M&A Roll-Up Playbook: The IRR Framework That Replaced Budgets at Zayo | Dan Caruso (Part 2)

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Welcome back to M&A Science. This is part 2 of our conversation with Dan Caruso, founder and former CEO of Xeo. If you haven't listened to part 1 yet, start there. The link is in the show notes. We covered how Xeo built its thesis from scratch, how they found deals nobody else was chasing, and how they pulled off a hostile acquisition with a fully funded offer delivered in a sealed envelope. It's worth it. Today we pick up where things got complicated. Post-IPO talent drain, the equity value creation model Dan used instead of traditional budgets, activist investors, and the full Zale sale, including how Dan engineered a competing bid when the lead consortium tried to leave him with no other options. Let's get back into it.

Did it change between doing deals as a private company versus a public company?

For us it did, but it, it did because of the dynamic I just shared.

Right.

It got more competitive, but did your structure approach change at all?

We didn't use equity, I don't think, ever. Maybe a little bit. I can't remember one deal where we used our public equity as part of the deal because that would've been discounted by sellers. But what changed was just the competition for deals. Everywhere you'd go in the 2017 era, I guess we went public in, let's see, 2014. So by 2016, everywhere you'd go in the industry, every infrastructure fund, They would say, yeah, we want to do what Zale's doing. All of a sudden we had a dozen infrastructure funds who had billions of dollars to put to work. And you'd say, well, what do you do in this space? We want to build a platform just like Zale. You just had an overabundance of competitors chasing deals and it was a good time to be sellers at that point.

I feel like that happens to every good thing. People catch wind and boom, everybody else is going to follow it.

But we had like a 6-year window there. That's the thing, you had a good brand in the market.

And it just stuck through and kept going. I think it's like the erratic behavior as part of negotiation. You have the example of the silence, which I've known folks that do that. I could appreciate it. Was there any other examples of unique things you do to negotiate these deals?

Oh yeah, all the time. And sometimes we do it just for fun too, but I had one that the seller would not respond to nothing.

And I remember sending a box of chocolate with an offer. And he finally answered the phone. He's like, thanks for your chocolate. Offer's too low.

Hung up on me. There'd be times where like you're going back and forth in negotiation and we'd be at 70, whatever somebody is, maybe 70 million. And they wanted 6 million. So we'd go 71 and they'd go to 75 and then we'd go to 68. And I was like, Daniel, we can't do that. We can't go back with a lower number. Like, yeah, these guys aren't taking our number. Go back with a lower number. Let them like stare at that for a week and see what they say. And then they typically come back and be like, yeah, I'm not sure what happened there. You probably need to talk a little bit more, get back on straight. We're not sure where that came from. What did you uncover in the diligence that made you lower your number? What did you hear that made you lower? You didn't want to tell them. Just wanted to see how you were going to react because you were being like a little stubborn and we wanted that emotion to go like from your toenails to the top of your head. Oh my God, this deal might not happen. And if it does, it might be a lower price than they were offering before. We just want you to feel that emotion. And then it's like, I know your last offer was at $71,000 and our last counter was at $75,000. How about $71,000 and one quarter? Is what they'd come back with. All of a sudden your number looks awful high.

I like that. You got bear on them.

Yep.

What else? They silence, call me back down on offers.

Start telling them about this other deal you're doing. It's a fun one too. Like when you're like, getting ready to have your negotiation or dinner and be like, hey, I know this isn't really part of this discussion, but we're working on this other great deal and we didn't think it was going to happen and now it's starting to pick up momentum and it's, gosh, just perfect for us. We're struggling with the time to do this deal because we really want to move on to that deal because it's really a great deal. And they're like, what deal are they talking about? And then they're trying to figure out what deal you're talking about. We might have just made it up. That doesn't mean there was a real deal there. It's just, yeah, these guys can move on from our deal and go work on this other deal if we don't freaking get this deal done. Tomorrow morning meeting, that might be our only window of opportunity to get to the finish line is what we want them to think.

I like that. Create urgency. There's like a FOMO of your attention that you're creating where they want to get the deal done.

For certain.

I'm gonna build a whole playbook out of this, by the way.

Like I said, unpredictable. Make stuff up. That's like kind of our— and some of it's very legit. I mean, it's gotta be believable and it's gotta be stuff that very likely could be true because it can't be stuff that they know you're making up. That won't work either. People want to get deals done when they're ready to sell.

Yeah, it is like a control, I think, is sort of what you're positioning. There's back and forth and like that going on the offer thing. It's like, all right, let's go back down and reframe the control in this negotiation here.

So I probably shouldn't tell all my little bag of tricks, but another one is let's say you're working with the CEO and then the CEO wants, their investor wants to hear directly what's going on. Like investors get a little frustrated because they're not getting their price and the deal's dragging out a little bit. And the CEO, of course, is briefing the investor. Here's exactly what's happening and here's what they're saying. So now they want to bring the investor because the investor wants to hear it itself. So you throw the investor a curveball. You say something that the CEO never heard before, but you say in a way like it was just part of the conversation. So now the investor's got to go to the CEO and say, well, you never told me this. You know, you didn't tell me that was what was going on. You didn't tell me that this is part of what's holding up the deal. And now the CEOs will pretend like they knew, you Even though, so they don't know if it's true or not true and they don't want to say, no, they, that was, had nothing to do with it. They just made that up. That doesn't sound like the thing either. So now there's this little bit of distrust between the CEO and the investor because the investor thinks the CEO didn't tell them the full story and the CEO is like, I don't really know what happened there and I don't want to sound like I didn't know what happened.

So you just have a little bit of context. Would that surprise be around like the terms of the deal or more of just some nuance?

Just something silly. You know, you pick on something that's But at least material enough to be like, we actually were comfortable with that price, you know, probably would get there. But some of the diligence we did on the network, we found some stuff we weren't expecting. An investor like does this and it's investor. What's those investors going to say? What'd you find? They don't want to say that. So they, and then you say it like as if you already knew that. So the investor doesn't act like they don't want to know and then they're gone. So it's not like the investor could call you up afterwards because investor goes, gets on a plane and But then he asked you like, what was he talking about? So you're like, I'm not sure what they found in that. It sounded like he already shared it with you. Stupid stuff like that.

I love it. I got enough to put a framework, Dan's Bags of Surprises.

I probably should write a book on that. It'd probably sell more than Bandwidth. Easier to write.

Yeah, it's maybe an afternoon, 20-page manuscript here.

Okay.

So I want to talk about the execution of these deals because it's one thing to get the deal actionable, get the structure. Get the LOI signed. But then from there, 45 deals, and I published a book called Buyer-Led M&A, and it was myself going through about 300 of these podcasts and reflecting and saying, here's a pattern here. When you look at the maturity of an M&A function in a corporation, there is clearly a maturity that happens from the first deal tends to be through an inbound auction process. They scramble to go do the deal and then they make a bunch of mistakes. Then you look around the 10th deal, Very buyer-led, just like you described. We're proactively looking for the right asset. Even if you look at the execution, they're really taking lead and making sure that they're going to follow through and how they're going to integrate the business. Move fast instead of the other way. Let's do integration after we close and figure it out. It's so different even from the first conversation and letting the CEO know where they're going to fit in. I'd love to hear from you and how you've seen it evolve as Zayo Group, how your execution process matured over time in the deals you've done.

Yeah, so ours was most like a curve like this. So what I'm drawing is like going up and then going down. So the first, call it 6, 7 years of Zayo were like magic. The team worked together really well. We brought in some new people who weren't part of our team before, and they melded with us really well. And like our CFO at Zayo joined us maybe a year into Zayo, and we, none of us ever knew him. He was recommended by one of our investors and It turned out to be just a key part of our team as if we worked together for years prior to that. The left hand knew what the right hand was doing and we could talk shorthand and we were forced to be reckoned with. We were really, really good at what we were doing. But then the other thing that happened when we went public is then the team started to get a lot of liquidity and all of a sudden everyone was worth a shitload of money. I was, I'd already made a lot of money, but a lot of the people on the team, that's the first time they really had liquid liquidity. Of significance. And it's not as much fun to work in a public company environment because you got to deal with a bunch of just public company kind of bullshit. We're bigger, it's becoming less fun. We've got quarterly earnings calls, we got to deal with just a lot more noise in the system. And the people who are more entrepreneurial were like, I want to go take my money and take some time off and do some other stuff. I want to buy a car, I want to buy a house, I want to buy a second home, and I want to go into an entrepreneurial environment again. So in the window after IPO, we lost a lot of our core talent and I still wanted to keep it going. It just became less fun and harder and more competition for deals and more of a slug. So we kind of hit our heyday both when we went public and a little bit thereafter, but then it became harder after that.

Let's talk about the good times. What was like the maturity, how you saw it evolve from like the first deal going through that 6, 7-year period?

There was a period of time where it was just fun. It was fun doing deals. It was fun integrating. It was Fun being the center of attention in the industry. It was— felt a lot of success.

Was it just like natural maturity that happens from getting the reps in that, hey, we're building our playbook, so we're getting better at this?

And yeah, I think so that we knew we had a good thing going. We— one of the big innovations that we had is in our industry at the time, the common approach was to have a bunch of different systems, each of which had its own version of the data, and then integrate the systems together and there'd be processes and workflows and a lot of other bureaucratic words that you'd use to describe all that. And I had this epiphany that if we could get all of our data into one system and define all of our processes around that system, we could just make things a lot more effective and efficient. We were already having success using salesforce.com and in the sales side of the equation, and we just started adding everything else we did. Into our salesforce.com instance. So it became our full end-to-end system, life of the customer, billing and provisioning and everything, all in one system that was visible to all of us. So our ability to have command and control of our data in one instance, the only difference when you were done with the sale is it just transitioned into now it's part of the service activation process. It was just a stage, not transfer from one system to another system. It was done with service activation, transmission in the building. So it just gave us this platform that was a huge advantage, both in operating the business, but more so in synergizing and bringing together these disparate networks all into one instance. We felt confident about that and we were innovating around that and we were creating and we were operating. It was just, it was a period of time that was just shitload of fun and we all felt great about it.

Did your execution approach evolve or change where you're doing more of this integration planning earlier in the process? Or is there anything of just even when you think about getting the executive team, a lot of people are fixated on the price and how much money they're going to get versus how they're going to be involved with the business post-close. Was there any of that stuff that you started changing in the front of the deal to make it more successful afterwards?

Nothing comes to mind really. During the heyday, everyone was motivated by the true value of the company. We developed early on this methodology I developed and called equity value creation. And it became almost like a religion within our company and one that the key people understood and bought into. So it was a true metric of defining how much value are we really creating authentically and how does that translate into dollars per share and the value of management equity. And people could see that direct equation and what it meant to them personally and what it meant to us as a group. And It got rid of a lot of politics and arguments over one person's opinion of what's valuable versus another's. I don't really care about each other's opinions. What does the math say? And it became kind of a unifying and organizing way of focusing everyone on what's my contribution toward this value creation equation.

That created alignment with the people to really ultimately be on the same team and execute. We're going to dive deeper into that. I wanted to know, as you scaled and started doing more deals, what's the first thing that broke?

The wear and tear of everything we had been going through started to take its toll. The former team moved on, the original team moved on, and newer people came in. They didn't buy into what we were doing as much as the older team. Some of them did, some of them didn't. But if we were a public company by that point, and that was a tax competition for deals, not so much the competition in the marketplace, but the comp— well, that's not true either. Even the, even what we were doing organically. The kind of deals we were doing organically. We also had like this, we were innovators there as well. We were doing these deals, particularly with the big web-scale companies, that's what we called them back then, as well as mobile carriers. We were doing these really unique big deals, helping them leverage fiber, and others started to catch on to that, but when the infrastructure guys came in, then even bid up those commercial deals, all of a sudden it was like deals that we knew were really good deals for us and really good for the customer. but we could get them done. Now, someone who thinks they have cheap money, lower cost of capital, they want those deals and they're willing to cut terms that are much more favorable to the customer. And they were like, okay, I don't know if we want to win that deal or not win that deal. Because you win that deal, you might be losers at the end. You don't want to do a bad deal. You're getting bid up where it's a good deal, is it a bad deal? And some of them were clearly bad deals, but then that's not fun to lose deals either. So it was the toll of all those things. We were victims of what we created at that point. Now we still did well, don't get me wrong. It's just we were used to creating value at a pace of literally 40% a year. Like our equity IRR, which we would measure and would get validated based on future rounds. Every year our equity was going up literally 40% in value a year, 40% a year over 6, 7 years. That's how you get from $1 billion to $8.5 billion is you just start compounding at a high rate. And we would measure that, but all of a sudden 40% went to 30%, went to 20%, then it was like, man, we're having trouble increasing this by more than 5, 6, 7% a year. We would never go backwards. That wasn't what I was playing for. I didn't want 10% equity value creation. That was like, I don't know, I could go put my money in the stock market and do nothing and get that. So when it was harder and harder to see the rewards of what you were doing in terms of creating value for your investors and for your team, that would take a toll as well. That's when you got to shift to be a seller, which is what we did.

Before we jump into that, were there any other integration mistakes that you made early on that you later fixed?

Yeah, there were tactical mistakes. Like I could look backwards in time and wish I would've— these are ones of what I could have done differently and I won't get into them, but there were like 3 or 4 deals where I'm like, you could have handled that one a lot better. I could have been better in terms of how I directed an integration take place. Being aggressive worked for us in aggregate, but sometimes maybe being too aggressive is where I would've been a little more subtle at times.

But it sounds like things got figured out. You understand centralizing data. Was there anything else that you thought you did differently in terms of integration that protected value?

Just that we kept sticking to our strategic roots because a lot of the companies we would acquire, the reason we liked them was because of a certain part of what they were doing, their assets and the part of their business that resonated with us. But they would do other things that were different. And what we would do in those cases is sometimes we would just separate into two businesses, which was unnatural. We're like, okay, this is a voice business and no, we don't want to be in the voice business. In fact, we explicitly don't want to be, but there's value in that voice business. So we're going to set that up as its own business. And other people are like, I don't even know what you're talking about. This is like just a product that's on top of all other products. Everyone thinks their product is really high margin because they don't pay attention to costs that take place. Below their layer. So we would separate the business and then we're like, okay, now that's separated and you got to buy kind of the services underneath you, just like your competitors would have to do. Now we would apply that value creation equation to that and we'd find some really good entrepreneurs who would also, they would be empowered. Like now I understand what I need to do to really create value in this part of the business. And then we would monetize those separately. We would sell those off, but we'd keep the pureness of what we had. This bandwidth infrastructure, we wouldn't try to go up the stack, even though I don't know how many times I would have to deal with, we'd acquire a company and they'd have this great plan that they were going to bring all these new products in. We don't want your new products. We want to be the best bandwidth infrastructure provider out there. That's what we do. But no, we don't want to layer on higher layer. We don't want to go after small businesses. We're here to serve those who really need lots of bandwidth and where your network gives you a huge advantage. And we don't want to get distracted. So that played to our advantage as well.

How do you think about culture? If you think about culture, and there's a big thing that comes up, integration goes bad, you want to blame culture, we're incompatible. Zayo had a good reputation. I had a good longtime friend that actually worked for you years ago, and he'd always rave about the company culture. And I feel like there's like different schools of thought. There's, hey, I'm going to acquire a business, we're going to come together, make a unique culture, old school corporate thought, right? Then you have more of a progressive, we want to understand their culture and find a nice tailored way to get the best and integrate properly. There's some teams that need to be separate, for sure. And then there's this more aggressive, like, they're going to come and fit our culture. That's what it is. We have it. They're going to come and conform and we're going to help them. We're just going to be upfront about that. What was your view on culture when it came to the deals that you did?

Yeah, it was definitely the latter for us. It was, we have a culture. I'm not saying our culture is better than your culture. In fact, some of the companies acquired had great cultures. Like EvolveNet had great culture. It was just different than our culture. And if it's like debating systems or debating the name of the company, you allow people to start, we want to tell you about our culture and we'll tell you about ours. And you know, what are the merits? So, you know, let's come up with a culture that's the best of both. We don't have time for that. We have a culture and we want to move on to the next deal because before too long, we're not going to have deals to do anymore. Other people are going to catch on. So here's our culture. It might work for you. It might not. We're not saying our culture is better than your culture, but it's the culture.

Were you upfront about that when you started?

Yeah, maybe to a fault. And yeah, absolutely. We're upfront about it. I don't know if I use the word culture, but I'm like, we have a way of doing things. For some people, this is going to feel really good. And for some people, we're going to look like the devil and they're going to like go and say, this is the most horrible thing ever because of their culture. And like, yeah, we're not the right culture for everyone. We don't have a universal culture. We're not like, we're not trying to come up with a culture that works for everyone. Come up with a culture for people who really want to roll up their sleeves and do some really cool stuff and create the leading company in the industry in a short period of time. And that means you're going to have to want to be part of that or else go do something else.

You went public. What's it like taking a company public? You know, why'd you do it? What was it like?

Going public is still a big achievement, a career achievement for people. It's like, I took a company public, still matters. Now, there's a lot of baggage that comes with being a public company. So If I knew then what I knew now, I was having a conversation with someone recently who is likely to take their company public and they're in a good situation. So they're trying to think about the context in which they take it public. And one thing they're thinking about is whether to create supermajority shares, voting shares, those super voting shares that would be held by the, the management team slash insiders. So most bankers and lawyers say, no, don't do that. Because there'll be problems. But when the person was bringing it up, my advice was, you know what, you're going to go public. You should do that. If I had it over again, that's what I would've done. I would've ignored the bankers and ignored the lawyers because if activist investors see that it's a closely held company, there's supermajority shares, the activists will go move on to something else. They're going to find companies they could pick on, not companies that they go to, they could just say, well, I'm sorry you feel that way. We, there's 5 of us who control the voting in the company and we're going to do what we're going to do anyways. The activists will just move on and go somewhere else. Yeah, it's great to sit up there and ring the bell. In fact, I got to sort of enjoy that again just 2 weeks ago because one of the first investments I made after I left Zayo and one that I served as interim CEO as a transition period was called Cold Quantum at the time. It's called Inflection now. They just went public a week and a half ago and I got to watch them. They invited me to go out there with them, but I didn't make the trip, but got to watch them go through that experience. And it brought up great memories of how special that moment is when you're ringing the bell and you're celebrating afterwards. It's just a special life moment for everyone involved.

So think through control and power dynamics when you go public. There's more homework, it sounds like. You got to do earning calls and are in the public face at that point in time. You got to deal with the whole investor relations, but the fluctuations in the market, how do you view that market sentiment that is either on your side or again, your counterparty? I'm curious, how do you think through that as a public company operator?

The way I thought through it, I don't know if this worked or didn't work at the end of the day, is stuck to the principles of the value creation. It's like if we're truly creating value, like measurable value, the stock price will find its way to your value. At times it will think you're worth more than that. At times they'll think you're worth less than that. Don't get caught up in what the market thinks at any given point in time, but be transparent in how you're thinking about value creation and why. And over time you'll end up with investors who want to invest because of how you're creating value and they understand it. And those are the investors you're going to want to have for the long term. That was at least my theory. In practice, it was more complicated than that. And maybe I'm not the best public company CEO from that perspective because I was maybe a little bit naive, just thinking I had kind of a Warren Buffett type approach, is just be plain and tell people what it is. Don't tell them stories and don't fall into the traps. And that's easier said than done, perhaps.

It wasn't like a PR game for you to keep a positive perception of the company?

No, because I saw people get in that trap that they were always, they were always of the frame of mind. How do you view your stock price? The public markets don't fully appreciate our company. It says that all the time and it means absolutely nothing. For me, it was like, I'm not going to go down that route. My job's not to make the stock price as high as possible. That's just not my job to do that. That means someone's going to buy your stock at an overinflated price. Once they buy your stock, they're your partners. You help sell them something for more than it was worth. Yeah, maybe the person who sold feels good about that, but they're not your partner anymore. Now your partner is the person who bought it at too high a price. Did you really do well for them? So for me, it was like, I don't know what the exact price that's right for the company, but I don't want to be on the side of hyping it to be higher than it should be. I want to be as transparent as possible so that Buyers and sellers are tending to make a good decision. The buyer's buying at fair value and the seller's selling at fair value. And then we increase the value over time, not based on storytelling, but based on kind of fundamentals.

What surprised you the most about transitioning and being a CEO of a publicly traded company?

I think I could have structured the management equity so that for those who were there before the IPO, I could have done some things so that there'd been a longer transition period before it would've been easy for people to leave. And that it would be more staggered, but I mistakenly set it up so that it would be optimal time for a lot of people to leave all happen one year after the IPO. And that was an unforced error on my part because I could have done things differently to foresee that. Well, if you do that, what are people going to do? They're going to leave so that they could— it's easier for them to sell once they leave. And then they got a lot of liquidity. They're going to take some time off while I'm still like slugging away. And then they're going to start doing stuff again, like reapplying the playbook. That should have been very predictable. To me, I need to be there for a period of time longer. I should have made it harder for people to leave. While I didn't have that option of leaving, it was harder to onboard new people and maintain the momentum. So that one I should have seen. Another one that I didn't see, and I don't know how predictable it should have been, but by revealing what we did, because I thought we already revealed it before the IPO, but by revealing the financial success that we had in a way that outsiders could really, teams of people, and say, how did they do that? That our playbook would all of a sudden be understood by others who then could throw a bunch more money at trying to do what we were doing.

And so we just felt less competition. Were there any skills that you thought you developed as a CEO, as a public company CEO, as opposed to private?

Yeah, certainly understand how public markets work from the perspective of a CEO. I mean, I understood how they worked from the perspective of an investor and a University of Chicago graduate, but from the lens of being a CEO of a public company and dealing with In particular activist investors, because I always thought activist investors were a good thing, that they would hold companies accountable and that would help unleash value. I was of that frame of mind that they'll hold bad management teams more accountable and they'll help investors out. What I didn't realize is that it's really a racket because they can operate in ways that if I as CEO operated, I would be in jail. By their behavior, they basically create volatility and they create inside information because they know that they're creating the volatility in ways that isn't transparent to the public markets. When they create the volatility, if they know it's coming from them, then they know how to trade in it. So if they behave in ways that will lower the stock price, they can buy, and then they could almost counter what created volatility and the stock goes back up to where it should be. And they could rinse repeat that and they could cause tension in the management team. That could cause overreactions in management, which create trading opportunities. The activists weren't really unleashing value. They were creating volatility that they could trade into. And what I also learned was that they could do that in cahoots with private equity investors or public investors by walking this fine line between signaling to each other in ways that was not illegal per se, because it wasn't— they just could read each other's body language. It's kind of a— I use the word racket, like, I know if this activist does this, here's how I should interpret it, so I'll do that. And if I use these words, they'll know what I really want them to do, and they'll do that. And they know how to scratch each other's back and benefit. And learn that only when you're in the inside and seeing it happen.

Wow.

Okay. The activist piece. Any other skills? The network, actually, I'm curious about. So I feel like your network changes as a public company CEO. I'm very convinced they sort of network with other public company CEOs.

I think it's more the drain on time. As a public company CEO, you could fall in the trap of spending way too much time doing the things that analysts want you to do and the market wants you to do. And that's a distraction from running the business. If I was doing it over again, the other thing I would do is pay a lot less attention to what a public company CEO is supposed to do. I'm going to go to a Wall Street after I do the earnings call. I'm going to meet with investors and I'm going to go to JPMorgan's conference, Goldman's conference. Listen, I'm going to run the business. I'm going to tell you once a quarter how we're doing, but I'm not going to distract myself or my CFO or any of us in trying to appease the market. If we deliver results, we'll get rewarded from it. But it's— we need to focus on running the business, not getting distracted.

Any other advice for a first-time public company CEO?

Think hard before you really want to do it because there is a big tax that comes with being a public company.

So not the hardest job in the world, is it?

No, but at the same time, it's like the big leagues. There's big rewards with being a public company CEO from a pride standpoint and from a career standpoint. And there are public companies to be run and it can be quite lucrative if that's what you care about. Some of the bigger companies are public companies. There's just pros and cons.

It got harder after you got public. You invited a lot more competition. You're on their full radar. More funds started investing in the space, other roll-ups emerged. When do you know it's time to sell?

Well, I go in that in the book. So Warren Buffett gives some good advice to that. When there's a lot of buyers, you should be a seller. So you gotta go with the market. So I saw what was happening. I saw all the infrastructure money flowing into our space, all the capital formation, all the eagerness to buy Zillow-like assets. And it's like, okay, take advantage of that. Find those who want to be buyers and sell. Don't feel like you can't sell the company. It doesn't need to be a public company. You don't need to be CEO. In fact, I was ready to move on anyways. If it's a frothy market, if it's a time where buyers are eager to buy, that's the time you should be eager to sell. So I had to be the seller as opposed to be the buyer and take advantage of that opportunity that was best interest of our shareholders. And frankly, it was best interest to me too, because It's time for me to move on.

Did you sense like returns were compressing? Were there any kind of indicators?

Yeah, no, absolutely. Because the value creation math that we would always do, as I was saying earlier, we were doing that math in the past and we could just see even before it happened that the value was stepping up. And it was pretty straightforward math. And then we could see when we were public that it wasn't that our stock price was wrong, it was that our our value creation engine had slowed down. And if your value creation slows down, you shouldn't expect your stock to keep going up. So yeah, we weren't creating value at a pace that we were, and others thought they could come in and do a better job. As long as they were paying us for the privilege of having the opportunity, we should sell.

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Did it come to a formal decision like, hey, we should sell the company, that we, you run a process, or what would that look like?

I was ginning up interest. You could signal that as well. So I knew how to signal that we were open and there was interest brewing. And I can't remember if we ran a formal process out of the gate or not, but we definitely were signaling that with all the large infrastructure funds out there and they're paying higher multiples than we were trading for, that we would be open to.

Is this when, uh, you had the activists come in?

Yeah. You know, activists were in the equation as well. That isn't what triggered us to sell, but it certainly— You had— it wasn't—

Carlyle was part of it?

Carlyle was a different story that I was part of. That was— I tell in the book, and that was a situation where there were opportunities to learn by being part of something. It was— we would say at the time, like, I don't know if I want them to sell us or not, but it's fun to, like, be part of this because it was definitely an opportunity to interject ourselves. And he was behaving in a very hostile way toward other shareholders of what was called XO Communications because he was trying to get outright control. And he was a master, so he was playing all kinds of games to wrestle control. But we were playing some games as well, as I tell in the book. And again, that's all backed by— because it was a public company, you can reference SEC filings, which I did when I was selling the book. And I was like, wow, I forgot that this is how this played out. But That was before we sold.

But there was surprises on that story.

When you look at it, it's like, wow, that's crazy.

How'd the sale process go? Was it competitive?

And yeah, it got really crazy because we had a certain price in mind and a group of investors that I was friendly with at the time came together and they met our price and they needed due diligence. And frankly, they brought on several members of our former Zayo team as advisors. That was a new period in industry that's continued to stay where the really big infrastructure and private equity funds will make it very lucrative for people who used to be operators to be advisors to them. They get paid a whole bunch of money and don't have to do that much work. They were really trying to almost corner the market as it played out. What I mean by that is they brought a consortium together that was most of everyone who was in a position to buy an asset of the size of Zayo in the space, because we were one of the biggest take-private in the history of take private at the time. There's been some bigger ones since then. I think we were number 2 ever when it finally happened, and there wasn't the capital formation at that stage that there was soon thereafter. So the private equity firms had to join together to do it. There wasn't 1 or 2 who could do it easily on their own. So we had the kind of a whole lineup. We had Blackstone leading it, and Carlyle, I think, was part of it. And you look at it, it was multiple major, major investors. Including my lead Series B and my lead Series C investors were part of that group, people I was really close to. So all was going fine and dandy until some of the bad actors there were starting to work with the activists. They saw an opportunity to get it for less than $35 a share. That was the price we agreed on. And then they were coming back and saying, well, all this stuff in diligence, we're not going to get there. We could tell they were starting to signal that they were going to come back and retrade the deal the deeper we we got. But while they were like going through that, they also tried to lock up all of the, all the sources of debt to do a deal this size. So basically they were setting it up so that there was zero chance there could be an alternative bid. There wasn't any strategics involved. So they were cornering the market. They were locking up all the debt sources, making them sign agreements that they couldn't support any other bid, almost all the sources of equity, leaving us with no other choice. Either they would even oversubscribe it intentionally just to Yes, and deliberately, and knowing that there wasn't anywhere else to go seemingly. And that would have been fine if they would have paid $35 a share because we wanted to sell it, but it wasn't fine if then they started to get greedy and started to then try to lower the price and make it sound like it was our fault because this was different than that was different. And okay, but $35 is the price. So, but then they would use activist pressure to try to make it so that we couldn't just say no to the deal. It would have been very hard for us just to back down and say, we're not selling it because you lowered the price. And it was dragging on and stuff, but I had to work really hard to get an alternative deal. So I played a really big role in lining up two companies that typically wouldn't work with each other. One would only do deals by themselves, but they couldn't afford— this was too big for them by themselves. We don't ever work with partners. The other one didn't usually work with partners either, and they weren't even big enough to partner with the other one. But I somehow got them to a point where they were willing to work together and then they offered an alternative bid. Then it became kind of a really crazy process. So I tell the story in the book from the perspective of Aesop's fable where some guy's walking down and the sun and the wind make a bet. Wind says, I think I could get that guy to take his coat off. Sun says, I get the guy to take his coat off. So they make a bet and the wind goes first. So the wind creates all this torrent wind and howling wind. And all the guy does is clutch his coat tighter because he doesn't want the wind to blow off his coat. Well, the sun then comes in and just makes it really hot. And the guy takes off his coat because it's hot and he wants to take his coat off. So the sun won the bet. So I described the one who was being very hostile as being the wind, trying to force me to do something I didn't want to do, force us to board. And then the other bidders were the sun. They wanted to work with us and stick to the price. Sun, which was the second consortium, ended up prevailing in the deal. Crazy story I tell in detail in the book.

Yeah, it's a really good one. It was a group of PE firms that ended up coming together in like the second largest in the world right now.

Yes. EQT, the second largest in the world, which ironically, this was too large for them to do at the time, and now they could do it by themselves in a heartbeat.

My favorite part of the book was actually the appendixes. You had two, you had the owner's manual and this. View on IRR owner's manual. Is that more of like a reflection of here's the key ways of operating your business, or was it—

Oh, I developed that at the beginning of Zale. So Warren Buffett publishes an owner's manual as part of Berkshire Hathaway. And what does it mean owner's manual, Tim, is like, well, if you bought a lawnmower, you get an owner's manual to tell you how to work the lawnmower. If you buy Berkshire Hathaway stock, don't you think I should give you an owner's manual? Now you're an owner of my stock. Here's how this works. So he writes this owner's manual and he updates it every few years saying, here's how I'm going to run the business. And I want you to know that so that if you want to own my stock, you know what you're getting into. You don't like it, don't own my stock, but this is what I'm going to do. And he articulates it. So I had the inspiration that I should have an owner's manual that I could share with investors. I could share with my employees. I could share with people who gave us debts and this is how we're going to run the business. In its way of holding ourselves accountable too. And it talked about kind of 9 or so principles of what you should expect if you're a partner of ours. Here's how we're going to go about making decisions and why and how we're going to think about the business. But that's what I took. I took one of the old versions of that, cleaned it up a little bit and put an appendix.

A little more than company values that you see everybody have. It was, you get a little more in depth about how we're going to operate this business and what to expect if you're going to participate in this company.

And it was important because remember we were coming off the telecom meltdown where the trust between management teams and investors was destroyed. People went to jail. They went to jail for doing things that were fraudulent and trying to deceive their investors. And I wanted investors to get over that period and be able to trust the management team that we're not going to do things that were done in the past to create illusions of value. We're going to be committed to true value creation. And here's how we're going to go about doing that. So it was maybe overkill from the lens of the future, but from the time, it meant a ton to our investors and meant a ton to our management team. Now I can go to the management team and say, okay, this is how we're going to operate.

This leads to the equity value creation model that you came up with. I want to break it down tactically so I can apply it in my business. You had this view that at the end of the day, investors, there's only one metric to measure their performance. And it's sort of labeled IRR. And you have this view that why is it at the end of the exit that you calculate IRR? Why isn't this a continuous metric that we all know what we're working towards? When did that come up?

It actually came out of a little bit of like stress. And what I mean by that is every management team will say our number one objective is to create value for our shareholders. And think of this as more developed companies, maybe not pure startups, but private or public. We are committed to value creation for our shareholders. They all say that. Am I right?

Yes.

Okay. Well, how do you measure that? Then they look at you like, what do you mean? It's the stock price. Yeah. But if the stock price is down, you say that the markets are wrong. And if it's up, you say that's because you're a great management team and how much value. But then when it's down again, you say it's not our fault. It's the market doesn't know what we're doing. So the stock price isn't— that's not measuring value creation. As Warren Buffett often says, that's a voting booth. It's not a measuring tool. It's not scale. You need a true scale of how to measure value creation. Your stock price isn't that. If you're private, you don't even have a stock price. So you're saying you're creating value. Do you measure values? Like, yeah, we have a budget every year that we negotiate with our board and it's got revenue targets, got EBITDA targets, got capital targets. Okay. So you got like targets. Is that measurement of value creation? If you achieve your plan, how much value did you create? And they look at you like, I don't know what you're talking about. No one, I mean, it sounds crazy, but no one measures value creation. It's the craziest thing until you think about it. Yeah. No one measures it. Except, you know who does measure it? Private equity firms, right? They do it every quarter. Every quarter they measure valuation. In fact, it's even regulated that they have to do it now. So what do they do? They have a very simple process. I've got 10 companies in my portfolio. I know how much I invest in each of those companies. That's how much I put in. I invested $10 million in this one and $5 million in that one. And every quarter I go through a process to say, what do I think my investment is worth? When I'm doing it as a truly honest way, it's because I want to know approximately what the answer is. So I look at one of the companies and I look at what's the best metric used to estimate the value of that company. And for some businesses like our business, EBITDA multiple is the first measure. If I take my EBITDA and multiply by 12, that's a good approximation for the value of the business. If my EBITDA is $100 million and for that business, 12 is approximate multiple. I know the business is worth about $1.2 billion. So that's at a point in time. I could look backwards in time and say, okay, a year ago when I did the same math, it was worth a billion. I could also look forward and say, if the management team hits their budget, I don't know if they will or won't, but if that budget they put in me, if I run the same math, it'll be worth $1.4 billion a year from now. Okay. So the business went from $1 billion to $1.2 to $1.4 in terms of what it's worth. So does that mean you created value? Well, not necessarily, because that just tells you what the business is worth at 3 different points in time. It's an important number, but it doesn't tell you if you created value, because if I got from there to there because I burned a bunch of cash in the meantime, yeah, it's worth $1.4 billion, but you invested $500 million more because you bought a company. That's why you're worth more. I didn't create value. I lost value because I put in $500 million more and it's only worth $200 million. I went backwards. So the same simple math they do for each of their companies and for their portfolio. You could take that exact same math and apply it to the operation of the business. The only big innovation, the big light bulb is I just need to take their methodology that they use when they're valuing portfolio and apply it to the lens of you're running the business. You could look at that backwards in time and see how much value creation took place historically, but you could also look at it forward in time. If I make my plan for the next 3 or 4 quarters, so I know how my EBITDA is going to change and how much cash I'm going to burn in the process, I can show whether value created. And then if I can normalize that for debt, then I can see how much equity value I created because part of it might go to the debt holders, part equity holders. And you could do that over time and it will correlate really well with the exact same way you calculate IRR. Exactly.

You're just doing it. As an exercise.

We all do it when we're looking at a business. Like, I'm going to do a 5-year plan for either starting a business or for acquiring a business or a 5-year strategic model. It's the exact same math, but you're using it as a real-time metric.

Do your metrics change? Like, we use the techies example. Like, right now it's kind of just shifting in a different direction. But would you, if you had this model, change instead of the 12x EBITDA depending on the market, would you adjust that and say, oh, now we probably got to start using 10x because things are different.

You have to be honest in your assessment of what approximately the right EBITDA multiple is. And you got to realize that that's not stagnant over time, nor is it externally driven over time. It has more to do with the growth rate in your value creation. It's a little bit circular. If you do your value creation math and you're creating value at 40% a year, which we were, well, that tells you if you had conviction, you should be willing to buy that asset for a lot more money than 12 times EBITDA. You should be willing to buy for 20 times because you're going to catch up to that 12 times within a year or two. It's going to be a signal that you're probably using an EBITDA multiple that is lower than what a rational buyer would be willing to pay you for the business. But the same is true the other way. If you can't demonstrate value creation at a 12x multiple, no one's going to give you a 12x multiple for the business because it's not creating value when a buyer really looks at it. If they're savvy enough to understand what they're buying, they'd be like, eh, it's not really worth 12 times. So you gotta pay attention to your growth rates, not just of revenue, but your growth rate really of value creation itself. And, but usually those are tight ranges. And if you're comparing your equity value at one period to the next period, you're using the same multiple. It doesn't matter if you're exactly right on the multiple, whether it was 10x, 12x, 14x, it's really the change of it that you care. And that What's the change of it? That's called IRR. It's changing at 20% from one period to another, and that period is one year. That's 20% IRR. It's changing at 20% over two years. That's about 10% IRR. So the IRR is the percent of change in value creation, and equity value created is the absolute change. I went from a billion to $1.2 billion, and that was a 20% increase. But it's the exact same math that every private equity firm uses. Now it's harder to do that in, you know, like you can't do that with the quantum business right now because quantum businesses, that's more about projecting into the future what you think quantum might be worth. That's much more subjective, but for businesses that are anywhere close to trading based on the financial performance, you can do it. And it doesn't have to be even down multiple. It's like, what's the norm for correlating kind of value to a metric, the precision of that multiple matters not much. You gotta be in the right ballpark. It's really keeping it constant period to period and seeing if with a constant multiple, are you creating value? And if so, at what pace? Once you do that, it becomes a math exercise and you use it to judge, is this an appropriate budget going forward? Because it takes all the silliness out of budgets. It was funny because we never had budgets at Zale, which is really crazy. There was never like, a negotiated budget with the board and then measurement against how you did against budget. That was never part of our vernacular because we didn't really care how we performed against budget. What we cared about is when the math played out, is the value creation equation saying that we're worth a lot more. It was years before our investors even figured out that, you know what, we're not even having a conversation about budget. And they didn't even care because what they knew we were is we're having conversations about financial performance, but it was never really against budget. It was more in an absolute context. Then after I sold Zayo, about 2 years afterwards, it was really funny. I get along and really good friends with the CEO. They lost all these principles when I left. He tried to explain to me like a year and a half after he took over the company, did you realize that Zayo never really had budgets? And I'm looking at him like, you're asking me, the founder of Zayo who ran it for 14 years, if I realized that Zayo didn't have budget. I'm like, that's true, we never had budgets. Yeah, of course I knew that.

It was just because you just kept him distracted with the IRR.

They wanted to know if their investment was worth a lot more now than it was before.

You gave them a clean formula.

In fact, maybe calculated.

And this is—

and what was nice, they even started to laugh. I was a couple of them laugh in a respectful way because they're like, every other portfolio company, we got to do all this math ourselves about what the company is now worth compared to before. You just give us that math and all we got to do is look at it and see if we agree. And then we just repeat it. So you're even doing the work for us in terms of how we value our investment in Zayo.

And I'm going to try it. I got a business I run now that's right at $9.9 million ARR, bootstrap the business. So I could probably figure it out. I know I got about $1.6 million that was put in over time. You got some debt, paid off the debt, but then we'll probably do a recap at some point and start getting that.

It becomes very motivating once people understand it and buy into it. All decision-making is not— because with budgets, people want to negotiate budgets. I'm the CEO and I want my revenue target to be lower so I could suppress revenue and get my bonus. Is that what you want? The lower revenue target? Is that your motivation? I mean, but if you're saying them by like, I'll give you a bigger bonus if you beat your revenue target, they're going to want to negotiate for as low revenue target as possible. It's human nature. It removes all that kind of gamesmanship out of the system.

Would you incentivize on having that equity value creation?

Yeah, that's all we incentivize on.

Other than salespeople, based on that. And then is it tiered? Hey, we have a pretty much— you listen.

Yeah, that mess that we created, a lot of value, bonuses pay out wonderful. And now everyone had a lot of equity too, so it would be correlated equity. But yeah, all the financial rewards, including to get promoted. And then we end up with a bunch of people who knew how to run businesses, which in our industry, that wasn't the norm because our industry was like, you knew how to do operations, you knew how to sell, you knew how to be a CFO, you knew how to be an engineer, but no one knew how to run a business because no one ran a business. But that's why so many former Zayo people run companies right now in our business, because they all learned how to really be business people and they took that. And now they all, like I said, I was just came back from that trade show, which I don't go to those anymore. And I had a bunch of people come up to me. If they were on the East Coast, they would liken it to the Belichick tree. Like that, you must have so much pride. Look at this Belichick tree. If it was on the West Coast, it was the Shannon tree or whatever. Well, in the industry now appreciate how much true management talent has come out of the system and they're running companies and they're creating enormous amounts of value for lots of teams, largely former Zayo teams and for investors.

Before we wrap up, I want to talk about what you're up to now, but let's go through the exit because you got paid a lot, but you've also minted a lot of millionaires in that process, which is an extremely successful exit. What do you do with the money? I keep asking a lot of entrepreneurs this question because I'm trying to play it through because I'm eventually have an exit and whatnot. And I'm like, what do you actually do with the money? I don't tell— we'll talk a little bit about taking money to make more money, but like, what do you actually do with the money?

What you should do is you should be wanting to have a positive impact with your wealth. What you shouldn't do is just hoard it because if you hoard it, it just sits in some bank account somewhere doing nothing. But if you put it to work in different ways, in ways that reward and give opportunity to others and help improve whatever community you care most about, then you're doing something good with your money. And we now have what is a single-family office. It probably doesn't look like one externally facing. We have a very clear mission. It's to be the most catalytic tech investor in Colorado with an aim toward helping Colorado be the top ecosystem for tech investing between the West Coast and the Northeast. So we have a clarity of mission and it applies not just to how we invest our capital, but it also implies to how we navigate our foundation. I was able to fund a pretty sizable foundation and we use that to help create that culture and environment that is both good for the community and also helps bolster the entrepreneurial environment. So it's consistent with our overall purpose. So Endeavor Global is the top organization nonprofit for scale-up tech entrepreneurs globally, operational in 45 countries or more. We launched Denver, Colorado as part of that, and Denver, Colorado is one of the top performing offices. So it's all about helping those who are in their scale journey already get to be really effective, but it's also to be role models for those people on what do you do once you have success? How do you give back to the community? We are very active with Sundance Film Festival, which is moving to Boulder. We have launched Boulder Roots Music Fest, which we see as a complement to Sundance, opposite time of the year, using music as a theme, but build an entrepreneurial ecosystem around, around that. Support Colorado Startup Week, Boulder Startup Week. So we lean into a lot of community activities, but then we invest. We're at, we're very active investors in Colorado tech companies. And when we invest, make no mistake about it, we're investing as capitalists. We're investing to earn outsized returns as investors.

These are two different things. This is like Crusoe Ventures is sort of investment vehicle. And then the, what's the not-for-profit?

The, it's called Crusoe Foundation.

Crusoe Foundation separate, two different things.

Yes and no, because it's all part of the same mission. So we're all serving the same mission of being the most catalytic. And by catalytic, that's an importantly chosen word. Doesn't mean we want to be the biggest, doesn't mean we want to be the best, doesn't mean we want to be glorified as anything. It means we want to help the ecosystem. We want to help other investors. We want to help the entrepreneurial ecosystem in general. And certainly we want to help our own portfolio companies. We want to really be catalytic for the community of Colorado, Boulder in particular, but Colorado. And what is really important, I mean, you got a thriving tech ecosystem, that's good for everyone. If you don't, you're in deep trouble, especially with what AI is going to do to everything. You're in a geography that does not have a thriving tech ecosystem. I don't know what you're going to do to have good schools, to have good healthcare system. To have people be able to live comfortably, particularly with the disruption that's going to take place with AI. So we believe a thriving tech ecosystem is not for the entrepreneurs, it's for everyone else. It's for the community.

Very cool. I like that you're really proactive on making an impact. I read a lot of billionaire biographies, all the names you've heard of, and you see this common pattern. Get to around 70, figure out you're worth billions and billions, and then it's, oh, I better do some philanthropy, and you're just cutting big checks to different endowments and whatnot, but you're taking rein and actually seeing things through of like personal dollars to impact that you're making.

Looking backwards in time, people thought doing good was giving money to philanthropy, and certainly there's an aspect of that, but what's contributing to positive forces in the world is not philanthropy, or philanthropy is, but that's not the main— it's tech. Make no mistake about it, there are less people in the world today by far who are living under the poverty line, that people are living longer, they're living healthier, they're living in more comfortable situations on every corner of the globe, not because of philanthropy, but because of technology. That's kind of something that we still have to make sense of because most people think that the gap between those who have money and those who don't is getting wider and buckle your seatbelts, it's going to get much wider in the future because of technology. But it's that same technology, that same wealth gap. That is the fuel to making everyone's life better. In general, people are more healthy across the globe. They're more educated across the globe. There's more equal rights across the globe, less poverty across the globe than at any time in human history by a lot. And that's fueled by technology evolution, not anything else.

Betting big on tech. What kind of deals are you guys doing? You mentioned quantum. I talked to one of your associates. We talked a little bit about space. Those are the main two categories. You're going to highlight some investments you're super proud of.

We got a really cool portfolio and it's performing really well. And I was so surprised you were—

in my head I was thinking of this reading the book. I'm like, Dan must be like just funding a bunch of roll-ups right now. No, you absolutely are not.

No, I don't think you're funding any roll-ups. We're 100% focused now on Colorado. You look at our portfolios, you'll see things outside of Colorado.

Colorado has actually been known as a pretty big space hub.

Shit. Yeah, it is. It's a big hub for digital infrastructures, thanks in part to our legacy of Level 3 and Zayo, but others as well, but huge hub for like data centers and Lumen and Zayo are still headquartered here. Digital infrastructure is a huge ecosystem. Space tech, this is one of the biggest aerospace and space tech markets, period. And quantum, it's gigantic and we're very active there. There's a content creation and creative tech scene that's beginning to gain more momentum out here. There's energy innovation ecosystem out here. There's outdoor lifestyle, even natural food. This is a kind of historically important market there. Agriculture, technology, regen is big out here. So Colorado is a big playground for lots of different sectors. Most markets outside of Northeast and Bay Area are known for one or two things. We're leaders in a lot of areas and, uh, and we get a lot of the best deals come our way. So we have, you know, 6 quantum investments. One's already exited, one, one Went public 2 weeks ago at a huge valuation, and that was, been one of our bigger investments. And we have the other quantum companies in our portfolio are doing really well. In fact, we're hosting, we, Korus Ventures, are hosting a film premiere this coming Monday. So it would've already happened by the time you dropped this podcast called Our Quantum Future that was filmed all over the world, but we're premiering it right here in Boulder because of Boulder's and Colorado's prominent role in quantum. We're really excited about what we're doing. We got some really cool AI investments that are here local that are going to unveil themselves in the next year or two that are really compelling. So yeah, we've got a lot of cool stuff going on.

Yeah. Some space deals too.

Space deals. Yeah. We're the largest and lead investor of Agile Space Industries, which makes in-space thrusters and in-space tanks. That's doing really well. We're an investor in this company called Boom Supersonic, which his mission is to build— I know this company. What's crazy about this company, and we're sizable investors in it is they first failed in their quest to build supersonic engines and all but ran out of money, all but ran out of support, all but had to close their doors in part because Rolls-Royce was going to build their engine. And Rolls-Royce not only pulled out, but they pulled out really publicly. That left the company reeling. So the entrepreneur is a gritty, gritty entrepreneur, which is so important. So he said, we're going to go build our own engine to have the first supersonic plane. Who does that? They go build the whole engine, run out of money, run out of support. It's not quite done. And, and led by some really prominent Silicon Valley investors with names like Sam Altman, so prominent group there, they led a recap of the company that we participate in. And they discovered that engine, that turbine that they're building for their supersonic plane. Is ideal for AI data centers, better than state-of-the-art by a lot. And the state-of-the-art turbines are in really short supply. You can't get them for like 5 years. So now they're selling these engines into that market for contract values of like lots and lots of money. And it's going to be a huge success story.

So they're still going to build the jets.

That's going to fund the buildout of the supersonic commercial jets, but they're going to fund most of that through commercial deals, not through the need to raise more money. It's like one of the I think it will be successful. It's got to still get there, but it'll be one of the most interesting pivots since SpaceX decided to do Starlink.

When they launch commercial, I'm going to hit you up for some discounted tickets, just so you know.

Absolutely. We're going to have to wait 5 years for that first flight. I'll pay you.

I'll pay you.

I can show you the engine in operation next year, I think.

Okay. So you got investments, you're investing a lot back in the community, philanthropy. I want to know, like, what do you do for fun? Like the money, did you buy a yacht? Did you buy a jet? What do you actually do with the money? What is the fun you did with the money?

Crazily, I've been golfing a long time. My 3 best golf rounds have been in the last 2 months. It's almost makes absolutely no sense. Not because I'm taking a bunch of lessons, but I just started to click at least for 3 rounds. My creative side has come out. So the book, I wrote a song, which is crazy. And it was more accidental that got produced. I do the podcast, The Bear Roars, B-E-A-R, The Bear Roars, my nickname, The Bear. And it's a really cool podcast. It's got a lot of traction and you should definitely check it out.

Diverse. I went through it. I actually listened to get some context to one of them, but yeah, you just don't follow one theme. It's very oriented around the community.

Yeah. The primary theme is cool people doing really cool things in Colorado, and a lot of it is like tech entrepreneurs or tech investors, but there's also some of our cultural icons. But then there's also a theme around the bandwidth industry and people telling stories related to bandwidth books. So joint lived experiences where they're telling how it played out from their perspective. It's kind of got the two-pronged approach, but a lot of iconic people on there. But we also have a really nice house on the beach in Cabo at a really exclusive club that's very social club. We spend about 2 and a half months there. I'm busy all the time, but I'm doing stuff I want to be doing for the most part. Sun, golf, book, podcast, song, and Boulder Roots Music Fest, which is going to be a gift that we're able to give to Boulder and Colorado, and hopefully much broader than that, that we think can grow into being an iconic annual, not just music event, but South by Southwest structure around it that is really designed to appeal to investors, particularly tech investors, tech entrepreneurs, as well as the broader cultural arts community in and around Boulder, Colorado and beyond.

I'll book you for a ticket for that. We'll get it for the—

Do it. —money science crowd. Yeah, it's going to be a blowout event. This August, the weekend before Labor Day weekend, mark your calendars. August, come to Boulder.

Okay, it's right on my birthday. There you go.

Be part of a Boulder Roots Music Fest. Look it up.

I gotta ask, what's the craziest thing you've seen in M&A?

Oh, the craziest thing I've seen in M&A. Let's see. Ooh, good deals that we've done. Probably the craziest one was the ICG one we did, because that thing was certainly the above-net story is crazy story and definitely worth looking at that. But the ICG where this is a company that had $30 million of remaining cash, no access to debt by their own admission was burning $8 million a month. Okay. So do the math. What's 30 divided by 8? It's a short period of time. And that was when we started talking. Okay. So they got no access to money, $30 million, burning $8 million a month. Do the math. We were able to buy the company. We only gave them $8.7 million. Buy the company. Most of that didn't go to their burn rate. It went to pay the lawyers and the bankers and whoever else was involved. So almost none of that money went in the company. We never had to put a dollar in that company and we got to cash flow positive. And they're still like, okay, that makes no sense. You didn't even own it. You didn't even buy the company until you were deep into that, like remaining burn days. But we just, while we were buying the company, we also restructured a bunch of stuff and By the time we owned it, the burn rate was down to almost nothing. And we brought in some cash from things that we teed up to sell, you know, before we actually owned the company. And we never had to put another dollar. And then a year and a half later, we sold it for $250 million in aggregate. It was like freaking crazy. It's still like, you're looking at like, how do we do that again? But it just happened. We would have meetings with the investors and we had to call the meetings, what have you done for me lately? And the reason we did it is we were making all this value creation for the investors. They knew it. But every meeting wasn't like, wow, you guys did a great job last week and this last month. Never had time for that. They're like, okay, that's great, but that's what was already done. What are you going to do next? What are you going to do for us now? So every time it was like, no one ever saw this coming and everyone just wanted more and more and more. And the craziest thing is I think we left a lot of money on the table because we should have sold some of it and kept some of it and used that to launch what became Zale because some of those assets would have been really valuable as part of Zale. But Oh well.

Yeah, this has been great. I appreciate you taking the time. Appreciate you reaching out.

That's the full Zayo lifecycle. A thesis formed during a hip surgery recovery, 45 acquisitions, an IPO, and a sale that ranked among the largest take privates in history. The thing that Dan kept coming back to is this: most leadership teams say they're creating value, but they can't actually measure it. The model he built wasn't complicated. It was just honest, and that honesty is what kept Zayo aligned and focused for over a decade. If you want to apply the same thinking to your business, the M&A Science Hub has an equity value creation scorecard. It's built around exactly what Dan described. Link in the show notes. Dan's book is Bandwidth. It's the longer version of everything you heard across both episodes, operator-level detail, No theory, worth your time. Thanks for listening. Here's to the deal.

Thank you for taking the time to explore the world of M&A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts, I'd love to hear from you. If you need help standing up an M&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, kison@mascience.com, or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, Visit mascience.com 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&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.