How To Sell Your Startup with Mark Achler and Mert Iseri

An exit isn't a I sell, you buy short term transaction. It is much more of a relationship that has been built out over a long period of time that's fundamentally built on trust with an eye towards creating future value which is only realized after a long period of time. So it's less about I'm buying a house. Like I give you money, you give me a house, I'm buying groceries, I give you money, you give me groceries. And it's much more we're partnering together to create X with Y value towards our customers and we came up with a framework that essentially allows founders to make this distinction much more quicker about Is this the right partner for me? Is this the person that I should be going on this journey with as part of this exit? We call it fair. Everybody wants their acquisition fair. And fair stands for four things Fit, alignment, integration, and rationale. I need some traction. You need some traction.

Let's get some traction.

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A successful Exit is a dream for all of us, but it seems like a black box or a game of chance. So how do you bake that exit strategy into your business from day one, whether it's an acquisition, acquisition or a merger or an IPO or something else. And these fine gentlemen here, Mark and Mert from Math Ventures, they wrote a book. They wrote a book called Exit. Right after interviewing over 70 seasoned entrepreneurs with multiple exits under their belt. M and A executives and buyers like Google, Facebook, Amazon, along with lawyers and bankers. And so they're going to tell us all about it. We're going to talk about frameworks, we're going to talk about how to build relationships. We're going to break down the term sheets, lessons learned, horror stories from 70 exit stories. So let's get right into it. Mark and Mert, first tell us your backstory. How do you guys get to where you are today? How did you guys get to connect? We know Math Ventures is a pretty prolific VC in the Midwest here, so let's hear it.

Okay, so my background is I'm a serial entrepreneur. So I'm OG from Apple. I was a very early Apple employee back in 1983, left Apple after a few years, came back to Chicago and started building software companies, built the second product ever for Windows 1.0, a couple of games companies, healthcare companies. And I became an investor. And some of my businesses worked, some of them failed. I have a lot of scar tissue and experience and I've been helping and mentoring entrepreneurs for 40 years. And I'm also an adjunct professor at Kellogg. And what I love to do is help and give back. And the framework is joyful innovation, because I think innovation is hard, but it should be joyful. If it's not joyful, like, why do it? Building community, Lloyd. I know how important community is for you. It is for me as well. And teaching empathy. And so that's the framework of how I put my life together. And Mert, why don't you tell your story and how we met each other?

For sure.

I was born and raised in Istanbul, Turkey. So shout out to everyone who's dialing in from Turkey. And now I live in Chicago. So shout out to everyone who's dialing in from Chicago. I built a company called SwipeSense, healthcare technology company. We started in 2012, raised $24 million, got ended up getting acquired by SC Johnson in March of 2020. Like right before COVID was hitting, we were getting the deal across the finish line. And I was like, at this point in the Final days, like laying down on my bed with an ID licen. My God, please let this deal go through the world is. It feels like. It felt like the world was coming to an end. It feels like a lifetime ago now. But it was a difficult transaction with lots of stressful points and it was my, you know, Swipe says was my first startup and I really didn't have this know how of like how to get acquired. Like how do you actually have a successful exit with the company? So there were lots of ups and lots of downs and Mark was actually part of the brain trust in that process. How we actually, you know, got the deal across the finish line was a lot of lessons learned and advice that I got from Mark along the way. And so when the deal made it to the other side and it was like, look, successfully completed, I had lots of like thoughts around, like, man, like we could have done differently. We could have done it this way. Knowing what I know now, I would go back and change this. It wasn't just like stuff that was at the heat of the deal. It was about stuff that I would have done years ago prior to an exit. We're going to get into a little bit about that in the conversation today. But those initial sort of thoughts around here's how this could have gone better ended up being the outline of what later on became exit. Right. And Mark and I share this value of essentially paying it forward. A lot of people in the entrepreneurship community will resonate with this. You're standing on the shoulders of a lot of people, help you along the way as you're getting to accomplish what you accomplish. And it's almost like a sacred duty to pay it forward. So we wrote this book in the spirit of giving back. Like we wanted founders to have great exits. And an exit doesn't have to be just an immediate transaction. It's like a long term relationships that you form with the company that's acquiring you to achieve something great. We're going to get into that today, but that's like how we got together. And now we have the pleasure of working together at mathventure Partners. I'm an entrepreneur in residence in here and Mark is one of our partners.

Life and business is a marathon, not a sprint. And relationship truly transcends companies. Now tell us a little bit about Math Ventures and the kind of companies you guys invest in before we get into the rest of the show.

Yeah. So Math Venture Partners, early stage. I don't know what we call it anymore, Seed plus A. But the first real institutional round of funding, we typically put in 1 to 2 million dollars and the first real round. We also make investments, smaller investments of 100k in a pre seed deal. We're software investors primarily and our investment thes something a little bit different. We love companies who have an unfair advantage in sales and customer acquisition. We think there's a lot of really smart entrepreneurs who create great products. And we have a saying which is the greatest product in the world without customers is a great product, but it's not a business. So we're always looking for. So we think great product is the baseline and what we're looking for is leverage in a sales model, that unfair advantage in customer acquisition. One example, Lloyd, is community. Like this is something that you preach and that you believe in. We do too. We think that's one example. It could be channel partners, it could be direct sales, it could be SEO. However you define customer acquisition, it's not enough to build a great product.

Sales fixes everything. Ultimately, happy customers generate revenue and that keeps your business going. Right. So you interview.

We actually say revenue covers lots of sins. Yeah, right. If you've got revenue, you can fix things too.

You can fix things too if you have revenue. But if you keep the crap around for long, then the revenue will leave you as well. So you need a combination of things. Now you guys interviewed over 70 people. How did you find them? Who are these people and what attracted you to get their stories?

Some of the folks we had known along the way. I've been mentoring at techstars now for the past five years as an all star mentor. So you get to meet companies from all shapes and sizes, get to interact with other mentors. Techstars as a community is one of the most amazing networks that you can join as a founder. So a lot of our connections were from there, but more so Mark, don't be fooled by his youthful looks. He's been doing this for a little bit, let's just say a couple of decades. And over the years this collected quite a few interesting folks in the venture business who was were kind enough to return our calls. And we always asked the folks that we've interviewed, what were some folks that they learned things from? Initially for us, we both had sold companies. Mark had been sitting on the boards of dozens of companies that got acquired. We thought early on this was going to be a process of documenting what we already know and we're going to get interesting perspectives along the way. And then so comes out a book. It couldn't be further from the truth. We learned so much from the wonderfully thoughtful people that we've interviewed as this book was coming together and it really changed our way of thinking in terms of how companies ought to get acquired. So we're really grateful for the brilliant folks that have contributed to the book. And the key question we asked them was what do you know now that you Wish you knew 15, 20 years ago? And again, mind you, these are people who do M and A for a living. These are folks who work as investment bankers, these are folks who work for M and A lawyers, people who run M and A functions in large tech companies, serial entrepreneurs who gone through multiple acquisitions. And there were so many nuggets of wisdom that we're able to capture in the book.

And what's really interesting too is that there's so much out there for about how to start a business, how to raise money, the messy middle sales, marketing culture, hr. But it turns out there's actually very little about how to sell a business. And the reason is one's confidential, so there's confidentiality agreements. Two, if it's a good exit, nobody wants to brag. If it's a bad exit, nobody wants to talk about it. But it was really important. These are lessons that could make the difference between a transaction happening or not happening, a successful transaction and adding millions or tens of millions to a price point. The lessons we learned here were just profound. And I'll tell you that it starts the minute you take somebody else's money. Because the minute you take somebody else's money, you're taking their agenda and you're taking their time frame and their time horizon. So it doesn't begin. You've run your business for 10 years. Oh, I guess it's time to start a business, sell the business. It starts, you start thinking about it, you start thinking about your cap table. From the very beginning, I had the.

Good fortune of speaking with a fantastic entrepreneur, a CEO of Zoho. And he told me that when he started the company, VC came to him and wrote him a term sheet, top tier vc. And he hated that exit clause there. I think it was seven years or something. The standard clause that you need to sell the company or you have, we have the option to make you sell. And because of that he never raised money. And then he built a billion dollar revenue business completely bootstrapped. So that happens too. So let's dive into this. You interviewed over 70 people, SM people, super experienced people. What were the top common learnings that would benefit our audience here of founders?

An exit isn't a I sell, you buy, short term transaction. It is much more of a relationship that has been built out over a long period of time that's fundamentally built on trust with an eye towards creating future value which is only realized after a long period of time. So it's less about, I'm buying a house, like I give you money, you give me a house, I'm buying groceries, I give you money, you give me groceries. And it's much more, we're partnering together to create X with Y value towards our customers. And we came up with a framework that essentially allows founders to make this distinction much more quicker about is this the right partner for me? Is this the person that I should be going on this journey with as part of this exit? We call it fair. Everybody wants their acquisition fair. And fair stands for four things. Fit, alignment, integration and rationale. Fit is the cultural fit between those two companies. Can you actually sit next to this person in the plane for four hours and get along, get along by the end of the flight because you're going to be starting a long term journey together. It's really important that you share values and you have like share sort of understanding between those two things. The second is alignment internally alignment between you and your co founders and your board and your team and your investors. A lot of people need to be looking in the same direction here in order for the exit to go right as well as alignments between what the company that's acquiring you is thinking about going. Are you aligned in the same direction? Third is integration. Is there a plan in place for these two companies to come together and deliver value together to your customers? We've seen so many examples of companies. One company is a much larger one has a competing product, they buy the smaller company with the superior product and years later those two products are still competing with each other in the open marketplace. It's owned by the same company. And yet the plan wasn't actually fulfilled to bring those two things together. It becomes this really messy long term prospect where ultimately leads down to value being left on the table. And then finally, rationale. Can you explain to your grandmother why this makes sense? Why one plus one equals a hundred? What is there ultimately that sort of plugs a strategic hole in the acquiring company or for the smaller company, something that they can access in terms of maybe a distribution channel or a much broader salesforce. What is it that the smaller team couldn't accomplish on their own or with further investment? That makes a ton of sense with their acquiring company. So those four elements fit alignment into Integration rationale. If you have those four elements that means you likely have a great exit along the way. And if you're missing one or more of those components, chances are the deal is not going to come together. If it does, it's not going to work out long term. So that's one of the things that I want to share. Mark, I'd love to turn it over to you to see what you have to say about this.

So yes, and the rationale is really interesting because most people when they're valuing a company, they look backwards, they say what was my trailing revenue? Maybe it's top line revenue if it's a strategic buyer, maybe it's EBITDA if it's a financial buyer. But they're basing the value of the company looking backwards at what was accomplished. And we think that the rationale is looking forwards of what could these two companies do together and what is the impact of of the smaller companies products service offering on the larger company? If you plug into what Mert just said, if you plug in your software into the larger company sales force, are you going to 10x revenue? If your software plugs a strategic hole will improve the retention rate on the larger company's existing products. That's how you drive real value, is by looking forward and building a great rationale. So another thing we learned is having an annual exit talk. So look guys, there's a stigma to talking about exits. There is entrepreneurs. I've been a CEO four times, Mert's been a CEO, I'm a VC sitting on lots of boards. These CEOs don't like to talk about exits because they don't want to signal to their investors that maybe they're tired or maybe their heart's not in it anymore. We're big believers in openness and transparency and building trust. And one of the ways you build trust and one of the ideas in the book is having an annual exit talk that's regularly scheduled once a year. And the CEO can lead the conversation and say, yeah, we're still growing like crazy, the future's in front of us, it's way too early or sales are starting to slow down a little bit. Maybe there's new competition in the marketplace. Maybe our technology is getting a little bit old in the tooth. Maybe we should start thinking about it. And from the investor perspective we have venture funds have life cycles. So a typical venture life cycle is 10 years. So if you're in year 10 of a venture fund, they're starting to get pressure to deploy capital back to their LPs. Most VCs don't talk with each other about where they are in their fund life cycle and they don't talk with the CEOs. But boy, it matters. And so having an annual exit talk not only takes the stigma, but it also gives you some time to prepare. So let me be specific. If you think you're going to sell to a strategic buyer who cares more about top line growth, you might spend a little bit more money on marketing or hire some more salespeople. You want juice up growth. If you think you might be selling to a financial buyer who cares more about EBITDA or the bottom line, you might want to dial back some of your expenses and you might want to make your bottom line look a little bit more attractive. And if you have some time, if you have 18 months, two years maneuver, it could be getting your intellectual property house in order, making sure that you have the right patents and all your IP protected, everything filed. If you have a little bit of time, you can get your house in order. So we're really big believers in having an annual exit talk.

Now when you have that annual exit talk, do you have it with just the board or the execs or the company as a whole? Who needs to be involved with that exit talk? And what is the framework for discussion? What are some things you guys specifically prioritize discussing? So it's deliberate and maybe some action items come out of that.

Yeah. So this is primarily the board that you may depending upon. Every company's different, every executive team is different. You may want to include your executive team. Just your executive team. It's definitely not a company wide conversation. The minute you start talking about exits, people start to freak out. They one, they get worried about job security. Two, they start human nature is what's that going to mean to me? What am I going to get? And so this is not a company wide conversation. And maybe it's with your top two or three lieutenants, but it's a broad conversation. This is really a board strategic conversation. And in terms of what do you consider? Merck, I know you have a bunch of ideas. Yeah.

One is to talk about strategically how you add more value to your customers. So we're big believers in that. The exit shouldn't be framed as here's how we're going to make a bunch of money for everybody. That's great. But it's almost should be like a byproduct of a successful exit. The real conversation topic of an exit is how do we deliver more impact to our customers? How do we add more value? How do we make life better for the people that we serve today? Is there strategic partnership that enables further impact? This is a fantastic conversation to have with the board because there might be again partnerships, distribution, product integrations where the end goal is to build a better experience for a customer. That's a very healthy conversation to have with your board. And again, this doesn't mean that we're selling to this larger company tomorrow, but it sure does help that if you're considering an exit four years, five years out, you might want to start a partnership conversation today just to build that trust battery, just to charge that up. Because eventually if there is an interest in getting acquired, when you pick up the phone, you want there to be someone on the other end of the phone. One of my favorite saying is that you don't build a network when you need one, you build it when you know you're growing your business. So I think it's a really important sort of distinction that we make here around when you're talking about the exit, think strategically and less about, well, boy, let's fantasize about how much money we're all going to make. Like that's not a fruitful conversation, that's fantasy. Everybody feels great at the end, but that's not really adding value to you and most importantly to your customers.

So to add on top of that trust is the lubrication trust. All transactions have ups and downs. It's an emotional roller coaster. And when there are dark moments and every single transaction has a dark moment, it's trust that gets you through those dark moments when you can look somebody else in the eye and say, we'll figure this out together. And so we're big believers in the long game and building relationships. And we asked leaders at Corp Dev and Atlassian and Snowflake and Google and Amazon and Microsoft and Facebook and all the big tech companies. And we said to the leaders of Corp Dev, what do you wish CEOs knew before they came to see you? And every single one of them said, don't wait till you're ready to sell. Come and start building that relationship sooner. Because we like to acquire companies we know, people we trust. And the other part of that is information gathering is bi directional. So when you're building relationships with the corp dev leaders or product managers at larger companies, not only are they going to ask you about what you're doing, more importantly, you're going to ask them about what they're doing, what their strategic plans are, where Their holes are what are they looking for? What are they missing? And sometimes they'll tell you and sometimes they won't. Obviously confidentiality. But you should look at every single interaction. Not only is it an opportunity to build relationship and friendship, it's also an opportunity to gain knowledge, really important knowledge. Because if you know what the strategic plan is of potential acquirers and you know what holes they're trying to plug, maybe you can turn your knobs and try to help them help plug it.

Now, I want to get into some examples of that, like how do you build relationships and approach potential acquirers earlier on? And ties to Jayesh's question here. As an entrepreneur of an early stage company, what are some moves you can make early on that you are well leveraged when you do exit? And how do you approach a potential acquirer early on? These are all great examples. But maybe concretely, if you have a couple examples where entrepreneurs have approached bigger companies and built relationships over time, because I truly believe you can't optimize for the exit when you're ready to sell. You should be building that relationship before you need it.

Absolutely, absolutely. I'll make it practical. So let's say you're the founder of an early stage company and you're looking to develop some of these relationships. First of all, let's get ahead of the myth here because companies are advised to never talk to larger companies. Just build a great business and they will just come to you. We don't believe in this advice. We believe that, as one of the folks that we interviewed for the book and Bonaparte called called it, you should always have your party dress on when you're, you know, meeting with like, your industry peers. This could be larger companies. This could be good direct competitors either to be acquired by them or for you to acquire those companies down the road yourself. You never know what's going to happen and what we advocate for in here. We're not saying, reach out to the CEO and say, hey, by the way, here's my financials, let's have coffee together. We're saying, let's do value add to each other. How can you become an interesting expert in the space that you're building to these larger companies where you're a strategic thinker? So if there's an industry event, you should probably grab drinks together and talk about the larger market trends that are happening. You should be talking about, okay, is there any ways in which we can collaborate for the customers that we're ultimately serving together? And again, this is nuanced because we Also believe that you shouldn't be spending all your time trying, thinking about selling your company. This is maybe 5%, 10% of your time at most, if you will. But this is this long term investment that only you as the CEO can make in the company. Everyone else should be 99.99% focused on building the business. And if you're not doing this, then no one's doing this essentially in the company. So practically speaking, we think it's fantastic. If you say, listen to the investor calls of a large public company that's in your space that have done prior acquisitions, listen to their quarterly investment calls, where the CEOs talking, these are priorities for the next five years. That's really read the S1 report. There's an annual filing that literally outlines this is where growth is going to come from for us selling companies an exercise in empathy. They're now buying your company because they like the way you look, they like your revenue. Those things are validators of what they are planning on doing with their business. They're buying to further a business priority for the buying company. So you almost have to be an expert on what the buying company wants to do, wants to become, wants to deliver value in. So if you notice, oh, okay, I see that this larger company is thinking about expanding into this new product line. They're expanding this new market. You can then cite that and add value down that thread and say, hey, we actually do that as well. Let's have a partnership together. Look so on and so on. It's all about the end customer value. But you putting yourself in the shoes of the buying company and seeing how you can move the needle for them.

So well said, Mert. I love teaching about empathy and I have three rules of empathy and they are one, it's not about you. Two, do your homework. And three, bring a gift. And so what I mean by that is like all entrepreneurs, myself included, when we are laser focused, all we care about is our product, our customers, our employees. Like we're just laser focused about how does life impact me. And the reality is it's not about you. It's about your customers, or it's about your employees, or it's about the potential acquiring company. It's not about you ever. The second thing is do your homework was one of my pet peeves. There's no excuse for going into any meeting, especially a meeting with a vc, but any meeting or with a potential acquirer without actually spending some real time doing research and understanding who they are, what they care about. Mertz Suggestion of talking, reading the quarterly earnings calls, going to talk to an analyst. Go talk to an analyst of a publicly traded company and see what they care about, See what they're measuring, see what their KPIs are like. For example, one of my favorite questions to an enterprise salesperson is who's your champion? It's always somebody and I say, okay, when they get a bonus, when your champion gets a bonus at the end of the year, what are their KPIs? What is that bonus predicated upon? What are the financial measures? What do they really care about? So do your homework. And then Mert said it beautifully. Bring a gift which is add value because it's not about you, it's about them. How can you add value? And there's always ways, especially if you're doing some cutting edge technology or have some industry insights or there's always something that you could do that adds value. And remember, it's an ongoing relationship, not a moment in time. So don't just show up once every five years. When I sold my first company, I had a development tools company that I started in 88 and I sold it in 92 to Symantec. And every three months, every time I was in Silicon Valley, I made it a point to go visit the CEO of Symantec and just have a cup of coffee and just hang out and just exchange information. So even though I probably did that for four years, five years, and then he bought and then it was time to sell, it was easy because we knew each other and trusted each other and I knew what he cared about and what was important to him.

It's a great way to figure out values, alignment and also build that relationship. People do business with people they like, right? So diving into your fair framework, fit, alignment, integration and rationale when you're approaching these prospects, whether it's the product person or the sales leader or even the corp dev person, just discussing sharing information, staying in touch, how do you decide how much to share versus not share? And tied to that, there's a couple of questions here where how do you protect your company from falling prey to a partner like that? You make it far easier for them to compete with you on one hand, but on the other hand, they could be a natural acquirer. Totally.

The rule of thumb here is this, don't share anything you wouldn't share on a stage with the acquiring company company. If you're on the TechCrunch stage where you're presenting your company to a group of people, you're at a conference, you're talking about a bunch of stuff about your company that was not on your website but you're sharing publicly with the world. That's more than plenty to be sharing with a larger acquiring company. We agree you should protect yourself. Don't share your super secret sauce unless you're in like deep diligence with someone. Eventually those things will have to come out, but you have to somewhat be keeping your cards to your chest. But I do want to address this head on. In terms of what if my company gets copied? I hate to say it. If you're worried about your company being copied just because you're having a conversation with someone who can potentially buy your company, you probably need to add more protectability to what if it's that easily copied to what you're building? That's not like a realistic concern in my mind where somebody just finds out about you and they immediately decide to copy you. It's way more likely that they're going to be buying you because you should be doing together with them versus them just hitting copy paste to whatever you're doing. Mark, what are your thoughts?

Yeah, look, big companies have, it's really simple. They have a make partner buy decision. If it's something that's in their zone, they're either going to make it themselves, they're going to partner or they're going to buy it. And what you provide besides, if it's really unique and is you provide time, if you can save them two years, if you can get a product to market two years faster. So you should just know going into it one, that's how they're thinking. They're thinking, I can make it, I can partner, I can buy it. The other thing is, in my experience, most companies are honorable, not all. Most. I don't know if it's the 8020 rule, but, but the vast majority of companies, they're not going to rip you off and they probably, you're too small, they don't like it's not going to be material. There are a few companies who have a reputation for taking advantage of and ripping off smaller companies. And so one of the things you should probably do your homework on is finding out which of those companies out there have a reputation for doing that. There's not many. Like maybe it's 90, 10, 90% of the companies don't, but 10% do. And so you just have to really do your homework, talk to other entrepreneurs and find out who in the industry, like who's the one you should be paying, who you should be more Careful around. And we have a saying too, which is, excuse the expression, no assholes rule. The life's too short. Life is just too short to deal with people that you don't share values with.

100% that over and over again, I agree, 100%. Now, how do you determine when's the right time to sell en route to that decision making process? What are the top three things you should prioritize to make sure the business is firing on all cylinders?

So we specifically named this moment in the book called the local maximum, which is basically, it's not like something is wrong with the business when you make a decision to sell, but you look in the horizon and you see dragons, you see mountains that need to be crossed. Maybe there's a new entrance to the marketplace, maybe there's a large competition, maybe there's a big product release that one of your competitors put out that you also have to catch up to. It's basically challenges ahead that will need more resources. And those resources could be, you get more sales, your customers end up paying for that, you end up raising more money, your investors end up paying for that. Or you can say, hey, we can actually overcome those challenges together with a strategic partner and that allows us to deliver more value. But this is a great sort of fork in the road moments where you can ask yourself, do we take on those future challenges with more resources by raising more capital, by having more internal capital, or by partnering with someone or joining forces with a larger entity? We think this is a healthy moment to ask this question. Another, I think underspoken moment is also like internally, it's also a little bit about you personally as the founding team. Are you in it for the next five, 10 years? I know how founders can feel. I felt that feeling myself. When you know you're running a business for eight years, nine years, 10 years, it becomes difficult. There's real fatigue. Things might be going wonderful by that. I'm not saying that the business is struggling, it's just that, hey, man, it's been nine years and we're both blood, sweat and tears. Maybe you're not ready to put in another five years. This is an okay thing to say. Ultimately, it's a lot of whatever your personal decision is in terms of whether you're going to invest more time and energy into the business or whether you want to actually consider an alternative partnership. Mark, what are your thoughts here?

I would add it's also your comfort with risk. So one of the questions was about selling early, selling almost even pre revenue. And I would tell you that if you have a rocket ship and you have lots of momentum, maybe it's too early to sell. There's plenty of examples like when Yahoo approached Facebook and said, we want to buy you for a billion dollars. And Facebook went, no, not yet. They were right. And here in Chicago, when Google approached Groupon and offered them $6 billion and Groupon said, no, we want more and now they're worth a fraction. So it's really hard to judge. But I would also add this in our portfolio. We've had a couple companies recently. Valuations have been significantly higher than historic norms in the last couple years. They're starting to adjust right now. But last year, the year before, and we were seeing companies with revenue under a million dollars getting 20x 20x revenue offers selling for 15 to 20 million. We had a couple companies and for the entrepreneur, it was a young entrepreneur in each case was life altering. For the entrepreneur, that was a fantastic outcome because you took all the risk off the table, you were able to have a life altering event. For us as a VC, that was a bad outcome. We made 1-2x on those deals. And what's interesting from a VC perspective is different from an entrepreneur perspective is we have 15 slots. So if you're going to take one of our 15 slots and we have to invest knowing that some companies fail, so they're hoping that any company has the potential of returning the fund. So we would never ever invest if we thought that the return was going to be 1 to 2x. And so what I said to the entrepreneur is if now I'm the old guy, I said if you were my son and somebody offered you 20x and there was still a ton of risk involved in the business, take it. For me as a vc, it's a bad outcome, but for you as the entrepreneur, it's life altering. And my only comment to him is when you start your next company, hopefully we're the first call. Like when you're ready, when you want a partner for the next one, come see us.

How do you determine how to value your company and what's best? Because I like this framework of local maximum looking for dragons. Sometimes founders get tired. There's a lot of money in the market right now with the tigerization of capital here and so you can raise lots of money. But sometimes founders say strategic partnership and I think it's a great framework to evaluate. Do you have the fit, do you have the integration, do you have the alignment and do you have the rationale and maybe you apply that Same framework against raising lots of money with a VC versus a strategic that you've having conversations with. But then how do you determine valuation?

A couple things. First, I believe in servant leadership. And the CEO is not only responsible for maximizing return in the moment. We like to ask the question, are you going to take care of your employees? Will your employees come back to work for you in the next company? Are you going to take care of your customers? Are your customers, are you going to make sure that the acquiring company is going to treat your customers well? Will your investors want to invest in you again? Because there's a lot of tension in a transaction between the acquiring company wanting to put as little money as possible paying the previous investors and a lot of money incenting the management team to perform in the future. So how do you manage that tension between what do you give to your previous investors versus what do you give? Incentives. And if you were a jerk, if you were just, if it was a bad transaction and you took your money and you ran and will the corp dev leaders want to invest it and want to buy your next company? And by the way, one of the things that we found out is corp dev leaders, they hop from job to job to job. One of the ways you get promoted in corp dev is by going to the next company. And it's a really small corp dev world so your reputation really matters. So all that said, you asked the question, how do you drive value? How do you know what the right price is? And the way once again to drive value is by that rationale. Looking forward on how the two companies together can create outsized value. Mert, what would you add to that?

Yeah, I would like to have all the founders in the phone and I saw a couple of questions around like how do you value something that's pre revenue? What if we have a patent on an it? That's fantastic. All of these assets that you have is great. The product that you're building, imagine you're the CFO of the acquiring company and you're sitting down in a room like you can role play this out with someone on your team or an advisor that you trust, where the CFO is talking to the CEO of the acquiring company and making a case for hey, here's how much money we're going to make using this patch or when it's in our distribution channel. Like ultimately there needs to be a clear mathematical formula of how the acquiring company drives value from that protected piece of technology or the product that works 10 times better. If you think through, let's say you have a technology that makes checkout rates more efficient or reduces abandoned carts or something. If you have pre revenue, if it's just like something it's hard to gauge if you're Amazon and you have something that improves Amazon's like checkout rate by 0.0001%, congratulations. Stop whatever you're doing and just you're gonna, you're gonna be a millionaire. Like it's gonna be a fantastically successful product. And it's all about how the acquiring company makes that case internally. Again, you can only do this if you understand how the acquiring company's business works. So think that through there is a direct line to revenue. Not maybe with what you're doing, you don't have to go get those customers. But the acquiring company at some point wants to make money either by making their existing process more efficient by acquiring new customers, or charging more for their customers. Think about how you add value to them and there's your price. That's by the way, how you maximize the process as well. Because a lot of people think that this M and A stuff is around like shrewd negotiation. I raise, you fold. Think of it like a heads up poker game or something where it's like really tense, whatever. It's much more of a collaborative exercise where you sit down with the person in front of you and say, okay, how do we drive value together? So it's almost like a Jedi mind trick where you're using their numbers against them to increase the price that you have. Because you can say, but wait a minute, you're only offering me $10 million for something that's going to make you $100 million per year for the next five years. 10 is too little. You have to pay me more. And this is a great way to drive more value. It has nothing to do with the fact that you have revenue or not. It's what you can credibly say, I'm going to drive this to you down the road. And if you can say that with conviction, with real evidence, with real proof point and with real defensibility, you're going to face the highest price that you possibly can.

Let me add one more thing here. So a lot of entrepreneurs, they think of it as a badge of honor how much money I raise. The more money I raise, the better. The higher the valuation, the better. And what most entrepreneurs don't understand, especially first time entrepreneurs, and it don't mean shit at the end of the day, when there's an exit, there's a waterfall Distribution of who gets what first, the preferred shares and the different classes of preferred shares and eventually the common it. And so when we ask the entrepreneur, like the real savvy entrepreneurs, what they want to understand is what will the common shares be worth in an exit? Now, I'll give you an example. You could raise a little bit of money with no preferred multiple and you could sell for $50 million and you could, the common shares could be worth a lot of. Or you could raise $100 million and sell for $200 million and the common shares could be worth almost zero, especially if there's like a 2x multiple. And today, the last few years, you mentioned tiger and lots of money pouring into technology. And it has, it's been a lot of money before. I know it's hard to raise money, we're very respectful. But there's been a lot of money flowing into tech and valuations have not necessarily been tethered to the underlying business reality. Whenever there's a correction, what will happen is that money will tighten up, valuations will come down. Terms which have been very entrepreneur friendly will start to become more investor friendly as cash tightens up. And you're going to see what the exercise, the real exercise is what will the common shares be worth at the end of the day? And most companies like. According to the national venture capital association, 67% of all companies who receive venture funding return less than 100% of the capital they receive. 67% fail of those who get venture money. So the real question is, and so if you're not, if you're not clearing the stack, if you're not clearing the preferred stack, the common shares are going to be worth zero. So that's the question you have to start asking yourself.

So for the benefit of our audience, tell us the difference between common and preferred just in quick. Maybe Rapid Fire Preferred has.

Preferred shares have extra value, that's why they're preferred. And they have all sorts of rights associated with them that the common shares do not have. And typically one of the key rights that VCs pay attention to is they oftentimes will get their money out first. So from a distribution perspective, the preferred shares will get their money first and then it'll trickle down to the common. What's the left over? So there's all sorts of rights associated with preferred shares in terms of information rights and voting and control and who gets to pick board seats. There's all sorts of categories. Actually. It's a good segue, Mert, into the term sheet and how we dissected the term sheet in and what entrepreneurs should know about the term sheet in a sale. I'm making the transition from a venture funding to a sale. But you should, as an entrepreneur, you should always understand what you're signing and the implications of what you're signing.

What are the best case scenarios or things to look for in a term sheet and what are some pitfalls? Right. So maybe I want to optimize for all cash as an ideal scenario. And the best probably scenario for me, like as a founder if I ever sell is all cash and no earn out and very little stay on time, maybe a year max. That is everyone's dreams. But what are some best case scenarios and some worst case scenarios to look out for that you have? Man, if these are on your term sheet, just run for the hills.

Yeah, there's three buckets that you should pay attention to as a founder when you get a term sheet. The first one is of course price. That's what everybody wants to know, how much is the company worth? How much am I going to get paid? But even the price itself has a lot of nuance in it.

One question on price here. Do you peg it 10x20x on the future? So let's say you're pre revenue and everything is sales and that you talked about. Figure out what the ROI will be. Looking into the future of your pre revenue for the buyer and you can understand how you're going to save them money or make them money. Or maybe you have revenues and you have a growth rate. How do you peg that valuation? Are there some specific metrics there? If I'm growing 1 1/2 x 2 x or maybe 50% year over year and I have a high retention, then I commend this versus that.

Actually Merck loves to tell the story of Instagram. I think that's a great example of go ahead, tell that story.

For sure. It's not something where we can say, if you have this rate, there's no blue book of startups where you look up and go, okay, we're growing at 47% at this margin, therefore it's 8x. Okay, let's apply it and everybody goes home happy. No, not everyone's revenue is created equal. If you have a 95% high margin, super protectable revenue, that's worth more than we make 0.2% in each transaction. But we have billions of that transaction. So it's all a matter of understanding what the financial model says at the end of the day for the buying company. And we don't like to think of multiples. Think of the multiple as the years in which you're going to deliver that value and the amount of cash you're going to deliver to the bottom line. That's your multiple. Multiply one with the other and that's what you're ultimately negotiating for, why you should be getting paid today. And of course, discount the risk and the sort of the investments that need to be made to get there. So it's less about. We have this, therefore, that it's much more about. Okay, let's have an honest conversation about the value that we can drive together and go from there. So price is ultimately calculated from there. And when folks saw Facebook bought Instagram for a billion dollars early, I think it was early 2010s, 2012, pre revenue, pre revenue. It was pre revenue. They had millions of users. But in the world of social, it was like tiny in terms of user. They were growing fast. They had dominance in mobile. But There were like 10 people in the company, 12 people in the company. They raised a small amount of money. When they got offered to be bought for a billion dollars. I remember this. People looked around and said, this guy, Mark Zuckerberg, don't know what he's doing. What is up with this person? We are here to tell you that they stole it profit for a billion dollars. Because if you look at what Instagram/Facebook was able to accomplish eight years later in 2020, Instagram delivered 20 billion, like 19 billion. And some change in terms of profit to Facebook's bottom line. It was one fifth of all of the money that Facebook generated. So if you count it from there, a billion dollars seems really reasonable because what ultimately it allowed Facebook to do is to plant a flag in the world of mobile and expand in there and extend their lead. That benefited at Facebook did. So it's ultimately about the value that you drive with the acquiring company. Kevin Systrom understood this. So therefore he like in the initially in the negotiations, he actually asked for $2 billion, not one when he was going through the acquisition process with Facebook. But price. It's often focused as like the most important thing. We actually think there's two more things that really matter in here, and one you touched on is the HR component. What do you as the founder are signing up for in terms of the job? Not just for you, but you as the team? Is the acquiring company planning on firing everybody after the acquisition is done? That's a variable. Are they planning on having you on board and putting away what you're going to make for years to come and set sort of like earn the money that you've made in this acquisition for four years later. Like that. The HR component of this is a humongous variable as much as the price. And the third component is the certainty to close. A lot of times the term sheet will talk about these are the conditions that need to be met in order for this deal to close. Who cares about a super high valuation of fantastic terms if the barrier to close is insurmountable? Like you're just going to end up spending a ton of time and energy on a deal that's ultimately not going to close? And those three elements should all be weighted like together when you're making a determination on whether a term sheet is right for you or not. And it's not just one or the other. I don't care about a super great price if I have to work for the next 10 years to get it. I don't care about. I could just walk away if we need to hit an unimaginable sales number in order for this deal to be a reality. So certainty to close, price and employment agreements all matter a great deal.

And whoever is the acquiring company writes the deal docs. So if there's something silent in the term sheet, you better believe that when those deal docs get put together, the assumption is always going to be in the favor of the acquiring company. So if there's something that's really important to you, it should be in the term sheet. And most people do it backwards. Most entrepreneurs, especially if you've never sold a company before because the acquiring company goes, oh yeah, yeah, let's keep it simple. We'll just do a one or two or three page term sheet. We'll deal with the rest of the issues when we paper the deal when we do the deal back. So. And guess what, they're writing those deal docs, it ain't going to be in your favor.

A simple term sheet is a sign or a signal for the proctology to follow.

I've been there, I've seen it.

So Devin asks here, what percent of the shared created value that the company plus acquire creates that you should ask for, like looking into the future, maybe you can estimate it, maybe not eight, 10 years, but maybe three, four years. Immediate time horizon.

I think you should base it the highest sort of lung time horizon that you can defend with evidence. And this is where the negotiation comes in. I think the key exercise here is for the individual that asks the question, this is where the negotiation comes in. Of Course, you should be able to say, we're going to drive value for this amount of time. Here's where the revenue is going to come from. It has to be credible. But you're approaching in the right way. I'm sorry, we can't give you a right answer. It's 83%. That's the mean captured value. What most people do, like, you're already starting the game 7.0, like you're already ahead of the game when you're framing the acquisition price from the perspective of the buyer. As long as you're doing this, regardless of the percentage that you capture of that is going to be more than whatever you've been able to do with your company's existing metrics.

Let me add to that, that if you can wrap exactly what Mert said and if you can wrap that with urgency and scarcity. So urgency is why should this deal get done now? What's happening in terms of is the acquiring company losing market share or they're trying to gain market share? Like, how do you create a sense of urgency and scarcity is. Well, there might be more than one bidder, right? Like creating that sense of scarcity that you are special and there might be more than one person who really cares about this. So there's a dance, a psychological dance that needs to be wrapped around that as well.

What are some best ways to create urgency and scarcity? The more we go through this, it's like selling to enterprise. Right. You need to create basically urgency and scarcity because time kills all deals if there's lull and tying into that. Also the communication, how often you communicate and route to any close. The communication mechanics need to be frequent in if there's gaps of one, two weeks, then it feels like something is wrong.

Absolutely. This is actually the best analogy that we could think of ourselves as. Well, people like to compare M and A to fundraising. We think it's actually an imperfect analogy. It's much more of a B2B sale. It's like the B2B sale of your company, if you actually get it right.

So now a couple of questions here. I liked what you talked about in the what to look for in the term sheet, the employment agreement, the price and what was the last certainty to close?

Certainty to close, certainty to close.

Because there's all kinds of obscene things that you can't hit and it's not within your immediate time horizon that it's a waste of time. What is the ideal time frame for an acquisition to close? Like from first conversation, we're serious and whatnot.

Three to six months is a reasonable expectation. But again this is highly contextual. If it's a larger deal deal, it can take way longer. If there's a ton of urgency like the Whole Foods deal from first conversation between the Whole Foods CEO and Jeff Bezos to signed deal was like done deal was six weeks, which is crazy when you think about it. They got acquired for billions of dollars. But I mean they had a lot of huge urgency to get the whole deal the Whole Foods in Amazon and you had a leader like Jeff Bezos in there. So it really matters from deal to deal. What we like to think about in terms of advising the founders is you should budget 36 months at least from the first conversation to signed term sheets, closing docs, all of these things take time and you should basically be properly time horizon. For those things to happen, three to.

Six feels more palatable.

Yeah. I was fortunate enough one of my companies, my third company, I ended up having a bidding war between Intel, Sega, IBM and then Bill Gates personally brokered a deal between us and SoftBank and we closed. I went to Tokyo, I shook Sunsan's hands and from the time we verbally looked each other in the eye and said we got a deal, we had it closed in 10 days. So three to six months is normal. But sometimes magic happens.

Do you wait for the acquiring company to bring it up or let them know you are open to discussion, like you're building this relationship with them, you've looked in into the future and you've hit this local maximum and the next wave of growth has a lot of drag. And what do you say? How do you start that conversation? Hey, we're on the market. Do you hire an M and a person, a banker maybe. How should you think about that?

A really healthy way to approach this conversation is the follows. Assuming you have a relationship with the CEO of the acquiring company, it's a phone call. Hopefully it's already a regular phone call that you have. Maybe it's once a year, once every six months where there's a back and forth already that's existing in place. And you sit in that conversation you bring up. I'd love to talk about what a strategic partnership would look like between those two companies. I don't think you say, by the way, are you thinking of buying the company would be great. I think that's almost like too forward. Then you talk about, hey, let's talk deeper about what would the world look like if we could deliver more value to our mutual customers? Start the conversation from there. And then eventually as you realize what that broad value prop looks like, it's going to be evident that you need to be working full time, closely together. But I would center the conversation about what would higher level of value for your customers could look like and start the conversation from there. This is of course like one version where there's no preempting event. Another version of this is you have an inbound offer. We call these unidentified flying offers UFOs. They just show up in your doorstep. It does happen sometimes you just get somebody who's like willing to buy your company to approach you directly and say, hey, I'd like to acquire your company if that happens. And I know, I saw in the chat that there was a question as well. It's a fantastic moment to again recircle back with those folks that you've been building relationships with and say that you have an inbound offer and you'll be happy to have a conversation with them if they're interested in being part of this process. It's going to be an off market deal that they can participate if they would like to. It's also a great signal because sometimes that forcing function, again, it creates that urgency and scarcity because the companies that you're in talks with, they might be thinking that, oh my gosh, like we were thinking about acquiring you as well, you forced our hand. So it's all matter of being open. But it's a whole lot different if this conversation is happening with someone that you've been regularly meeting with for the past four or five years versus someone you just met for the first time. I don't think it's realistic. You meet somebody for the first time, you say, hey, I'm for sale, that person's gonna take you immediately seriously. It's really hard to generate trust in that moment. It almost feels maybe a good opportunity. But I don't know if I trust you. So you want the trust to be existing, you want the trust to be there before you have that conversation.

And companies are bought, not sold, right? Like good transactions. I would take what Mert said. And if there's an inbound, or even if they're say, hey, we got this inbound, we're not quite sure it's ready, but we got to run the ball out, we got to pay attention to it. If you have any interest, maybe now's the time we should start talking and just have that honest and open conversation. But you never want. If you're pushing the sale, you're not going to get. You're not going to maximize value. The other question you asked was about bankers. And we have mixed bankers. This is a. I don't know how much more time we have. I think we're running out of time here. But we've got. This is a much longer conversation. Like anything, there are good bankers and average.

We have time. If you guys don't have to hop off, people are still engaged. There's about close to 100 people here. So if you want to answer that, like, when's the right time to engage a banker versus not, I think that's really key.

So let's talk about transactions smaller than 100 million versus bigger than 100 million. A small transaction from a banker perspective is under $100 million. And so the question is, what does a banker do? So a banker can help you organize and tell your story. Put your deck together. They can organize your data room to make sure the deck is pristine and good. The data room, everything is there and all buttoned up. Because nothing will kill a deal faster than a real sloppy data room. They can identify potential buyers. Now let's split it up between strategic buyers and financial buyers. Chances are, especially if you've been doing your job, the top five or top 10 strategic buyers you already know and you already should have a relationship with. So a banker is not going to really help that much with identifying strategic buyers. And by the way, when we talk to corp dev leaders all over the valley, they hate bankers and they feel like bankers are just pushing stuff and trying to push up the price and are unrealistic. We got a lot of pushback from bankers on the smaller deals, not on the bigger deals, but on the smaller, under $100 million deals. So now they may be able to help you identify financial buyers. So if it's a private equity fund or a financial sponsor, chances are you as an entrepreneur may not know all the different financial buyers out there. So they could source some financial buyers out there and they oftentimes have trusted good bankers, have trusted relationships with financial buyers, and then they can help you negotiate. But where they really add value is they know the market. So they can look at multiple transactions and they can know where the right pricing should be relative to the market. That's really helpful. What I have found over and over again, especially for smaller transactions under $100 million, is that it's the CEO who gets the deal done. It's the CEO who's really negotiating the price. And so you're paying a lot of money for telling your story. Hopefully it's been a while. You can tell a good story. You certainly have raised money. If you know how to raise money, you know how to put a deck together. You should have your financial house in order to. And you should have a clean data room including intellectual property. Maybe you could get some help in financial sponsors, but I don't know. I have really mixed feelings about bankers. A great banker can really add a lot of value. An average or mediocre banker can kill deals.

We might take your recommendations on a couple bankers you guys have worked with. Maybe after the fact I'll attach it to the YouTube channel. But I couldn't agree more. Your data room is really important and that could turn into an ongoing frustration and derail the deal. Right. Your P and L. And if you're a SaaS company then showing metrics of retention and net revenue retention churn and growth in cohorts. I think that is really important as well. Having a. How important is a deck in this process? Maybe that deck is just in the data room for review process. If you've been building a relationship, tell us about that.

Ultimately I view it as glorified appendix because ultimately you deal who's getting a deal to the across the other side. But the deck really adds more evidence to what you're doing. And this is also a great opportunity to actually use bankers. So I'll take the other side of this. When bankers are really helpful and useful is sometimes you're going through a process and folks have asked in the chat of okay, how do you talk about this with the rest of your team? Do you share this with the rest of your employees? Do you like sit down and talk about this with the whole company? And the answer is absolutely not. Maybe select members of the the leadership team for sure. Your board, some of your key investors who are like large shareholders are going to have a huge say in the matter. But that's where a banker can come in and really take some load off your back in terms of putting those materials together. And the deck itself should tell a story. I can assure you a great deck is not going to sell your company. You and your story are going to sell your company. A deck is supplemental materials because ultimately the story itself should stand up in its own and it should be evidenced by what you put in the deck. So think of it as like something that eases the due diligence process where you have your key facts and figures like already referenced in this, but not necessarily something that's just going to by itself be passed around and ultimately lead to the exit. Like it might open the door for you, but what opens the door for you is much more of a one pager, a teaser deck versus this larger due diligence appendix deck that has all the facts and figures about your company. That comes later. That comes way after the initial conversation where you see like, okay, there's actually an opportunity here for us to work together. Let's put together a broader conversation with the stakeholders from both sides. And then the deck is really helpful. But early on, the story should stand upon it.

As a founder, it's important to tell the story. If you're relying on the deck as a crutch, then you don't know your business kind of thing. I think it's important to speak stories, the future, what this could look like, ROI cases, connecting with the buyer on how this could add value to their business. Go on. Sorry, Mark.

No, I was just going to say. So, Mark, where can you find all.

That information.

In the book? And I dropped the link. I dropped the link to the book. We'll also add it to the YouTube channel as well. A couple final questions here. Say you get an inbound offer out of the blue. What are some tactics to then, you know, say you've not thought about what my local maximum is, things are going well or just going in general. You get an inbound offer out of the blue unexpectedly. What are some tactics to scout for other buyers and strategies like a conversation? Because now you're in this situation totally.

This just. This is going through one of our portfolio companies of math right now. I'll give the same advice that I gave to them to you. If you have existing relationships, pick up the phone, give them a call, tell them you have an inbound, see if they're interested in participating. It's that simple. Just be direct. Again, if you're interested in evaluating this further, if you have an inbound offer, I think 90% of the time the best thing you can say is, hey, thanks for just growing the business.

Business.

That's all you should say. Because if they're serious, they're going to now be really interested and make you a much higher offer. And if they're not serious about it, then you know they're going to move on and such is life.

Great, thanks. We're just focused on growing the business. I like it.

Yeah, that's always the first answer.

That's the first answer.

But I want to leave this conversation with. There's multiple stakeholders. So as a CEO, you are. We haven't talked about spouses or significant Others, you're not alone on this journey. Like, I put my wife through hell. The first couple, the first 10 years of our marriage, I had my first two entrepreneurial companies. You know, the first one did okay. The second one failed. My wife was like, your spouse or your significant other, your family, they're along for the ride with you. And so you've got stakeholders, you've got investors, you've got employees, you've got customers, you've got your executive team. You're not alone. And so it's not like building alignment with all your stakeholders is really important too.

I'll share the story of mine. I effectively, we went through a fundraise, and it's similar in many ways, right? So I went through a fundraise in 2020, and I kept telling my family, we'll celebrate. We'll celebrate when the fundraise closes and the fundraise closed. We were supposed to celebrate. But I got pretty serious with COVID and I was hospitalized. You got to manage that. Families typically become collateral damage. Your employees become collateral damage. You got to keep your sanity. What are some tips for keeping that sanity?

One is to understand that you're not going through this alone. It feel. It will feel like a very lonely journey, especially when the things are getting tight because again, you won't be able to talk about if stuff is getting tight. You don't want to signal that to the other side and say, I'm really struggling in here. Or maybe with your team who's like relying on you or with your board, like, the board is looking at you as to be this the stable statue, like having a steady hand on the business. It's really important to have a brain trust and so surround yourself with kind of what I did with Mark. So find people who really care about what's the best case for Mert, like, who really has your back. That ultimately can be both someone who's your advocate, but ideally someone who's been there before that can give you, like, real advice and say, look, I know it feels like the world is coming to an end right now, but it's probably not the case. Here's what why. Let me share a story, X, Y and Z with you. So again, this could be people that are small check investors. Like in a scenario, Lloyd, I'm thinking about someone like, maybe as an angel investor, you're not the largest check in the cap table, but you've been through some real fire, you've been through some real things. So I'd love to have you on my corner and say, I'd love to have a sanity check with you about what's going on and can I just be like, use you as a sounding board in here. In short, you want to have the red phone like in old spy movies. I remember, like, you like pick up the red phone and you call immediately. You can call the president. You want to have someone on the other end of the phone who's going to be there whenever you need them, especially in the sort of like high pressure moment. Who are you going to call? The Ghostbusters of this moment.

This.

Really think of it as like a pressure cooker. This alleviates the pressure of the situation because 99.9% of the time what feels to you as like the end of the road, it's probably a minor setback. Like, yeah, I mean, shit happens. But it's not like the deal is going to fall apart if this one meeting goes badly. Like, look, you'll recognize, recover. You said something you're not supposed to say or you've like presented some data that's not ideal. Whatever it is, like, you'll overcome it. This is why you've been building trust over time. But it's really important not to keep your, not to lose your cool. And boy, I felt that myself. When the stakes are high, you've been working so hard for years and years. The moment where all that dream turns something much, much greater. Of course you're going to be super stressed. But that kind of like brain trust really alleviates and let some of the pressure off the pressure cooker so that you ultimately can see the obvious answer that's staring at you in the face.

Remember when you and I took that walk and I told you the Steve Jobs story?

What was the story? Let's hear it.

This was before the acquisition hit a really challenging path with swipesense. And I really disagreed with my board at the time was about who we should hire to join our leadership team. And I really believed strongly on the direction that we should go in. The chair of my board believed otherwise. This is a much longer story, but I ultimately believed that my way was the better way. And I remember being in this like real moment of struggle because look, I ultimately, I believe that CEOs. You're responsible to the board. The board ultimately cares about the shareholders and the CEO reports to the board. And Mark shared this incredible story with me about the early days of Apple where the infamous 1984 Apple ad when the big, you know, movie theater you hurled the iconic Apple ad that was for the original Macintosh do you hurled the hammer to the big screen. And early on in the boardroom, when Steve Jobs presented that video as this is going to be our super bowl ad, that people were up in arms and saying, over our dead bodies, you're not going to run this. This is unprofessional. Of course, it became an iconic ad afterwards. But when they initially saw this, you got to realize in 1980s computer ads was like, check out this computer. You can buy this whatever. And here was this ad where there's this person hurling something and like 1984, here's the Macintosh will show you what 1984 isn't going to be. Like that Steve Jobs basically said, I don't care what you all think, we're running this. Thank you all. And it just left the board meeting. And lo and behold, it became one of the best running ads of all time in history. And the important moment of that story was, every once In a while, CEOs should have a spine. CEO should basically say, this is the truth that I believe in and I will die on this hill. This is like knowing when to make that decision is, of course, where the art is. Like, you shouldn't have this approach to everything. You should listen to your board 95% of the time. But every once in a while, if you believe strongly in something, you need to follow that gut. And this was the important sort of takeaway for me, where if you ever find yourself in that place where you have lots of conviction on something, maybe.

You should pursue it.

And having that kind of like brain trust is really important to help make that happen.

And one of the key things of having that conviction is building relationships with the people behind the decision, Right? Because nothing happens in isolation. Talking to customers, employees. If you work in the middle, if you're working at the top as a leader, you may have conviction about the wrong thing sometimes. And the other thing I want to talk about is like the mental health side of things. If you look at it in a high pressure environment, you lose it sometimes. And it's very important. Like, my 2020 was spent deprioritizing my personal life, which caused more stress, killed my immunity. I ended up getting Covid. If you saw Will Smith from the Oscars, right? And Denzel Washington said, in times of high pressure and high stakes, the devil comes to you, right? Maintain your composure. So that is super important. Workout, read, meditate, spend more and more time with people that make you happy. Positive energy, ultimately, to stay positive through those things. A few great frameworks here. Not just the fair framework which is finding your fit, alignment, integration and rationale. But I like this framework of what's important in a term sheet, the price, the certainty to close if there's uncertain terms which you can't hit and the employment contracts, I think those, those are fantastic things to look for. And then in terms of the local maximum, when do you decide when to sell? Are you ready for the dragons ahead or. I think I would be fine with a strategic partnership or. Great. I'm actually just helping a good friend through an acquisition. In fact, I called up the CEO and said, you should acquire this company. Then I helped him negotiate and I said, listen, optimize for all cash. Optimize for all cash. Almost no earn up. The earn out should be on your terms, stock versus cash and lowest possible time to stay is what I told him. And it looks like it worked out right. And if they're grilling you on price, just don't respond for a couple of days. So I just wagged it. But this is a good framework. I wish I'd had this framework a few weeks ago that I would have walked him through it as well. I would have told him to watch the webinar. This has been super delightful, super insightful. Thanks so much for joining us, folks. Check out Exit right. I dropped the link for the book. You can get it on Amazon. Exit Right. It's right there. It's a fantastic book. Everything you need to know about selling your company. Where can we follow you guys? Where are you guys most active on social?

I'm active on Twitter and mark is on LinkedIn. Reach out to us. We'd be happy to connect with you offline anytime to help you out if we.

Yeah, please. We wrote the book to give back. We wrote the book to help. And so if we can help, just reach out, we're always glad to talk.

In the words of the famous Zig Ziglar, if you help enough other people get what they want, you'll get everything you want in life. It's been a great pleasure, folks. Love and peace, my friends.

Thank you for listening and we hope you enjoyed this week's episode of the Traction podcast. If you enjoyed the show, please leave us a five five star review and you can find more information and all the resources mentioned in today's episode at Boast AI that's B O A S T AI blog.