How i sold my company for $25 MILLION with sharon gillenwater | Startup Guidance

Summary

Welcome to the podcast! In this episode, we dive into Sharon Grewal's entrepreneurial journey and her path to startup success. Sharon shares her early influences, including her admiration for her working mother, and how her background in journalism led to a successful transition into the startup world. She discusses the advantages and challenges of corporate hiring and startup growth, offering valuable insights and lessons for new entrepreneurs.Sharon highlights the rise of entrepreneurship, the evolving landscape of venture capital, and the importance of understanding founder exits. We get an exclusive look at her book, "The Empathetic Entrepreneur," and the privilege of doing what you love.

Takeaways

1. Early influences and experiences can shape an individual's career path.
2. Working at a startup offers unique opportunities for growth and impact.
3. Skills gained from unrelated jobs can be valuable in entrepreneurship.
4. Understanding the dynamics of venture capital and founder exits is crucial for entrepreneurs.
5. The rise of entrepreneurship is influenced by factors such as technology and access to resources.
6. Doing what you love can be a privilege, but it is also possible to find fulfillment outside of work.
7. Selling a company is a structured process that involves creating a marketing deck, reaching out to potential buyers, and conducting due diligence.
8. Bootstrappers should cultivate relationships with potential customers, offer free high-value advice, and consider custom projects to win early champions.

Chapters

00:00 Trailer
01:20 Sharing Journey
07:35 Lessons from Working as a Serving
09:12 The Rise of Entrepreneurship
24:02 The Empathetic Entrepreneur Book
28:08 Privilege vs Right to Do What You Love
30:15 Thought Process Behind Selling the Company
37:55 Understanding Private Equity and M&A Bankers
41:20 Types of Businesses That Can Be Sold
45:00 Deal Structuring and Negotiation
52:30 Advice for Bootstrappers
57:55 Ritual Time
59:40 Conclusion

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Transcript

Mudassir (00:01.326)
Okay, please do a clap for me Sharon.

Awesome. It's not a gimmick. It's a trick, actually. It's a media production tip. So the moment you clap, and the moment the sound produces, it's produce a wave, like huge wave. So it helps us in syncing audio and video in like a second. Otherwise, take 30 minutes to sync. Yeah. So it's just a tip. Anyhow, so we're rolling live now. Hey, Sharon. OK, cool? Awesome.

Sharon G (00:14.52)
you

Sharon G (00:22.072)
Oh great. Good. Okay.

Sharon G (00:29.312)
Okay.

Yep.

Mudassir (00:34.414)
Hey Sharon, welcome to the show. How are you doing today?

Sharon G (00:36.44)
Thank you so much. I'm doing great.

Mudassir (00:40.558)
Thank you so much for the time. I appreciate that. Well, you blew up on TikTok and all of these things, so you're becoming that influencer slash celebrity, whatever you want to call that. But I want to start us off with the very early days of Sharon, the one that most people don't know. And the question that I want to ask you is, what's the earliest context you have of your life? And how did you end up becoming a mega, mega entrepreneur?

Sharon G (01:11.928)
Well, the earliest context of my life. Well, I can tell you that when I was a child, my mother had a career and I was one of the few kids in my class who had a working mom. And I used to really admire what she'd wear to work and she would wear cute outfits and heels and...

costume jewelry and sometimes even wigs. And so I was fascinated by, you know, watching her get ready for work and heading off to this life that I didn't know much about. And, you know, that was something unique in my friend's circle because nobody's mother worked. So that was the first thing I remember about the world of work and a career. She didn't go to college, but she...

in the 60s to do computer programming and operating with those punch cards, you know, because at that time computer work was considered women's work, clerical work. And so she got hired by the US Navy as a civilian to do that kind of work and they saw her potential and so they sent her to Los Angeles to be trained by IBM.

Mudassir (02:27.47)
you

Sharon G (02:39.544)
So while she didn't have a college education, she got trained by the pioneer in both business and personal computing. And so that's my earliest memory of being a woman in the workforce. And I had a few jobs in journalism after college. I was specializing in writing and content. And...

Mudassir (02:42.83)
you

Mudassir (02:49.568)
you

Mudassir (02:57.806)
you

Mudassir (03:07.68)
you

Sharon G (03:08.12)
You don't make a lot of money in that business. And so I went back to grad school, went to grad school, and I moved to San Francisco and was exposed to the world of startups and I fell in love with it. I thought I wanted to be a big company corporate person. I tried to get a job at Gap or Williams Sonoma, Levi's, all the consumer companies here in the Bay Area.

Mudassir (03:25.792)
you

Sharon G (03:36.472)
But I just couldn't seem to get past the HR screening at any of those places. And I think it was because I just was too out of the box for them. And it was a blessing to not get hired because that's when I went to work for a startup. And I just loved it. I loved wearing all the different hats. I loved having a big impact at a small company. And...

Although I went on to consult for some of the biggest technology companies in the world, I always loved the small company vibe, just the ability to make a decision and implement that decision, implement that right away is something that I really enjoy, and to see the results or maybe.

see that there aren't any results and then you move on and try something else. The speed, the velocity is really appealing to me.

Mudassir (04:38.83)
Yeah, it's a very good description of the startup world. It's just like you try so many things at such a high speed and you just get so much out of that. Why do you think you would never have fit for those big companies?

Sharon G (04:52.344)
I was just so scrappy and would take risks that, and they don't really like that at big companies or it's a red flag or something. I remember I interviewed at Gap corporate.

And my husband, we had just gotten married and he was a graphic designer. He was a print designer who made the jump to digital successfully. And he was also a hot sauce collector. And so he made, you know, took a hot sauce and we put a label on it that he designed that was all about me and Gap, you know. And what I was so proud of,

is great and I left it behind after my interview and when I pulled it out, the woman from HR, her eyes just got huge and it never occurred to me that misappropriating the Gaps logo on a hot sauce label would be my big strike against me. I thought it was clever. She was pretty horrified and things like that are not appreciated typically at big corporations.

Mudassir (06:07.374)
You

Sharon G (06:17.016)
And also, you know, this is where my kind of working class background comes into play. My dad was a blue collar guy. He worked for an airline. When I was in high school and college, I needed to make money, you know? And so how do you make the most amount of money quickly? You work as a waitress, as a server, you know? So I worked as a server.

in different restaurants for quite a few years during college and actually after college. And Gap and Williams Sonoma and Levi's, they want to see people who were working in retail. You know, they want to see people who worked at one of their stores or some retail store while they were in high school and college. And so I didn't realize that was going to be a strike against me. If I had gone in and I had worked at Gap,

for a couple years, that would have been a huge advantage. And a lot of people know that and understand that, and I didn't. I just needed to make the most amount of money possible. So working in food service was the best choice for me, or so I thought. But then I saw, okay, maybe that wasn't the best decision for the long -term career plan.

Mudassir (07:41.582)
Okay, okay a very dumb question I want to ask but I don't want to ask you what do you learn you know serving tables? What do you learn there?

Sharon G (07:51.416)
You know, that might be, waiting tables at a busy restaurant is a great preparation for being a founder because you've got, you know, six tables, your food is backed up, your orders are backed up, you've got drinks waiting at the bar, your entrees are coming out before your appetizers.

You go to get the chowder and the cauldron is empty, so you have to wait for more. It's just everything going on at once and many things going wrong and it's triage. And you've got, you know, unhappy customers, drunk customers, people who try to skip out without paying and all this is happening simultaneously. So I really did get used to being just

Mudassir (08:33.39)
Yeah.

Sharon G (08:51.314)
so busy that time just evaporates during your shift. And you don't work an eight hour shift, you might work a three or four hour shift, but it is just a complete onslaught for that three or four hours. And it gives you a capacity for problem solving and time management and people management and conflict management. And so...

I'm not surprised that I have a capacity for just really working very, very hard and handling a lot of different things at once.

Mudassir (09:31.874)
Yeah, totally agree to that. So there's a question that I want to ask you is you grew up in a very career -oriented sort of a family in that sort of an ecosystem. It's like jobs and career kind of becomes everything. That kind of becomes everything. So question number one is how did you end up deciding that you need to start your own business? Because anybody who grew up in that sort of an ecosystem, in that sort of an environment, it's a pretty damn difficult thing to even.

think about, hey, I'm just gonna leave my cool job. It's probably gonna pay me a lot of money, you know, later down the road, and I want to start doing something because I have an itch that I need to scratch. So how did you make that shift? And the follow -up question on the same one is,

Nowadays, entrepreneurship is kind of sexy. It's just like everybody wants to be an entrepreneur. It's just like you open LinkedIn and gosh, everybody is a founder these days, entrepreneur these days. So what exactly has changed in terms of errors, in terms of timing? Why not so many founders and entrepreneurs and people who were willing to build a business back in the 90s, back in the 80s? Why we see so many people doing the same thing today? So two answers.

Two questions please.

Sharon G (10:51.896)
To answer the first question, so when I moved, you know, I was a freelancer for a while when I was in San Diego where I grew up. Freelance writing, you know, I mentioned that I started my career as a journalist and a writer. So, you know, you've got to patch together a career there. You're doing some PR work over here. You're writing some articles over here. You're doing some corporate writing. You have to cobble together a living.

So that's entrepreneurial in and of itself. I didn't really realize that, but you're an operation of one and you gotta make it happen. So that gives you a little bit of the hustle that you need to be an entrepreneur. When I moved to the Bay Area, my first job was at a startup. So it had about 30 people, maybe like three million in revenue. So I was immersed in that environment. So...

and I really enjoyed it. And I had my first child while I was working there. And meanwhile, the company had been through a merger and the merger, you know, was rocky. It wasn't as fun working there after the merger. And it wasn't as fun going downtown every day when I had a baby at home. So I was looking for things to do and my sister -in -law,

who was at the time an executive at Sony, she is very entrepreneurial. I married into a very entrepreneurial and business -oriented family, whereas mine was not. I mean, my mom had her job, but my dad was a blue collar guy and there was no talk about business ever. So my sister -in -law was at the time buying up,

domain names, which was a thing that people did in the 90s. So she had bought up a bunch of domain names and she sold one of them, which was she .com. She sold that for $45 ,000. And then she had another one called fidget .com. And she had this vision of an email newsletter site.

Mudassir (12:49.998)
I remember that yeah, I remember that yeah, yeah. I remember that yeah.

Sharon G (13:15.672)
but like a consumer oriented one where you could get email newsletters on sports or cooking and it would be an advertising revenue model. And so she was at Sony so she couldn't do it. So she encouraged me to do it. And she said, I'll give you the domain name. I'll give you the 45 ,000 for starting up and you can go for it. And so that's what I decided to do. So I quit my job.

and my brother -in -law and I got this company off the ground called fidget .com and we had a blast. It was really fun but we weren't paying ourselves anything. That 45 ,000 was going to last us a long time but as luck would have it we did raise three million in April of 2000 which was when the crash was already happening so I'm amazed that we

Mudassir (14:13.87)
Yeah. Yeah.

Sharon G (14:14.744)
it off. But they, you know, when it was apparent that the crash was going to be longer than anyone anticipated, the funder, which was an incubator, reneged on our funding and tried to sue us for fraud and it ended up in a lawsuit, almost ended up in a lawsuit.

and we settled, but it killed the company because when you raise $3 million, you're expected to spend it, right? So we got a bigger office. We hired people. We signed annual contracts for things like, you know, hosting the website and all of these different expenses were piling up. And so because, you know, you can't all of a sudden shrink that back down.

Mudassir (14:50.99)
Yeah.

Mudassir (14:58.732)
Yep.

Sharon G (15:10.936)
It killed the company and I spent quite a few months shutting the company down and negotiating with vendors. And you know, a lot of them were vendors who hadn't even done anything for us yet. We had just signed the contract. We hadn't even moved our website to that new serving or to that new host. And they wanted us to pay for a full year. So I had to negotiate all of that for quite some time, pay off our vendors.

and paid myself a little for the process of shutting that down. And that was that, you know, and it was unfortunate because I could have bootstrapped that company so that it survived. And it was a little bit ahead of the market, really. Email newsletters were just kind of, you know, happening. So I learned a big lesson there. It's like, I could have done this on my own and it could have survived.

Mudassir (15:56.494)
Yeah. Mm -hmm.

Sharon G (16:09.528)
And then we tried to sell pieces of it off. And so that was a whole.

Mudassir (16:15.758)
And the follow -up was why we see a lot of people making that entrepreneurial leap these days and not back in the 90s.

Sharon G (16:27.928)
oh, well, it's just so much easier to start anything up with all the digital tools out there. You know, when I started, it was expensive and hard to build a website, for example. Now you can put something up easily yourself. There are low code, no code tools. You have, you know, all kinds of tools to help you run the business.

accounting software, HR software. There's a lot that entrepreneurs can actually do themselves at a very low cost to manage every aspect of their business, whether it's building and launching a digital product or whether it's all the backend tools that you use to pay people and run your business.

Mudassir (17:24.974)
Okay, great. So Sharon, here's the thing. I have been in that VC ecosystem for quite some time. So this entire podcast was primarily, was to help people, help first time founders to make that leap of faith and just make that entrepreneurial journey a bit easier, but it's gonna be a rocket ride anyway. But the focus was, since the beginning, was primarily around venture backed businesses, like businesses of scales.

your unicorns and your deca -corns and all of that. But over the period of time, what I've learned is, and I'm a strong proponent of is, not every business needs to raise venture capital. And not every founder should think about raising venture capital. It's a totally different ballgame and stuff like that. A couple of minutes ago, you mentioned this thing, like I could have bootstrapped that company. Could have been like you were ahead of the time or something like that. So I'm gonna come back to the bootstrapping in a minute, but I want to ask you this one question.

which is how I get to know about you, which is how millions of people get to know about you. Why you put that video out? And why you think it blew up?

Sharon G (18:37.176)
I put the video out.

Sharon G (18:42.136)
because whenever I saw an exit or reporting on an exit, I always wanted to know how much did you get? How much did they walk away with? Everybody wants to know that. I know because my partner, the founder. Yeah, I mean, I've met founders. I've met a lot of founders and I've met founders who've exited and...

Mudassir (18:58.446)
Yeah, the founders? The founders vocal? Okay, okay.

Sharon G (19:10.648)
I'm just fascinated by how the deals are structured and how much people get, but you don't usually have access to that information. You might have the top line number, you know, I know Jigsaw sold for 175 million to Salesforce. Well, how much did, you know, Jim, the founder get? I mean, I remember when that exit happened and I knew Jim, um, and my partner and I were like,

How much do you think he got? And you just think, you spend so much time thinking about it and trying to do the math in your head. Well, I know this VC invested this much and blah, blah, blah. And information truly is power. And I realized if I really want to help founders, that's what I say I wanna do and that's what my intent is.

This is one of the best things I can do to help them is to help them understand how these deals are structured so that they don't make a mistake that's going to cost them, you know, everything that they've been working for. And, you know, even when I put out the video, I didn't realize how screwed founders often get.

I use the word screwed. I mean, they're willing, they're doing it, buying into these deals. But it wasn't until after I put out the video and it blew up that it was being reposted by venture capitalists.

Mudassir (20:37.868)
Mm -hmm.

Sharon G (20:51.448)
And they were holding me up as this hero, like, this founder is amazing and listen to what she has to say and founders need to learn this. And well, first of all, I'm like, well, why aren't you guys telling them? Because you're working with them. Right. And. What I really realized from some of the comments on the video. Was you can have founders who create a company that's.

multiples, you know, much bigger than the one I created that might sell for hundreds of millions. And they might even get less than I walked away with because of all the different rounds and, you know, the dilution over and over and over and also the preferred status of some of the shareholders, right? And I guess I didn't really realize that because I haven't ever.

Mudassir (21:38.542)
Yep. Stacks, yeah.

Sharon G (21:48.116)
Personally been through that whole VC stage, you know my first time it blew up and didn't go anywhere and then the second time I didn't raise so I had a hypothesis when I Started, you know after I sold my company and I started really reflecting and writing a book about it I had a hypothesis that

You don't have to raise venture capital to build a business and have a life -changing exit. You know, I thought that was true, but what I didn't realize is you can raise venture capital.

and have a huge exit, but end up with the same amount of money that I walked away with, or even less, which would be terrible because when you raise that money, it's just so much more pressure. And you've got a knee in your back, even if you have the most friendly, supportive funders, I mean, that's gotta be a ton of pressure. I know I felt it the first time I raised. And if you don't raise, if you bootstrap,

Mudassir (22:46.614)
Yeah.

Sharon G (23:03.448)
Are there painful years? Yes, there are. There are some very difficult years. But you can run your business however you want without anybody interfering or breathing down your neck. If you want to experiment with something, you can. If you want to blow 20 grand on something and it fails, well, you do that and you move on. And by the way,

I think raising money can lull you into a false sense of security. There's not as much pressure to get to profitability and revenue as there is when you're bootstrapping. And so maybe you don't work as hard. Maybe you don't work as smart. Maybe you over invest in things too early that you don't really need in the beginning. And yeah, you...

Mudassir (23:35.36)
Yep.

Sharon G (24:00.184)
you can really make smarter decisions as a bootstrapper. And so I was just really surprised that that video was so popular and lauded by the venture capital community. A friend of mine was talking to this random venture capitalist a couple of weeks ago and she mentioned me and she's like, oh yeah, I saw that video. So it's really made the rounds. It's had more than a couple million views and...

Mudassir (24:28.908)
Yeah.

Sharon G (24:30.366)
You know, and then the comments are funny. You know, what happened was I knew it was blowing up on TikTok, but one day I got a call from a friend of mine and she said, my daughter just saw you on Twitter. And there's this video that has more than a million views. I was like, oh my gosh, because I hadn't been on Twitter in a while. And so I went over there and it was like, it was surreal finding it, seeing all the comments and.

Mudassir (24:32.846)
Yeah.

Mudassir (24:53.646)
Hehehehe

Sharon G (24:58.392)
the assumptions that these VCs or founders were making about me that were completely not true. And so then I popped in and had a lot of fun just saying, nope, you're wrong. Nope. Because they were saying things like, oh, there's no way this was an all cash deal. She must have gotten some stock. And I'm like, nope, 100 % cash.

There's no way she's in California because she would have had to pay a lot more tax. Nope, I'm in California. I'm in San Francisco of all places, you know? And there were a lot of assumptions about...

why I didn't take advantage of the QSBS, a qualified small business stock exemption. People were saying, oh, she made a mistake or her accountant was bad. No, I mean, I didn't take the QSBS because you have to be a C -corp to do that. And we intentionally were an S -corp.

Mudassir (26:12.374)
Escort, yeah.

Sharon G (26:12.376)
because we had no money in the beginning and we needed all those benefits that you save a lot of money when you're an S -corp. It's the most beneficial way for bootstrappers to start their company. And nobody ever thought of that. It's either she's stupid or her accountant was bad. Nobody ever thought of like, well, maybe she didn't have any money in the beginning. So she was an S -corp. So.

You know, I got those escort benefits for a good 10 years and that was, that's actually what kept me and my founder in the business when we weren't paying ourselves much or anything at all.

Mudassir (26:55.31)
Okay, okay, awesome. Interesting. Let's talk about the book because you mentioned there's a book that you're writing on top of that. So yeah, what's the name of the book? What is it about? What are you covering in that? And why anybody should read that book?

Sharon G (27:02.136)
Okay.

Sharon G (27:15.256)
The book is the working title. By the time this airs, I think the book's gonna be out, but we're pre -publicating right now, and it's The Empathetic Entrepreneur. And the subtitle is How I Built and Sold a Company with No VC Funding and Without Being an Asshole.

Mudassir (27:21.836)
Yeah.

Mudassir (27:36.174)
Okay.

Sharon G (27:37.304)
You know, tech is tech, tech CEOs are not having a really great time of it lately in terms of their image. So there's a lot of hating on entrepreneurs, particularly tech entrepreneurs. And so I want to offer that perspective of how I managed to accomplish what I did.

Mudassir (27:56.686)
you

Sharon G (28:02.616)
while building a phenomenal team and rewarding that team as we went along, as we succeeded, which I think is really important to the success of any entrepreneur, because you can't do it all yourself. You can't get to where you want to go alone. And so the book is, it's a memoir. It's not a business guide, but there are lots of lessons to be taken away from it for entrepreneurs.

Mudassir (28:18.828)
Yep.

Sharon G (28:29.688)
But, and I am gonna be launching a business guide in the future, a bootstrappers guide, but I thought with this first book, I just really wanted to tell the story of how someone like me, you know, with first generation college, grew up in a working class family, successfully got to be an exited tech entrepreneur. And it's meant to inspire.

other people like me who think they can't do it or they don't have the right background because I zigzagged through a variety of jobs until I started the company. I took many twists and turns in my career and I did not plan my career well. I just didn't come from that kind of a background where people did that. You took any job that was offered to you in order to support your family and you weren't supposed to like it.

or get a lot of rewards from it other than money. And so I tell, in the first half of the book, I tell that whole story and I had some really terrible jobs and experiences. And then I had some amazing mentors who taught me what I know and allowed me to kind of move on to the next thing. So I tell all of those stories.

And then the second half of the book really kicks off with the founding of boardroom insiders and then takes the reader through the development of the company, especially, we didn't hire anyone for six years. So we hired our first full -time employee six years in, and then the team just grew really fast after that. So that was, it's a really different proposition.

running a company with two people and a bunch of contractors versus, you know, 27 full -time employees and a team of 25 in India, you know, all kinds of vendors. So it touches on all of that. And then, you know, the book starts and ends with the sale of the company. So there's a prologue and an epilogue, like, this is what it was like the day I sold the company, this is what happened. And then the epilogue is like, okay, and now how am I feeling?

Sharon G (30:51.064)
now that this is all behind me. So it's more of a beach read than a business guide. And I've been seeding the market a little bit, sharing chapters, and it's getting great feedback. It's been called inspiring and hilarious and keep people on the edge of their seat because there's a whole lot of drama in the book. Whether it's, you know, what happened in my first internship.

to what happened the last three days of the deal and how crazy that got.

Mudassir (31:25.678)
Okay, we're gonna come back to the book in a minute. The question I wanna ask you is because you mentioned that thing a couple of times, quite a few times actually. So the question is, do you think doing something that you love, is that a privilege or is that a right?

Sharon G (31:43.832)
I wish it was a right, but I don't think it really is. It's a privilege. It's a privilege. My dad hated his job and was just always trying to go out on disability, so he didn't have to go there. But my mom loved her job. And eventually, she was making enough money where he could quit his job. And...

Mudassir (31:48.75)
That's a privilege.

Mudassir (31:55.502)
you

Sharon G (32:11.192)
I remember him saying to me, because I was telling him, he died when I was 26, so pretty early on, and I was going to quit my first job. And he said, why? And I said, well, I just don't really enjoy it anymore. And he said, it's a job, you're not supposed to like it. So I grew up in a family with that attitude, even though my mom did actually love her job.

But I think it is a privilege. And it takes a lot of searching, usually, for people to find what they enjoy doing. And sometimes it's considered an either or. I know people who work just to make money, and then they have a passion outside of work that they pursue, and that's where that fuels them.

Um, for me, I really like my work. I have other things I like to do outside of work, but I enjoy it, you know, and I think if you have that, you're lucky. And if you have that, I think your chance of success in your field are much higher because I used to jump out of bed on a Saturday morning and be excited about tackling a project for my company that I didn't have time to get to in the week.

I didn't mind. I didn't feel sorry for myself because I was doing what I like to do.

Mudassir (33:46.286)
Yeah. OK. So let's talk about what was the day like when you sold the company. But behind that, walk us through the thought process that you had, like the driving force behind this decision that you're going to exit your company. You're going to sell that to somebody else. And the reason why I'm asking for the thought process is because there was no pressure from an external investor or anybody else that you should be making an exit.

you could have continued to go on, continued to go on. You ran that thing for more than a decade. So yeah, what was the thought process and why did you decide to, okay, so this is it, this is the time, now is the time, or was it like there was some very substantial amount of interest from somebody? So what was the thought process behind saying yes to that exit deal?

Sharon G (34:42.976)
Well...

Just from the very beginning, I took on a partner two years in, and when we got together, we had to make sure we were aligned with the end game. And we both agreed we would like to sell the company someday, and we would work towards that goal. So that was from the get -go. We were in agreement that we wanted to do that someday.

We struggled for quite some time because our solution was quite a bit ahead of the market, like by years, years ahead of the market. So, you know, we didn't know if we would ultimately be successful, but at a certain point, like the business started, it was very profitable, it was lean, and it started throwing off cash so we could actually pay ourselves a good amount.

And we realized like, well, this just might be a lifestyle business. This might be something we just run until we don't and we pay ourselves really well every year. So we considered that. But probably around 2019, we started getting these outreach from PE firms, private equity firms, few M &A bankers, few potential strategic acquirers.

asking about partnerships and that's how often how it gets broached, you know, in the guise of a partnership. And so we thought, hmm, you know, we just noticed that this was happening and we were still below probably below 4 million ARR at that time, annual recurring revenue. And that, but then 2020 happened and the pandemic happened and

Mudassir (36:12.854)
Yep.

Sharon G (36:37.848)
after an initial little scary dip in some deals, like deals weren't closing, all of a sudden, we just, we doubled in size during the pandemic because in particular, event marketing budgets had no place to be parked as events were canceled. And so event marketers and marketers in general were redeploying.

Mudassir (36:55.502)
Yeah. Yeah.

Sharon G (37:03.8)
part of their event budgets into tools like ours, because their CEOs, their C -suite was stuck at home. So instead of flying to a customer site, they were taking meetings over Zoom, which meant they could do like 10 times as many meetings as they were doing before, because they weren't having to travel. So, you know, our tool supported that kind of executive to executive engagement, because it provided dossiers that would...

Mudassir (37:22.006)
Yep.

Sharon G (37:33.944)
give information on their business initiatives and priorities, right? So anyone would want to have that before they talk to a customer CEO. So we doubled in size during the pandemic. And at the same time, these PE deals were not happening. Deal flow was not happening during much of 2020. And so you get to 2021 and...

PE firms start looking down market at smaller companies. Before, they might have had a threshold of 10 million in ARR. Now they're looking at five and we were almost there. So we started getting a lot of outreach in 2020 and 2021. And at the same time, like our business was going really well, we had a really strong pipeline. We hired a...

VP of operations to kind of shore up a lot of our processes and data so we could run our business better. And so in April of 2021, I got a call from one of the PE firms that we had talked to and met with a couple of times and they had our financials and they were just checking in. And I said, well, you know, we've got our heads down. We're kind of doing fine over here. And...

We're not really interested in talking right now. And he said, oh, that's too bad. Cause I could give you a term sheet for 48 million today. And I thought, whoa, cause no one had ever thrown out any number at all. Like valuation was like, we didn't know what you were worth. And so that was the first time anyone had put out a number and it was kind of an eye popping number for a company sub 5 million ARR. Multiples were huge at that point. Like,

Mudassir (39:07.31)
Wow. Yeah.

Sharon G (39:21.848)
10, 12 even and so...

Mudassir (39:25.326)
In the market, like in the market in general, the multiples were huge.

Sharon G (39:29.61)
Yeah, in like sales and martech, which is the category that we considered ourselves, the multiples were, you know, seven to 12 on the high end. And we knew we wouldn't be that high end because of our scaling issues. And so I hung up the phone and I said to my partner, I'm like, well, I think we need to consider this because the thing that

Mudassir (39:57.23)
Absolutely, I mean who weren't yet?

Sharon G (39:59.16)
The thing that he and I had been talking about for a very long time, if you look at what tech was doing, most of our customers were in tech, so we were very dependent on that market. It had just been going gangbusters for so long, we knew it was going to bust at some point, and we didn't want to be running the company when that happened. And so we were just, we felt like we were running out of time because the bust was going to come at some point. And so after I got that call, I said to my partner,

We got to think about this and he said, call Michael. Michael was the guy, Michael Blend, he's a public company CEO now, he's a super entrepreneur, he's done a ton of deals and he gave me 125 ,000 for 10 % of the company when I built my database back in 2008. And that's, aside from a little bit more money from a few more angels, that's really...

I took we took a little over 200 ,000 and that's it. And so I Called Michael he's quite a character and I you know I snuck out in the hallway because I didn't want my employees to hear me and I called him and I told him What the private equity guy said and he said Sharon they're full of shit. He said don't believe it. They're gonna throw out

a big number and get you all excited. And he said, once you get into due diligence, they're going to just like chip away with it, like with an ax. And then you're going to be down to like 20 million and you'll just do it because you're exhausted. And he said, why are you thinking of doing this now? He said, last time I talked to you, you said everything was going great and you weren't thinking of exploring it. I said, well, because no one's ever thrown out this kind of number before. And he said, well,

Mudassir (41:43.31)
Yeah, the numbers should be here.

Sharon G (41:45.144)
And I said, and I said, listen, we're afraid of the timing. I said, we feel like there's a crash coming. Like we just want to get out before that happens because we're exhausted. And he said, okay, well, if that's the case, then that's fine, but you need to run a process, hire a banker and run a process. And so I hung up the phone and I ran. Yeah.

Mudassir (42:05.582)
Kenneth? Yes, sorry to interrupt. So most of the people who's gonna be listening or watching this particular episode, so they are in that very, very early stage, like back in 2012 for you guys, okay? So they have built a company, I don't know if there is, took a couple of rounds, maybe not based around at all. So when you say like private equity, like people understand private equity, but when you talk about like M &A bankers and stuff like that, please just explain that like.

Sharon G (42:15.96)
Yes. Yes, yes.

Mudassir (42:33.934)
how these deals are actually structured. So go into as much depth as you can. So I want people to understand, like, okay, so this is the crap show that's happening behind the scene that nobody wanna tell you about.

Sharon G (42:46.616)
Well, and you're right to dig into that because it's very important because guess what? When I was out in the hall talking to Michael and he said, hire a banker and want to process, I didn't know what he was talking about. So my partner is a former commercial banker. So I ran into his office and I said, what does this mean? And he said, he said, okay, an M &A banker, that mergers and acquisitions is what that stands for. He said, an M &A banker is like a realtor, but a realtor.

Mudassir (42:56.782)
Yeah.

Sharon G (43:15.192)
You hire them, they come in, they look at your house, they tell you what's wrong with it. They might ask you to stage it. They might make suggestions. They set a price. They take it to market. They go out and find as many buyers to compete as possible. And then they get the deal done. He said, an M &A banker is the exact same thing, but it's for your company. So, you know, what I always thought, I thought that selling your company was like dating.

I thought like if you made it as attractive as possible and worked really hard on that, they would just come to you. That's not how it works. You hire a banker to take you to market and they dig into your business like no one ever has. They create a very in -depth and detailed marketing deck for you, which is fantastic. I mean, I think it's the first time in my life I haven't had to create my own deck. You know, they create this for you.

Mudassir (43:49.486)
Yeah.

Sharon G (44:13.968)
review it with you. They come up with a list of buyers, potential buyers they're going to reach out to, and then you have the opportunity to add to that list since as a business person, you probably had many conversations over the years with these potential partners. And so they cold call, you know, they call these companies and present your deck and ask if they want to learn more. And so that's, and then they have a...

a day which is like offer day or it's like a period of a few days and then the companies can submit their offers and they do that so you know to create a sense of competition and also to prevent them from like you know pushing the first offer that they get for you. So that's how it works and then they work to complete the deal which is a big lift you know you go through due diligence.

where the buyer digs into every aspect of your business and sometimes will uncover problems that could be deal killers or cause you to be retraded. That's the term for them coming back and saying, eh, you've got all these issues, we're gonna cut it down to 20 million from 25. So you wanna avoid that and the banker will help you avoid that.

Mudassir (45:41.934)
Okay, that is very cool. Again, a very innocent question. Can any business be sold? Like all businesses have the potential to be sold?

Sharon G (45:54.168)
Um, I think so. I, you know, you're, you're better off if you do have like, and if it's an, an annual subscription business, there's some kind of recurring revenue business. Um, and you are better positioned if you have some technology that, you know, you're not just relying on humans or services or consulting. Um, I, you know, this whole business that I created.

Mudassir (46:10.252)
Okay.

Sharon G (46:23.992)
came from consulting that I did. I worked as a consultant to tech marketers for quite a few years before I started the business. And I kept seeing this executive engagement puzzle emerge, which is why I created the product. But I basically took frameworks and methodology and approaches that I used in my consulting, and I turned it into a software product with annual recurring revenue.

I knew that I wanted to get away from being in the billable hours business, which I was in. And so I thought, you know, I'm going to create something in a digital product and it will be, you know, bought over and over again by different people. And so that'll get, get me away from the billable hours business. So those businesses are, they will have more attractive multiples to them. But, you know, I heard a story about a PE firm buying a

Mudassir (46:59.372)
Yeah.

Sharon G (47:22.944)
you know, the majority stake in a road paving business because the owner of the business, his kids didn't want to run it. They wanted to do something else. So not only did he sell it and keep running it, he sold it and kept running it like two or three more times. And so he got like two, three, four bites at the apple. He just kept getting paid.

Because apparently he ran and grew this business quite well So the first acquisition is something like 25 million the next one was like 80 million the next one was like 200 million and he still was holding on to his little Yeah, he his ownership was shrinking but the overall pie was getting bigger So he kept getting paid millions of dollars to run a company that he had been running anyway, you know so

Mudassir (47:59.55)
Wow. This is because of the chunk, yeah.

Sharon G (48:20.152)
That's a very different type of business, very capital intensive business, I think. And then you have, you know, you asked earlier about why are people starting things at a much higher rate now. You can sell an app, you know, there are platforms like acquire .com where maybe you've built a piece of technology, but you're like, eh, I don't want to build a whole company around this. I want to go off and do something else.

Mudassir (48:33.87)
Mm -hmm. Yeah, yeah.

Yep. Yep.

Sharon G (48:48.952)
You can just sell your technology right there without using a banker. There's a whole platform to help you facilitate those types of deals, which I find fascinating. So there are all different types of things you can sell. And then there are, at the lower end, there are business brokers. They're not really M &A banker type of deals, but you might have a restaurant or a...

accounting, small accounting firm that you could sell and monetize. So, yeah, I mean, certain types will get much higher prices, but you can, there are all different ways you can build something and monetize it now.

Mudassir (49:19.086)
you

Mudassir (49:37.454)
Okay, great. So going back to the topic of merger and accusation and this entire thing, so can you just walk us through the deal structuring and the negotiation, like how long it took from, suppose like anybody's interested who was actually interested and not like that P from that you was talking about. So when they were actually interested, so how long it took from being that initial call of interest to signing the documents, getting the money wired in.

Sharon G (49:55.744)
Yeah.

Mudassir (50:07.53)
So that is one. And two is because you mentioned this thing a little while ago and that was like it was all cash. So there was no stock. It was all cash. So I know a few people would understand that because you know having gone through that stuff myself, so I know the importance of all cash and like stocks and stuff like that. So can you just walk us through like how the deeds are prepared, what these things mean, how long the time takes. Because in my experience it took like a good six months.

Sharon G (50:15.736)
Mm? Yes.

Mudassir (50:37.678)
from the beginning to the end. It takes a lot of time. So yeah, if you can please just share that particular part of the journey.

Sharon G (50:45.368)
Yeah, so it was a little more than four months from hire to wire. I love that phrase. You hire your banker, you sign the paperwork, you're wired the money. So from start to finish, it was a little over four months. We went through the process that I mentioned, you know, they sent out the marketing deck, they had the list of companies to reach out to. We once once they received the deck, the next step would be they request a management presentation.

with the founders and that doesn't mean you present anything. You just sit there and talk and answer questions. They've got all the information in the deck and they've got the financials. And so we had maybe three or four of those and then we had one offer, you know, just one and the banker.

Of course, their job is to make it seem like there's a bunch of competition and the buyer doesn't know. It's like it's a game, right? And it's the same with if you're selling your house, it's the same thing. So they came with an offer of all cash, but much lower than what the bankers had estimated. We interviewed three bankers.

and they all gave us a 30 to 50 million dollar range. So the first and only offer that came in, it was all cash, but strangely it said 17 to 20 million. And I don't know, the banker said he had never seen an offer like that. I mean, who's gonna say, oh, I'll take the 17, right? No one's gonna say that.

Mudassir (52:08.814)
Hmm.

Mudassir (52:22.19)
Yeah.

Sharon G (52:29.944)
And I don't know if they were trying to show us like, well, we wanted to pay 17, but we'll give you as much as 20. But it was just too low. And I knew that because we had been maintaining a spreadsheet for a couple of years that calculated everything down to what the fees would be for the transaction, what the other shareholders would be getting, you know, Michael and a couple of other guys. And then,

what our individual taxes would be, because it was all about me and my partner and what we were going to walk away with and was that going to be enough? Because you don't want to sell your company and then have to go and work for somebody else. You might as well just keep running it. And so we could plug in any valuation and see exactly how much we were both going to walk away with. And so 20 was not enough for us.

And so I called Michael and I told him what was going on. And first he said, all cash is amazing. He said, if you get an all cash offer, you shouldn't feel bad about getting on the lower end of what you're expecting. All cash, you know, it's all certain you're going to get it for sure. Whereas they can structure deals. So you may not actually get anything more upside. So.

Mudassir (53:43.234)
Mm -hmm. Yeah. Yeah.

Sharon G (53:55.704)
He said, you know, what do you want? And I said, well, I want 30. I want the low end of what we were expecting. And he said, well, then go get it. And so I wrote an email to our banker and I specifically wanted to put it in writing because I had a very specific way I wanted him to take the information back to the buyer because I had remembered the buyer had said,

that we've acquired four companies already in the people intelligence space and yours is going to be the last one that's going to allow us to bring it all together. And we had this soft, really sexy software platform that we had developed in 2019 and launched it. And it was a really killer product. So I feel like that's what they really wanted. And, um,

So that's what I wrote. I said, you know, you all said, the buyer said that we were the last kind of piece of the puzzle so that they could bring this all together. And if that's the case, then they should be willing to pay us 30. And that's what I want. And so the banker was very cautious and like, I don't know, Sharon, like you're asking for, you know.

Mudassir (54:56.768)
Thank you.

Sharon G (55:16.244)
50 % more than they're offering and I don't think that's going to fly. They might walk away. And then I said, well, then they walk away and we'll just keep going. And so they came back with 25 and then I had to decide what's my walk away number. And we didn't much discussion with my accountant and my partner and my husband. And we decided that that was going to work for us. And so we accepted.

and immediately went into due diligence after that. Our deal was very simple. It was all cash. We didn't have a lot of complicated stuff going on with our business. We didn't have lawsuits. We didn't have a complicated cap table. Our investors that we did have were very small percentage and very chill about it. And so it closed quickly.

Mudassir (55:53.998)
Okay.

Sharon G (56:16.472)
And we were also super organized with our paperwork and our kind of business practices. Everything was documented and buttoned up because, you know, that in my, I credit my partner with that because that was very important to him because he didn't want to get to this stage and have a shoe box full of papers. I'm a shoe box full of papers kind of gal.

So he had to get me in line with all of that paperwork and hold me accountable for getting it all done. As well as things like privacy regulation compliance. You know, that was GDPR in Europe and CCPA in California, and now it's going to spread. We had to deal with that and it was just an emerging thing. So nobody really knew what compliance looked like. The regulation was very vague.

Mudassir (57:01.55)
Yeah.

Sharon G (57:14.776)
So we had to deal with things like that. And the buyer, when we were going through due diligence, they repeatedly complimented us on our business practices and documentation and how buttoned up we were with things.

to an unexpected degree for a company our size. But that made it easy to close, you know, because there weren't all these messy little threads that we had to unravel.

Mudassir (57:39.502)
Okay. Yeah.

Mudassir (57:45.934)
Okay, all right, Karen. So the last question that I want to ask you today is...

how anybody who's a bootstrapper, okay, starting a company, maybe have raised a little bit of money from friends and family, from angels and stuff like that.

From day one, that you guys have this sort of a conviction, like okay, at some point in time, someday we're gonna sell this thing.

How can any bootstrapper just starting out in 2024 can plan this company, build this company, amazing business and all that stuff and plan this thing okay, 10 years from now, 15 years from now we're gonna sell it. How can they do it? Like if there's a, I'm asking for a cheat sheet or a code sheet or something like that. So a cheat code or something like that. So if there's any that you can share with the audience, I think that would be amazing.

Sharon G (58:44.184)
Well, I could talk about that for two hours because there are lots of different things that you can do. But I think the most important thing is to cultivate and stay close to your intended customers. And what that looks like in the beginning often involves things that people don't want to do, such as...

having a lot of free conversations and giving a lot of free high value advice to customers.

Sharon G (59:24.44)
What you're doing is you're being very generous. You have to be very generous when you get started because you have to make it worth their while to take a risk on you. You have to give them something for doing that. You have to work with them. I was the first customer for two different vendors that I used, big vendors, my tech and development team.

was always outsourced. And my India research team was a dedicated outsourced team. And Boredom Insiders was the first customer for both those firms. And the free consulting and advice from rock star experts that we got early on because they were just trying to bring us on was game changing for us.

They really propelled us forward. And it's because we had the attention of the principals of the firm in the early days. And they would sit down with us and say, have you thought of this? It was like having free $500 an hour consultants for months on end. So valuable because they had worked with all these other startups. And in the case of my research partner, he'd worked for every.

you know, data tool out there and knew how things were done. Whereas I was coming at it from an outsider. I had never worked in that business. So you have to do the same when you are getting started. Who are the customers? What is the problem they're trying to solve? Hopefully there is a problem that's painful for them. I was embedded with those customers for many years, so I knew there was a problem. I saw it over and over and over and, um,

Mudassir (01:01:14.19)
you

Sharon G (01:01:18.902)
You know, when I was developing my product, I did a lot of free work for Cisco and Sun, you know, showing the things and what if you did this and, you know, doing a pilot project with an account team. All of that stuff you should be willing to do to win over some early champions. And what you get back from that is someone who's gonna champion you.

and give you input, real input into whether your product is something they would actually pay for. And then you discover all the areas of friction too, like, oh, you know, this is great, but, you know, they're in the blank, you know, and then you can fix that part of your model as you go along so that when you do get to the point where you're, you know, big time,

Mudassir (01:02:08.236)
Yeah.

Sharon G (01:02:19.416)
you've got all of that ironed out because you've seen it before. So, you know, staying close to those customers, doing the free consulting for them. And then another thing that we did, which I hear a lot of entrepreneurs have to do is you may have to do some custom projects for your early customers. And you can get paid for that too, right? You can get paid a lot. And that's...

Mudassir (01:02:46.062)
Yep. Yep.

Sharon G (01:02:47.416)
more money for the business and you know this happened with me and my partner early on he would talk to a big tech company and they'd say well this is really interesting the problem is is we don't really know how to leverage the kind of information that comes out of your database so you know can you write up a deck that explains like how you would use the information if you were us and I created a whole I used to create

whole events, event plans for companies like, oh, then you could have a breakout session about this with this person speaking and your seat, you know, it was all on paper and we got paid to do that. It wasn't what we wanted to do, but it, it showed, it educated the customer to how to use the information. And that would ultimately lead to a database subscription most of the time. But you know, my partner, he was laser focused on ARR.

Mudassir (01:03:27.212)
Yep.

Sharon G (01:03:42.808)
And he'd be like, this is not ARR, Sharon. Like, we can't be doing all this custom work. And I'm like, just trust me, just trust me. Like, this is going to lead to them being a customer. And sometimes it didn't, but sometimes it did.

Mudassir (01:03:55.342)
Okay, awesome. Thank you, Sharon, for all the advice. Pieces of wisdom, really appreciate that. We do have this one small ritual on the podcast. What we do is we ask all our guests a question for the next guest without telling who the next guest is gonna be. So I got a question for you from the previous guest, obviously, and I'm obviously gonna take a question from you for the next guest. So the question that the last guest left for you, what one piece of advice you'll give to your new mentee?

you're about to mentor, you are mentoring these days, about starting a business in 2024.

If you have to narrow it down to just one, what would that be?

Sharon G (01:04:42.424)
Keep it lean. Keep it lean. There's no reason not to. You know, bootstrap it for as long as you can. When I first started, it was a stigma to be sitting in my home doing business. I used to pretend I was in an office. And you know, we didn't really have video back then. And now...

there's no stigma at all, you know, everybody's doing it. And so you don't have to pretend, and it's, especially with the VC.

Mudassir (01:05:19.2)
you

Sharon G (01:05:24.984)
It's to be self -

Sharon G (01:05:41.974)
Being lean.

So bootstrap as long as you can.

Mudassir (01:05:49.496)
Absolutely. Question for the next guest.

Mudassir (01:05:58.702)
Give me a tough one, give me an interesting one. Not the one that you answered, so yeah.

Sharon G (01:06:14.104)
Would you rather?

Sharon G (01:06:21.08)
Would you rather start and run your own company?

Sharon G (01:06:29.4)
Okay, let me rephrase this. If you were guaranteed the same amount of money,

for your exit, regardless of you did one or the other, would you rather start and run your own company or would you rather be a cog at the sexiest unicorn of the day?

Mudassir (01:06:55.41)
Okay, so the reason, it's a good one. It's a very good one, obviously the depth and all that. But it's more interesting because my next guest is, just telling you, not gonna be part of the recording. And obviously, you're just gonna come out later, blah, blah, of that stuff. The next guest is a very, very, very, very popular San Francisco VC, just so you know that. Yeah.

Sharon G (01:07:12.408)
you

Mudassir (01:07:24.654)
And he is, he wears that hat pretty proudly, like, what are the early stage VCs? What are the early stage VCs? We invested in 700 companies in San Francisco or something like that. So, yeah, just so you know that.

Sharon G (01:07:34.638)
Is it Cowboy Ventures?

Mudassir (01:07:39.758)
No, no, no it's not. No it's not.

Sharon G (01:07:43.448)
Yeah, I think that's really... Because the reason I asked that question is it's because it's something that I've thought of for myself, you know? It's like, would it have been more fun to be at... My nephew who's... My nephew worked at WhatsApp. This can't be part of the recording, by the way. My nephew got a job at WhatsApp.

Mudassir (01:07:55.31)
Mm -hmm.

Mudassir (01:08:02.254)
you

Yeah, yeah, no, no, it's not. It's Don't do it by the way.

Sharon G (01:08:11.128)
when he graduated college, and then two years later it sold for 19 billion, and they only had 55 employees. So it's like, and I think, I'm pretty sure we ended up with a similar amount of money. I mean, I'm almost 60 and he's 31 now, but I think we got kind of the same amount. And so that's why I have that question. Like...

Mudassir (01:08:19.662)
I remember that, yeah.

Mudassir (01:08:26.528)
you

Mudassir (01:08:38.656)
you

Sharon G (01:08:38.704)
When my exit happened, it was just quiet, you know, and nobody came.

Mudassir (01:08:42.734)
Yeah, yeah, nobody cares about that, yeah, I know.

Sharon G (01:08:46.552)
When he did his, it was like the number one headline in business for weeks. And he was inundated with Maserati salesmen and bankers.

Mudassir (01:08:58.274)
Yeah, yeah.

Sharon G (01:09:03.096)
management people and he just because his LinkedIn has WhatsApp and it's only like 55 people who work at the whole company. So it was wild. And you know, everybody he knows is just they all probably thought he got way more money than he did. But he got a lot of money. You know, if he got 13 15 million, whatever, I still don't even know the seed that that's why I did made the video because it's like what?

Mudassir (01:09:09.07)
Yeah.

Mudassir (01:09:14.976)
you

Mudassir (01:09:28.158)
Yeah, nobody knows. Yeah, yeah, yeah, totally.

Sharon G (01:09:32.66)
You know, it's very private, but that's why I think it's a curious question. Plus, if you work at the big sexy unicorn, you know, there's a lot of fun and prestige associated with that. And I often wonder what that ride must look like. It must be pretty fun, but you know, also it can be a, it can be miserable.

Mudassir (01:09:42.834)
Hmm.

Mudassir (01:09:50.254)
Yeah. Yeah, you know, a company called Lume, the one that you need to you can.

Mudassir (01:10:09.262)
recently got acquired by Atlassian, the company that owns Jira, stuff like that. So it's not going to be part of the recording. So I know somebody who was very heavily involved in that deal, like very, very heavily involved in that deal. And he was telling me, but he was involved like somebody he knows, I don't totally remember that. And he was telling me this thing. That company was offered 1 .0

Sharon G (01:10:11.)
you

Sharon G (01:10:19.16)
Thank you.

Sharon G (01:10:29.848)
you

Mudassir (01:10:39.406)
7 billion or 1 .6 billion dollars. They didn't go for the IPO or you know IPO or the acquisition that they said no to it. The next time they sold the company for 900 million almost half of like what they were offered and I was just asking this question because again as I told you like this is the segmentary section for me so I learned as much as I can and I was like just tell me one thing so I work with a lot of early stage VCs like this is primarily where I operate.

Sharon G (01:10:44.426)
you

Mudassir (01:11:08.942)
How are these big guys making money? And then he said, do you know about preferential stacks? I was like, yeah. He was like, OK, let me explain to how to do that. So he just pulled up the Excel thing and just walking me through. OK, so they raised early rounds, like a couple million bucks, and then five million bucks, and then 20 million bucks, or something, something, something. So the guys who actually put like 400 million or something like that later on.

your favorite, Enri's and Horowitz or you know, Sequoia or like these brand name people. So they put all of these money, like whatever they put, they get the same money out. They didn't make a lot of money on that deal. They get almost the same money out, one point something X is what they got out of that deal. They had 2 .5 X preferential stack, preferential treatment on that, 2 .5 X. And then obviously I'm not super good at math, but.

He was just doing up all the math and then drawing all these figures and he was like, so the founders, so the founders probably gonna walk away with less.

And it's a company that they sold for...

my gosh, like a billion dollars. And he was like, you know, do you see how the VentureMath, so he was teaching me like how VentureMath works. And I was like, man, this is so freaking, like most founders, honestly, honest to God, like they don't know this preferential stack stuff. They don't know all these crazy deals that these VCs do. Like I know a lot of these, like I know a lot of them. And they would like,

Mudassir (01:12:50.094)
every single time you talk to them, they're like so well media trained these days. Like most of the people that you will talk to in the VC industry, they are very well media trained. So they'll have the perfect answer for everything. We have an investment thesis. We invest in founders who are going to change the future of the world. But the reality is, my dad, so I worked with somebody who's a friend with Obama who plays

Sharon G (01:12:54.04)
you

Mudassir (01:13:18.99)
go off with XYZ and he knows XYZ from, so yeah. I could have the dumbest of the dumbest idea. I'm gonna get the check right there. And you can have the fanciest of the fanciest idea and you would still be like, oh, you're too early. It's not gonna work here and it's never gonna scale. So it's that industry. So yeah.

Sharon G (01:13:40.664)
You know, I...

off the record, although I did make a video about this, but I didn't say who the company was. So the company that bought us, they bought four companies before they bought us. They bought two companies that specialize in information about wealthy people, and those are used by like financial services companies and also non -profits looking to target donors.

Mudassir (01:13:45.934)
here.

Put it up. Okay.

Mudassir (01:13:56.878)
Mm -hmm.

Mudassir (01:14:08.654)
Mm -hmm.

Mudassir (01:14:12.876)
Mm -hmm.

Sharon G (01:14:13.208)
And then they bought a company called board X that did relationship mapping between executives. And then they bought a company called real side or relationship science that also did relationship mapping. So relationship science. I remember very well when they started, it was in 2012 and my company was kind of still getting off. Yeah. So they raised 120.

Mudassir (01:14:34.57)
Oh yeah, you told me you told me the last time about that company. Okay, so that's that's the name. Yeah. Okay Yeah

Sharon G (01:14:43.736)
sold for seven, we raised 200 and sold for 25. So, you know, it's the whole game with the VCs, like honestly, I mean, I don't understand VC math. I don't understand the whole preferred. I think it just means they get paid first and they get paid more. But I...

Mudassir (01:15:00.814)
Yeah, so Preventative Stack is...

Mudassir (01:15:06.734)
most founders would be like super happy, oh, we just only gave 10%, so 35%, and somebody would come in and they say, oh, the round that we raised, so the VC took like 10 % of that company. But there was one X and 2 .5X, so the 2 .5X means if you raise that business for X amount of dollars, they're gonna get their return 2 .5X times, and you guys can take care of whatever year you left. So.

talking about the Loom thing, so suppose they sold for a billion and it was 3X, whatever they invested in, so they invested 400 million and the company was sold at a billion. So this took up all the round, like the entire round, whatever they were sold, because they were like, we're gonna give you 400 and we're gonna get three times of that money, regardless of whatever you're gonna sell.

and only the debt is the first thing that you guys need to pay, rest is ours. So suppose that company was paid for a billion, they had whoever that person was, firm was, they gave them 300 million at a 3X preference, so they took 900 million out of that. So you the founders, the early stage investors, the angels and everybody else.

Sharon G (01:16:07.8)
Yeah.

Sharon G (01:16:27.114)
you

Mudassir (01:16:27.822)
you just only have like 100 million to just play around with. And now if you do the math, there's like 20 people distributing, you know, whatever that 100 million looks like. So it's that dirty game that they play, most people don't understand. And it's very easy. It's just the same thing that they do.

Sharon G (01:16:38.072)
I mean if you're going to do it that way then why do you even assign a percentage of the company that you own? You know like you could say I

Mudassir (01:16:52.142)
Oh yeah, just say I'm gonna take that much money anyway.

Sharon G (01:16:55.96)
I mean, well, and that's what's really confusing probably to founders. It's like, wait, they only have 10 % and then you don't...

Mudassir (01:17:02.062)
Yeah.

We have seen all kinds of people. Let me just say the bias and pause the recording because this is going to just continue the time. Let's say the bias, but I'm going to pause the recording, but please stay on the call. Probably again. Thank you so much, Shai. Thank you so much for the time, the wisdom, all the things that you shared. I learned a lot of things, and I'm sure a lot of people will learn a lot of things. Only can thank you for the time. Appreciate it.

Sharon G (01:17:21.24)
you

Sharon G (01:17:32.792)
Thanks for having me.

Mudassir (01:17:34.67)
Awesome. Okay, so it's stopping now.