A Founder's Guide to Lean M&A Strategy with Christian Hassold

This episode is brought to you by dealroom, the M& A platform actually built for buyers. Most data rooms clunky seller first zero real workflows. Dealroom flips that script. It's the number one platform for buyer led M and A. Designed so corporate development and private equity teams can run the deal end to end with speed and control. You get built in project management, smart templates for diligence and integration, real time collaboration across teams, and AI features that actually reduce the work, not just repackage it. No tool hopping, no chaos, no surprises. If you're ready to run a tighter process and close better deals, go to dealroom.net or hit the link in the description Lead the deal, Own the outcome take dealroom.net now back to the episode. I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Foreign. A Scientists welcome to the M and A Science Podcast. This show is part of our mission to rethink how M and A is done and build the operating standard for buy side M and A. That old school seller led approach. That era is over. Buyer led M and A is about strategy alignment and execution, putting value creation at the center of every deal. And let's be real, it's not just about closing the deal, it's about it's about making it successful. And we get there by learning directly from the best. You want to go deeper into the framework? Grab my book Pyre led M&A if you want the full system frameworks, templates, exclusive content expert Q and A sessions, access to me and the AI Powered Intelligence Hub. Join the M and A science membership@mascience.com it's the home of Biolet, M and A. While there, make sure you sign up for a free newsletter. Lead the deal, Own the Outcome let's jump in. I'm your host Kisan Patel. Today I'm joined by Christian Hassel, Senior Vice President of Corporate Development and Strategic Partnerships at W Promote X giant Spoon, a leading independent digital and creative agency. Christian's path to corporate development is a bit different than most. He's a recovering founder and CEO who built and sold three companies over the past two decades in both enterprise software and tech enabled services serving digital commerce and media. His experience as an operator provides a unique lens on M and A strategy, especially when it comes to tying corporate strategy to inorganic growth Creation has a track record of building corporate development functions from scratch at companies like Channel Advisor, where he created their first corporate development function as a public company. Tech Unicorns, Commerce iq, Salsify and now W Promote X Giant Spoon. Most recently, he led the acquisition of Giant Spoon by W Promote to create one of the largest digital and creative agencies in the US and has some fascinating perspectives on what actually works when you're doing M and A at companies under a thousand employees. Christian, how you doing today?

I'm doing fantastic.

Hey, thanks for making a trip to actually one take a break from doing deals. Two come here to Boston, our headquarters of Deal Room to have a conversation with me.

I I love that you're here every time we meet. We're in New York City, so I assume your gang affiliation is New York, but here's your entire team here in Boston, Massachusetts. So excited to be here and excited to be with you.

You got like a good day. Middle of the week. The office is buzzing today. Can we kick things off a little bit about your background?

First thing that I should share is my roots are in entrepreneurship. If you go back in my lineage, my dad was an entrepreneur, my uncles were entrepreneurs, and before that my great grandparents, they were all entrepreneurs. They've all owned and operated their own businesses over the years and that is deeply in my blood. So I am very much at the foundations. Someone who likes to challenge traditional thinking, think outside the box and looks at pretty much everything as is this a business opportunity? Could this be a business? How can we take this and make it bigger and better? And that's I think foundationally who I am. I'm a little bit non traditional in that way in that I incorporated my first business when I was 15 years old. I built that business up into sizable for something at that age. I then transitioned into the music business. I failed terribly at it. My dad made me go to work for Circuit City Stores and learn the roots of operations management and running a business and working for someone else. Which gave me a lot of foundational skills around leading teams, thinking about how traditional management styles and operating modes are translatable to building businesses from scratch. From there, I was very fortunate to build several different startups, get my education later than most people would get their education. We can talk about that a little bit later and then ultimately build two more companies and sell them before I transited into corporate development.

There's a lot to unpack there. I like when he started at 15. The one thing I actually really appreciate is your dad. He didn't go to Circuit City to learn business operations.

When I failed at that second business, he came into the living room and he said, you're going down to that store and you're going to apply for a job, you're going to work for someone else. That was a tough conversation, but it was the right thing to do and I wouldn't go back and do it a different way.

And that's something I find a gap in my own background. I never saw like a lot of the operational scale always just built something from scratch to the next thing. And next thing. Yeah, well there's that part that was interesting. Transition to corp Dev. What prompted that?

The way I got started in corporate development was completely by accident. I don't think I knew what corporate development was when this happened. As you mentioned at the top, I built and sold three companies. The first company was a complete luck shot. I met a guy named Tony Aquila who is a very well known successful founder and inventor. He's built billion dollar enterprises at this point. But when I met him, he hadn't done other than started a small business. And he came up to me one day and said, hey, do you want to start a company with me? And on that day I became an employee founder of a company. And I went on this journey whereby from scratch we built a business that from day one was basically built through a lot of inorganic means. What I mean by that was in 1999 when this company started, capital was really easy to come by, ideas were really easily funded, but we had really big ideas about the amount of money we wanted to raise and the business that we wanted to create. And one of the conditions that our investors at the time, which was CMGI and Juan Partners, they conditioned that as a part of starting the company, we would take over the employees and the infrastructure of a company that wasn't working out. So on day one, we were literally aqua hiring employees from another startup, taking over their balance sheet and a lot of their cash and their people and interviewing them for jobs in a company that they didn't apply for. And that was really an inorganic way of starting a business. So on day one, after getting funding, we had 30 employees who had just come from another company that was doing something peripherally similar but quite different. And that company went on to do three more acquisitions. And I was not really a part of the deal process. I was more of the identify the opportunities, vet them out and help get them integrated into the business. And that really started my interest in what is corporate development. But I didn't really know what corporate development was at the time. And as my career evolved, I became a little bit more keen to it and it just became this muscle that was natural. I didn't have a label on. It was more like inorganic was the natural way that I enjoyed building businesses.

That's fascinating. Given that background, how do you think that influences your approach to corporate development today? Cause that's very non typical.

You could look at it one of two ways. You could look at it as a blind spot or a superpower. I like to think it's a superpower. When I meet CEOs that say, I have a vision for this business, I'm going to build it completely organically. No one can build this product, no one can build this business better than I can organically. I will be the one person in the room who will raise their hand and show them five companies that they could acquire that would accelerate the speed with which they grow and give them capabilities that they didn't have, that they would spend a lot more money and time making mistakes, going and figuring out what to do rather than going acquiring them inorganically. If a CEO says I don't want that kind of thinking in my building, I'm probably not the right person for them. But most CEOs want someone who is thinking outside the box around them and thinking of ways to accelerate, to grow and to create defensibility for a business. And what is a very fast moving environment. Growth really matters. Profitable growth really matters. And there are so many ways that you can go about building a successful business. But one of them is having really smart people and people who really have a passion to build whatever it is you're building. Whether it's I want to build the best deal room software that's out there so M and A practitioners don't have to spend time trying to find their way through clunky deal rooms or I'm in commerce. What's the most efficient way to enable commerce and get to every single human being and make commerce frictionless? Whatever those problem sets are, if you assume that you're the only person that can solve those problems and no one else is thinking about it, then you're counting out that there are a lot of smart people in the world. I'll just give you one quick example. Put this into modern day thinking. The founder of OpenAI, Sam Altman. This business has been built from scratch, but to date I think they've done something like 40m and a transactions and one transaction at a time. They're getting best in class talent, best in class ideas, and that company is moving fast. It is accelerating fast. It is evolving faster. Can you imagine a universe where OpenAI said we're going to hire 100 people? We think that the people that we hire are the only things that contribute to growth. And to this company being highly defensible, it'd be a different company than it was today. And so we sometimes discount the magic that M and A can do in a business. And that's probably my blind spot is if someone hands me an organic growth plan, I'll always be thinking about what are the inorganic ways that you can grow it.

That's interesting. So you have this operator executive lens on just business operation. You've seen how you can supplement with M and A. That's how it gives you the appetite for it. But you go back to bringing that full picture executive thinking to the deal.

Absolutely.

What's something you wish you knew before your first M and A deal?

There's three things that I wish I knew before my first deal. One is assume nothing. You really have to take time to deeply understand one the motivations and goals of the business that is doing the acquiring. And you can really never spend enough time with not just your executive team, but other key leaders in the business who are going to make inorganic strategy successful. Don't make assumptions about what their motivations are. Don't make assumptions about what they do or don't know or what they understand inorganic strategy to be. The second thing is committing to your craft. And by that I mean this is a world where there is so much knowledge out there and you really need to be a lifelong learner, a sponge, a absorbing the different ways of going about running an inorganic strategy. And one of the things I've been incredibly grateful for is this podcast. And I really mean it, Kiesen. Because when I started corporate development function at Channel Advisor, I was reading books and I was studying materials that were available to me. I wasn't really listening to podcasts. The one thing that really helps you become better at your craft is listening to other practitioners, understanding the hard things and how they navigate the hard things and also having a perspective of what a corporate development leader in a 10,000 person company is doing versus a 1,000 person company. The way you go about it in different size companies, it has to be different naturally. But you really want to study and understand the different ways of doing deals. Committing to your craft is really important and that really ties to also being a sponge. It's just being willing to take input, take insights and take feedback from others and use that to make whatever you're doing better.

Good principles, assume nothing, be sponge, keep learning, be committed to the craft. One of the things you mentioned was tying company strategy, your company strategy, the M and A. That's your sweet spot. You walk me through that?

Yeah, I mean, I think one of the things I've established at the top is there are two kinds of practitioners in corporate development. Some come with a consulting or finance background. And there is a particular way in which those practitioners approach. Looking at M and A, I think it's somewhat academic and incredibly financial model oriented. And there's another way which is I have real world business experience in building a company from scratch and, and knowing what it's like to build a product function, build a go to market function, build one in the US build them in Europe and other theaters. One of the things that is a superpower that I run with is I have the context of building and running a business and being a CEO. And I also have all of the shared knowledge that I've gathered from other corporate development practitioners. And one of the things that I observed consistently is misalignment around strategy. Strategy can be a very broad term that can be so broad as to be meaningless. Companies sometimes over engineer strategy. So one of the things I do well is I work with leadership teams to really get inputs from all points on what are the common points of agreement about where the company should invest in organically. What evidence do we have underlying the business either in our sales calls and feedback from clients and feedback from internal teams. Can we synergize, put all together and say, okay, these are the things that are really common beliefs. Let's go at working at solving those common beliefs and running with it. And one of the things you have to be willing to do in building strategy is one being firm on we are going to build this company inorganically and we have some clarity on the specific things that we're solving for, but flexibility on the details given that the business is an amoeba, it's a moving mechanism and you don't want to shift strategy every 12 to 18 months erratically, but you also want to be flexible enough to understand that some information you didn't have has now come to light. In the companies that I work in, which are typically companies with a thousand or less employees, I've found a moat there where my business experience and generally my strategic sense is able to tie those things together and communicate a strategy, a team that everyone can say yes, we're behind that and go run with it.

Can you teach me how to do this?

I love to do that. I've got some pillars I can walk you through. This is kind of deep diving into a framework for what I would call Lean M and a strategy. I differentiate this from playbook. My CEO Andrea Benzik at wpromotex giant Spoon and I were just talking about it. A framework is something that is firm but flexible versus a playbook, which sort of implies here's exactly what we're going to do at each step of the way. I really like the idea of emphasizing that this is a framework. So the framework has five fundamental steps. Deep dive the business, define and battle test the strategy. That is, what is the problem you are solving, communicate the strategy, run the funnel, and commit to close. So let me walk you through that framework. The first thing is, as I was just mentioning earlier, which is deep dive the business. When you come on as a corporate development leader, especially in a company that's ever had one before, the first thing that happens is people come to you with a million deal ideas. And the footfall of this function is to immediately start running at those deals that are sitting right in front of you because you want to hit the goal. It's always great to be a corporate development leader that gets a deal over the line. And when teams are already aligned around one or two specific targets, it's easy to go running after those. I like to pump the brakes and say, okay, what is it the problem that we are trying to solve here? So I like to really go into the business, talk to sales, talk to customer success, talk to the leaders, but more importantly, talk to the clients. And you really want to spend time doing, whether it's a third party consulting or doing your own work, to really understand what is it that the customers want that you can't do for them today and what are the things in the business that are less defensible without those capabilities, without that software, without those services. Really deep dive and understand the business. And I like to make the important point of this is a collaborative process. You want to actually bring people into a room, let everyone speak and debate in an open forum about the things that they see and note and understand where people are aligning and where they are not aligning and, and use those tensions, creative tensions, to find a way to align on the fundamental strategy. As I mentioned earlier, the next thing that you want to do is to define and battle test the strategy. And what I mean by that is you've defined the problem that you're solving, but you want to battle test it a little bit. You can battle Test it with investors you can battle. Test it with bankers who are observing the industry and say, hey, we're thinking about doing this. Are my other competitors thinking this way? What do you think is missing from this? You want to take the time to synthesize the strategy and shop it around, if you will, and get feedback. You're not trying to completely disrupt what you've created because there should be truth in that strategy that you've developed. But you want to get outside input to really say, okay, I've thought in a 360 way about this. Once you've got that strategy nailed down, the CEO says, this makes great sense. Run at it. The team says, we believe in it. Go do it. You then want to communicate the strategy. When I say communicate the strategy, people will frequently think, communicate it internally. Communicated internally is only part of that. Your inorganic strategy should not be a state secret unless you're building thermonuclear weapons or you're building something that is so sensitive that if someone else knows about it, they're somehow going to be able to disrupt your plan. One of the common points that other leaders bring up is ideas are really meaningless unless they're actually executed really well. In business, if you have a strategy, you shouldn't be uncomfortable finding friendlies outside the business to shop it around. So one of the things I did in communicating our strategy, I'm one of the only corporate development leaders just tooting my horn here. For the record, I'm one of the only corporate development leaders in my sector that build a 10 page deck that I shared and communicated with other bankers to help them understand exactly what our company was looking for. These are our three priorities. Here are the tenants on which we are evaluating these priorities. Here's the kinds of deals we will do. Here's the kinds of deals we won't do. We provide an incredible amount of transparency to our banker community. So the deals that they would bring to us would be well aligned with our interest areas. Rather than getting a rainfall of sims and inbound deals that were really not interesting, that will happen, but you just want to have a frame for which you're going to be able to evaluate opportunities and also give very direct and specific feedback. Your partners, whether it's a banker or whether it's someone who's just giving you a deal idea, giving them feedback because you are, as a corporate development leader, one person. And generally speaking, our functions, whether it's a company of a thousand or ten thousand, are very small teams. You are only good as the number of People who understand what you're doing, who can go out and search for those opportunities that might make the most sense for you. I really look at the community to the extent that as many people as possible that you can trust have your strategy in hand and know what you're looking for so you can maximize your funnel. And that leads into running the funnel. You now have a strategy, you now have the filters in place. You know what you're looking for running the funnel. There's two parts to the funnel. There's the organic part of the funnel that is you going out and proactively using AI and other data mechanisms to identify businesses that will be interesting to you. And two, using banker networks to bring you the inbound deals. For a lot of industries, bankers tend to be the most reliable source of actionable deals that are easier to get done. Proprietary deals are very hard to get done. But that doesn't mean you shouldn't go after proprietary deals. But you want to make sure that you're balancing running the funnel with banker LED opportunities and organic led opportunities. The reason why you want to be doing both is organic opportunities give you a lens of getting directly to the founders and building relationships with founders and talking to them about their businesses and where they are, what is their thinking. In the process, you're also learning about the space around you. When you're working through bankers, you don't have as much access to power. Access to the leaders on the front line lacks that sort of organic context on what's happening around you. So I really like to do both. But running the funnel is the process of, at a high rate of speed, getting 100, 200 opportunities into your funnel and you're working your way through them. Because a hundred opportunities in your funnel will likely only materialize one to two actionable opportunities. Experience after experience tells me you need to have at least a hundred opportunities in your funnel, at least in the industries I've worked in, to get the one or two that are potentially actionable. And, and the last thing is to commit to close. You're going to identify opportunities that are right for the business. What I mean by commit to close is running the process on the assumption that you are going to close this deal until a point where you say we shouldn't do this deal. I'm not saying go blind into the deal and not be skeptical or not be looking for reasons not to do the deal. What I'm saying is commit to a process that ultimately is to close a transaction unless you are given a compelling reason not to Close the transaction. And so those are the key pillars.

Just to get clarification. So commit to close. You made a point that people tend to find looking for red flags to not do the deal, but you got a perspective of more of real alignment, commitment, actually doing the deal and making the deal successful. Is that the general gist of it?

If you're running the process right, and you're looking at a hundred some odd different opportunities and you've rounded down to one or two and you're pursuing those two, there's a reason why you got to those two. Don't discount the amount of time and effort and energy that has gone into identifying those two opportunities. If you've run this framework roughly as I've described it, you should have 1, 2, 3 actionable opportunities in front of you. You didn't get there by accident. You got there because the team, as a team said this is the right opportunity. So what I mean by commit to close is, is that by the time you've gotten to identifying those one or two actionable opportunities, you don't want to be waking up every day with someone saying, oh, this thing happened or that thing happened. The reason why you shouldn't do a deal is not one specific thing. It's usually a collection of things. You're not ignoring those collection of things. What you're doing is you're cataloging them and keeping them in mind. And if it's three times in a row, the founder is saying things that aren't true and they're not owning up to it. Okay, red flag, we need to pause. If you're going through the financials and you're finding consistent issues with the integrity of the financials, or you're finding the potential of financial fraud, okay, red flags, stop the ship. But short of those big red flags, run the deal to a point where you say, we're committing to close this or not.

So you operate at the level of certainty, but being mindful that if you do collect enough of this.

Yeah, absolutely. I mean, absolutely. I'm not saying you don't pump the brakes on a deal, but you as a team, be in the mindset that you are going to close one of these three deals and you're going to close the one of three deals that makes the most sense to close, and at the point where you get a loud and blaring sort of a flag from the team that says the culture's not right, we don't trust this founder or CEO, we don't trust the integrity of these financials. Whatever those key red flags are, you want to surface those things. You want to make sure there's an environment where that can come up, but you also want to make sure that one or two people saying, oh, I don't really know if this fits with our strategy, but let's have a conversation about that. Let's keep moving things along.

Okay, so the five stages Dive deep into the business. This is where you really want to understand what your customers want that you currently don't offer defensibility in the marketplace. 2. Define and battle Test the strategy. This is when you're really taking what you developed as a strategy and socializing it. Quick question on this. When you say socializing and shopping around beyond just the company, who does that include?

It's really important to communicate your strategy to as many friendlies as possible. Let me back this up for a second. So, communicating the strategy. What is the problem that I'm solving by talking about communicating the strategy? The problem that I'm solving is there's one of me. There are a thousand employees and there are hundreds, if not thousands of bankers and others who are out there sourcing deals for various parties, your company included. The problem that I'm trying to solve is there's only one of me. I can only touch so many people in a day. If I can create network effect by effectively communicating what it is we're looking for with banker partners, with other advisors who I consider to be friendly and are not going to use that information in a way that is not in my best interest, I want to be able to communicate that strategy because that is just more people knowing what I'm looking for and bringing opportunities into my funnel. Remember, the funnel is fundamentally a math problem. You can get a hundred opportunities into the funnel, but you're only going to be able to action one or two of them that are really going to fit. And the more that you have coming through your funnel that fit the top of funnel filters, the more you're going to be able to have your choice of the right opportunities. So it's really just using the network around you to get as much opportunities into your funnel. That makes sense. So you can action like the optimal opportunities that get down to the bottom. You just want to find the one or two that that you can do that you're really excited about that are a really strong strategic fit. They fit with your strategy. There's a culture fit, there's great financial metrics. It's hard to find those opportunities out of thousands. So network effect is really what communicate the strategy.

So don't be reserved about it. Get that out there, communicate it. That's your third pillar, was communicate the strategy. You had a view of not only doing it internally, really getting it out externally, but this also allows you to clarify the market, very clear criteria in the businesses that you're looking for, thought through and aligned with your strategy. And then four, run the funnel. You mentioned organic, which is doing your own hunting, inorganic, working with the different intermediaries on the market, but put a lot of effort in your organic efforts. For every hundred businesses you look at, maybe one or two are actionable. I like that rule of thumb and then commit to close. It's like approaching this deal with this level of certainty that you're committed to, committed to doing the deal. And then the skepticism is something you sort of build as your model. If you collect enough evidence, then you can act on that skepticism or red.

Flags that you identify one thing as I'm auditing. What I'm saying with you here right now is if I'm another corporate development practitioner or an executive, they're going to say, wow, he said commit to close. He basically is not willing to pull the brakes on a deal. But for a complete red flag, I want to say something important about run the funnel because we're being super technical here. I always say to my teammates that M and A is a team sport. One of the elements of run the funnel that I didn't mention that I should mention here is running the funnel includes having regular standups with your deal team, with your key players, usually your chair or exec chair, your CEO and a couple of other informants within the business and running them through what are the deals that are in funnel, what is interesting and highlighting to them what you are seeing in the funnel and having questions. Is this interesting? Does this fit? Should we get on a call together with this prospect and talk to them in more depth about what they're doing and make sure that strategic fitment is there. What I don't want to leave out is running the funnel is not just the tactics of sourcing and getting things into the funnel. It is also the process of being highly commutative and highly collaborative with the team around you to make sure that the opportunities are getting to the bottom of the funnel are ones that everyone at the table says, this should be here. So by the time you're getting to the point where I'm saying commit to close, you've all looked at this thing five different ways and now you're going into the business diligence portion where you should already have some conviction around this is the right deal to be doing. The order of magnitude of things that should stop the deal dead in its tracks should be dishonesty, fraud, or just plain culture is not fit, or something broke down in the strategy that wasn't plainly obvious to you earlier. There's always going to be skeptics of a deal, and healthy skepticism is great. You should have open conversations about things that make you skeptical of deals. But fundamentally, by the time that deal got to that stage, the reasons why you should walk away from a deal process should be things that really are counter to everything that you thought it was by the time it got to that stage.

You know, one of the other things I think about when you use the phrase come into close is the integration piece, because a lot of times it gets pushed back where it's, hey, want to have certainty to close? We want to like really make sure we're going to close and then we'll loop in the integration folks. But I think of approaching a deal when you have that commitment to close, you're really building in how you can actually pitch your deal thesis, how you can integrate the business and bring that into your process with that level of confidence that we're going to close.

Actually, I love that you brought that up between run the funnel and commit to close. There's an important point where you should establish a thesis. That's probably another point of clarification, which is there should be a thesis going into the deal when you sign the loi. Here are the reasons why we believe this is the right thing. Here are the metrics, or here are the strategic changes to the business that we believe will be positively impacted if we do this deal. You should always be testing the thesis against the deal as you are running through the process. That's kind of one of the backboards there, and there's probably more chapters in the book as you go through each one of these steps. But certainly you should have a thesis and you should battle test that thesis. One of the things that I learned by listening to your podcast and one of the things that I learned the hard way by listening to others was post merger integration should be stood up the moment that you're signing an IOI or an loi. The PMI team, the team responsible for integration, should have a front row seat on the process. The moment that you have agreed to deal terms, others might say they'll be a part of the process all along the way. And basically they're in the listening room but you're intentionally standing up that integration process the minute that you sign that piece of paper. And the reason why you want that team there is they are there to listen in on both the thesis and also to be an audit on culture, to be an audit on how will these things come together practically in the business. We'll own it. Post closing. Who will own these metrics? Post closing. And it takes a lot of time to learn that. So this podcast and this discussion is not really about imo. But I don't want to discount the importance of IMO being a critical part of the team when you get to the point where you identify that prospect as the one that you want to carry forward and you have deal terms agreed upon.

Thanks for clarifying. Can we role play this out?

Sure, of course. Yeah, let's do it.

Okay, here's a scenario and I'm being a little open here.

Okay. Yeah.

I Talked to about 60 growth equity funds in the past year behalf of Deal Room.

Wow.

I think there's two things that I've realized. One is you got to have a strong story about your tam. That's got to be a big piece. That's the number one thing investors are always skeptical about. You got good growth now, but how long is that going to continue for? I noticed that with Deal Room it's like, well, today everybody uses software to sell a business, but very few use software to buy a business in the future. I see a world where most people are using software to sell a business and most people are using software to buy business. That's how I view TAM, is that it's going to change. That's one point of something that in terms of organic growth, it's a big emphasis on tam. And then inorganic was an area that I struggled where in our space it's not very fragmented. There's only a handful of direct competitors. If you have an opportunity to acquire them, it's a one off and there's only one or two really viable targets there. And when you're really trying to build a strategy, if you want to work with top tier equity investor, that's part of it, they'll help support in organic growth. That was the thing I struggled with is like adjacencies. I feel like the business at 10 million ARR still needs to develop that core central distribution to make it more compelling to start tacking on other products. Until we get that, which I felt, hey, probably another 10 get to 20 million ARR, we'd really have that matured. But when you start to look at adjacency, you look at FP&A software because there are things that relate to M and A around consolidating financials. And then you have private equity space but then you start getting into more of the back end like fund administration, which whole different customer buyer there. And then you get into the legal side which we built a lot of competency with document AI extraction. But again nice big attractive space but a different profile together selling to law firms. And that's. It was tough for me to have something that was wholeheartedly confident that this is the. To me it's. We're the buy side. Our mission is to change the way buy side M and A is done end to end. I'm curious just kind of what you talked about. Like how would you ground somebody like me to rethink from your business strategy to building the na? I feel like you're almost to a point when you're doing it backwards. You're just looking for pockets where you could do M and A deals and then tying it to your thesis, which I don't think is the right way to do it. And then it goes back to that. Are you really going to get synergies from doing these deals? And it does it wind up at the end of the day?

Yeah. The first question that you asked around TAM is a really good one. What is the TAM of buy side LED transactions in the US in a given year? Do you know?

We try to hone in on organizations that do two or more acquisitions a year.

Got it.

Because then you can sell them software that makes sense to think of like programmatic M and A. You're going to have an ongoing subscription reoccurring revenue. If it's an organization, it's like we're doing one deal, then we're not sure when the next deal is going to happen. Very one off. That's tough for the profile. So when you distill it to that segment, now you're starting to look at Fortune 2000 companies, probably another Fortune 2000, let's say 80%. A lot of them still do an organic focus, but I would say 80% have some form of inorganic. Then you'd have another Fortune 2000 that are privately held that sort of operate the similar way. And then that's the corp dev ecosystem that you're very familiar with. Yes, you got large public strategics and you got feedback rollups. The other segment would be directly the private equity firm, which we have about a dozen private equity firms. We just don't directly go to market different buyer behavior. Corporate people go online and they find deal room, start engaging. They're looking for solutions. Private equity, a lot of them come from banking. And it's like they don't look for solutions. You gotta go knock on their door and show them the light basically.

What do highly acquisitive large corporates say to you? I'm sure you've had these conversations. You said a large, a corporate that's using a competitor's product, what do they say to you? What are the reasons why they say no to Deal Room product?

Why if they're using a competitor, they would say no? They're settled. Like it's hard to get change if they're using a competitor product. Because if you have a product where you're mapping out your whole entire MNA program into it, that's a lot to move over. And we've done it this year. We moved about eight, nine accounts from one competitor. It was so much of a lift. Like we're talking about 15 hours of internal time between. I think now they're building automation scripts to do it faster, but they're not, they're probably to not make it friendly to export. So there is a little bit of that. Like you sort of standardize something unless you're truly unhappy with it, it's hard to get that change.

Yeah. Being a customer of your product and being a strong believer that Deal Room is a superior platform for running a buy side process, I definitely think that there is the challenge of entrenchment, which is the other players in the market are deeply entrenched. It's kind of the better mousetrap issue, which is like, yeah, it's a better mousetrap, but why change? What is the pain that we're experiencing right now? And we could probably go on and deep into customer discovery and understand what that pain is. But every time I look at the Deal Room product, I'm struck by what an easier to use experience it is. And is it possible to capture potential acquirers earlier in their life cycle so you can cut off the supply to your entrenched competitors? I most compare Deal Room to Monday and Asana and I think, you know, I think you did a great podcast with Notion and Notion had talked about using Notion's infrastructure for their M and A process. I think you're very similar to them. And maybe it's possible that by looking for acquirers that are doing a minimum of two deals a year, you might be limiting opportunity for those who are going through their first acquisition. So thinking about what does it cost for someone to start using Monday board tomorrow? What does it cost for someone to use Asana tomorrow? You have a way of developing product strategies so you have sort of an MVP that any acquiring company can use. Because one of the things that I've just been blown away by is the number of startups that are acquiring other startups. A lot of times startups are cost conscious if they have to spend a large upfront sum and to them it could be 1000, 2003 if they have to spend an upfront sum using software that might make them just say okay fine, we'll use Google Drive, we'll use spreadsheets, we'll use whatever. But what they don't realize when they're going through that process is just the amount of challenges are creating by using something that isn't purpose built for running a buy side M and a process. So one of the things that might be interesting is to do discovery. I can't give you the answer here, but to do discovery on those small transactions and what is the one product wedge that you can land early on those acquisitive startups on those acquisitive small businesses, that is a pain point that you can remove from the M and A process and get that messaging to that buyer. And then by doing that you will probably also discover adjacent solutions that are those low lift fits. So I think about one of the hard parts of buy side M and A is financial analysis and how much AI is doing to simplify it. So is there a solution for doing financial analysis on whether it's ARR or tech enabled services or what is that kind of entry point solution that you can acquire or that team you can acquire, they can get you a product wedge inside of one of those smaller businesses that the large side the Fortune 2000 might be red Ocean, but what is Blue Ocean is all of the smaller deal activity that's taking place in market. So that's the hypothesis that I would have going in if I was leading an organic for deal room, I'd actually probably be looking at the lower market because if I can capture OpenAI during its first one or two transactions and hold onto them as a client because I'm such an irreplaceable solution. I've just caught off the supply or the competitor product and as they become more acquisitive, I'm going to become bigger and better along with them. How does that strike you?

Well, it's got me thinking about hypothesis and what to validate maybe thesis. So we Have a pipeline solution. We always think of that as the entry point. If you're building a corp dev function, you usually start off by building pipeline. So we are pretty aggressive. It's like 12,000 a year and then that's our entry point. And then you naturally stack on rooms, get next plan, do all the execution stuff. But when you start thinking and reframing it to market segments smaller deals, it might not be about the pipeline. Actually it might be. So first deal. Now I remember I had a customer. This was years ago. We had an online flow to go sign up. I was so surprised. She signed up and spent like $20,000. Like never talked to this person and they literally did a full trade, $20,000. And I asked her and she said, well I found this template. First acquisition we ever did this template. I looked at it because we're going to hire this advisor. When I saw this templates, this is all we need. This kind of lays out everything we need to do this transaction. And it was way cheaper than the advisor. I went and bought the product with this template that preloads and that's what I used my first deal. The company is making me actually think about that where I'm like that was actually the solution for that first time transaction. It wasn't the pipeline.

If I get back to the problem that you're trying to solve is you want to capture as much market as possible. Where's the blue ocean? So let's go back to talking about the very active acquirers that are not in plain line of sight, but we know that they're out there. When a startup or an early stage company goes to do M and A. M and A is led by the CEO, the cfo, one of the co founders and usually there's a second point person. There's someone who is what I call the walk on corporate development leader who has never done the work before. What is the IP of your business? The IP may not be the software, the software may just be an enabler. Your IP is that you have a framework for them to run with. What are the boxes that need to be checked? What are the things that need to happen and in what sequence do they need to happen? And do I have an easy to follow playbook? You can't get a playbook from your competitors. They just hand you a box with a key on it and say hand out some passwords and usernames and start dumping materials in there. But what about the process? What about the intellectual property and the pain that goes through running an inefficient buy side process. So many processes go sideways because you skip steps that you don't know you need to be crossing about what should a shared expectations workshop look like? When you've decided that you want to pair up with someone, what is the right way to go about deciding from both perspectives how you want to run the business? Once you're together, what are the conversations that you should be having? The intellectual property of the business that you've built. The software is sort of a workflow layer, but the knowledge of actually the process is the value.

We need to build a first time buyer kit.

Yeah, something like that. Something that, you know, maybe it's a right size playbook. I go back to my expertise. My expertise is M and A for companies under a thousand people. Why is that my expertise? It's all I've done. So how can I claim expertise for 10,000? I won't. And when you think about HP, Cisco, Alphabet Meta, they have corporate development teams and functions that are largely staffed by people who've been doing that kind of work forever. And they have their established systems, their tools, playbooks or frameworks, whatever they may be, they're already built, so it's hard to penetrate that inertia. But what you can penetrate is going Back to my OpenAI example, Sam Altman, if you can get to his number two or his number three, who was a person who was put in charge of doing M and A, and help them do m and a 10 times better than they could because they didn't have a playbook and they hadn't done it before, what did they learn through their first five transactions that they can extend to the next 10 transactions to make M and A much more effective and accretive. We know that 90% of M& A fails. If you as a player in the market can be someone who can put the odds in favor of the acquirer that is a superpower.

I like this. This is a good exercise. We validate this by talking to the customer, right?

Absolutely.

And then it gives us direction because we have a few different. There's this sort of practice play, you know, maybe the software component. There's things that we always think about too, which is the cost of doing a deal. At the end of the day, you spend a significant amount on diligence between lawyers, consultants, bankers, et cetera. We always look at like how do we chomp away at that with software? How do we get into that and optimize it and drive efficiency there?

I think there's a lot of businesses that are trying to solve that problem. And I think there's a ripe field of inorganic opportunities that with the right financial partner would make a lot of sense. That sort of disruption of the cost of doing a deal. And one other thing that you said that is an important double click is talking to customers. Take care to define your customer. The customer you know today and the customer you desire to have be talking to both of them and balance the input from both. Because the customers you have today, they already love you and they're going to give you feedback on what they need to be more successful and what they need to stay. But what we're talking about here is the customer that you don't have, that you desire to have. How do you find them and how do you have a conversation with them and get product market fit with that population. And that's something that in strategy gets missed a lot which is we over index on the feedback from existing customers or what we know about the business to be true today inorganic growth is about frequently go getting capabilities or talent that you don't already have in the pursuit of getting customers that you don't.

Know already today 100% see that this segment ought to go after first time buyers. And then if I go talk to my existing customers, they're the ones more inclined about hey, I want to reduce the cost of my legal bill. First time buyer has no idea what his legal bill is going to be. So you're absolutely right on that. So let's say we go through this and we start getting some validation. Let's do the first time buyer kit. Some of them feel like in three, four months from now you're going to be co hosting the buyer kit series with me on the first time buyer. We validate it that here is an opportunity to really go to this market. Once you start going through this and surfacing some validation on your strategy, how it could shape the for example, going up to this market the first time buyers, how does it evolve into an M and a strategy to support it.

There's the customer discovery, the prospect discovery and then mapping out what is it the most effective way to solve the gaps or to address the opportunities that are identified. Some may be very cost effectively and easily solved organically and some may be best solved inorganically. So let's go back to the deal room example. What can you organically solve? You have the know how. You have thousands of interviews with thousands of subject matter experts and now we have the power of AI. You can turn that into a playbook. It's out there on the open Internet, you've got thousands of podcasts out there, so anyone could theoretically do it. But what you have is the know how of segmenting where those people came from. 10,000 person companies, 1,000 person companies. Just thinking about breaking that apart. So organically, I believe that you have it within you to build that playbook in your business. And now that you've broken Deal room and M and A Science apart, you basically have the intellectual property in M and A science that can be somehow attached organically to the business. Now, what are the things you can't solve inorganically? It's very expensive to build new software. It's very expensive to hire people to get them to build that software. Even in an AI era where maybe what used to take a team of 10, you can now do with a team of three, you still have to have the idea, you still have to have a team that really understands the problem that they're solving. And then you need to be able to retain those people and get them excited. Sometimes it's easier to acquire them, especially if they have the subject matter expertise and they can run very fast at solving the problem in two quarters rather than doing it in six quarters.

You know, you got a good point of when it makes sense to organic versus inorganic. That's one thing. I noticed that software when I ran Dealroom, some of my best deals were licensed deals. You end up licensing some solution that you'd embed in your product, then it becomes a premium feature and then you want to give them more money because you're making more money. I'm wondering when you mentioned that, like here we looked at chomping away at the cost of diligence. There's a lot of point solutions popping up in the market. They're going after it. How do you decipher between, hey, these are a little company, we can just go acquire them or maybe just do a good license deal with them. I guess at that point they can still license with your competitor. We could do a license deal, get that technology and just keep making our solution more competitive that way.

This goes back to the Lean M and a strategy that we talked about earlier in the podcast and again the time that we have, I oversimplified, but one of the ingredients of running the funnel is partner first. If you go after an M and a prospect that you just started to get to know in the past few months, building the trust and building the mutual understanding and building sort of the proof that this will work is a higher bar. And that's why deals sometimes take time as the trust building and the getting to know one another and working through obstacles together. You can de risk that by partnering first. One of the elements of running the funnel that we're building live here as we talk about this framework is be open to partnering first. And so I think the licensing example is a great example. So what if others have it? The one thing that you should know is that whether you license it on an exclusive basis or not, think about the whole conversation that everyone's having about the Nvidia chips, whether we should be exporting the Nvidia chips to China or not. The conversation isn't about whether we're exporting our ip. The conversation is about how soon will they figure it out on their own. If we don't let them have it, they're going to figure it out on their own. They have. In this world it's the same thing. Intellectual property at one point or another will be disrupted by a competitor. So go ahead and license it on a non exclusive basis. If it sticks and it works and that relationship becomes very fruitful, you have a natural opportunity to acquire if it makes sense. But you also might identify, look, I can just license other tools in here. We can take a cut of the revenue and share it between us. Sometimes partnerships stay partnerships and that's okay. That's a nuance of these pillars is of running the funnel, which is a part of that funnel is a partner.

Track that could be a thing to focus on now, where we are still thinking through what M and A as a strategy would look like. Think of like where we could just partner in some of these areas that we talked about.

Yeah, M and A is incredibly high risk. How do you de risk it? There are multiple ways to de risk it. Partnership is definitely one that is good.

What about like when you hear trying to buy a competitor, you can partner with your direct competitor.

Do you believe that by acquiring the competitor you're solving the problem of defensibility or you're just buying time? I would say a younger version of me thought a lot about buying competitors, but I'm less interested in that because I believe what happens in most cases is you erode value along the way. By buying a direct competitor, you should believe that you can build a business through organic and inorganic means that will ultimately eat up the share or out win the hearts and minds of clients and therefore you can take on the market. Now I want to be careful about saying I've acquired a competitor in the past. There are pros and cons to acquiring a competitor. But ultimately if you're just trying to capture market share and get three or four quarters of advantage on other incumbents in the market and your ultimate goal is on a short timeframe to exit business as a larger ship, then maybe acquiring a competitor is the right thing to do. But you have to take care and in acquiring a competitor because you run the risk that you're just doing more of the same rather than really innovating the business.

I look at it as we're participating in a market we anticipate to grow, sort of TAM expansion.

Yeah.

And if we can get in and go from 40%, 60% in terms of market share, that sort of gives us this stronger position. Yeah.

I mean the devil's I'm failing on.

Anti competitive language here. Some lawyers have listened to this shaking their heads like man, this is on record. You screwed that one up, Mr. Patel.

Yeah, yeah, yeah. I mean the devil's in the details. Speaking academically and in sort of broad strokes, that's my thinking about acquiring competitors. But there's definitely a devil in the details. If you have two similar kinds of competitors that for various reasons you think strategically you should come together, one for synergies and two because you're very like minded and you're going after the same thing, maybe that makes sense. I would take care in acquiring competitors because that doesn't always solve the problem.

Fair enough. Gotta be the right circumstance. Okay, We've been talking a lot about my deals. I want to talk about about some of your deals.

Okay.

You told me a really interesting story about it's like a company that was going to shut down and then you ended up taking it over.

Oh yeah, it's a great story. This is kind of out in the public venue, but I was running a business between 2007 and 2014 that was essentially a tech enabled agency that did content optimization for automotive and industrial distributors. We had a licensed product that participants used to get data before Google and a lot of other solutions disrupted that ecosystem. And within that business I recognized a really interesting pattern which was the clients I was working with. They generally had 5,000 products on their shelf. But they were asking US to build 50,000 SKU digital catalogs so their clients could look at those products, get the specifications and ultimately buy them. It occurred to me that, well, your warehouse has 5,000 of these products, but you want to sell 50,000, where are you going to get the other 45,000 products from? And they said, well, drop ship them from our upstream supplier or what have you? And I said, well, how will you do that? Well, I don't know. I've got someone who sits at a desk and will punch the orders. I created a business called OrderPigeon. And OrderPigeon's sole purpose was to take a catalog and match it with not only your inventory, but your partner's inventory and availability and pricing. And eventually we built it into an order optimization product. We bootstrapped this software business inside of an agency. I realized that we needed to fork the two out and I did. So I successfully sold that business to what is now SPS Software. And the other business I put out on its own as a bootstrap SaaS business. And for a year we went from a quarter of a million to a half a million to a million in ARR. And we kept running up against this one other competitor, Hublogix. I went to my investor and said, I think we're going to need to raise money because we're going up against this competitor. They've raised $6 million. All of the clients keep saying, you guys should just get together. You're basically doing the same thing. They have a great user interface, you have great technology. It's really like the pairing of two things. I wrote that off until one day I got a phone call from one of our customers and they said, hey, Hublogix is shutting down. Like they told us, we have 30 days to get off of the software. One way to play that game was to just take all those customers and try to onboard them and get them onto our product. But I very quickly realized that the use cases were slightly different and I would have to build a different product in order to service that customer base. So I took the time to talk to the CEO and ultimately the investors and I gave them a proposition. The proposition was, is that my investor and I would acquire Hublogix. But the public facing way we would make it look is as if Hublogix had acquired us. Really what it was is a merger combination. But what I wanted was their brand and I wanted their customer base and I wanted the capabilities that I didn't have. We put those two businesses together over the course of 18 months, cleaned out all the things that weren't working, got all the right customers and aligned ourselves to a couple of strategics. And one of those strategics was Channel Advisor and they ultimately acquired that combined business in 2017. Now in that sort of short narrative narrative, I make it sound a lot easier than it actually was, but it was one of the ways that I used the superpower of inorganic to bring two like minded businesses together to serve a very specific population of customers and to align our product capabilities with the needs of a much larger enterprise. To ultimately drive an exit to a public company. Which was a very, very proud moment for me. It took a lot of work, it was very hard to do and I'm grateful for the team that helped me get there.

How'd you do it? Like how'd you make that deal actionable?

There are a couple of steps. The first thing that I want to do is just understand what was going on. The company had laid off a lot of employees and it was based in Atlanta. So the first thing I did was got on a plane and started interviewing the employees. I was interviewing people because I wanted to see if there are any good people to get. But I was also interviewing people for intel gathering what was going on? Why was the business shutting down? What was working? What was not working? Was there dishonesty? Was there a bad product? What was it? And what I found the common denominator was is the founder of the company was really smart but hadn't built a business before and the investors kept putting operators in there who didn't understand the business and were running it sideways. The founder was put in not a great position by too much money too fast and trying to grow too quickly and a lot of bad ideas on top of one another and probably a lack of commitment to strategy. It took me about a week to figure that out and then I immediately started talking to the investors. And what I positioned the investors was you actually have a great business here. I know it's a great business because I'm running something similar to it. But you have a bit of better of a product strategy than I have. You have a better plan than I have. I want to put those two things together and save you from the pain of having to completely shut this business down. One thing to understand in this scenario is the intrinsic motivations of an investor. It's the calculus that an investor is going to invest in 10 companies and only one or two are going to work out. What they ideally would like is just to soften the blow of a company completely failing and being able to say that there's Continuum on this. So if you go and look at the investors of hublogix, they still proudly talk about Hublogix as a business that was successfully acquired by a public company. Behind the scenes are a little bit messy, but I was able to understand the motivations of the investors and what they ultimately wanted and set Aside my personal pride of the business that I had created to put them out in front so we could both win together. That was really kind of the steps. Talking to the employees, understanding what was happening, talking to the founder, getting to the investors and convincing them that there was a better way. Bear in mind I had to put capital on the table, I had to put personal and investor capital on the table to make this happen. But it was highly accretive in what we did.

Talk to employees, then you kind of understand what's really going on. Talk to the founder. Then you got to get the investors on board and he'll probably help you with the key investors or how the influencers.

In this case, it was a small investor pool, so it didn't take a long time to get to those investors.

What was the pitch that got them to go along with it? One, I assume that winding a business down comes with some costs and then here we're going to take over the business and continue. Did you have to pay significant goodwill to do that? There was your expectation. Because for me there's one deal looking at where they've raised significant amount of capital, say like 20 million and they're realizing they're not going to get the 20. It's been a process. Nobody's done anything with it. At some point they got to start thinking about winding it down. But teach me, how do you get that delectionable?

The first thing that you need to do is you need to set aside the capital they raised. The capital they raised is their problem. It's not your problem. What is it worth and what are their intrinsic motivations? What is the problem that they want to solve? Most founders, most investors don't want to completely junk a business. If there is some intrinsic value in the business, they want to get some value. Some of the value is monetary and some of that value is I just don't want my LPs to see that one of our portfolio companies failed. So what can you give to them that they want beyond trying to recover money that they're not going to get back? So the things that I would be looking at is okay, they raised this money, but how much cash do they have on balance sheet today? What obligations do they have? What debt obligations do they have? How does that venture capital firm or that investor think about the long term messaging to their LPs about the success of the businesses that they backed? Sometimes it's just about people. This is about trust, relationships. Can you trust me that I've built a great business deal room? I'VE been successful at building deal room. I understand this market and I can be a great home for your team. The things that break down in a business are in a startup are over investing on things that don't have a good return. Whether it's sales and marketing, whether it's engineering or what have you. Those are the things that among many other things that break down. Culture breakdown, leadership breakdown. What are the things that are broken in the business? And I think the question you should ask yourself is what are you getting? What do you value? Are you getting talent? Are you getting tech, software team? What are the things that you're getting? And value those things and just completely set aside the money that they raise. Cause that is someone else's problem for you to solve. What is it worth to you?

Okay, you're absolutely right. And then the messaging to the LPs is interesting. I feel like it's. You start getting a delicate conversation.

Yeah, of course it is. You're never going to say to the investor, don't you want to look good in front of your LPs? That would be a kind of thing that we get thrown out of the room. But what you want to do is say, look, I want to create a success story for you. And I think the success story looks like deal room acquires so and such company and we've come together to create a world class Insert your story. I'm going to take the pain of having to wind down a company off of your hands and give it a next great home. And in exchange for doing that, I'm going to give you a little cash, I'm going to give you a lot of stock and I'm going to get your employees really excited being part of the next chapter of something. And if you think about those pieces and investors want to be known for a couple of things. Again, back to intrinsic motivations. One, Investors want to be founder friendly. Founders fail all the time. I was just having this conversation the other day with my executive chair, Steven Power, because I'm constantly fixated on success or failure. Just the intrinsic way that entrepreneurs think is, was I successful or did I fail? You fail every day. Founders fail all the time. But they come back and they come back in a big way very frequently. No investor wants to be seen as not being founder friendly. So that's the first thing. The second thing is they want their portfolios to tell a good story about the kinds of businesses that they back. They invest in 102 will be successful. Some will exit in different ways. That may not necessarily Be economically accretive to the fund, but you still want to have a great story to tell. And the last thing is you want to do right by the people on the team. Can you preserve the careers of the employees? So when they look back and they say, wow, when we were funded by X investor, they took care of us, they did the right thing. That's the calculus that I see a lot of investors follow when they're exploring these kinds of opportunities and when financial returns are not going to be a part of the calculus.

But if you don't want any of the employees, well, then that's not very good.

Yeah, if you think that the team is not a part of it, then I would just go back to what are the things that you value and helping put together a win, win story.

That's what I'm wondering. The fallacy is you're going after revenue. It's like this revenue plus our revenue. We cut a bunch of cost, we blow up the EBITDA margins. That's the private equity playbook.

That's financial engineering.

The private equity playbook. Let's just call it what it is. You don't think that way.

There are a lot of people who are really good at financial engineering. I'm not a financial engineer in that way.

You're looking real synergies.

I believe in people. I believe in product. I believe in a 50 person company. Look, when I acquired Hublogix, I gained two employees that were so phenomenal, so transformative to the business. They created three of them. And along the way, because of my investor relationship, I got a chief product officer, Steve Frechette, who was like magic. And I had been looking for someone like him for so long. I got through that process, that transaction. People, the thing I would flag is financial engineering. Is financial engineering. I always believe that in a stack of 10 or 20 or 50 people, there are three or four superstars. You should not write off that there are superstars there that can 5x your business and make everything more valuable because you brought them along. The other one I'd have to say is Kelly Martin, who is now, she's so senior at Rhythm, which is now the successor company of Channel Advisor. She saved my life a million times. She replicated a lot of my superpowers and also balanced out some of my weaknesses. You gain through these processes, people that really can do magic. So I just say that I believe in the power of great people. And those people are not necessarily on paper, super seasoned or super experienced. They're just very passionate and they are really committed to the mission.

How do you differentiate your conversation relationship with the founder versus like the investor when making this deal actionable?

Again, it goes back to intrinsic motivation. What is the intrinsic motivation of anybody that you're talking to? A founder and investor have a little bit in common in that you want to save face the story. No one wants to shut a company down. Is it catastrophic failure? I don't know. If you're a brain surgeon and someone dies on your operating table, that's catastrophic failure. That must feel really terrible whether it was inevitable or not. A company failing is not catastrophic failure. But most founders, it feels like catastrophic failure in a way. Unless they are sort of written off and don't care. You want to be thinking about and want to understand is that one of their intrinsic motivations. The next thing that you want to do is get a sense of are they really committed to keep going. You have to suss out whether that founder is someone that you want to partner with long term or whether that founder is more of a transitional character in the narrative of the coming together of the business. And if that founder is not going to stick around, I would encourage any inquirer to look at the next two or three people in the business because you do want human continuity. You want that knowledge to exist with the business on an ongoing basis. If you don't, all you're doing is acquiring the customers and the revenue and you're not acquiring any of the people. At least in this kind of a scenario. I raise the flag of who has the sort of the institutional knowledge of a customer base and the revenue and how the business works. If the founder is not going to be that person, it needs to be someone else. But you were asking the question about the founder. I just say focus on what is it they care about the most and what is their level of commitment in the longer term existence of the business.

Would you work with them to get influence on the investors or it depends.

If they're a proponent of the deal getting done and you feel like they are honestly working to help you get the deal done, then you should by all means partner with them.

But if they're not because you're going to fire them after the deal's done.

That'S not a card I would advertise.

But well, wouldn't you want to be honest about that?

I think you want to be honest about ultimately what is their motivation and interests. I think if you don't think that they should be a part of the continuing story and they're not really excited anyway, then your interests kind of align in a roundabout way. If you think that founder is just not a fit and it's not really worth your time to spend time with them, then by all means, skip jump and spend time with the investors. But just remember, founders exercise a lot of control and influence on their business. Now, they could be really bad at what they're doing, and they may have alienated their team along the way. You can have to make some airtime calls on that. But I've always found that ultimately founders who started a business, there are some tentacle ties that they have to the business. So you have to proceed very carefully in terms of how you treat them. And I just generally believe that you should always endeavor to want to treat people as you would want to be treated. So having an honest conversation about where you have alignment, where you don't have alignment is incredibly important. But you just have to be delicate in terms of how you deal with.

Relationships, intricacies of these conversations. You really got to pay attention for the detail. And there's no one size fits all.

Yeah.

Hey, I know we're hitting close to time here. We only got halfway through our outline.

Maybe they'll need to be a part two. I don't know.

I was going to say I'm staging it up. I'll stage up for a part two where we can talk. Because after this role, you got acquired by Channel Advisor where you stood up the corp dev function.

Yes, I did.

So that's a topic of its own. How do you stand up a corp dev function?

Yep.

And then we didn't talk a lot about the whole. How do you actually drive the success post close and integration and teeing that up, understanding the culture to shape integration, planning for it. So that could be another topic we tack on.

Absolutely. And I mean, again, the framework I ran through in this episode, full disclosure, I was oversimplifying given the time constraints, but there's a lot more details to it. And I would say to anybody who's listening to podcasts and said, wow, commit to close. That's like you're putting on blinders. There's a lot of details to committing to close. And maybe committing to close is a whole episode in of itself.

You know, before I let you go, I got to ask, what's the craziest thing you've seen in M and A?

Oh, my goodness. I was at the KPMG Tech M and A conference a few weeks ago, and just the size of deals that are happening. So we're here in Boston Cvent just two days ago announced the acquisition of Goldcast for something like $300 million. That company raised roughly $38 million. The crazy thing to me, the new exit multiple of companies is not ARR, it's the money raised. There are multiple deals that have happened this year in 2025 where the exit price paid the EV of the business was 10x the money raised, not 10x the ARR. It's wild. I think that this AI craze has created a whole different metric for what is the right EV for an AI company that's breathing life into what are otherwise sleepy businesses. Wow.

I know that company. We use their product. I know the founder pretty well. So that's so crazy. Yeah, because I know too. It's a company that raised it prime time. So that's so fascinating to see valuation.

A Series B company exiting for $300 million after four years and raising $38 million. Reportedly they had somewhere between 12 and 15 million in ARR. So just think about the multiple on that. It's wild.

It's wild.

That's the world we're in now.

And I thought we were going backwards. I thought people wanted tickets. Keep it at a tech companies.

Again, the stats are out there. The number of deals is considerably smaller than they have been in the past, but the valuations are much larger. That's what we're seeing in the data.

Giving me some sense of optimism with the tech company I'm involved with. This has been great. I really appreciate you coming down, taking time and helping me become a better M and A scientist.

Thank you so much for having me. I really appreciate it. It's great to be on.

If you're still listening to this podcast. My true diehard M and A scientists out there reach out to me. I love hearing from you especially you're committed to listen to content through and through. Let me know what you thought of this interview. Give me some feedback. Share with Christian. Let me know if you want it back. You know, want to get some indicators. I'll drive him to come back with sushi or steak or something.

It's not going to be hard.

And then feedback if you got other topic ideas. You got some tips for me to improve my interviewing skills here. Love to hear from you. Till next time. Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post. Add a review on Apple podcast. We'd love to hear from you if you need help standing up an M and a function or optimizing one that you already have. We're here to help, and if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit MA for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.