From Y Combinator Founder to Cash Flowing Empire (Shawn Sheikh of Adly)
Shawn Sheikh, co-founder of Adly, built a portfolio of 18 cash-flowing internet businesses after exits from a Y Combinator startup and the agency Pivot CMO. He focuses on acquiring profitable online assets through data-driven due diligence and growing them with paid media and SEO, while staying cautious about hype-driven tech like AI and VR.
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I kind of always knew I wanted to own something. Really random, I was like the student body treasurer and there was a t-shirt company that would call me all the time. And this t-shirt company was just like not getting paid on time. And I was like, I can get you paid faster if you gimme 10%. So then I started a t-shirt business and I think junior year of high school was making like 10 grand a year, which, you know, in high school, it's kind of a lot of money. It's great for then. I ended up buying the vice president of my high school's Porsche off of him.
Really?
Yeah. At the end of the day, like the way agencies grow is like, either your clients spend more money with you, means their company's getting bigger, or you get more bigger clients.
Is freedom the draw for you? Like, what do you— what fuels you?
Yeah, 100%. I mean, I just want to eat dinner wherever I want and relax, take my parents out. In general, if someone's selling their business, you have to be like, what the fuck is wrong with this thing?
Yeah, why are you selling it?
Yeah, like, why? Let's say you pay 3 times earnings for a company, right? Uh, what people don't realize is we live in California, so 55% taxes. So that means that I gotta make six times in order to just get my capital back. A lot of the guys that are selling their AI companies want crazy valuations.
That's true.
You know, so I'm like, this just doesn't make sense, and you're probably gonna get crushed when ChatGPT decides to go into your vertical.
Welcome to Just Go Grind, a show all about building and investing in companies. Today on the show, we've got Sean Sheik, the co-founder and managing partner of Adly, a company that acquires, partners with, and invests in. Internet businesses. Before that, he built and scaled Pivot CMO, one of the fastest growing performance marketing agencies, which was eventually acquired. And he also co-founded a YC-backed startup that he exited. Scaling a business isn't just about driving growth. It's about having the right financial infrastructure in place so you don't run into cash flow issues, messy expense tracking, or inefficient capital use. That's why I want to take a moment to highlight Ro, the all-in-one finance platform built for startups and high-growth businesses. With Row, founders get a single pane of glass that they can use to run and scale their business. Bank accounts, corporate cards, expense management, bill pay automation, and accounting to help them move as fast as they scale. Row is trusted by thousands of companies from 2-person YC startups to brands like Perplexity, Cal.com, Splitwise, and more. The big thing with Row, every customer has a person at Row. 24/7 customer support. That's phone, text, email. They will be with you at every critical milestone in your startup's journey. To learn more about why startups choose Ro, visit ro.co today. That's ro.co today. Today's episode is also brought to you by Tribe, a vetted network for top early to mid-stage entrepreneurs. Join the entrepreneurship community connecting the fastest rising entrepreneurs, founders, and business owners at tribehq.co. Now let's go on to this episode with Sean Sheik. Sean, lots to talk about today. You've sold businesses, you've started a business, like so many things you've done already. Now you're investing. Have you always been wired with this ambition, this drive to create stuff? Like, tell me about that.
Yeah, I think so. I mean, I kind of always knew I wanted to own something.
Yeah.
Um, I think we've talked about this a little bit before, but I, Started the first business in high school.
Yep.
Sort of on accident. Basically this teacher that I had in this computer class was like, oh, there's this one student that started a website development company and he's making, you know, whatever he was making a year. And I was like, I can build websites. Like, that's not that hard. You can have a WordPress website. So did that in high school and then really random. I was like the student body treasurer. And there was a t-shirt company that would call me all the time because I would, interestingly, like in high school, they like let you sign checks.
Yeah.
Um, so I was signing checks for this t-shirt company because in high school, like that's where most of your money is spent on like school spirit. And this t-shirt company was just like not getting paid on time. And I was like, I can get you paid faster if you give me 10%. So, um, so then I started a t-shirt business and I think junior year of high school is making like 10 grand a year, which, you know, in high school, it's kind of a lot of money. It's great for then, especially. So I think when you're in that situation, you're like, I have money, I can take girls on dates. I ended up buying the vice president of my high school's Porsche off of him.
Really?
Yeah. So then I was like—
The world's open to me.
Yeah. I was like, I should probably do more of this. And then so Um, you know, I was like, okay, you can make money. Yeah.
There's no going back at that point. Once you've seen—
No, there's no going back.
I love it.
I love it.
I know we talked, so we talked a while ago. For people who don't have context, I interviewed you in 2019. It's like almost 6 years ago, whenever it was. I still wanna give context to people who hadn't heard that interview. So thinking about Solve, let's maybe start with that company. So I started a company before that, but with Solve, how did you meet your co-founder, decide to start this business? It went through YC, all this stuff, but how did it get started in the first place?
Yeah, kind of got lucky. I had started a dating app out of college. We raised some money.
Yeah.
You know, it grew to like a couple hundred thousand users, but ultimately like it kind of fizzled out. We sold the company to another dating company that was trying to expand to the US. And one of the guys that wrote one of the first checks into that company, We kind of just became friends and really successful guy. His name's Blaine. Thank you, Blaine. And when I unwinded the company, I was like kind of embarrassed. I was like, hey man, like, sorry. Like it just didn't work out, you know, whatever. He was like, oh, I'm thinking about starting this like travel concierge company. Like, do you want to come join and work for me? And I wasn't like a co-founder or anything. Like I was just there to learn and—
Yeah.
You know, I was like 22 or something and working for this guy that was ultra successful. And then I just hustled hard. And I remember being on a flight to London with him and he is like, hey, I really appreciate everything you do. Like, here's some equity. Like, I want you to be a co-founder, like all of that. So, you know, I think like, and my dad thought it was crazy. I turned down like $125,000 a year banking job to go work for Blaine. Blaine didn't, like, it was a startup, right? Like he paid me, but it wasn't like a lot.
Not crazy. Yeah.
Yeah. But I was like, you know what? Like this guy's ultra successful. I wanna be this guy one day. Like, let me just go and absorb as much as I can. And, you know, ended up working out, um, in the long run.
Yeah. I mean, you guys sold pretty quickly actually, right? Like a year and a half or something less than that maybe?
It was like, yeah, a year, year and a half in. There were some other circumstances like, um, You know, Blaine, my co-founder at the time, had another company that he sold right when we were in YC. Um, you know, at the time, like, he asked me to step up and like be CEO. I really didn't want to do it without him. So we ended up selling to one of our like biggest customers. Um, hindsight, like, thank God I didn't own a travel company during, um, COVID because it would've destroyed our business.
But, uh, there was no future after that.
No.
For that particular company, at least. I actually didn't know the dating company. I didn't know you raised money for that company too.
Like, not a crazy amount.
What's not a crazy amount?
It was like $150K.
Okay.
Um, you know, I'll tell you a really funny story. So, uh, where I went to college, one of the professors was managing director of Bessemer Venture Partners.
Oh, wow.
And he just taught a class because he's just a good guy. And like, it was like the best class I've ever taken. He's just one of those dudes.
Yeah. Yeah.
And so I flew up. I was living back here and I kind of emailed him. I was like, hey, can I get a meeting? Ask for advice. Really, I wanted money. There's the saying, ask for advice, get money. Ask for money, get advice. I was like, can I get advice? And I remember the night before I went out with a bunch of my friends and I was ultra hungover in the morning. And so I was meeting him on campus at where I went to college, and I went down to the cafe to get a vitamin water. And I remember that this guy, every single time he comes to our class, he came to our class, he would, uh, uh, have yellow vitamin water. I was like, okay, yellow vitamin water has— actually had one this morning. It has caffeine, it has like B12, like this is perfect for a hangover. You know what, I'm gonna get this guy one too. So I like Buy him a Vitaminwater. And then we have this good meeting. I'm like, hey, uh, Mr. Tanja, here's, here's the Vitaminwater. He goes, holy shit, you remember this? I was like, yeah, you always come to class with one. Not— he thought I went out of my way. I was really just hungover.
I'll get one too.
Yeah. And like, you know, 30 minutes into the meeting, he's like, cool, I'll write you a check for $100K. I was like, really?
He's like, are you sure?
Like, I was like, why? He goes, no one remembers the Vitaminwater thing. Like, the fact that you remember that. I was like, Yeah, I remember that.
You're like, I'm so lucky.
Yeah. I was like, this is the best whatever, $2 I've ever spent in my entire life.
I think that's a good return on that.
Oh yeah. It's, uh, spend as well. That's it.
Wait, going from that though. So you, okay. Even with the, with Solve, the first company, I know you tried the agency. So Pivot CMO, when you were running Solve, you said you weren't really ready to do without Blaine, at least at that time. What was it about Pivot CMO that you were ready to start That company, and that was with Fred, right?
Yeah. Fred, who's my now partner at Adly. Yeah.
So why were you ready then?
That was totally by accident. We were not ready. I mean, Fred, my co-founder, is really good at growth and running ads and all that. And we were kind of tinkering. Basically, I had this like year off where I was doing nothing. And Fred and I were just like bouncing ideas. Like we wanted to start a tech company. We wanted to do a lot of the stuff that we're doing today, but Um, I had this other friend who was like, hey, my cousin owns this clothing company in, um, LA. They have a shop on Robertson. Can you like help him with his ads? I'm like, no, like I'm not an advertising agency. He goes, well, he'll pay you. I was like, no, it's fine. Like we have some savings. Like we're gonna like focus on our whatever startup we're gonna do. Yeah, yeah, yeah. Of course. He's like, dude, like it'll be 2 hours a week. Like let me give you 5 grand a month. And I was like, all right, fine, we'll do it for 1 month. Okay. The guy ends up going from like, I don't know, almost nothing in online sales to like half a million dollars a month. And I'm like, damn.
What?
You know, so then we're like, oh, like, hey, maybe you should pay us more. And then, you know, I think within a year we were doing like $800K in profit. Fred and I basically looked at each other like, let's just do this. This is the thing. Let's make some money. And then it ended up becoming a business. Granted, we were pretty scrappy and pretty lucky, I think. Slightly right place, right time. Also, a lot of the YC founders came on board. And YC used to be very anti-ads, like, don't run ads, have a good product. Now they still are like, obviously you have to have a really good product, but you know, run some ads to get people to try it and then iterate type of a thing. Yeah. So we were kind of at that age where like a lot of the YC companies were, had some ad budget and yeah, working with us and then, and we were good. Like I, I think that's, you know, what that was.
Give me backstory on Fred, 'cause obviously you're still working with Fred today. So how'd you meet him, decide to work together? Tell me more about that.
Yeah. So Fred's a few years younger than me. We went to college together and I was in this when I was running the dating app, um, fresh outta college. There was this like incubator called the Delta Prize. They take like 10 companies, they incubate you. At the end, you like showcase your company and then if you win, like they write you a check. I think it was like $10K or something like that.
Right.
So I ended up winning and the guy that ran that program at Berkeley, um, he runs a summer program too and he texted me and he's like, hey dude, like, I have this kid. He's just as annoying as you are. You should meet him. I think you guys will really hit it off. So we end up meeting, we hit it off, but Fred was still in college and he would just call me all the time like, hey man, what do you think about this? What do you think about this idea? What do you think about this idea? He's just one of those really smart people that tries a lot of things.
Yeah.
And we just kept in touch and he was working at a pretty well venture-backed startup doing growth. And, you know, we just wanted to start something together. And, you know, he's, he's the one co-founder that I've had that like, we never fight ever. Interestingly, we get along really well. Like, we're very different people. It just clicks. Um, and I've been through a lot of co-founders and I've fought with all of them except for this one. I don't, I don't know why, but, um, like, how are decisions made then?
You just always kind of agree or you just, you're accepting of the other person's view?
Like, I don't know. We don't always agree, but we're very rational, very data-driven. Yeah. Um, I, I think the thing about us that we've realized is like, you don't have to be right. You just have to try things and like move on really, really fast.
Yeah.
Absolutely. And like I tell a lot of my employees now, I'm like, look, I don't care if it works or not. Try it fast. Yeah. Kill it. faster. And then, you know, you're probably gonna try 10 things and 9.5 are not gonna work.
Yeah. Yeah.
And that's, that's totally okay.
Like, you make more progress that way than delaying and not trying.
100%. Yeah. 100%.
Wait, so Pivot CMO. So when we had chatted, you were still running the agency. That was back in 2019. So you sold it in 2022?
Yeah. March 2022.
Why sell it? What was that process like?
We weren't going to, um, actually I was on the phone with the head of marketing at Crocs, like trying to pitch them to use us. And he was like, hey, by the way, I sold an agency. I was like, why would you sell the agency? Like, it makes a lot of money. Like, you should keep it. Like, um, it's cash cow, right? He was like, look, just talk to this one broker and, you know, just, just talk to him. I was like, okay. So I talked to the broker and he's like, look, you should partner with like a bigger agency that can bring you bigger clients and It'll just make your life easier. 'Cause yeah, at the end of the day, like the way agencies grow is like either your clients spend more money with you, means their company's getting bigger, or you get more bigger clients. And we partnered with an agency that was like way bigger than us and it just, it made sense. We love the guys and yeah, all that. So.
Running that company though. So I just wanna touch a little bit on it. Like you grew that company, who knows how, how many people did you have by the end, by the end of it?
I don't know. I mean, not that many actually, like maybe 30 people.
30 people. Okay. And working with clients, you said in the early— I know from our last interview in the early days, I think you said a lot of it was email outreach worked a bit in the beginning or something like that. How'd that grow by the end of it?
Email outreach was everything. I mean, we sent a lot of spam.
Tens of thousands.
Uh, yeah. I mean, there was a point where we were emailing 5,000 to 10,000 people a day.
Jesus.
Um, my LinkedIn was aggressive. We had a team doing that.
Yep.
It's a sales is a numbers game at the end of the day. And, you know, agencies at this point are very dime a dozen. Yeah. Everyone and their mother has an agency.
Seems like it. Yeah.
The difference is like how intense you wanna be, like signing clients, like how aggressive you wanna be. Like that's really it. And yeah, Fred and I were very hands-on. Like we were very operational. I think that's the other thing that mattered a lot.
Were you more sales, him on the growth? Like how was that split?
Yeah, it was more like sales, operations, human ops, whatever you wanna call it. And then I ran the SEO team and then he ran all the paid teams.
Gotcha.
All the, um, strategists and stuff like that.
You had been through, so selling that company, how did that differ or how was that experience in terms of the actual like process? How long did that take? 'Cause I've heard so many different stories around it took 6 months to close, it took a year to close, you know, like How was that process for anyone selling a business or wants to sell a business?
That one was a little longer.
Yeah.
Um, just given the nature of the business, it was like 4 or 5 months. We, um, and, and I think the fit mattered a lot because we, you know, we owned a percentage still afterwards and we wanted to stick around afterwards. So finding the right person was important and inherently it's a very people-run business. So you, yeah, you just need to find the right person. So that took some time. I've bought stuff where it took 60 days, like, which is, you know, due diligence, legal, closing, you know, like that's, that's actually pretty quick, like 45, 60 days, whatever that is. So yeah.
I know when you talked in 2019, at that point in time with the business, I'm trying to think of like the growth trajectory. I think you had already been starting to buy businesses though, right? At that point. Or like, I think you maybe mentioned in the interview something about buying a business or 2 already by that point in time.
We had bought some like domains and we were like, incubating things.
Yeah.
Um, you know, many of which did not work. Um, 2022 to 2020, end of 2024, we bought a lot of stuff. We bought 13 companies, like really grew the portfolio. Um, that's not including like domains that we bought, like things that we're like testing out. So, um, so yeah, we've always been trying.
What was that thought process? So even working with Fred on that, he's your partner at Adly, your thing you're running now, your investment firm. What was the thought process between you guys along? Okay, we're moving on from this agency to we're going to start buying companies, investing in companies, and then doing that side of the business world versus what you were doing before. Like, what was the thought process behind that?
Also very serendipitous. Him and I were going to like work on stuff, but very casually.
Yeah.
In fact, we were looking at buying a winery.
Really?
To chill on in Paso. So my now wife and him and his girlfriend, we all went to Paso. We looked at a 60-acre winery and I was like, I'm going to live here and chill and be done.
Yeah.
And somebody brought us a deal and was like, look, I really want to buy this company. I need some investment. Do you want to do it with me? And we're like, okay, whatever. And I remember being on the jitney in New York from Long Island going into Manhattan and just like grilling this founder, like, why should we buy your company? Blah, blah, blah. And then we kind of just took a leap of faith. So Fred and I bought the majority of that company. There was— that's the only company where there's some outside investors. And, you know, within a few months of us running it, like, it grew like crazy. So Fred and I looked at each other like, we should do more of this.
Let's do that.
Yeah, that worked. This is working. And it was a— it was an interesting time in the market, like Things were reasonable valuation. We knew how to grow things. And I realized that starting things is really hard. We're really good at taking things that exist and ran a marketing agency, so can sort of make things grow.
Can make you explode from where you were at to—
That's the idea.
That's your expertise for sure.
Yeah, that's kind of the idea. And thankfully a lot of the brokers that we talked to guided us through the process. We have since refine the process, like structuring how we structure deals, how we do legal, all that. Um, so that's been—
With that first one though, so like with that first deal, did you buy it in the intention of like, all right, we have this growth experience, we kind of already know what we're gonna do with it once we bought it, or like gonna let them run it still? Are you trying to like kick the CEO out? Like what was the— explain that.
Yeah, so what it was is this site called doublelist.com, and it's a dating site. It, it basically took over what Craigslist Personals was, but with a lot more moderation and like, it's just a, a great like dating site.
Yeah.
And the guy was monetizing it with just display advertising. And for anyone that's used a dating product, you know that you need like a subscription product.
Yeah.
And you know, so the idea was buy the company, be better at advertising, get more like advertising units, and then build this subscription product. And, and we did that and like, that's really what worked. Um, you know, I think the company is like a 4x since we bought it.
Jeez.
Um, the team is small. Um, actually the team, the team's getting bigger now. It's probably like 30 people, 25, maybe something like that with developers, moderators, all of that. So. Yeah. Um, yeah.
So, so going from that then, so you guys bought that business, you're like, all right, we're gonna do more of this cuz it's obviously worked, you liked it enough. How did you think about that expansion? Because you said you had investors for that one, outside investors for that one. Now, is it all your own capital or are you still trying to get in? Like, what's the deal?
Yeah, all of our own capital. I mean, even for that, like Fred and I own the vast— Adley owns the vast majority of that company. Um, and the outside investors were this guy that brought us the deal, like his cousins and mom and dad. Like, it wasn't like institutional or anything.
Gotcha.
Um, and in fact, like, we were like, hey, we'll take the whole deal, but He had already like had people committing capital and they were— have become our friends. But yeah, everything else has only been our own capital. I mean, my parents were like, you're an idiot. Like, because we bet the entire, like everything that we have on that one. Even the guy, like private wealth managers were like, what the fuck is wrong with you?
Why are you so dumb?
Like, go buy a nice house. Like, get a nicer car. Like, what's wrong with you?
How do you stick to your guns on that and do it?
We're young, you know, like I think it was one of those things where it's like, I don't need this. Like, uh, the joke, the joke is everything is for my kid's kid. So that's true. Um, I think that that was that. We wanted to like build LTV. We wanted to build, um, something that like is gonna last a while and we just had a lot of energy and we still do. Like, I think that's what that is. The numbers made a lot of sense. I mean, The one nice part about my co-founder is extremely data-driven. He's very like, well, if you look at the math, like this deal's a no-brainer. I'm like, well, when you put it that way, sure. Like let's better entire net worth.
Yeah. Casual.
Yeah. So there's a lot of that.
Okay. So then you buy that business, you know, you want to grow this thing. Did you consider outside capital as like raising a kind of investment vehicle fund in that way? Or did you always like, We have enough money to start to buy the next one. We're gonna do that piece by piece by piece. Like, how did you think through that side of things?
Yeah. And people keep pushing me to like raise outside capital. I think the thing is, you know, a lot of people think like buy a business, the way you make money is to grow it and like sell it. That doesn't have to be the case. Like, you know, buy or start a business that's profitable and then keep it forever. Like that's what most If you go into like any nice neighborhood, most people own a business that does pretty well.
Like, yeah.
And I don't mean like anything super fancy. Like I know a guy that runs an ins— you know, the local State Farm branch that does pretty well, right? He started it, he has like a little location, you know, he's making a couple hundred thousand dollars a year. Like that's, that's pretty good.
Yep.
So I think we realize like those are the types of businesses that we like and we don't want other people calling, hey, when are you gonna sell? Hey, when are you gonna do this? Like, The pressures of outside capital. It's just so much bullshit dealing with people and you just don't want to be beholden to anyone. I also will say, I mean, we started small. You don't need to buy a big company out the gate. We've since sized up our deals because things are going in the right direction. But I get calls every week like, hey, I saw that you bought stuff. Can we talk about it? I'm like, yeah, cool. How much capital do you have? I talked to a guy 2 weeks ago. He's like, I've got a million bucks. I have a HELOC on my house. I'm gonna like take some margin on my stocks. Got a million bucks. I was like, cool, don't spend a million dollars. Spend like $250,000 and then learn and then, you know, yeah, uh, make some money and then like, you know, then go spend a million like later.
Give us ballpark. So you said smaller ones have gotten bigger. What is that? What size now, even for like people listening, we're looking at like working with you, for instance, like now is way different than when you started. Like what size deals in general? Did you already have an idea in your head of like What that was going to be?
Tell us more about that.
Yeah.
Look, we bought stuff as small as things that are doing $10K to $100K a year in revenue. We bought stuff as big as they're doing a couple million dollars in ARR. We have put out offers for things that are tens of millions of dollars. In those cases, we would use some leverage, obviously. We haven't done a deal that big, but we've done deals in the double digits. Like low double-digit millions of dollars.
Yeah.
You know, I don't think like size is a blocker or whatever. Like I still love small things that can be big, but if we find big things, great. The valuations also are an issue 'cause when you get into like over, you know, $5 million of EBITDA, then like valuations are crazy and then it doesn't make so much sense unless you're gonna flip, right? Like, yeah. Uh, like I like to call Adly like private, private equity. Like because we don't have investors, it's better to just make things profitable and keep them forever versus if you're a PE firm, you buy, you grow, you flip, right? So the valuations don't matter. They matter, but like they don't matter as much. Um, you're also using other people's money, so it's a little bit more palatable.
You mentioned that like outside investors part of it, like is freedom the draw for you? Like what do you, what fuels you?
Yeah, 100%. I mean, I just want to eat dinner wherever I want and relax, take my parents out. Like, you know, someone was like, hey, maybe you guys should IPO. I was like, never. No, I don't want to be that public. Like, it's not—
The crazy part though is too, if you think about with what you're doing, if it keeps compounding and you keep investing more business, like, there's no reason it can't get really, really big anyways.
Like really, really big. That's the goal. Yeah.
I've seen who else is doing like, like Enduring Ventures stands out, Tiny stands out. Like there's ones like obviously Tiny went public, but different situation. Like they can get big. Like what is your, not the endgame, but like what do you wanna be doing? Freedom is one part of it.
Cool.
So you want to maintain freedom. Maybe it changes where you at some point get outside capital if, if it makes sense ever, but you don't wanna sacrifice freedom.
Like what is the endgame or like what do you want this thing to be? I mean, there is no endgame, I think. Inevitably we will sell stuff because there are things that we just don't wanna work on anymore or it makes sense to sell. We're issuing equity to a lot of our employees now, so we wanna make sure that they get something out of it. So we wanna sell things. Yeah, some liquidity. Um, it, we do have a lot of businesses in the portfolio that are like mailbox money, right? Like they're there. I don't think about them that much. I get a check every month. It's great.
Like lovely.
It's good for my kids and all that. Um, So yeah, I mean, I really know endgame, like, and I think that's okay. Like, I think a lot of people are so focused. I wanna sell my company, retire on a beach. Okay, you're gonna do that and then you're gonna go back to work out like in a week.
Like, yeah. Especially 'cause you're super ambitious and you're not gonna be able to just turn it off.
Well, that and like, you know, do you want your wife just yelling at you all day at home? Like, the truth comes to the back, right? Like, um, I love my kid, but like, do I really wanna spend that with him all day? Yeah.
Maybe some balance there.
there. Yeah, I think it's that. And then also, um, while I was driving here, I was actually thinking about this. I was like, well, you know, like, give jobs to my friends. I can, you know, hire my friend's kids. Like, it's good. Like, hopefully my kid will take over the business. Like, a little bit of nepotism is not a bad thing. Yeah. You know, so yeah, I think those are like the ultimate goals. Like, yeah, how do you build something that feeds your family forever and their kids and their kids?
And it's funny you mentioned, I was just like listening to a Invest Like the Best. Actually wasn't Invest Like the Best, it was like an interview with Patrick O'Shaughnessy, host of Invest Like the Best. And he was talking about how like he doesn't have an end goal either. He's just like, we want to make 10 out of 10 podcast episodes. I want to keep working with people who are doing their life's work and keep funding them and just keep growing everything. Like there's no like this goal, this date, this whatever. You just like want to keep, keep doing the thing and that compounds, that grows over time, but you're enjoying the process of it. Like that is the main thing. With what you're doing too, you You start with that small deal, done bigger deals, you can even do larger deals. Take us through that deal process. Where's your deal flow coming from as a starting point? And I want to know more then how you're evaluating deals.
Yeah. So I want to say 60 to maybe 70% of the deals came from brokers. And the brokers have been really good to us. We've got deep relationships with them now.
How'd you find them, the brokers?
Honestly, just Googling.
Really?
A lot of Googling, a lot of knocking on doors. Um, and then like asking those brokers like, hey, do you like, where else should we look?
Yeah.
Um, so that, yeah, most of that's there. And then the rest is like manual outreach. We've tried a lot of different manual outreach methods. It's painful. Um, a lot of the deals that we did were like buying competitors of companies we already own.
Yeah.
Um, that is easy because you have a target. You can like reach out to the founders, you can be aggressive, all of that. Um, these days, I mean, I probably get like 3 to 5 deals to my inbox a day. Granted, like a lot of them aren't qualified. Like we're not in the e-commerce business, for example. Like we don't buy e-commerce companies. Not opposed to it, we just haven't. So those are auto-delete. But, you know, I, I'll say like if we look at 3 to 5 deals a day, let's just say on average we look at 4 deals a day.
Okay.
So 120 a month, we might get on 2 phone calls with the founders. We have a long due diligence checklist that we'll send over. Usually it's like a week of DD, a week of quality of earnings, like making sure like what they say they're making is what they're making. And then legal is just however long legal takes. You know, we're usually really, really quick. Like, yeah, you know, we're lucky to have like a few attorneys that we work with really well.
Do you have any— whether it be like frameworks or check— you said obviously due diligence checklist is one thing, but like frameworks for deals you're looking at, what are you looking for? What gets you excited? I'm kind of like Trying to dive into your mind. Like, what do you? What does Sean see? And he's like, that's interesting. Like, what is it?
Yeah. So number one, in general, if someone's selling their business, you have to be like, what the fuck is wrong with this thing?
Yeah. Why are you selling it?
Yeah. Like why? And then like you get on the phone with these founders and like, well, it's a great business. Like it makes money forever. I'm like, well then why the fuck are you leaving? Yeah. Like you know. So like you have to. I think that's like thing number one. Like yeah. Be ultra skeptical. We like recurring revenue. Like anything subscription we love, we like software, we like, um, high margin, which is inherently software. We like things with like not that big of a team either because we can put our team in there. And then I think the thing is we stick to our expertise. Like we're really good at paid ads. We're really good at SEO.
Yep.
Can these things benefit from paid ads? Can these things, uh, benefit from, you know, SEO?
Yeah.
We're pretty good at like product fixes, like CRO stuff, like Our director of product, Austin, is awesome, does a really good job, brings a company in and just a couple small changes to the purchase flow can unlock whatever. So I think those are the things that we're inherently looking for. I got dinner with my jeweler the other day. I don't wear much jewelry. My jewelry— Where are all your chains at? My wife's jeweler, he's become a friend and he's like, He took over his dad's business and he goes, hey Sean, like I want to start a coffee business. I'm like, fuck no. No. How about expand the jewelry business? Like if you just increase your business by five percent, it'll be way bigger than this coffee business that you want to start. Trust me, and you're already really good at it. Yeah. So I'm like, if you want to buy something, like think about what your expertise are and then just double down on that. Like don't try to do random shit because it sounds cool. You saw it on a YouTube video or whatever the case. Like, yeah, you know, I talked to another guy that's like really good at sales, but he wants to go run like a software business that requires like SEO and paid ads. I was like, do you know anything about SEO or paid ads? He goes, no, hire an agency. I'm like, dude, just buy a business where you can go sell some enterprise contracts. Yeah, you'll do really well. You're so good at sales. Like why would you get away from like what you're already really good at? You know?
Yeah, that makes sense. So wait, 'cause that's like one part of it though. So red flags, what about, what about that? So you're looking through, obviously you're asking them, you know, why are you selling this business? What are red flags either from that or from the diligence? Like things you're like, you know, we can't live with, can't do this deal.
I mean, the P&Ls are very telling usually. You know, my dad is an accountant and he was like really forceful on like me having to know accounting even though I never wanted to be an accountant. So I think anyone that's like gonna do this, like go take an accounting class. Like the P&Ls are so telling.
Yeah.
So that's thing number one. Like, is the business growing? Is it dying? Like what are the growth levers here? You know, that's generally pretty telling. Um, just looking at traffic and ranking data is like really important. So like looking at SEMrush, Ahrefs, SimilarWeb, like, are they dying? Like, is the traffic dying? Um, looking at concentration risk, like, uh, is all of their revenue coming from like 3, you know, customers or something like that? That's scary.
Yeah.
Um, you know, are they selling because it's inherently dying, which is often the case. Like, are they selling because something's changing in the market? Or, you know, are there a bunch of competitors that have come in? Like, those are all really big red flags. Like, we looked at buying some like SEO tool companies and then Google changed their algorithm. There's a bunch of AI snippets and you start to see the company freefall. And when you have the call with the founder, they're like, yeah, yeah, I'm not worried about the Google algorithm, blah, blah, blah. I'm like, you are because you're selling the company.
Yeah, yeah, yeah. So that's not bullshit. Yeah.
You know, And so then you, uh, one, one thing that we do is try to ask founders like, look, if it's such a great business, like why don't you keep a piece? Like why don't you keep 10 or 20%? We'll have a clause where, you know, you can force us to buy you any single time, but keep a little bit. Or like as a part of the deal, like, uh, why don't you do an earnout? Like I'll pay you quarterly as long as the business doesn't, the revenue doesn't go down by X percent, like 10% in any quarter. I'll pay you. Almost all the good deals that we've done, the founder's like, yeah, it's a great business. Of course you can do that. No problem. If anything, I can defer some taxes for a year, whatever the case is. When founders are like, absolutely not, and they don't have a really good reason for not wanting to keep a little bit, even 5%, it's called schmuck insurance. We sell the company down the road for a lot more and we grow it, you'll get a lot of money.
Yeah.
Is the idea. But I think that's also like, why are you selling? And like, why don't you want to keep a piece? Or why don't you like earn out? Like, I think that's really important.
Are you typically buying out the entire thing when you're buying companies?
Pretty much always.
You are?
Okay.
So full. Yeah. Yeah. Makes sense. So that there's like different phases here. So there's seeing the deals is always like the first thing. Are you seeing deals? Then it's like, well, is it a good deal or not? Once you're kind of evaluating that, you also have to be able to get into the deals. Like the good deals, they're going to have competition because if everyone has seen it, That's saying they have, if multiple people have seen it, obviously there's competition. Why do you win deals at Edly?
I think a couple things. Um, whenever we talk to founders, I always tell them like, look, we're not a bunch of finance bros. We are gonna transition you out fast to the founder, right? Yeah. Like we've run tech companies before, we know what we're doing. I want to not talk to you after 30 days, and I know you don't want to talk to me after 30 days. Yeah. So like, let's make sure that that happens. So I think that on itself is like a big deal because think about like a private equity firm, right? Like a small private equity firm that's buying smaller companies. Yeah. You got a bunch of MBAs buying tech companies. They've never seen a line of code.
Yep.
You know, they have to have someone set up their email for them. Like it's not, it's hard. Like you're gonna have this guy calling you every day. Like it's just not fun.
Yeah.
So I, I think that is like a big one. I think the other thing is Especially in the cases where people are like retaining equity or whatever, like they believe in us. Like they think that we're the right people to run these companies. We have a track record. You know, we'll show that. We'll like open our books and like show them, hey, like if you want to see the P&Ls, like for some of these businesses we bought, we're more than happy to show you. And then we have a good relationship with the brokers. Like the brokers like know that we're not full of shit. Like we're going to close. If we put an LOI out, a letter of intent out, it means something. It doesn't It's not bullshit. Like, I think those are like the main things. And then we move really fast, like, you know, 45, 60-day close. Like, that's pretty fast. A lot of that has to do with we're deploying our own capital, so I don't have to like go call, do capital calls. I don't have to like ask a board, like, if I can spend my own money. Like, you know, that's good.
Fred, we good?
Usually Fred's like, Sean, we good? I was like, I guess, like, if that's what you want to do.
I mean, sure, why not? So what, what does that look like after? Because you have, you have a pretty big team, don't you? At, at Adly?
We're either 237 or 273. I don't remember.
Either way, it's big. It's like, so after the fact, you're buying out almost the entire company, typically like full ownership. You guys have all this expertise, like from your background, your history, whatever. Like what does it look like after?
So it depends. Like some companies come with some staff, which is great.
Like, yeah.
keeping developers, keeping customer service people around is good because they know what we don't know.
Yeah.
And we don't know what we don't know also. The founders usually leave and then there are things that our team is good at. So there are roles at AdLead that are almost like agency. So for example, we have a growth department, we have a Google ad buyer, a Facebook ad buyer. That person buys ads for the portfolio of companies. So they'll go in and they'll help or whatever the case is. Sometimes we'll replace an agency that, uh, most of these companies don't come with ad buyers, like just as an example. Um, and then usually the founder was the product person, so we'll bring in one of our product guys and product guys are really good. So, um, that happens. And yeah, actually this is an interesting topic because people are like, okay, like just buy the company and then you run it and whatever.
Yeah.
Like let's say it's $1 million. Hey, you spend $1 million. It's like, no, like I bought the company for a million bucks. I gotta invest another whatever afterwards to hire people because I gotta replace you, the founder, and, um, all the growth initiatives we wanna do, like they cost money. So like it's not a million bucks, it's like 1.5. Like it's not way more. Yeah. Um, and inherently I think like we've been successful because we get our hands really dirty. Like that's kind of the key. Like, you know, it's hard work, you know?
Well, I mean, you pay for the company. It's like you wanna make, make it successful.
Well, that's the thing, right? Okay. So like, let's say you pay 3 times earnings for a company, right? What people don't realize is we live in California, so 55% taxes. So that means that I gotta make 6 times in order to just get my capital back.
Oh, brutal.
So any ounce of growth we can squeeze out makes the capital return a lot better.
And it's all your capital, so it's just like—
Yeah. Yeah. But I mean, look, there, there's equity, right? Value. Like the companies are worth something. Like If we needed to sell, I like to think that we could sell some of these things. We, we haven't yet sold much, but you know.
When you guys started, so you had the agency, then you decided to buy more companies. How did you think about the team itself? Like what we were gonna need? Did you know right away like, hey, we're gonna be hands-on this whole time. We are gonna have to hire a bunch of people 'cause we're gonna fill all these roles once we buy these companies. I'm just thinking like, how did you think about what you wanted to build as a firm? You know?
It was really slow. Like I, I like the idea of hire when it hurts. So the first 2 hires were a growth person, a product person. And then my brother was the ops team with me for a while. He worked at the company. And then we acquired another company and this product manager kind of got upgraded to director of product. And then he hired like one PM at a time and it sort of snowballed that way. And then obviously like when you buy the companies, like I said, they come with some staff. So like inherently like, okay, like when we bought this dating site, it came with, you know, You know, 8 moderators. Um, the developer was the founder, so we had to hire, uh, hire developers. We had to hire a PM. Um, so it, it really depends. Um, you know, we didn't hire, like, we didn't plan to hire this many people. It just kind of happened.
You just have 200-some people now.
I mean, a lot of them are customer support, right?
Of course. Like, or contractors or whatever.
Yeah. Yeah. So it's not like I got like 200 people like sitting in an office somewhere, but yeah. It's gotten interesting. It's big though. It's, I guess so.
Wait, so your time is mostly what now? Is it a lot of meetings still, a lot of calls? Obviously you're the founder, you're still vetting, finding more deals clearly, but you also have this team. Where's your time spent now?
It's a lot of meetings. It's a lot of mentoring. I am trying to get away from, our team's good, so I'm trying to get away from like, hey, like this is what we have to do. And I'm spending more time like on special projects or special initiatives like When I was driving here today, I was like, we have like no presence on Reddit. Like, let me like think about this. So I was on a call with like a bunch of people like figuring that out. Then I'll like, we'll strategize together. I'll hand it off and then like people will run with it. I think these days it's like a lot of reporting. It's a lot of strategy. We have started an incubator arm too at Adly now. So now we're like starting companies again. So that's been fun because I like that part of it. Like it's actually, you know, interesting.
Yeah.
Yeah. So yeah, it's, it's been—
Why, why that, why that part of it, that incubation?
Deals are getting expensive. Valuations are up, money's getting a little bit cheaper. So I think when the interest rates came down a little bit over the past year, like a lot of people are trying to buy stuff. A lot of people are being forced back into offices. They don't want to go. So they, everyone and their mother is trying to buy a company now. Like I probably have this conversation like weekly, like, hey, can you talk to my friend? Like he wants to do what you do. He wants to buy stuff. I'm like, cool. And they always start with, I wanna buy a laundromat. I'm like, stop listening to every YouTuber that's telling you to buy a laundromat. Like, there's not laundromats left.
Was it Cody Sanchez or something? Like whoever her name is.
Yeah.
Someone.
I'm like, Cody Sanchez owns all the good laundromats.
She's already bought 'em up.
Yeah. Like, don't worry about it. It's okay. Like, buy something else. Um, so yeah, so there's a lot of people coming in. There's a lot of, um, dumb money. Like, you know, people look at like Silicon Valley valuations and are applying that method to private equity. And like, that's just not, you know, what I want to play in. And then I like starting stuff. Like, it's fun. Like, it's cool. Like, um, you know, Fred, my co-founder, is like, dude, you're obsessed with like making the first $1,000. We have businesses that if you just grow it half a percent, like, it's bigger than this business you're trying to start. I'm like, yeah, I know, but it's like really fun, you know?
But you're after freedom and like enjoying what you're doing. And it's already— you've already made money too. It's not like you're like I'm trying to make my first dollar here.
It's like watching your kid grow up. Hey man, this is pretty cool. I don't know. There's something inherently fun about it.
Oh, I totally get it. It's like constantly trying to figure out how to focus because there's so many different things going on, which is always a struggle. I'm curious about a few of your portfolio companies. You have so much, you have a mix. You have content businesses, you have software obviously. You have a lot of different things. Why the content businesses? Where does that fit? It's like, that's gotta be a passion project. There's like a watch company. There's like—
That was a fuck up. That was the, hey, like, let's buy one of these and see if it's a good bet. And they're fine. Like, they, they go well. It's just, they're not as growable. We are like trying new things and they are growing, but not at the rate that a lot of the software companies are. So 2 things, like, um, Fred and I sat down and said, hey, should we buy all the same shit? And he's like, no, because, uh, if there's ever a down market, we're not gonna get screwed. So for example, like these content businesses with all the AI stuff that's going on.
Yeah.
Um, aren't growing as well as they should. Fine. We only have 2 or 3, 3 content businesses. So, you know, that's not a lot of concentration risk. We're not relying on that, right? Like, um, so yeah, so that was a test. Um, we have not bought any additional content businesses since. Um, but also like we bought those businesses. I'm really into watches. So like the watch site's really cool. Like it's more fun more than anything. So I don't regret it. I'm just saying like we did one and like maybe let's not do that again.
I looked through and I was thinking the same thing. I was like, well, this seems like a fun thing to do.
Yeah. And like, not everything is about making money. I mean, ideally it is.
Um, but, but it's your money, it's your capital. So you can do that. as well. You're also not justifying that to investors.
Yeah. And I—
okay.
Yeah. So that's actually a good point. I didn't think about that. Like, that's, you know, it's fine. Um, and again, like inherently they're worth something. So if we really wanted to sell it, we could, but yeah, I like it. So.
Well, on kind of, well, I guess other end of the spectrum, kind of this AI, um, this education, this writing app, it was a writing tool. I think it said in the website has like 10 million users or some crazy number of like millions of you.
It's a lot. Yeah.
What's the name of that?
It's Modin.
Yeah. What's the story with that?
We, it was a good deal. I liked the founder a lot. Yeah. And inherently a lot of the AI companies that are coming out just wrap something around ChatGPT's API. We don't do that. Like they have their own, um, LLM. Um, yeah, it actually is good. So like I sat down and I tried all of the like AI content detectors. for example, and ours is actually the best.
Yeah.
We don't do a good job of like packaging well. Actually, a redesign went out yesterday and we're gonna do another round of redesign. So we're working on that. Um, but it's just a good business. Like, uh, came with like a large user base. A lot of the users are free users. So, you know, part of the objective is like, how do we convert some of them into paid? And maybe we don't, like, maybe like we should monetize in other ways. Like the site gets a lot of traffic. Like maybe we should run ads. Like, I don't know.
Hmm.
So, you know, I, I just like it and the numbers made sense. The founder's good. The team's really good. Like it checked all the boxes and, you know, going back to like why people sell, like he was like, look, this is my first business. I love to travel. I want to like, you know, take some money off the table and I'm going to go like travel. And he actually did. Like this guy called me from Machu Picchu like a month after we bought the company. I was like, dude, I need you to 2FA on your, Gmail app. Like he goes, dude, I have like really bad reception. I'm on my computer right now. I was like, bro, trying to get into the Google admin.
Like, come on, man.
Yeah.
I did what I said I was gonna do. I'm traveling.
Which is good. Like, I mean, that, so that, like, that's a guy that like was, hey, I wanna sell my business 'cause of X, Y, and Z. And then he did. So.
That makes sense. That's a, I mean, that one seems to be crushing it. It's, it's the first one listed. I dunno if it's the most recent, but it definitely is crushing it. It seems like.
It's good. I mean, um, not without its challenges.
Always.
But Um, I like it. Like, yeah, it's something interesting.
Like, on that, that point of AI, where does that fit into your process at Adly and also what you look at these companies? 'Cause I'm sure you're seeing something.
Yeah, it's a lot of noise, honestly. Like, people's like, you should AI everything. I'm like, eh, maybe not everything. Like, yeah, we use it like, you know, to help with the process. We use it to like, if I don't really wanna build a spreadsheet model, like use ChatGPT or whatever the case is. So yeah. I am cautiously optimistic. It's like, you remember everyone was like, oh, Apple Vision Pro, like, you know.
Oh yeah.
VR is like the next thing. Like, okay, who has a VR headset? Like, you know.
Or uses it if they do have it.
Oh yeah. Like it's just like the next hot thing and it's very useful, but I'm cautious about overinvesting in the space. Like, yeah, it's a little scary.
It's still early, to be fair.
It's early. And then like, you know, maybe next year there's a new, you know, thing that everyone— remember it was like crypto. Crypto was like this, it's that. Like now crypto's getting regulated like crazy. So, you know.
Yeah, it feels like AI is different, but also it's early and we'll see what you— because people are saying like, to your point, the, the kind of ChatGPT rappers, it's like, well, now you saw like DeepSeek or whatever compared to ChatGPT, you're like, oh wait, maybe that wasn't as important as What's the user interface? And these wrappers can actually be super viable. So it's interesting to see this kind of back and forth of that. I don't know where that goes exactly, but I am curious. It's like you're seeing a bunch of companies in general because you're obviously buying companies. Like, do you, do you buy some of those companies or not? Like, if—
We looked, um, yeah, anything that's like a wrapper type of a thing, like, we don't buy because, you know, Smoten's good because it inherently has its own tech.
Yeah.
Like it's proprietary, so it's actually valuable. Yeah. Um, I think there's gonna be a lot of consolidation. A lot of the guys that are selling their AI companies want crazy valuations.
Oh, that's true.
You know, so I'm like, this just doesn't make sense and you're probably gonna get crushed when ChatGPT decides to go into your vertical or whatever.
Like, it's a risk.
Yeah. I mean, like, okay, like example, like I have a lot of friends that are using, um, one of the ChatGPT plugins for therapy. Yeah. And it's supposedly really good. I'm like, great. Um, but there's 30 of them, you know? So if ChatGPT decides tomorrow, like, hey, this one's doing really well, it, let me give you a better example. Yeah. It's kinda like, remember when, um, Amazon was like, cool, Allbirds is doing really well, we're just gonna make Allbirds.
Yeah, yeah.
It's like, you know, like that can happen and like you're kind of screwed overnight. So, you know.
Ah, it's so hard to like play in that space then, like figure that out. One of the things I wanna end on though, I know we're getting close to time, but I want, I'm curious, you mentioned like starting businesses, obviously incubating businesses. I'm sure a lot of people out here listening to this and like newsletter, podcast, all that stuff, they're starting stuff. Or even if they sold stuff before, they're still starting stuff cuz we're in a very interesting time of the AI stuff. But also it's just so easy to start anything now. How do you approach starting something from scratch? Like what do you look for? What, just following your interest? Like tell me more about starting things now.
Yeah, I think it's, I don't think we're that good at reinventing the wheel. Like that is not what we're trying to do. I think we see things that work in the market and we're like, you know, one of my old bosses said this to me a long time ago, CEO of Guthrie Ranker. He goes, Sean, I don't need to be Peloton. If we're Pelotron and we make 1% of what they make, we have a great business. Right?
Yeah.
And so I think like inherently that's, what we're looking for, like what exists that we can do slightly better or what exists. Like for example, we bought a company that was monetized on display ads. Like I was saying, like we're really good at paid, so, or in subscription products. So like, let's just layer this in, like, you know?
Yeah.
Just because they're doing it that way doesn't mean it's the only way to do it. Um, so I'm trying to think of that. I'm also thinking about things that are very simple and like very straightforward. Like I'm not even opposed to buying like, uh, brick and mortar, right? Like, people are getting away from that. Like, uh, we don't have anything, by the way, yet. Uh, but I'm just saying that like, if someone brought us a deal and the numbers make sense and, you know, whatever, like, we'll do that. Um, so again, I think it's just all about business principles. It's all about looking at data, uh, making sure that we can actually monetize things. And, and that's inherently it. Like, I am not at a point, at a place in my life where I want to like, go solve cancer or something like that. Like, it's just a problem. Not what we're good at, right?
Yeah. Not your experience. Is there anything right now you're like, okay, I would like to start this, I don't have time for it, or I'm getting to it eventually? Or like, what's on your mind?
Yeah, I think a lot of the content stuff is interesting. Like, I think there's a lot of stuff that we can do with like The Modest Man, for example, that we don't really have time for. It's not necessarily our expertise. So as an example, like our head of growth was like, hey, I'm really into fashion and clothing. Like, maybe we should start a clothing brand. I was like, like everyone and their mother has done it, but it's not a bad idea because we have, you know, a pretty big community for The Modest Man. So maybe it makes sense to do it, right? Yeah.
Like where's your competitive advantage?
Yeah. Yeah. So I think like, you know, maybe we have a lot of platform businesses and there's a lot of stuff that we can expand on.
Yeah.
I actually think that's like kind of interesting. Like we have a lot of businesses that have been like, I was saying mailbox money that we could probably do a lot with if we just focus. So that's the other thing I've been thinking about a lot is like when you have 18 companies, like no child gets loved the most. So maybe we should be like putting people in charge of, you know, growing this like one sector or like adding features that like are actually pretty good. So, um, I think inherently that's like, how do we start businesses on top of what we already have?
Like, yeah, you know, it's a big foundation there already.
Well, you know, get in there.
Yeah.
I want more stuff.
There's always more stuff to buy.
That's the thing.
Maybe next thing is a winery and maybe you come back to it. You're like, oh, Paso Robles. Like, let's come back to that.
How do you make $1 million in wine? You start with $10.
Of course. Yeah. Well, you, but you say you're not, not trying to make money with everything necessarily, so maybe that's the event.
Yeah. I really love wine. So yeah, there's that.
That, that tie-in with content is interesting. Uh, just from a fun perspective, I think it could be interesting. Um, where's the best place for people to reach out to connect with you if they want to?
Yeah. Um, LinkedIn. Um, you can also email me, sean@adley.com. You know, I respond for the most part to everyone's emails and Yeah, I'm like happy to be helpful. Like, I think there's a lot of like consolidation happening. I think there's a lot of people that want to be doing things but are just not approaching it the right way. Like, I went to dinner with some friends last night and they're like, we want to buy a business. I was like, cool, like, let's talk about it. Like, maybe I can invest. Like, that'd be really cool. So yeah, that's, that's sort of the idea.
Open opportunities though, all the time.
Yeah, always.
Awesome. Sean, thanks for your time, man. Appreciate it.
Appreciate it. Thanks, man.
