight. The odds of that happening, though, for you are almost non existent.
Mike: The thing is there’s a difference between them filing suit versus them having jurisdiction over. The sucky part would be you’re gonna have to comply to it just to make that lawsuit go away or you’re gonna have to fight it which you’ll win if you fight but you’re gonna incur a ton of legal fees over the course of doing that because they don’t have the jurisdiction and that’s what the court would rule.
I certainly wouldn’t recommend trying to fight it yourself and be your own lawyer there. I’m sure that somebody probably is skilled enough to be able to do that but I wouldn’t wanna be that person, I wouldn’t wanna risk it.
Rob: Here’s another option I heard someone throw out. They said EU customers are less than 10% of my business, I’m gonna reject, not allow EU customers anymore because I don’t have the bandwidth to do it. That’s what someone told me, that was really interesting. That’s a super bummer but at some point you have to throw your hands up and you gotta do IP detection or you just ask, “Are you in the EU, yes or no?” If they say yes, during the signup, you just say, “Sorry we can’t support you through the GDPR.” It’s pretty fascinating, I hope it does not come to that but I can imagine some businesses that’s just going to be easier and simpler to do that.
Mike: I’ve heard some people tried to, I think it came up at MicroConf Europe this past year about the legislation. There is someone there I met who was basically basing his higher business idea off of the idea that there were going to be US based businesses who aren’t going to comply to GDPR and they were gonna say. “You can use our service and you will be compliant.” I disagree that that’s a great business idea because all they have to do is comply and then suddenly your whole business value proposition goes off the window.
Rob: Obviously it’s complicated but I do think there’s a pragmatic way to approach this. As with any legislation, it will iron itself out, it will be more understood. You can watch companies like MailChimp or Drip Leadpages or whatever, GitHub, or Slack and watch how they handle it and then evaluate, “Do I need to do some other things?” You can also read that 250 pages doc and try to sort it out.
I don’t think it’s as bad as people make it out, I’m hoping it’s not gonna be that way. I do think if you’re in the EU, there is definitely more of a cause for concern if you’re running a business. Thanks for the question, Andrew. I think that was super helpful and a timely topic to discuss.
Mike: I think with that question, we’ll wrap things up for the day. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike talk about getting funding or acquisition offers, when to fire someone, and more listener questions.
Items mentioned in this episode:
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I talk about options for finding funding or an acquisition offer, setting up a U.S. company as a non-U.S. citizen, and when to think about letting someone go. This is ‘Startups for the Rest of Us’ episode 323.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:36]: Well, I wanted to say congratulations to Sherry Walling for ZenFounder being selected for Entrepreneur.com’s list of 24 Exceptional Women-hosted Podcasts for Entrepreneurs in 2017. Obviously, you are the co-host of that show but definitely wanted to send congratulations to her for being mentioned on that list. I think that’s quite an accomplishment.
Rob [00:54]: Yeah. It was a big deal. It seemed to get a bit of notice. People were taking notice and I know we got a big bump in ZenFounder email subscribers as well as some more podcast downloads. It’s always fun to be recognized for something like that.
Mike [01:09]: Yeah and after a short period too. The podcast hasn’t been around for very long so it’s nice to see that kind of attraction.
Rob [01:15]: I’m kind of mellow this morning. I’m still getting back onto time zone because I was in California for eight or nine days. In Santa Cruz hanging out with family, friends, reconnecting with people. It was a really nice time. It’s a lot warmer there so I still was wearing sweatshirts and stuff but a 50 or 60-degree difference depending on the day. I’m still, like I said, an hour or two off time zones so I’m getting going this morning.
It was good and it just reminded me how important it is to take some time off and recharge now and again. And depending on your level of exhaustion or burn-out, maybe you need to take a little time off every month. At other times you can take a little time off every quarter or every six months. It’s really important to come back, and I just feel a lot more motivated and like I have clarity of thought because I had this time to step away from work and stop thinking about it.
Mike [02:07]: Cool. On my end, I added another paying customer for Bluetick in advance of my public launch. I also integrated Zapier into the equation so –
Rob [02:17]: You got Zapier done, huh? That’s cool.
Mike [02:18]: Yeah. There’s a couple of things left with triggers to be able to send data outside of it and allow Zapier to kind of natively subscribe to different events that happen inside of Bluetick. I would say all but one piece of being able to trigger different things inside of Bluetick is done in Zapier. Then there’s this last piece of being able to allow them to subscribe to events. Once those are done I should be able to start rolling that out a little bit more.
I’ve got a couple of people using those Zaps right now. Most of them are actually going into my Zapier account, and I’m just piping them through Zapier back into Bluetick because when you create that Zapier integration obviously it’s create a personal, private one first and then you can share it. So I’m slowly going in that direction just because I don’t fully understand all of the implications of the decisions I’m making in Zapier. So I’m trying to be a little cautious about putting that out there in a way that makes it difficult for me to modify it later.
Rob [03:09]: Right. Yeah, for sure. That’s the nice part when you have that private Zap then you can, like you said, share it with other people. I think they want you to have like ten active users before they will move it to production. That’s kind of their rule of thumb. They want to make sure that it’s tested because once it’s out there it’s really kind of a pain. You have to version if you want to fix bugs.
Mike [03:30]: Yeah, and that’s the issue. The whole versioning thing is like, “Okay, well how do we do this and not screw things up?” I actually started going down the road of building a custom API end point specifically for Zapier so that if we need to make changes to our API for things that happen inside of our interface, we can do that and it won’t affect the things that are going on through Zapier. That’s kind of a work-around that is pretty helpful just because our API is still in flux and there’s lots of other stuff going on.
And in terms of the public launch that I’m working towards, one thing – I’ll get your feedback on this – but I’m considering going more down the route of having multiple small launches as opposed to one large one. The idea would be that I’ll gear up more towards a launch where I have a set number of people that I want to put into the system and I’m thinking in my head about twenty right now. Then go for the launch and basically tell people up front, “Hey, I’m only letting twenty people in the door at the moment.” And I could lay out my reasons why. Some of them are just to make sure that everybody’s getting the attention they need but also to make sure that if anything happens or if any bugs come up or if anyone has any specific needs as they come into it, then we have the time available to be able to address those. Whereas if I let in 100 or however many additional people, it would be difficult to do that. It’s hard to give everybody the attention that they need.
What are your thoughts on that?
Rob [04:51]: I think that’s a good idea. That’s why I did the slow launch with Drip was exactly this reason. We just didn’t have the staff to let hundreds of people in and I knew that we would bleed out trials that we couldn’t respond to quickly enough in terms of developing features or even fixing bugs. It can get really complicated and be a big rush of people. I think that’s a good way to go.
I don’t know if they need to be monthly. I think they could be every two weeks or three weeks depending on how long your trial is. Do you know how long your trial should be yet? Or do you still have to figure that out? Are you going to take a guess and then see how it goes?
Mike [05:22]: I’m not actually at the point where I’m at the point where I’m even considering offering a trial. What I’m doing now – and this is kind of hybrid pricing model where instead of offering an annual plan and a monthly plan, what I’m doing is I’m offering a quarterly plan. Because the value from the product does not surface itself for at least a couple of months. It could be several weeks or a month or even two or three months before you start to see the value just because of the pipeline of emails that you are sending through it and how long it can take people to respond. You might get responses immediately, but you might not get them for several weeks after a couple of emails.
I have a hard time believing that people would get value on day one or day five or something like that.
Rob [06:01]: No trial? Do they pay upfront for a quarter?
Mike [06:03]: Yes.
Rob [06:04]: They pay upfront for a quarter at a time? Got it. And you haven’t had any issues so far. I don’t think charging upfront is a bad way to go at all. If you realize that you get a bunch of pushback on that then maybe it’s something, you’ll want to change. It’s a judgement call at this point because you just don’t have any data so you have to make a call one way or another.
Mike [06:20]: I haven’t gotten any pushback so far. The people I’ve been putting on this past month or so where I’ve just said, “It’s charged quarterly and we charge upfront.” Not one person has said, “Are you sure? Or can we do this or that?” Nobody’s had any questions or pushback on it.
Rob [06:34]: You’ll have to see if you’re able to sell it enough upfront for someone to enter their card without talking to you. Because these people have all talked to you. And that’ll just be an experiment. You’ll have to do that first round and figure out what you think you’re going to get from it. And then since you are charging upfront, you need to prove that there’s going to be a lot of value to someone upfront so your marketing has to be really on point. And your pitch of what the product does and how it’s going to do it for them needs to be on point because if you fumble that at all there’s friction. There’s friction of that quarterly payment that you’re going to have to overcome. And that’s not impossible to overcome. I don’t think it’s a bad call. You just don’t have enough data at this point to know if it’s going to work.
The only thing I’ve heard people do quarterly with is membership sites. I’ve never heard a SaaS app do it. I think it was Andrew Culver who was saying that quarterly is the worst of both worlds in terms of accidental credit card churn. I forget what it is. If it’s that not monthly so that banks are suspicious of it so it will get blocked more often or something like that. There’s something about quarterly and how it’s not a great way to bill in terms of involuntary churn. I think you’ll want to keep your eye on that and if you switch to monthly later – you could always make it a quarterly payment and then let people switch to monthly down the line.
Mike [07:45]: That was probably what I was going to do longer term. The idea with the quarterly is one: it puts people in a position where they don’t get to the end of the first 30-days and they say, “I haven’t used this yet.” And they just want to cancel because they’re not using it. And it gives me an opportunity to reach out to them. I can see their usage and say, “You’re not using this. Let me help you get started with it. Or let me help do things because I am so early.”
The other thing that it does is that it gives me the revenue for that upfront. So if I do a monthly launch then I need a third of the number of people signing up to get the same amount of revenue that I would get three months down the road.
It helps from a cash flow perspective and it also helps from the perspective of being able to put people on it and be confident that the system is not going to fall apart. And then also making sure that they’re getting the value. I don’t anticipate doing quarterly long term. Maybe the data will prove me wrong, but as a starting point I think that it has a lot of benefits.
Rob [08:39]: I think if you do it and it works, I would not stop doing it. The cash flow is just too good. If you can pull this off without a trial, get the money upfront, obviously, offer a 30-day money back guarantee or whatever you want to offer because that’s going to be a sticking point for people as well. The question is, “What if I get it and I don’t like it?” And you want to be able to answer that. I think if you can make this work and the numbers work, it’s not a bad way to go.
Mike [09:04]: I definitely hear what Andrew Culver was saying about it’s the worst of both worlds. I hadn’t thought about it in those terms but I think that right now the benefits of it outweigh the negatives especially since it’s so early on. I just don’t have any data to work with and I may as well just try something.
Rob [09:19]: That’s right. The other thing I like about doing smaller launches and having “X” spots is you can justify it. You can say, “Look, I just can’t onboard more than twenty people. I don’t think we can support more than twenty people in terms of answering all of your questions.” It’s easy enough to justify because you are a small shop. But it also adds a little bit of that scarcity so that if you email the list, then you can build that up and say, “Look, there’s only twenty spots and if you really want to get in then you have to do it now” type thing. I think there’s a benefit on both sides in terms of making it more manageable for you and also being a nice little bit of marketing help.
Mike [09:55]: I’ll keep you guys posted on how that goes and we’ll see how it shakes out.
Rob [09:59]: Do you have a date for the initial launch?
Mike [10:01]: Right now I’m targeting January 31st. I’ve got some emails that I plan on sending out tomorrow and I’ll prime the launch queue so to speak. We’ll see how that goes.
So what are we talking about today?
Rob [10:11]: We have a few listener questions I wanted to run through. The first is from Matt Visk and he says, “Hey guys. Love the show. I’ve created a SaaS company myself and would love your input on it. It’s called PortfolioLounge.com. It helps people create their online portfolio. It has quite a few members with a handful of paid subscribers. I was wondering if you had any advice as to finding funding or interesting acquisition offers. I’m a developer at a large company but I’d love to go fulltime on Portfolio Lounge if I could.” Do you have thoughts on this?
Mike [10:39]: Not really. I’m not really in a position to figure out what an acquisition offer would look like for something like that. And I’m not real familiar with portfolio websites to be honest. You’d have more insight on this one.
Rob [10:51]: Matt, acquisition offers at this point, if you have a handful of paid subscribers, they’re going to be nonexistent. There’s just no – unless you have some unique technology patent that somebody wants or you have some Google algorithm or something like that. Just having a handful of paid subscribers, even if you’ve spent years working on the code launching and everything, it’s all about revenue. It’s actually all about net profit or it’s about strategic value. Net profit would be used in acquisitions that FEInternational would handle. If you were doing 20K or 30K a year, which is not a tremendous amount, but if you’re in that range then you can approach someone like FEInternational or Quiet Light, Latonas – there’s several brokers out there and they can get you acquisition offers. But if you want the maximum purchase price where it’s not three and a half or four times net profit but you might get five times annual revenue typically between three to seven “X” annual revenue – then that’s where you’re getting a strategic acquisition. That’s the kind of thing where you would really need to have a place in the market where a big strategic would want to acquire you. It doesn’t sound like you have that so I don’t think an acquisition offer is something you want to entertain. I just don’t think you’re going to find any.
In terms of finding funding, that’s the kind of thing where you’re going to go on AngelList. You may want to consider talking to someone like Bryce over at Indie.vc – he was on the show eight episodes ago – he funds smaller apps like this. Or if you live in the Bay area – my guess is you don’t – but if you lived in the Bay area there’s going to be a bunch of options for you. There are accelerators, there’s a lot of options. If you go to Google and talk about how to find startup funding, there’s going to be options. The question is: do you want to do that? Funding is not necessarily going to be the answer to what you’re looking for. I think it’s figuring out what your goals are and then finding the right options to line up with that.
Thanks for the question, Matt. I hope that’s helpful. Our next question is about setting up a U.S. company as a non-U.S. citizen. It’s from Justin and he says, “Long time listener from Taiwan. We’re experiencing some tremendous growth on Amazon and we’ll be building some ecommerce-related SaaS apps in the near future. Our team members are scattered around the world but our main market is in the U.S. We’d like to hear your opinion of where to set up a company in the U.S. as a noncitizen and a nonresident.” What do you think, Mike?
Mike [13:06]: I think that there’s kind of an underlying assumption here that you have to set up a company in the U.S. The situation is he’s a noncitizen and nonresident, and I would question whether or not he has to set up a company inside the U.S. in order to do business. My thought here is that if your growth is coming from Amazon, then maybe that’s a requirement, but I don’t know for sure if it is. And if it’s not, there’s obviously a lot of different options for you to create a company whether it’s in Taiwan or it is based in some other country. I was listening to The Tropical MBA podcast a couple of days ago and one of the episodes they had on was about an e-residency program in Estonia which I think was $100 to get into, and then you could base your company out of Estonia. That gives you essentially a European address that allows you to use a lot of your SaaS services. I’m not positive of this. I think that Stripe would also be an option there as well. But you have to figure out where you’re going to be able to get your services from, where your bank accounts are going to be, what the different tax implications are based on where your company is. Some of that comes back to how your taxed in your home country versus how your business would be taxed in a foreign country.
Something else you need to consider is that once you start crossing international borders, it can get much more complicated. If you’re a U.S. citizen, you’re going to get taxed no matter where you are and no matter where you’re making your money because the United States government wants their money. There’s a – I forget how much it is – but there’s a cut off number where above that amount I think that they do not charge you taxes on anything below that certain amount.
Rob [14:37]: That’s right: 90K.
Mike [14:37]: Yeah.
Rob [14:38]: I’m pretty sure it’s 90K or 180K for a couple.
Mike [14:40]: Right. But that only applies if you’re paying tax to a foreign government. They’ll basically give you credit for it. But anything above that they say, “You owe us taxes.”
Rob [14:49]: It’s pretty crazy. It’s the only country in the world that does that. Where if you live outside their borders they still collect tax which is – there have been people who basically get residency somewhere else and then they give up their U.S. passport purely because of that.
Mike [15:01]: Yeah. I guess I would just question the underlying assumption that you absolutely have to set up your business in the United States but because it’s Amazon, you may need to. But I would look into that. I think you have a lot of other options if you don’t have to do that.
Rob, I know that we talked offline a little bit about other options. You had some thoughts as well.
Rob [15:19]: Yeah. And this is purely from hanging out with folks in the D.C. and they are digital nomads and they have the option of setting up anywhere in the world. Most of them are U.S. citizens and none of them have their companies in the U.S. Almost none of them. They tend to go to New Zealand and Hong Kong. There’s a bunch of reasons for that. If you want, I’m sure The Tropical MBA or the D.C. would be a better place to go find out why.
You can even Google the Five Flags theory and I think it’s Simon Black from Sovereign Man. He talks a lot about this stuff. He talks specifically about which countries are set up to be which flag and such. All that to say, unless you need to have a U.S. company, I wouldn’t do it. If you do, it’s typical to do it in Delaware. A Delaware corp is one of the most common setups here in the states. Even companies that aren’t located in Delaware tend to do that, and it’s because they have very favorable business laws and a bunch of other stuff. That would be the most common. You’ll want to either talk to LegalZoom or talk to a lawyer and have then set that up for you.
Mike [16:14]: The other option for setting it up in the United States would be using Stripe’s Atlas program where it’s $500 to get set up and they will create a business account for you, you’ll get incorporated, you can start accepting payments through Stripe. There’s also options for getting tax and legal advice. I don’t know the details of that. Patrick McKenzie would probably be a good person to reach out to about that because he does work for Stripe now under their Atlas program. That’s another option if you had to do it in the United States.
Rob [16:43]: I’m glad you brought that up. I would probably do that over the recommendation I just said of LegalZoom or finding a lawyer because I bet Stripe has this dialed in and you’re going to probably want a Stripe account anyways, I would guess. And if it sets up a bank account and all that stuff, that’s a big win and for $500 kind of a no-brainer.
Mike [16:58]: Yeah. I think that they also have this set up when you do that they have this partnership with Amazon to get you $15,000 in AWS credits. If you need a hosted infrastructure of any kind they can certainly help out there as well.
Rob [17:11]: Awesome. Thanks for the question. I hope that’s helpful. Our next question is from Steven Lieberman at SkillsDBPro.com. He says, “Love the podcast. I have a fast growing business. I’ve made about 1,000 mistakes so far. But without your podcast and one or two others, I’m pretty sure that number would be 3,000. I’m a developer and I just had to fire a developer. He’s a contractor who knows his stuff, started out great. His first piece of work with me was outstanding. Though as the assignments progressed he got slower and was billing more time for less work. I’m working on similar items and getting them done in half the time. There may have been a combination of issues. One big thing is that he started working in two-hour spurts which, obviously, makes it hard to really get up to speed. I tried to address this with him and he kept ignoring those parts of the text. After he finished his last assignment I let him go. Letting someone go is hard to do because on-boarding someone else is a lot of work and a lot of my time, as you know. So here’s my question: what are the breaking points when you choose to let someone go? I really struggle on how much time I should spend to fix the situation or just cut my losses and move on. So, other than the obvious (i.e. they’re stealing from you) what are your thoughts? Not only for developers but for all positions.”
Mike [18:18]: I think for this it comes down to your personal feelings on what the future looks like. If you are feeling like whenever they do work you have to go in and double check it to make sure that it’s right or the directions and stuff, the course corrections that you try to put in place and you tell them, for example in this case, you sent them texts and said, “This is what I need to happen,” and those pieces of the texts where ignored, the next step may be to send them a single standalone message that says, “This is incorrect or this is a problem and we need to resolve it.” And if as a standalone message, it’s still ignored or not corrected then, at that point, you need to pull the plug.
For me, it’s more of a personal feeling that I get to a certain point and there’s this nagging sense in the back of my mind that says, “You have to go double check this. Or you have to keep following up.” And it’s almost like there’s this weight hanging over you that you have to stay on top of whoever that person is and make sure that they’re doing their job right. And essentially you’re becoming a micromanager. As soon as that happens, they’re no longer helping you in the business. It’s actually hurting you because then it’s distracting you. It’s taking time away from doing other things. It’s taking your mental energy away from other things. And it’s just a nightmare to deal with at that point. It’s more hassle than it’s worth. And that’s really the breaking point.
But there’s not, I wouldn’t say, a set thing that if “X” happens or “X” or “Y” happens. Obviously, if they’re stealing from you – those obvious things, sure, pull the plug immediately. I feel like it’s more of a general sense of being aware of how you feel about moving forward with a person. If it’s not something that is able to be corrected, then you have to pull the plug.
Rob [19:53]: Yeah. I feel like Steve handled this pretty well. If he was trying to address it and was bringing it up and the guy was ignoring it, that’s a big red flag. I think the question is different if they’re a contractor or W-2 employee. I would definitely spend more time if someone were W-2. I’d also do a lot more vetting upfront. But if their performance went down – let’s say you hired someone who was good, easy to work with and then their performance is going down over time – I would definitely bring it up and try to help them and find out what’s going on and how you can turn it around. Do they need to take some time off? Are they burned out? Are they trying to do another job? You’ve got to try to figure out are they screwing your and overbilling you and not actually working the hours? Or are they running into personal issues or something?
That’s for an employee. With a contractor, I would tend to – I’ll say give them warnings – but it wouldn’t be things like, “I’m going to fire you if you don’t do this.” It would be more like Steve did where you reach out and be like, “Look, your performance at this point – you’re not delivering nearly what you used to and we really need to talk about this. It’s an issue.” If I brought that up a couple times and they ignored me, then they’d be done because there’s no excuse for that. If you can’t communicate with me then there is no relationship that’s going to come out of that. It’s just too hard to try to manage someone who’s going to not be able to communicate or have a conversation with you.
All of that to say, I think I have a little bit less tolerance for contractors because you don’t have as much of a relationship with them. You’re not as invested in them. They’re never as invested in you or your company, so if it’s not working out it is a bummer to have to onboard someone new but it sounds to me like you made the right choice. Thanks for the question, Steve. I hope that was helpful.
Our next one is from Michael. He says, “I love your podcast. It’s my favorite by far so please keep up the good work. I’m what you might call a “wantapreneur.” I dream about getting out of the rat race, being my own boss, etcetera. I have a few average ideas but don’t think any of them are worth pursuing. My desired entrepreneurial destination is a B2B biz with $10,000 a month in revenue. I have the will to work hard but I already make decent money at my job, which I think is part of what’s keeping me from ideating more. I also have a wife and kid so my time is not limitless, but I make time when I really want to. I get up a couple of hours early most mornings to read and study. Perhaps I’m too much of a learner and analyzer and not enough of a doer. Recently, I’ve split my time tracking into three parts. Part one is family and fun, part two is the day job, and part three is the side business which is currently only imaginary plus learning. I’ve been consistently filling up one and two but I feel hopeless with number three except for learning. I beat myself up constantly for not making more progress there and that affects my mood which in turn hurts my family’s wellbeing too. What would advise as I continue to strive towards entrepreneurship?”
I think the first question you want to ask yourself is: do you really want this? Do you really, really want it? Because if you haven’t pushed forward on it yet and you have a comfy job, it’s not for everybody and, in fact, it’s a long road where you’re going to be making a lot less than your current job for years. I remember Harry Hollander’s talk – or maybe it was Ted Pitts from Moraware Software – at MicroConf a couple of years ago and they looked back at what they would have been making at their jobs had they stayed. And they were like seven or eight years into their business and it was doing multiple seven figures, and they had just broken even at that point in terms of what they would have made. If it’s purely a monetary decision, then stick with the job. It’s an easier path, it’s less distracting, and it’s more straight-forward.
But if you really do want to get out of it, then you have to take some strides towards doing and really cut out the learning at this point. I would guess that you know enough that you need to take the plunge and actually start putting code to paper, as they say, and really get something out there. Just launching something at this point and whether you give yourself a challenge of launching something small every month for six months – not a bad way to go. Force yourself to do it. Or whether you want to launch a blog or launch a little WordPress plugin – pick something small and get it out into the wild. Because without experience, you have no idea how to put the learnings into action.
I would pick a small project that is not a SaaS app. Like I’ve often said with the stair step approach here, pick an ebook or a video course or a WP plugin or an add-on to Photoshop or an add-on to Shopify. Something small that you can charge a bit of money for and see what that feels like to do it and ship something. It’s probably a lot harder than you think, and it’s also probably going to give you more experience in that one month of doing it than you can learn in two years of listening to podcasts and reading blogs.
Mike [24:27]: I think Rob’s on the right track with asking if it’s something that you really want to do. I’d had a conversation – it was either last year or the year before – with somebody. We were actually discussing my sleep habits, to be honest, which is kind of slight tangent. The question that we were trying to discuss was: why can’t I get up earlier? I’ll be honest, I’ve always had a hard time getting up early. It’s never been something that is wired in my DNA. I do not like mornings. If I were president of the United States, I would abolish mornings and there would be nothing before noon. That said, the question that was posed to me was: what are the punitive damages of you not getting up early? What are the downsides of you not getting up early? I’m like, “I own my own business so I can get up at any time I want.” And he’s like, “Exactly. That’s the problem. Your issue is that there’s no downside, there’s no negative consequences to not getting up early so you just don’t have to.” You really have to have this external force of some kind in certain situations to push you in that direction. It sounds to me like there’s no external force that’s really pushing you to the point that says, “Hey, you have to build this business.” And it doesn’t sound to me like it’s something that you want hard enough. There’s no driving passion for it. You’ve got a job, you don’t find it exciting, but it’s not like you’re going to get fired or let go in three months and you know that that’s coming. So there’s no drive behind that to say you have to buckle down, you have to put this time aside.
You see that with various studies about people in college, for example, where they are given six weeks to do a project and then there’s another group of people that are given one week to do the project. The people who are given one week, they get it done. The people who are given six weeks, they wait until week four or five and then start it. It goes back to Parkinson’s law which basically says that work expands so as to fill the time available for its completion. This is a prime example of that where you’ve got this side business that you want to work long term but there’s nothing really forcing your hand to make it work. If it’s fun to you and it’s interesting and you enjoy doing it then it’s much easier to spend the time on it. But if you like doing it and you have this longer term vision where you want to do it at some point in the future but there’s nothing really pushing you hard towards it, then you’re probably just not going to. I think that that’s probably the fundamental problem here. It’s not so much that you can’t do it, it’s that you don’t need to. You have to ask yourself, is that something that you really want or is it just something that you would like to have at some point but isn’t really a passion of yours.
Rob [26:54]: And our last question for the day is from Adam Kelso. He says, “Hey guys. Thanks so much for the tons of great advice and experience you give in each episode. I know you target the show ‘Startup Founders’ but I was wondering if you had any thoughts on evaluating startups as an employee? I live in Austin which has a huge tech community and there are a lot of startups to choose from. Some have good reputations; most are too new for anyone to know much about. If you were considering working at a startup as an employee knowing what you know now, what would you look for and what would you avoid?” Interesting question.
Mike [27:23]: Yeah, I think that’s an interesting question. I think that I’d probably look for an environment where you could be very collaborative with people. If it’s a small company, if it’s a startup then your expectation is probably going to be that you’re going to be working closely with the founder or founders of the company so you want to make sure that you’re able to work well with them, and rather than jumping in and trying to provide value and skip from one job to another, I might offer them, for example, the opportunity to do some contractor consulting work for them. That does a couple of different things. One is it makes sure that they have money available. You’ll kind of get the inside scoop on how things are really going. Because the last thing that the last thing you want to do is quit your job to go work for one of these companies and then find out that they don’t have revenue to support you and they have to let you go in a month or three months or something like that. I think that that’s one side of it.
Being able to offer that is going to be attractive to them as well because you are going to be able to show your value and your worth to the company. If you are able to put in the time outside of your current working hours, then it gives them an opportunity to understand who you are and how your work. If you decide at the end of a couple of weeks or a month or two of working for them part time that you don’t like what they’re working on or you don’t see a future in it or you just don’t like the people that you’re working with then you can move on and go to something else. That’s really just hedging your bets more than anything else.
In terms of specific things to watch out for or red flags, I’m not sure because most of these companies, as you said, they’re going to be too new and you’re not going to really have anything to go on. There’s not going to be a whole lot of public information about them. You could ask people who you know about them but chances are good that, unless those people have been active in the community, you’re not going to get any information out of it and you’re not going to know people who know them. That would just be a difficult situation to be in.
Rob [29:12]: I think I would step back and ask yourself the question: why do you want to work for a startup? Because working for startups, you’re going to do it for, most likely, less pay than you would if you went to work at a larger company. And you’re going to get this promise of some eventual payout in the form of stock options. That’s the traditional way it’s done.
You’re putting a lot of risk there. You’re basically not making as much money as you otherwise could in order to perhaps have a more exciting job. Maybe that’s what you’re looking for. Could be less boring. Or maybe you are looking for the payout. I probably wouldn’t do it for that unless you’re joining as employee number one, two, or three. If you’re joining later it’s probably going to be trivial amounts of options.
I think with that stuff in mind, something I would look out for or really vet is “A”: how much funding have they raised? When did they raise it? How viable are they financially? Do I believe in the business idea? Do I think it’s kind of a dumb idea? Because there’s a lot of ideas that I think are stupid. I would not enjoy working on them. I would sit down, and if you have this list of startups and there’s some that sound really interesting, see what you can find out about their financial situation in terms of burn rate, in terms of getting their next round of funding. Because stuff can go sideways really quickly, and if a company has only raised an angel round or whatever, if you have no problem finding a job then maybe you do take a fly around one of these. But if you’re concerned about them going under and you being unemployed for a few months or something if there is an economic downturn, then you’ll just want to be more mindful of that.
I think that’s the thought process I would go through. I know that working at a startup – I worked for a credit card startup, and I think I was developer number three or four that was hired there. When I left we were at twenty-five or thirty developers. It was a lot of fun in the early days. Then, as we got bigger, it became less fun as companies do. One reason that I went to work for them is they did have buckets of funding and I needed stability at the time. This is ten, twelve years ago so I had the mortgage, was married and that kind of stuff. I was much more risk adverse than I am today in terms of being willing to risk employment and all that. It turned out to be a good decision. I did make a little bit of money off the options and things can work out. But the vast majority of time, it doesn’t. The vast majority of time they do go under. The vast majority of startups fail. Keep that in mind. Think to yourself, “If I come to work for these guys for six months, my options are worth nothing at the end of that and I don’t have a job, am I still okay with it?” If you are then cool do it because it will probably be a fun ride.
I’ve also heard of folks who go and work and they grind out these seventy-hour weeks for two years then everything goes south and then they really regret it because they’re now burned out and they have no job, their options aren’t worth anything and the opportunity costs of all the money that they could have made doing another job is a bummer. I guess that’s the last factor I would think of is: how many hours are these folks going to expect you to work? Because some startups really are a forty-hour week startups. That’s how we were at Drip. We didn’t expect everybody to work fifty, sixty hours. I think that’s definitely a more sustainable way to do it. Some are sixty, seventy-hour startups. That’s probably something to think about asking about upfront.
Mike [32:20]: I didn’t even think to mention it but my question was geared more towards working for a self-funded startup, not necessarily –
Rob [32:26]: Oh, got it.
Mike [32:27]: I don’t think that that strategy would work at all for a funded startup because they’re probably hiring because they need somebody and they need a body, to be honest. I’ve seen a lot of companies where they’re a startup company and they’ve got funding and they’re just like, “We need somebody to handle this.” They will take whoever they can get. And they’re not willing to wait six months to find the right person. They need somebody in the next three to four weeks. I don’t think that working for a company like that part-time is even going to be an option. It depends on who you’re talking to but – I had it more in mind of doing that for a self-funded startup as opposed to a funded startup.
Rob [33:04]: Cool. So there’s two perspectives. Hope that was helpful.
Mike [33:07]: I think that about wraps us up for the day. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at firstname.lastname@example.org. Our theme music is an excerpt for ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening. We’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob talks about the acquisition of his company Drip, by Leadpages. After finally closing the deal and making it public, Rob is able to talk about the thought process, negotiation timeline, and address some of the commonly asked questions about the acquisition.
Items mentioned in this episode:
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss the acquisition of my startup Drip by Leadpages. This is Startups for the Rest of Us, Episode 298.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products; whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:29]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:33]: Well, I’m in the middle of testing a pretty large data migration for storing the emails that are kind of on the back end of Blue Tick. So one of the things that customers have been asking for is the ability to see inside the application the emails that are being sent to customers and also the emails that they’ve received from them and whether those emails were sent by Blue Tick or whether they were sent kind of independently.
And because we have access to the mailboxes we can pull that information and display it. But obviously there’s some historical significance to a lot of those emails. So, if you sign up, let’s say today on Blue Tick and you probably want to be able to see the emails that you sent three months ago, six months ago to that person. So, we’re working on making those available inside of the application itself. And it just involves this massive data migration because it’s got to be done for every single mailbox and for every email that they’ve sent, which is “important.”
Rob [01:25]: Yeah, it’s interesting that when you’re building an app for the first time if you haven’t had tens or 100’s of users or you haven’t built something that has a lot of through put, you underestimate how hard it’s going to be to display this stuff and even store it long term. And just how large these data stores can get and how slow they get to query. So, I think by making this change early you’re probably getting ahead of the game here in terms of not having to do it once you have hundreds of customers and gigs and gigs of data.
Mike [01:53]: Well, we already have gigs and gigs of data to deal with. I mean there’s some where there’s like I was just running some local tests and I had to scale things down and say, okay, only deal with like 16,000 of these things because otherwise I would have had to deal with 250,000 and I’m just like, “No, I don’t really need to do that for just an initial testing.”
But, yeah, there’s just a lot of stuff that needs to go on. And I can’t do it all at once. It’s got to be kind of gradual migration for each mailbox which is kind of a pain in the neck. But it also kind of brings to mind that there are certain types of things where it’s easy to do when nothing is moving. And then if you have like a SaaS application where things are constantly being done or moving around or changing in the background, it’s almost like you’re a heart surgeon and the heart’s still beating and you still have to operate on it.
Rob [02:40]: Yup. Exactly. I mean I think that this is why some apps – I mean at a certain scale you just can’t do this anymore. This is why some apps that don’t add certain features that everyone’s clamoring for because it just becomes impossible to do. You know you can imagine being at, let’s say the scale of MailChimp with massive visiting, sending a billion emails a day or ten billion? I mean it’s like incredible the volume that they’re sending.
And so, while I’m sure people have been asking for automation and other features for years, you just at a certain point can’t do it and maintain the app and the throughput of the volume that you’re trying to do. And so, you have to make some of these decisions early because if you do hit scale, it can become a lot harder to do this down the line.
Mike [03:21]: You could probably do it if you were just saying, “Okay, let me toggle a flag in somebody’s account and allow them to do it.” But you still have to spin up API’s that are specific to that account and cross machines or cross data centers or something like that. And I imagine once you get to the point where you have to worry a lot about the scale and redundancy then it becomes even more challenging. And I can see how some companies would just say, “Yeah, we’re just not going to do that.”
Rob [03:45]: For sure.
Mike [03:46]: So, what’s going on on your end?
Rob [03:47]: Not much. Just hanging out. Nothing new.
Mike [03:49]: Nothing new?
Rob [03:50]: No. Oh man. I mean, I don’t want to underscore the importance in both my career and for Drip. And also the difficulty, the challenge of the last several month in that I haven’t been able to talk about what’s actually been going on with me. And I have two podcasts. I have a blog which I haven’t been updating because there’s nothing relevant that I could write about, because we were in the middle of negotiations for months, five, six months was just discussions with Leadpages. It feels really good both to close the deal because this big wave of stress kind of goes away, I started sleeping again, i started living more of a normal life.
But also, just the ability to just talk about it a little bit in public. And, obviously, I’m under NDA as acquisitions always are. Both sides are under NDA’s about specific terms and stuff. But there is still so much about the thought process and timeline and what went down that, I think, is good to talk about. I’ve always liked to share this kind of stuff because I think it helps other people. And that’s really what we’re going to do today. Kind of dive into probably the most commonly asked questions that I’ve heard since Drip was acquired by Leadpages about what, maybe, two or three weeks ago.
Mike [05:02]: So, for the people who may do exactly what I generally do for podcasts is skip the first 30 or 45 seconds. Setting the stage for them, Drip was recently acquired by Leadpages. So, could you walk us a little bit through kind of what the result of that is? Was it like HitTail where you’re selling it and you’re walking away? Are you sticking around with them? What’s going on? How did that happen?
Rob [05:21]: The fun part about this episode is you know the answer to every question you’re going to ask me, but you have to ask them to get the information.
Mike [05:27]: Yes, I feel like a futurist at this point. I’m going to say something and I know the answer.
Rob [05:31]: Exactly. So, yeah, I mean it’s a good point. This Drip acquisition really is more of a – it is a startup acquisition rather than a “sell your app” kind of thing. So, you know, I sold HitTail last November. And it was just the technology and the revenue on the website and the incoming traffic. And that’s where the value was.
And that is a very, very different kind of sale than what just happened with Drip. I think of it as selling an app versus a startup being acquired, like a fast growing successful startup being acquired, not for parts and not just for the people, which is an aqua-hire,not just for technology, which is selling your app; but the whole package. In my experience and my understanding that is definitely where there’s the most value to the acquirer. Those are the startup acquisitions where the purchase price is maximized because you’re not just taking people or technology. You’re actually taking it as a whole entity.
With a strategic acquisition like this where Leadpages – it’s an obvious fit. It’s obvious that Leadpages has landing pages and they collect emails. And the next step in that process is then to send email to people. They’ve always integrated with third parties and in this case obviously acquiring one like Drip is – it’s a pretty natural fit.
Mike [06:41]: Interestingly enough, that’s one of the pieces of advice that you might give to a single founder or a small startup where they have an existing product and they want to develop or launch a new product. And the question is, “Okay, well, what should we do?” And the answer is, obviously, try to leverage your existing customer base and launch something that is going to be complimentary to them. Or more valuable to them down the road.
So whatever the next step of their sales process is, for example, or more advanced features. And Drip really fits into that with Leadpages because Leadpages captures those emails and then you can use Drip to manage those email addresses after the fact. Now, you don’t have to use Drip but you could at this point.
Rob [07:20]: Yeah, and that’s been a big thing. Clay, who’s CEO of Leadpages, has talked about they’re continuing to integratewith all the other email providers and they want to be fairly agnostic to it so that it’s an open playing field for everyone. But there’s obviously going to be more that’s possible because now that Drip and Leadpages are owned by the same company, we can just do more things. You can do provide queuing and API’s and stuff that can just move more data easily than with a third party.
So that’s the thing. To take a step back, there are really two types of acquisitions. There are financial acquisitions where it’s based purely on numbers. And that’s like if you buy through FE International or you buy on Flippa. Those are the types of acquisitions I’ve been involved in.
And then there are strategic acquisitions and those are the kind where it is a strategic fit with someone’s or a company’s vision and their road map. When you look at Facebook acquiring Instagram, as an example, that was not a financial acquisition. They weren’t buying it for the revenue. They were buying it because it was a strategic fit into where they’re headed. It’s thus worth a lot more. Strategic acquisitions tend to have a much higher purchase price than financial.
Mike [08:26]: So, I guess on the concerns that some people might have, especially some of the customers that you have that are listening to this episode – because I think when you first started out with Drip, you kind of reached into your own network of podcast listeners and people who are in your network – one of their questions might be: what does this mean for me as a customer of Drip?
So, I guess maybe talk a little bit about that, because that’s something that you kind of have to take into consideration when you’re selling the product that you have. Whether it’s an acquisition that you’re just going to completely walk away from or you’re going along with. But you also have to take into account what’s going to happen to your customer base. Because you don’t want to make them angry because suddenly they’re no longer being taken care of. What sorts of thoughts did you have around that? And what sorts of things could they expect?
Rob [09:10]: Yeah. That’s a good question. Probably the first one that comes to most people’s mind. An early thought that I had and an early conversation that came about from it was – and Derek, who’s my co-founder with Drip agreed with this as well – is that I absolutely would not let Drip be acquired and have either the customers or the employees get a raw deal.
There are some startup acquisitions where startup gets acquired and it just gets shut down. I think Microsoft did this with Sunrise, which is a calendaring app. And I think Google does this pretty often, where they buy it for the team, they shut the app down and they integrate the technology into their own product. That, to me, hoses your customers who have invested their time and/or money into you.
There are certain deal breakers when you go into something like this. And it’s good if you know what those are. And so, I spent a lot of time thinking about what would I not let happen. What would not feel right to me. And one of them was if any of our employees lost their jobs through no fault of their own or if suddenly our customers couldn’t use the product. Because a lot of people are invested in this app, time and money, and I didn’t want that to happen. And, luckily, Clay and the Leadpages teams was totally on board with that. The whole point was them acquiring it in order to grow the product itself. They want to add more customers rather than shut it down.
And in order to add more customers, you need the team we have in place. Because even though they have a team, ours is specialized in Drip and we know, we have years of experience working on it and experience in the space. And so, that was something that I thought a lot about early on.
We’re fortunate that we’re in a position where I was approached by many potential acquirers. It wasn’t a few, it wasn’t several, it was many potential acquirers over the course of the past two years. And so, I wasn’t going to sell to someone who was going to do one of my deal breakers, who was going to go against that. And so, it was really cool that Leadpages was on board with that and, specifically, Clay was very supportive of that.
So, that kind of sets the stage of where I was coming from. The point of this acquisition is, I think it’s going to mean we can release more features faster; scale our infrastructure faster; and, even within the first couple days after this acquisition, we made a bunch of improvements to the acquisition in terms of doubling server capacity and doing all the stuff that we didn’t have the money for before. We’re bootstrapped, we’re profitable, but very cash limited as a result of growth. Typically, growing companies don’t have a lot of profit and that’s why companies raise funding is to help them manage this growth and scale and do all that stuff.
And so, it’s almost like being acquired by Leadpages allows us – you can think of it almost as we got funding through this – it’s like this indirect funding round without having to go through the funding rounds and all that stuff. We now have more budget to do interesting things. And there’s a bunch of stuff in the works. I can’t talk about that right now, but there’s a bunch of stuff in the works that we just plain did not have the budget to do.
And so, the goal of this – again, my deal breakers were: can’t hose our customers, can’t hose our employees. And then the goal of it – those are the negatives that I wanted to avoid – and then the upside or the goal of it was let’s grow this thing faster. Let’s build it bigger. Let’s do what large funding and large team can do for a product like ours, even though I personally and Derek as well, didn’t want to go out and raise a round of funding.
Mike [12:28]: So part of the goal of this acquisition was really to allow you to create more features faster and scale the infrastructure and provide a better experience and better product for the customers. That’s kind of what you’re getting at with what they can expect.
Rob [12:38]: That is the goal. And I don’t want to sugar coat it. It’s easy for someone to say, “Oh, we got acquired and everything’s going to be great!” I really do believe that and I wouldn’t have gone through with it if I didn’t, that kind of thing. I’ve done enough of these. I’ve built enough products; I’ve bought enough; I’ve sold enough that it was the opposite of a desperation move. If that makes sense. I genuinely believed the entire time and I still believe that this is – this or getting funding – was probably the right next move for Drip for it to be the best product it could be for our customers.
Mike [13:09]: Couple of things that you mentioned earlier were that there’s different types of acquisitions that can happen where – you mentioned Microsoft as an acquirer for Sunrise and they bought it and then shut it down. I think that there’s different viewpoints for that where a company will come in and they’ll just buy a product or a technology specifically for that one small piece that they want to integrate into a much larger suite of products that they have. And then they stop selling it as an individual product because they want to sell it to the suite and they want to sell it to enterprises.
And it’s interesting that this was much more of a boxed purchase, I’ll say, where they wanted the entire container. They wanted everything in it and they want to say, “Okay, let’s plug this entire block” as opposed to, “Let me just grab this one small piece of it or these ten people over here because that’s what important.” It sounds more like it was, “We want everything.”
Rob [13:53]: Yup. And it kind of makes sense if you think about what they’re up to. Leadpages announced publicly that it was, what 18 months ago or 2 years ago, they raised a big round of funding. It’s on TechCrunch, but I think it was 27 million or 30 million or something. And they said this is for strategic acquisitions. And so, it’s not a surprise that they would buy an email marketing company.
Mike [14:11]: Let’s talk a little bit about the timeline itself. I’m pretty sure you can talk about this because I saw it on Facebook and it wasn’t you that posted it, I don’t think. It was a screenshot of an email that Clay Collins had sent to you and it included the date, which I thought was interesting. So let’s talk a little bit about the timeline because right now it is July 13th of 2016. When was that email sent?
Rob [14:37]: Yeah, Clay’s first email was early June of 2015. So it was 13 months ago.
Mike [14:42]: So, it took 13 months for the acquisition to go through. Now was that 13 months of negotiation? Was it 13 months of legal work? Was it three months of this, six months of that? What does that approximate timeline look like?
Rob [14:45]: Yeah. The cool part about this is from all the research I’ve done and the reading and the talking to founders – I’ve talked to several founders who have been acquired. As soon as this started ramping up that’s where I went, was to try to get myself educated on this process. And the neat part is, my experience here or our experience getting acquired, I think is fairly typical. It tends to take a long time. It’s the dramatic exception to the rule when – again, Facebook buys Instagram for a billion dollars over a weekend – that just never happens. That happens once a year, once a decade. It’s just completely anomalous.
So for you to hear an announcement that Leadpages acquired Drip, everybody probably saw it on Twitter a couple of weeks ago and thought, “Well, that came together fast.” It actually was, again Clay emailing me 13 months ago, we emailed back and forth casually for a couple of weeks and then just kind of nothing happened. It was just radio silence. And then, I think it was in September/October, something else came up where we started talking again. And then it kind of just trailed off. We never got to a point where things got serious.
And then, I think it was November/December, things got serious again. And then we started talking more about some detailed points and how things might look. And you really started getting into the nitty-gritty. And then, eventually, there was another four or five weeks of silence. And so, it wasn’t until really until late January where things ramped up in a way that I would call active negotiations from then on.
So it was probably five/six months of pretty heavy negotiating. And I guess, to put a spin on that, it was more like three to four months of negotiating and then, the way it works is you sign a Letter of Intent. That’s what you’re negotiating upfront. And then you sign the Letter of Intent. And then you have due diligence which can be anywhere from – for companies it’s 45 days to 90 days or 120 days. They could be pretty long. As the seller, you want the shortest due diligence as possible and typically the buyer wants the longer one. But the range for startups our size would probably be 45 to 60 days.
And so, that’s when you get legal involved. It’s less negotiation. There’s still negotiation going on but it’s a lot more of like contract negotiation where you’re not negotiating these high level terms. You’re actually negotiating sentences and paragraphs in contracts. You’re trying to negotiate liability and who absorbs what liability where.
So that gives you an idea of how long this takes. And it seems like how could this possibly take this long? That’s really the question that came to my mind when I would hear these stories about – how can it take six months of active stuff? When I hear people saying it took a year, it’s like, yeah, but the first six months is really not that much time. But how does it take four, five, six months to close a deal? And now I understand.
Imagine you sell your house and there’s stuff going on constantly. There’s contracts going back and forth. And think about how much is standardized in a home sale. How that entire contract from the Realtor’s association is just done and everybody, generally, agrees on it. You don’t go through and read every sentence and red line that contract and go back and forth. Well, that’s what happens with acquisition because there are no standards. Nothing is standard. And so, every sentence and every deal point and every contract is essentially created from scratch. I know they use boilerplate and everything but they’re negotiated back and forth from scratch by the lawyers and the people involved. That’s why this stuff takes a long time.
And it can also take a long time to arrive at – you think about one point is price. And that’s the one that everybody puts on the press release, “It was acquired for this much.” But there are hundreds of other points to negotiate. It’s like, does the team stay on? Does the team have to move? How long do the founders have to stay on if at all? Well, what about stock options? Is the price paid all cash? Is there stock involved? What happens to different assets? Is it an asset-only acquisition? And it it…? On and on and on, and all of these things. That’s what takes the time, is negotiating and then once you’ve negotiated and the founders on both sides have shaken hands, it’s like, “Alright, those are the terms.” Now the lawyers get to put that into writing and that literally takes another couple of months just to sort that out.
Mike [18:48]: I remember talking to my attorney at one point about a couple of different contracts that we were working on and I distinctly remember he looked at one particular line. He was like, “That’s interesting. I’d never agree to that but let me put that in as boilerplate in some of my other contracts.” And it’s just interesting that because there aren’t really any standards to those agreements people are just kind of going on what other Edge cases or exceptions they’ve seen. And that’s really where a lot of these contracts come from, it’s like the Edge cases and the exceptions and the ways that different customers or – I don’t want to call them opponents – but people on the other end of the contract agreements that they have worked on have gotten screwed. And it’s just a matter of trying to figure out how can you get the best deal for the person who you’re working for and minimize the downside for it?
Rob [19:32]: Right. As well as be reasonable because there are certain things that you’ll throw in a contract and, in a perfect world, that would remove all liability and risk from you. And the other side would be insane to accept that. And so, at a certain point, both sides accept some time of risk, some type of liability. I mean, I’ll throw some crazy things like, what if we get into this and suddenly Rob gets killed, Rob dies from something? What does that mean for this whole thing? What does it mean for the deal and subsequent payment and all the terms of everything? It creates complexity and you have to sit down and think about that and talk back and forth. What does that mean for my family? That’s the kind of thing that lawyers have to think about. They’re anomalous. They’re not likely to happen. But if they do it sucks if you don’t have something in place to deal with that.
One other thing I want to add is throughout the timeline – and this probably a topic I will dive more into with Sherry over on ZenFounder – is I’m making it out like, “Oh yeah, it was a year and then five months of that was hard negotiation or whatever.” It was one of the most stressful things I’ve ever done. You’ll probably hear this over and over from people who were acquired. It was extremely stressful. And at the beginning I was able to continue to do my day to day work and run the company and do all that. Towards the end, it was pretty much my full time job. It was between 30 and 40 hours a week of what I was dealing with.
It’s really nice, to be honest, that I have the team that I do because those [?] were able to keep the company running. I just didn’t have the focus to push things forward and it was cool to see things still being pushed forward even though I was involved in a lot of phone calls; a lot of meetings; and a lot of getting documentation for the acquisition.
Mike [21:09]: One of the pieces of feedback that I had heard actually at MicroConf was there were several people who would listen to your talk at this most recently MicroConf back in April that they saw the talk and they said, “Oh, I’m a little disappointed because I’ve been watching Rob’s talks over the years and every single years he’s talked about the numbers and the snapshot of where he was at. And this year he didn’t.” Is that why?
Rob [21:33]: It’s interesting. It wasn’t why. I suppose it was probably good that I didn’t share revenue. But that was not the reason. The reason was – there were two things. I don’t like talking about revenue specifically. I don’t like sharing it. I feel like maybe that’s a whole other podcast. But the transparency thing can cause problems. And the people who are all into the transparency, I think you may want to go listen to the episode that I recorded with Josh Pigford a while back and how transparency came back to bite him in the butt. And it can bite you in butt in a lot of ways. One it can bring in competition who can much more easily replicate what you’re doing. Two, it can result in you not raising funding, VC’s – I’m not saying all of this are like this – but I know that some funders and some VC’s they don’t want all your metrics public. And it can impact acquisitions. Some acquirers do not want all that history up online.
And so, those are the reasons, to be honest. The reason for me was because stuff that I’ve released in the past couple years, intimate details of Drip has been – how do I say this? It has been commandeered and used to replicate what we’ve done and compete with us. And that had never happened at this scale. And so when I had HitTail or when I had these little businesses, DotNetInvoice, if people competed with me it didn’t really make that much of a difference. At the scale of Drip where we have ten people working on it and I’m paying people’s mortgages, the stakes are much higher.
And as more things started to come about that it was obvious had been used based on things I’ve been teaching and intimate details that I had exposed, I made a decision to do that less and to be a little more guarded about it. And I had long conversations with folks who are respected in the startup space and asked them, “Hey, why don’t you share this?” And they had similar stories of, yeah, I did that and then this happened.
It can happen to you eventually. That’s not a reason not to do it but it was my reason not to do it. I had hit the point where it made more sense not to share the revenue than it did to share it. And, in fact, at MicroConf I did give kind of a revenue range and said how many employees. And you can tend to figure that stuff out anyways. But, no, I didn’t give the big revenue graph. And there was definitely a thought process behind it.
Since I didn’t, like I said, I actually think that’s probably better in terms of the acquisition. It didn’t complicate things, but it probably wasn’t a major factor. I don’t remember it being a major factor when I put my talk together.
Mike [23:46]: So let’s move on a little bit to the thought process behind selling Drip. Because, obviously, there’s a lot of consideration that you need to put into the different components whether the employees are going to stay on or not; whether they’re going to move with the company. I think one of the biggest considerations is your family. Because you said that this was probably the most stressful thing that you have ever gone through. And I would imagine that it’s probably more stressful than selling your house. Because selling your house, hopefully, would only take a couple of months and once you find a buyer you can generally get those things straightened out in a month or two.
But with selling your company, that was 13 months of back and forth and ongoing stuff and you probably weren’t sleeping well near the end. That’s got to have some kind of an impact on your family. And in addition to that, there’s considerations for your family afterwards. So, can you talk a little bit about what role your family played in the acquisition and whether there were active discussions about it. Was there a lot, a little bit? Were they involved early, late? Talk a little bit about some of those things.
Rob [24:43]: Yeah, sure. There’s a lot to consider there. It was stressful and it definitely made me less pleasant to be around, as stress will do to most people. And that was a bummer. I think Sherry probably has a lot to say about that. I mean, if you’ve ever been through a really stressful time for an extended period of time, it changes the way you feel about the world and about yourself and about people around you. And it just puts you in a bad place. You can be in a bad place mood or whatever all the time. I don’t feel like it was that constant until closer to the end where things just really ramp up and they get really serious. It was something that I knew was a season.
Some people, when they’re just growing their startup, that’s how their life is. And they’re stressed all the time just building the company. I would not sacrifice myself for my company that way. I know founders personally who put on a lot of weight, as an example, because you’re so stressed and just eating like crap and they’re working all the time and they don’t have time for exercise. I know founders who’ve had divorces due to funding their company. I know founders who developed health problems and ulcers and that kind of stuff. And that has never been something I’ve been willing to sacrifice in order to grow a company.
In order to sell a company, I think that you are going to need to undergo a tremendous amount of stress. I think if you don’t undergo a large amount of stress, then you probably didn’t negotiate hard enough, is kind of how I feel. But I knew that there was a timeline to it. That was the thing. I knew that it would have to end within a few months. It did take longer than I had hoped but it did eventually close. And I had to be honest, the weight that lifted off my shoulders when that happened was tremendous. It wasn’t the same day. I remember it being surreal and just being totally in a daze for a few days. But the following week, as we started ramping things and I realized,boy, all that’s done and I don’t have to think about that anymore, my demeanor and my whole outlook changed. And I became back to normal is how I think about it.
So, there were definitely family considerations there. I had a lot of conversations – I had just a few conversations with Sherry early on and then as it got later and later and more stuff was being decided, especially – There was a decision at a certain point and like is it a smart decision to move to Minneapolis, which is where Leadpages is based. So Drips in Fresno, Leadpages in Minneapolis. There was genuinely a conversation of what is best for the long term play out of this deal. What makes Drip a success and what makes this acquisition a success for Leadpages. And so Sherry and I had a lot of conversation about that.
It’s funny, I think some people go into negotiations and they think, “I want to get everything for me, as much as I can. And I don’t care about the other party.” And I don’t go into negotiations like that. Maybe if you’re negotiating for a car, then yes. You just want the highest price, they want the lowest and you go. And you’re never going to see the person again. You’re never going to work with them again. In an acquisition like this where you know that you’re going to be working with that team and you respect that team and you respect the person on the other end, it’s less about maximizing everything in your outcome and it’s more about, in my opinion, maximizing the deal. Maximizing the benefit of this for everyone. And obviously you have your certain minimums, you probably have a minimum price. You probably have some minimum deal breaker terms – I won’t shut the product down, I won’t let the product have crazy features added to it, I won’t let my employees be fired.
But aside from that, it’s like the decisions of should we move and should the employees move were things of what’s best for the deal. And in the end we decided to move and the rest of the company totally had a choice. None of our employees had to move to Minneapolis and everyone was brought on as an employee of Leadpages. Some folks have decided to stay in Fresno or where they are, because we have remote employees. We have a guy in the Bay Area and a guy in New York. And then other folks made the decision that they wanted to move to Minneapolis. They ‘A’ thought Minneapolis was cool or ‘B’ thought being at Leadpages HQ would be a cool experience.
And so to go back to your original question, yeah, the conversations with Sherry were super helpful. Derek as well. Being my co-founder he and I talked a lot about deal terms. I talked a lot with FE International. David from FE was the broker on my side and he gave Derek and I from the broker’s perspective because he had been in investment banking and had done larger deals and so he had a lot of experience with that.
And then talking with Sherry was more about the mental side and it was about stuff that impacted the family because certain things did and certain things didn’t. Certain parts of the deal did and didn’t impact the family. And so, she was definitely helpful during that time for helping me keep a sanity check on things. Because you get so far into this deal and you get a certain lens you’re viewing everything through and it’s helpful to come out of a deal and then have a conversation and say, “Look, this is the situation. They’re asking for this. This is what I think.” And for her to say, “Oh, yeah, that’s totally reasonable.” Or, “No you’re way off base.” It was helpful.
Mike [29:16]: You mentioned that you’re going to be moving to Minneapolis and some of the members of the team had the option to also move. I would imagine that every single piece of that was probably negotiable. Because when you’re talking about an acquisition because there aren’t really standard terms for that stuff, some of that stuff probably could have been negotiated upfront for people or you probably could have gone back to them and asked them, “Hey, would this be okay with you?” But also, you’re looking at it from a holistic perspective of what’s best for the deal; what’s going to be best for the employees; and what’s going to be best for the company moving forward to be able to still do kind of what its core mission was. But the core question there is really is all of that stuff generally negotiable or is it something that you think that other companies might come in and say, “Hey, these are our terms, kind of take them or leave them”?
Rob [30:01]: Yeah, I think it’s going to depend on the acquirer and their goals. To answer your question, I think everything is negotiable and I just think that there are going to be certain deal breakers that certain acquirers have. Where maybe they say, “It is an absolute deal breaker if everyone does not move to our headquarters.” And then, as the founder, you have to decide is that something I’m willing to deal with? Am I willing to kind of force my employees to move and if they don’t then essentially they get laid off? That wasn’t something Derek and I were willing to do for sure. And the cool part, Leadpages never even asked because that wasn’t in their best interests either.
And that was a cool thing. Again, if you’re in a financial acquisition there is some alignment there but I think with a strategic there can be a lot more alignment and our goals for growing Drip and making it the best marketing automation, lightweight marketing automation app was in line. And we both have that goal still. A lot of that wasn’t hard negotiation. It was like, “Hey here’s what I think would be the best. The employees have the choice and it they want to come they can and if they can’t – some people just can’t do it due to family situations or whatever – then they don’t.”
That was a super easy point. It wasn’t even a back and forth because it just kind of was a no-brainer for keeping the company together. We already have remote people. It just made sense. But I can imagine getting into negotiations and having that be a complete deal breaker with the acquirer. And you’d have to ask yourself the question of are you willing to do that. And, again, for us, that would have been a deal breaker. That would have been an okay, we can’t do this deal. And so, if you have the luxury of having multiple acquirers who’ve approached you or if you’re talking to multiple at once then you can pick and choose the deal that works best for you.
And that’s really the position you want to get yourself into, is where there are multiple people because then you can stick to the terms that are most important for you.
Mike [31:48]: As you were talking through there, one of the things that came to mind was, I saw a talk by Eric Sink back in, I don’t know, it was 2011 or 2012 at the Business of Software. And he had talked about how sold his company, Teamprise, to Microsoft. And there’s a lot of parallels that I can draw from my mind from his talk to what it sounds like your experience was. It doesn’t sound like there was anything necessarily out of the ordinary.
Rob [32:12]: Yup. There’s a good podcast I’d recommend. If you are thinking about selling. There’s a good book called ‘Built to Sell,’ get that on audiobook it’s a quick listen. And then there’s Built to Sell radio which is where the guy who wrote that book interviews folks who’ve been acquired. And so there’s a bunch of stories of these real acquisitions. These are not the Instagrams and the billion-dollar blah blahs that are on the front page of Inc. Magazine or whatever. These are the more realistic ones where it’s a manufacturing company or retail company or service company or a tech company – there are tech companies in there as well. And those stories will really level set you for what’s more realistic. And in listening to those, that was also my experience, that Eric Sink’s discussion and then that our acquisition here of Drip was fairly typical in terms of the things that you have to sort out.
Mike [32:57]: So, I think I have probably two more questions for you. The first one is that you had mentioned that you’re going to be moving to Minneapolis to essentially work for Leadpages as part of this. So, what you said before was, the entire team is staying on and you’re sticking around with Leadpages. What sort of career considerations does that have for you? How do you justify going to work for somebody else as an employee after having been an entrepreneur for what, 10/15 years?
Rob [33:22]: Yeah, that’s a really good question actually. And it’s certainly one that I thought about. The one plus of having all this stuff take so long is you just have a lot of time to sit and reflect. You have a lot of time to think about what’s important to you and what you really want out of the acquisition and then out of post-acquisition. Because, that’s the thing, it doesn’t end at acquisition unless you walk away. And most founders do not walk away right at the end, either because they are required to stick around or because they want to stick around. Because, again, for the success of your product, there has to be some kind of hand off time frame. Can you imagine if the day that it closed, suddenly Rob and/or Rob and Derek were just not around Drip anymore? How would that work? I would have serious fears that things could go off the rails pretty easily. Like the wheels could fall off the cart because the two people who’ve been there since the start are suddenly gone.
Anyways, that’s how I think about it. I think for the long terms success of this, both Derek and I have to be around at a minimum, we’d have to be around for hand-off. And it’s not to say that no one else can run Drip better than us. Because certainly there are people who could take the reins from us at any time and be able to grow it. But the idea of the acquisition is probably shocking to some customers anyways and to hear that the founders also walked away would be a little jarring.
But I think, coming back to your question, which was how can I go work for someone else? The interesting thing – I talked to Clay about this, and I gave a lot of thought to it. Derek and I also went and visited Minneapolis and checked out Leadpages and the first thing is Leadpages is a pretty cool company to work for. And I’m not just saying that because I work there or because I’m going to be trying to hire engineers to work for us at Leadpages. But it’s just a fun environment. It’s not the crappy environments that I used to work at. You work for certain companies and it’s not very fun. You’re there either for the paycheck or the pension or whatever.
It was pretty obvious to me from our visit and from folks that I talked to because I knew folks who had worked there – who work there currently or had worked there – it’s a pretty fun company to work for. And so I figured company-wise I’ll be fine because I don’t have a problem playing well with others. I just never like working for companies that had a lot of red tape and, I don’t know, bureaucracy and politics and that kind of stuff.
And based on my conversation – you know, a lot of stuff comes from founder down or from CEO down – and in my conversations with Clay it was pretty obvious he wants to run a lean organization. I like lean, I like moving fast even though their company, now with the acquisition of Drip, they’re 180 employees, they operate like a smaller company. There’s way to stay lean and to keep moving fast because that’s the fun part. And so, that’s why where I saw it as a company-wide thing. In addition, I’ll continue to work with Derek and my whole team, who I really like. I mean it’s the best team I’ve ever worked with. And I’m able to work with Clay and, then there’s folks on the inside there. And everybody that I met, I really liked. And Derek felt the same way. We’d come back and I’d be like, “We met two or three people today and they were awesome. I would have no problems working with them.”
That’s always been my deal of working with people I don’t like. I don’t do very well with that. Working with people who aren’t on the same trajectory or have the same ferocity of getting things done. That always bothered me. And just the more people we met it was like, “Oh yeah, I cantotally work with this.” The other cool thing that wound up out of this was it wasn’t like Drip was going to be swallowed out and we were going to be distributed throughout the company where suddenly our engineers will report to the head of Leadpages engineering and our support people report to the head of Leadpages support. We got to keep the team together in essence, even though obviously we all work for Leadpages I still get to work very closely with the team.
And so, in actuality, not very much is changing here. Like me working for someone else, you imagine having this slave driving boss that’s like – I think Clay and I have this mutual feeling of we view each other more as colleagues. Just like Derek and I. I hired Derek as a contractor and then as a W-2 employee and then he became co-founder of Drip. But I’ve always viewed him as a colleague rather than some type of employee. And actually everyone on my team, if you ever hear me talk about the Drip team, when I introduce them at MicroConf or whatever, I always say, “Anna and I work together.” “Zach and I work on growth for Drip.” You’ll never hear me say, “Zach’s my employee” or “Zach works for me.” It’s just not how I think about things. I know in bigger organizations you need hierarchy and you need that stuff. That’s not how I personally think about things.
And so the cool part is it seems like Clay does as well. And so, all of our conversations it’s never been I’m going to be reporting to some backbreaking boss who’s making decisions that I don’t agree with. These are all things that have happened to me and all the reasons that I didn’t like working for other people. I like to frame questions. I realize this, I try not to be dogmatic about stuff. So I don’t say, “You should always bootstrap. You should never take funding. You should never sell your company.” That’s just not the way I think. And when people say that it bothers me because I don’t believe that’s the case.
I like to ask myself instead, I like to re-frame it, under what circumstances does taking funding make a lot of sense? Under what circumstances would selling your company make sense? Under what circumstances would working for another company make sense? And the answer may be never. There’s no circumstance. But I believe that there are circumstances where maybe you’re autonomous and you really believe that long term it’s the best thing for your employees and your customers. And you believe that you can be part of something really cool. And maybe there are other factors. For you maybe it’s a big salary. Maybe someone throws a bunch of money at you and that makes sense. Or they give you a ton of stock. I’m just throwing things out here. Any of these could be factors, but I think instead of thinking, “Boy, I’m an entrepreneur. I could never work for another company.” It’s like really? What if your boss was awesome and everybody you worked with was really cool and you didn’t hate the job and you got all these perks and the safety of this and that and healthcare and 401K and things you haven’t had for a long time?” I don’t know. There’s other factors into it and so I asked myself these questions. And I sat there in front of my notebook and I wrote all this stuff down. And as it turns out, it just made a lot of sense.
Mike [39:05]: Well, a lot of what you just said there kind of leads me to my last questions which is you probably had a choice as to whether or not to sell the company or to go out and raise funding. And, obviously, being in a position where you were profitable and you were growing the company, you kind of had that option. It wasn’t like your back was against a wall and you had no other choice. You actively chose to pursue the path of selling the business versus going out and raising funding. Why did you do that?
Rob [39:25]: That’s a good question. You are absolutely correct. I mean, aside from the cold emails that I was getting I’ll say maybe on a weekly basis – I don’t know if it’s that often but it’s pretty frequent – from venture capitalists and people looking to invest in equity funds and that kind of stuff. I have a network of people who are into startups and have money. I genuinely believe I could have raised an angel round or a seed round very quickly without a lot of hassle. And so that was something that we evaluated. Derek and I had conversations about that. Because, again, I never say you should never take funding. There are times when taking funding is a really good idea. If you’re growing fast and you know that putting a dollar in here gives you $2 or $3 on the other end and you want to grow and get big, why would you not? There are times when it makes sense.
And so, we evaluated that. And that was not off the table. We may have raised a round in the next six months, twelve months or whatever. There are some things to think about. It’s interesting, once you raise funding, you’re funding valuation is going to be tend to be higher than your acquisition valuation. So let’s just say you could raise funding at a $20 million valuation. You’re probably not going to be able to get acquired at $20 million today. It would be anomalous. It’s going to tend to be – I don’t know the numbers- probably half as much or a third as much. People actually writing you cash for a company versus giving you money based on funding valuations, they’re very different.
So, let’s say you did raise at a $20 million valuation. You can’t sell that company today for $20 million because the funding valuations are really high historically speaking. So as a result, once you take that funding you now have to grow the company to reach that valuation in order for your investors to even break even on their investment. So, if you raise funding you are signing up for three, five, seven years of just hammering on and growth and definitely growing headcount because that’s going to be a big part of why you’re raising the funding.
And so that was a question that Derek and I kept asking ourselves. Do we want to go down that road? Do we want to sit here and plan to go three, five, seven more years and to grow the company because we’re at ten people? On the trajectory we’re at, we’re going to be at 20 people on then 30 people. It’s kind of the natural way you have to go. In addition, there are situations where you do that. You raise that funding. You don’t take funding off the table. You don’t put that in your personal bank account. That goes into the business to grow it. So then you can go that three, five, seven years and if you get killed, if you go out of business, if you get acqua-hired at the end – because some acquisitions really are just a failing company and you get pennies on the dollar- if any of those things happen, you’ve spent many years of your life and basically walked away with almost nothing. And you could spend all that time grow a big business and walk away with literally nothing or hundreds of thousands of dollars which would completely not be worth all that effort.
So there is an advantage, if you get acquired at the price you want, essentially, that makes sense and the terms you want because price is just one of them; and you could also kind of have that funding. Like I explained earlier, we have the advantages of having these extra resources but there was also a fit for us in terms of the terms. And we are able to take money off the table. I actually want to quote Jason Cohen here, who I’ve long respected. He wrote a post called ‘Rich Versus King in the Real World: Why I Sold My Company’. And there’s a quote from it that I think is fascinating. It’s a really good post and it impacted me. He wrote it seven years ago, it was 2009. And just to add a little bit of context, to be king is to kind of run your own company forever and be king of the company. To be rich is to sell it and have money to live for the rest of your life, in essence.
And he says, “See, it’s good to be king but what do you do when you’re at Trudy’s North Star TexMex restaurant tucking into a chili relleno and the guy across the table looks you in the eye and offers you enough money that you never have to work again.” And it’s an interesting thing to think about. There are many paths here. And there are a lot considerations. And you’re going to have a lot of time to think about these things if whether from now until you get acquired or even if you’re in the acquisition process. And that’s probably a question that Jason Cohen just asked that you’re going to wind up asking yourself someday.
Mike [43:18]: I actually remember talking to Jason Cohen at a MicroConf over dinner once and he had talked a little bit about that. Because I told him, “Wow,” because he had mentioned that particular quote in his Business in Software talk. And he said that he had, basically, personal experience with going through that and he knew somebody who said, “Well, let me hang onto my company a little bit longer and grow it a little bit more.” And six months, twelve months later they were completely out of business and were left with completely nothing because they had chosen to go that path.
And I could see that happening if you decided to go get VC funding or angel investment or additional funding of any kind and then you grow it or something happens to the economy and everything just goes out the window. And then you’re left with nothing versus the situation he was in where I’m going to “take the money and run” but it was more of a calculated decision to, essentially, put himself in a situation where he wouldn’t have to worry about money in the future. And there’s really only so many opportunities that each person’s going to have to do that.
Rob [44:18]: That’s right. There are definitely limited opportunities to be able to do it. And the interesting thing is – I’m not even talking about, let’s say maybe you don’t run your company completely into the ground or you don’t get swiped by a competitor and go to zero. What if public SaaS valuations, as an example, they drop 57% earlier this year? There’s a Tom Tunguz article talking about public SaaS valuations and that does impact that ripples all up the chain. Because then venture capitalist’s valuation goes down, then acquisition values go down. And so, what it just that happens? Because right now there’s pretty frothy, there’s talk of bubble, there’s all that stuff.
I’m not saying there is or isn’t but per your own judgment what if we are hitting peak SaaS and things are going to come down on the other side and you can sell for a great multiple and get the terms you want? There’s something to be said for the bird in the hand. What if even broader? I’ve lived through several recessions. I remember the recession of ’93, it was a real estate recession. There was 2000, the dot com bust, 2008 housing bust. It’s 2016.
Again, I’m not saying that something’s coming here in the next six months or a year, but we do travel in cycles. The economy is a cyclical thing and we will have another recession. We will have one. Period. It’s just a fact. The timing is what’s in question. But for you to think that you can continue growing your company forever like it’s growing today, I believe is foolish logic. Because you are going to hit – let’s say a recession hits us sometime in the next three years. Those recessions can take a long time to pull out of.
So, again, you just have to ask yourself are you in this for the long haul? I did hear stories of several founders who didn’t sell – they got an offer, they didn’t sell, they decided to grow it – and then then they sold later but at half the price. So it wasn’t that they got nothing but they definitely felt like they had run their business over the top. And, again, I’m not making a comment on Drip. I don’t think it’s gone over the top. I actually believe that we’re going to – and I’ve already seen it – stuff’s starting to accelerate and everything’s continuing to go up and to the right. But I think this is something that the people don’t really think enough about in our space.
People get the vision of this founder who just goes and starts this and they’re just all about not selling their company. And so they look at Mark Zuckerberg. He started and never sold but it’s like, “Yeah but he made buckets of money from it. And he’s set for life, so he doesn’t have to worry about that.” And even like, let’s say Basecamp – formerly 37signals. They’re often brought up as an example of a company that they bootstrapped it and then they just run it forever. There are very few companies like that, by the way, that either don’t get really big, don’t get killed or get acquired. And Basecamp’s one of the few examples that I can think of of a company that’s not just on autopilot. Not some SaaS app someone has sitting on the side but an actual company with people working on it. It exists but it’s rare in a frothy space, I’ll add as well. Because if you’re in a niche, I think of like Moraware software. They are profitable in steady state but they’re in a very small niche and they kind of own the whole thing and it’s different than being an email marketing company where there’s 500 of them.
If you think of Basecamp as the counter example, even them, they got their big take home money when Bezos invested in them. He wrote a check, and I think it’s estimated – I don’t know if it’s public – but it was like $10 million or $20 million. And DHH said on an interview a while back, that was when he got his eff you money in essence. And so for them, to stick on, that makes sense. They were able to take that money off the table. And so they have different concerns then you or I, where you’re sitting there thinking, “I this fails, I’m back to square zero. I have to start something completely from scratch again after all this work.”
And it is, I think, a real concern that the folks should at least keep in mind. I’m not saying you should always sell if that happens or the economy’s going to hell in a hand basket or any of that stuff. But you have to ask yourself these questions, I think. And I don’t think they’re asked enough kind of in the mainstream press. And I think people have this romantic view that you’re going to keep your company forever or that everyone should be in it forever and I don’t think that’s the right way to think about this. I think there’s more realities that need to play into this.
In terms of Jason Cohen’s thing, he talked in that post also about he has enough money to pay for his kids college, to never have to work again. For everybody to be financially secure and like, that’s a good feeling.
Mike [48:19]: That’s the ability to buy your freedom, so to speak. Eventually, the longer time goes on, the more you’re rolling the dice. And, just like Vegas, eventually a house wins. Eventually, you’ll get hit by a bus or you just grow old and you’re not able to effectively run the business anymore. You just don’t want to or the economy goes down – there’s lots of things that can happen. So it’s a matter of risk versus reward. And when do you want to take the money off the table.
Rob [48:42]: Right. And some people do. MailChimps is an example of a company that just kept going. They never raised funding and they’re huge and they’re awesome. I really like Ben Chestnut. I have a lot of respect for him, the founder. And he has stuck with it for long term and they have seen all the recessions. Well, I guess they started in 2007 – so they saw the big 2008, 2009 dip and they’ll weather it through and they’ll be fine. And Ben will probably run that company until he retires. So there are going to be some exceptions to that. But I guess, from what I’ve seen, those are the rare ones. And he was able to – they got profitable. So, obviously, Ben Chestnut, as an example of probably doing really well for himself.
Mike [49:15]: But as you said, that’s an example of an exception and it’s not necessarily the general case rule. And I think that that’s something that people need to pay attention to when considering the risk versus reward for selling the business and taking that money off the table and setting up yourself and your family for the financial freedom. That’s part of why entrepreneurs do what they do. They want to build something for themselves and essentially profit from it. And if you don’t make the decision to do that at some point then what was the point?
Rob [49:44]: Yeah, there’s a lot to be said of that. A closing thought for me is, there’s a lot of considerations if you’re even going to evaluate this as an option. And I think the question to keep in mind is what are your true deal breakers. Not dogmatic stuff you’ve heard or you think always/never. What really are your deal breakers? And then, what is the ideal outcome? And if you can get pretty close to that ideal outcome where the terms of the deal make sense and you wind up really feeling positive about it at the end, I think that’s super important.
And I do. I guess, I’ll summarize by saying it’s been about two weeks I think since the deal closed. And I can say in all honesty, it has been really fun. I’m meeting a lot of cool people. Starting to just get work done, getting things done really quick. We’re ramping up hiring. We’re doing all the things that were harder to do as we were trudging along and I just feel like I’m excited. I’m optimistic about the future and I have a sense of personal calm that I haven’t felt in a long time. Because, of course, going through the acquisition it was – I wasn’t calm for even a few minutes at a time during that.
And so, I think that’s what I would advise someone, don’t take what the press has shown you. Try to be realistic about it and ask yourself what are your deal breakers and what are you really looking for out of all of this.
Mike [50:59]: Well, Rob, thanks for sharing the experience with us. There’re certain things that you can’t talk about but I think that everybody really appreciates the things that you have been able to talk about and the general process and things that you’ve learned going through that.
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