How To Buy A D2C Startup For Cheap and Sell It For Millions

It will go down as one of the best private equity deals ever. Over the 19 years, they put $226 million into Weight Watchers and got $5.37 billion out, $4.7 billion of realized profits. All right, what's up? Uh, we are back and we got another episode. Uh, we got a guest here today, Mehab is here. He's a, he's a friend of mine who most people I think probably, probably haven't heard of unless you're in the DTC world or you're on Twitter or you know what's going on in that, in that area. But, uh, I want to introduce you because you're somebody who A, has helped me a bunch with my DTC brand. You like know a bunch of tips and tricks and hacks and shit like that. So I'm like, I basically have a little scoreboard in my head and Everybody's attributes are there. And then yours, it was like business hacks was like filled up. And then the other thing was that you, I don't know if you listen to the show regularly, but you would send me little nuggets of like, oh, you should talk about this. You should talk about this. And so I kind of got confidence. I was like, oh, I think he's just got his back pocket full of interesting stories that are off the beaten path. And so I kind of like that. Do you listen to the show first? Let's start there.

Yeah. All the time. Almost religiously. So my go-to shower podcast.

Oh, that's, that's perfect. Uh, we are the number one rated shower podcast in the country, actually. Millions of men lather to us. So Sam, I sent him a picture of, uh, the Vancouver show where like the stadium or like the, the theater was filled up, and he goes, wow, that's a lot of virgins.

And I—

that's hilarious. So true. That's a good point.

My fiancée listens to the show religiously too, and she wouldn't use ChatGPT when I told her about it Maybe a month or two ago. And you guys mentioned it the other day and she was sending me screenshots. So you guys caught her using that.

Dude, the Dharmesh pod. I think you're referring to the Dharmesh pod. I've been using it all after talking to him. Uh, I implemented a lot of the stuff that he was talking about, man. He got me hyped up. Also what a lot of people don't realize this is Dharmesh pods always get tons of views on YouTube. And finally, Sean, like texted Dharmesh in a group chat and was like, Hey Dharmesh, what are you, uh, what are you doing? And he goes, oh, nothing really. And I go, really? And he goes, well, I'm just doing a few things. And he like gave this like very detailed list of like internet marketing, not hacks, but he was like, I'm just like testing, like buying ads, like $500 here just to test this. And then I'm like responding to comments, just like the small stuff that you wouldn't expect someone who runs a $20 billion company to like be doing.

And he's very tactical.

We don't even do it with our— it's our own podcast. We don't do any of this stuff. Like, people are like, oh, the thumbnail, the, the title. People don't realize we don't see those. We don't approve those. We don't know about those. We're not involved in it. Uh, we don't do a lot of this stuff that we probably should, but, uh, you know, can't be bothered to do all that stuff.

But he did. He did do it.

They said the devil's in the details, and I ain't trying to hang out with him.

Dude, he's the man. Like, he was like, oh, I'm not doing anything. Then he had this like Really long list, actually.

Mayta, you said this phrase to me the other day. I called you and you said a phrase that I've stole and I've just been saying all around town. I've just been saying it everywhere, even when it's not really appropriate, because I thought it was so funny. Sam, I was talking to him and I was like, oh, you lived in like, or like you're living in Utah. Why Utah? Like, aren't you like Canadian and you're like Indian? Like what's going on here? And he was like, he's like, oh yeah, my wife, something, something. and I go, I asked you something about your wife. He goes, yeah, you know me. He goes, yeah, you know, I look like I got beat with the ugly stick, but somehow I ended up with an awesome looking wife.

It happens. It happens. It's common here.

Beat with the ugly stick was so funny. I've been using that everywhere.

I use it to refer to my business partner all the time. So you're good.

Oh, you take him down with you?

Oh, always. Yeah. He's my go-to.

I don't know. I Googled him. He's pretty handsome. How old are you?

I'm 29.

Wow. I'm looking at—

You're interesting because he does stuff that like you say words that most people don't say. So I pay attention to vocabulary. So for example, in the tech world, me and Sam used to live in San Francisco and you couldn't go outside. You couldn't poke your ear out the window. You wouldn't hear the word EBITDA. Nobody says EBITDA in San Francisco. Nobody knows about it. Nobody talks about it. It's not a thing. But then when you get into like the cash flow business kind of world, that's all you're gonna hear. A bunch of, a bunch of different people talking about words that have to do with profits. You say a bunch of other words like, uh, dividend recap, distressed buyout, and he talks about all these things that I frankly don't know what they mean, what they do, how it works. But I know that, that you come from a little different world. So I'm excited because I wanna talk about some ideas from your, the, your neck of the woods, your part of the business world that is stuff I'm less familiar with personally. And so I think I'm gonna, I'm gonna learn a little bit. Where, where do you wanna start? What, what, what topic should we start on? You sent a doc with some things. I wanna, I wanna look at some of these. Let's start with one that we have.

Well, hold on, Sean. I need a little bit of background here. So you, you basically, uh, I like, I read your Medium post. So if I understand this correctly, what, uh, the name of your holding company, you guys buy into or you buy entirely outright distressed or only okay performing D2C brands and you make them great. Is that the summary?

Yeah, that's the gist of it. And we're less of a holdco and more of an independent sponsor, if that makes sense. And that just means you do everything on a deal-by-deal basis. So the equity that you're working with might be very different on a deal-by-deal basis.

That doesn't make sense. I don't understand. What's— what do you mean when you say sponsor?

So it just means that we're the ones making the investment and say on one deal Sean's a co-investor with us and then on the next deal Only Sam's on the cap table with us.

And you run it or you hire CEOs or what?

Um, it depends on the portfolio company. Right now I am day-to-day with one of our portfolio companies.

And how many do you have? Like 7, I think?

No, there's 3 platform companies and then there's another 8 to 10 kind of minority equity and debt positions that we have.

And the whole thing is roughly of what size? So me and listeners understand.

Um, the core platform companies, which is what I would count as part of the revenue because we own the majority of those companies. is well into 8 figures. It's kind of that, that mid-8-figure range.

Is the biggest one the, the flowers company?

No, that one's slightly smaller than the succulent company, but the flower company is the one I'm most bullish on. That one's solawoodflowers.com, and that's just because there's a lot of room for margin expansion yet.

So what's that?

That's the one you talk about the most. So let's give, let's, let's give, you said 3 platform companies. So you said a succulent company, Solo Wood Flowers. So it's a like a wood or fake flower company, correct?

Yep. Made, made in our motherland, Sean.

That— yeah, exactly. So made in India. People buy them for like weddings and things like that, right? Because flowers are super, super expensive at weddings, and so these look really good but they don't cost as much as fresh flowers or whatever. What's the third, like, majority-owned company?

Um, that one's an apparel company.

An apparel company. Okay. And so, um, You own these three. Let's talk before we go into the details about each of these. Um, I want to know the origin story because you've told me, you've told me some interesting things. Like I think you met your co-founder on Reddit, like in a subreddit. Yeah.

Yeah.

And so take us back, uh, go all the way to, I see here something about, about, about getting sick at 17. Start there and then tell us the story of how, how you got to this, this spot now when you're 29 years old.

Yeah. So the quick and dirty version is essentially, um, diagnosed with spinal stenosis and degenerative disc disease. When I was 17. So that meant, you know, obviously doing anything physical for work was kind of out of the picture. So I decided to learn more about e-commerce and entrepreneurship and just kind of stumbled. I started a Facebook page called Guitar Porn, and this is back when organic reach was awesome. You know, you post something, people would actually see it. Facebook blessed us with so much free organic reach. It was the greatest time ever. Almost like TikTok is now, right? And then, um, I transitioned. I started doing basically guitar runs, like semi-custom guitar runs with big brands. And we'd partner with a retailer, a dealer. This is before brands would work with you directly, right? And we would sell out these pre-order runs and basically take a cut. Eventually we cut out the retailer and became the retailer ourselves. Uh, that got to kind of low 7 figures. That was nice because there was no CapEx. So we didn't have to have much cash, right? It's all pre-orders. After that, I started a men's hair product company, which is really ironic cause I'm, I'm Sikh. So I, I don't cut my hair and I have a turban. And so did, did that with one of my best friends that also scaled to kind of low 7 figures along with a guitar pedal company that scaled to low 7 figures. And then after that I decided, you know, these are all fairly small, like TAM's really small for niche guitar pedals. So I decided to start investing. Realized, hey, you know, no one's going to come to me. Just given I'm nobody.

You weren't even doing guitars. You were doing guitar pedals specifically.

So the first company was a guitar retailer, like actual full-blown guitars. And then yeah, the one that was really profitable was guitar pedals just because the margin was insane. And I partnered with a guy who I'd met flipping guitars, like just trading guitars with. And he was a Grammy-nominated guitarist, right? He is. He plays in a band called Peripery. For any metal nerds. And, uh, so that went well. Like, those were both flowing well in terms of cash. But were your small opportunities—

were your products any good, or were they kind of— you're just good at the marketing? Because that's my, that's my kind of, uh, rub with a lot of DTC companies is, uh, they have pretty shitty products but slick marketing. Um, what—

no, the products are awesome. I mean, I had like 30 or 40,000 posts in guitar forums by the time I was 18, so I really was into guitar. I used to play 6 to 10 hours a day, so I, uh, I definitely knew what it took to make a good product.

So, okay, cool. Yeah. I mean, like a lot of these companies, like I'll see them like, dude, these are shit. Or like, this is some Alibaba crap that's just wrapped up in something a little bit nicer, but it's still pretty crap. Like there's no R&D that like made it a superior product. You know what I'm saying? Especially with like a lot of the cosmetic stuff, like lotions and stuff. I'm like, I don't know, man, this is kind of crappy.

So did you go to college? Cause it sounds like you were doing these when you were like 18, 19, 20, 21. Is that right?

Yeah, so I was in school and then I dropped out. It just didn't make sense to stay in school.

What did your Indian parents think about that?

They were not, they were not big fans of it. That was, yeah.

What was your like dropout point? Was it like, I'm making X dollars and X was just like too big for it to, or you just didn't have the time to go to school? What, why did you drop out?

It just didn't seem like the value was there relative to who I was, had the opportunity to interact with on the business end. And just seemed like there was more opportunity there, if that makes sense. Then obviously I was doing okay in terms of cash flow. So.

So how old were you when you made, you know, this podcast called My First Million? How old were you when you ended up making your first million?

In cash or equity?

Cash.

I don't know. I'd probably put it like mid-20s, early 20s, like 24, 25.

And so you, you did that through these kind of like smaller e-com things. And then how'd you get into this kind of like private equity style thing where you go and you buy these distressed companies and you turn them around? So how did that happen?

Yeah. So in the Great Recession, when I was a kid reading about it, I always thought it was interesting reading about the private equity firms that made money no matter what, like if the company did well or it failed. And I thought, hey, that sounds great. I hate being an entrepreneur because obviously if the company doesn't do well, you fail, right? And that's still the case. It's not like you know, it's just not as black and white anymore. So I started, I just realized that Sam—

Explain that. Why would it, why would it make, why would it work whether the company does well or not does well? Explain how that works.

Yeah, we can jump into that a little later, but part of our thesis is essentially investing on how much liquidity or cash the company can generate in a short-term basis. So if you can invest today and pull most of your cash out within 2 or 3 months, there's a lot less risk, right? Versus say you bootstrap something new, you're always putting more and more cash on the working capital side. You need to fuel growth, right? If you're doing a traditional consumer brand, that's less of an issue for something asset light like SaaS, right? But, but that's the case, then you don't actually end up pulling cash out of it for so long.

So where most people focus on equity appreciation, you guys focus on liquidity. You guys focus on how quickly can we pull cash out. Whereas most business people just think, how do I make this worth more? Which often results in putting more cash in. Is that correct?

Right. And that's just one facet of it. We're okay with holding for the long term or being more long-term focused if, if it makes sense. And sometimes we're just more of a short-term partner.

And like, it's not uncommon for a software company to sell on the low end for 3 times revenue, on the high end if it's fast growing, 10 times revenue. What you just said was you're going to buy a company for basically, uh, uh, uh, 1/6 times because you said you want to get your cash in. I can't do that math, but you want to get your cash back in 2 or 3 months. So you're buying it at 1/6 times profit or cash flow. I mean, like, like nothing.

So give us, give us a sample deal economics. So, uh, in a situation where that happened.

Yeah. So we invested in an adult health and wellness retailer. Um, which is a nice way of saying sex toys.

Um, that's, I'm in Utah, so, you know, but what, what, why don't you ever say the name of the brands? Cause you don't want to, you don't want to talk about it.

Um, well, if they're distressed, it's just kind of, got it. Okay. Um, yeah, just culturally kind of mean to them. So I, I'm not like that, but the, and I, I can send them over. I think I shot them over to Sean, but, um, yeah, so we, we invested essentially at, um, I'd say a fairly far below market valuation just because others were unwilling to invest in a, in that kind of company. And this was 2018, back when it was a little bit more taboo than it is now. Now there's a few publicly venture-funded brands like Dame, et cetera, in that space. So it's become more socially acceptable, but we got in far below kind of market valuation.

Give us a sense. So revenue was about X and then what was the distress? Why was it distressed? They had too much inventory, they had a debt problem. What was the problem?

I would say it was more of a case of really bad margins. and there was a clear case to improve those margins. They were, they're just originally a dropshipper. They're doing like $6 million a year. This is one of our first deals, so they're very small. They're only doing $6 million a year. Um, and I'd say market for that, for valuation, like the growth equity side would've been like $10, $15 million as far as valuation back then. Um, we got in at like $1 and then the company paid us a royalty until we were paid back in full on that initial cash investment. And then there's a few other kind of structural things going in, but we got involved and we helped boot up their initial ops.

Why would a company like that sell for $1 million? I think that's, I think if I'm listening, that's my question, right? Like, yeah, he said they're doing $6 million and normally that's like $10 million of value, but they bought it for one.

And how you, are you, are you just Mr.

Charming or what? Why were you able to, to buy it for that, that price?

So that one was a minority equity investment and we got involved. Like really hands-on operationally. So my co-founder, he jumped in and he helped them boot up their, their physical operations and transition from a dropshipper to holding their own inventory and booting up ops here in Utah. He helped them launch that facility, make their first few hires, GMs, et cetera. And then I helped them raise debt to fuel growth. And that kind of took them from that 6 to 12-ish mark.

Gotcha.

Gotcha. Okay. And then we sold our equity just via secondaries to a VC firm that invested later. Once that value has been created.

Okay, gotcha. So, so continue on. So you, you've done some of these. So you see— so I want to go back to sort of how did you get this idea? So you read about this, you're like, all right, private equity has this trait where they can buy stuff at a certain price or on certain terms so that they get their money back quickly, whether they, you know, their equity portion is small they have a lot of debt and they get the money back quickly. Uh, you read about that, but still you've never done that. So how'd you decide to actually go do it and how'd you figure out how to do it?

Yeah, so I just started posting on Reddit, um, to try and find initial deal flow. And then I met—

which subreddit?

One guy. Um, just the entrepreneurship one. So I met my co-founder who I still work with now, Alex, um, through that subreddit. And then I met a lady who was one of the first few engineering hires at Uber Eats. And she actually ended up retiring like 8 months after we started working together when Uber IPO'd. And then the other one was someone with a very traditional background in private equity. And he's the one who kind of taught me a lot about private equity.

And you're just what, building a relationship through Reddit DMs or like, how are you like, I don't meet anyone on Reddit. What is actually happening here? It sounds like you met some pretty high quality people and actually trusted them enough to partner with them.

Yeah, it's the same way you meet people through Twitter, I guess. Right. Just posting, getting to know people. I'd say that the community there is very low quality on Reddit versus Twitter and some other private forums like, you know, EO, YPO, what Sam has going on. Right. So there was a lot of filtering to be done, but we did source the deal through that. That's how the succulent company was found. Okay.

Gotcha.

Okay.

So Sam, what do you want to do from here? You want to talk a little bit about this like flower company thing or you want to talk about other brands that he's got on this list?

I wanna talk, you have, you have, uh, 3, well, well, shit. You have 5 categories or 4, 3 categories. You have frameworks, you have interesting ideas and opportunities, and then you have under the radar companies. I would like to start at number 1, under the radar companies. Sure. I read those, I read that in reverse order. Number 1, under the radar companies. You have things that I've never heard of and I like, I'm pretty good at finding these unheard of things.

Yeah, so let's start with a simple one. So tell us about Josh's Frogs. Yeah, this is one of these types of companies.

This is one of my favorite companies. There's all the characteristics of a company we'd love to invest in. And I've, I've been trying to invest in it since 2018, but he, he always says no. So it's okay though, I still love him. So basically Josh's Frogs does exactly what it sounds like. They, I don't know if you call it farming, breeding, they breed their own frogs and they're exotics. And they also grow the bugs that they eat and they sell the food. But they do all of that in-house in Michigan and they ship it to customers. So if Sam wants a frog tomorrow, he could order one from Josh's Frogs and they've scaled really cleanly, totally bootstrapped. Josh is awesome. I called him on a Sunday and the guy was catching frogs with his kids. I couldn't believe it. You know, I think he's been doing this for 15, 20 years and, uh, he's still loves frogs and frogs.

Basically, do you know the price of a frog? Oh, you know what frogs are going for, dude?

I'm looking at it. I'm looking at it now. I would have thought like. So you can buy a chicken at Tractor Supply for like $5, like a chick, or frogs are way more expensive and they're not delicious. Yeah, I mean, the frogs here range— the most expensive one is $400. It looks like the average one is like $60 to $100 for a frog.

These are people—

they're beautiful, but like, you know, these are for pets.

Like, people want a pet frog, so they go buy this, uh, $60 black poisonous dart frog. All right.

Later on, you guys should watch the tour of his facilities. It's really cool.

And so you like this business because what?

So what I really like is the steep ops moat. So no one else, your typical e-commerce guy is not going to go out and boot up a frog operation, right? It's just too intense for them. They don't really like physical things where you have to show up. A lot of guys just use 3PLs and it requires a lot of specialized knowledge. At the same time, you know that someone overseas is not going to undercut you. and it doesn't become a race to the bottom with monetized products because you can't really ship a live frog from China or directly overseas to the US. It's just not viable.

Thank God.

So with that, there's a very strong operating moat and you're only really competing against other companies in the US, right? So your cost per acquisition is consistent.

He's competing against like only people weirder than himself, which is only going to be like 3 other dudes in the country.

Yeah, your CPA, your cost per acquisition of customers stays consistent, doesn't really spike the way you see it spike in other Uh, it's like, you know, space, Josh's Frogs, Jack's Frogs, Sam's Frogs, and, you know, Herbert's Frogs.

Those are the, that's the, the big four in the frog industry.

If you're Josh, if you're Josh, if you're Josh from Josh's Frogs, what, what would you sell this business for? Or like, what would be the threshold of, okay, this is interesting, I'll take the offer, or I'll maybe take the offer?

Yeah, I obviously I can't say what his EBITDA is, and if I gave you a multiple, it would kind of tell you what his EBITDA is, but I would say there's probably— let's say your average D2C business his size might sell, and I'll just use a range for 8 to 10x. He would get a premium of a few turns on top of that because of that operations moat, and it's not something anyone can just knock off, right?

Yeah, it's super, super defensible.

Yeah.

Okay. So, and how did you even find this? You know this guy personally or you found him?

I had to meet him. I, I met him through, uh, I did a podcast on eCommerce Fuel and then he reached out and we just got along and I, I always stay in touch with him. We like to nerd out. We have similar problems with our businesses, so it's fun to discuss them with him, like implementing lean, et cetera.

So by the way, I just read, uh, I just Googled Josh's Frog revenue. So it looks like they're on the Inc. 5000, so you can find it there. But according to some articles, they're in the range of like $15 million a year in terms of frogs. I don't know if that's accurate and I haven't actually researched it, but that's like just some top searches that are showing that. That's pretty wild.

Yeah, I think they're bigger than that now.

That's wild.

Yeah, this guy's, uh, there's a picture of him on the about page and he just looks so happy. This guy looks like he's in frog heaven right now. I'm so happy for this guy. Just this one picture, just like, I hope to be as happy as this man right here. Um, this is a good one. I like this. And I think what's cool when you, so invent in the sort of like tech world, Right. All the discussion is always just about like the future dream, like the dream end state. It's like, what could this be if everything goes great? And what I've learned as I talk to guys like Andrew Wilkinson or the guys from Enduring Ventures or you, with people who are buying, who wanna buy, you know, solid, stable, cash-flowing businesses that are profitable, um, that's not the, you know, it's not the pie in the sky sort of thinking that you get in Silicon Valley. And instead, It's basically what could go wrong. So instead of what, what could go right, it's what could go wrong if I bought this company. And, um, that's why people love businesses like this that are, that have this like, you know, defensibility, this moat. So it's like, no one's gonna compete with me, not internationally, cuz you literally can't ship the frog locally. Mo, you know, the average e-commerce bro is not gonna wanna like take this on.

No.

Um, so who am I competing against? I'm competing against basically nobody, which will let me which means my business is extremely defensible. And so it's just a different way of thinking that is less common when it comes to tech, which is sort of like, how fast can you grow? You know, can this become huge? Can this become a unicorn? It's a different sort of like mindset altogether. What's another example of an under-the-radar business that that's worth talking about?

Talk about this fast-growing trees one.

I think that one's a great example. So similar, similar, similar operations, but where obviously they're kind of growing the trees. And again, no one wants to be a tree farmer, right? It's just not sexy. No one's going to go out and raise capital to become a tree farmer. Oh no, that sounds all right.

That sounds kind of neat to me.

Wait, so, so literally what is it? They sell seeds or they sell the actual tree? What's going on?

Both. And the company, I first stumbled across the Sam when the company was being sold 6 or 7 years ago, and I think it went for between $100 million to $120 million. And it looks like they've grown quite a bit since then. I wouldn't be surprised if They're worth closer to double that now, just with their website rehaul, et cetera. They had a very like—

Dude, their traffic estimate shows it went from— it's like at almost 3 million uniques a month. That's pretty crazy for a free website.

Their website says, uh, flower— so here's their H1: Flowering trees are it. You'd hate to miss out on the hottest trees of the season, wouldn't you? Shop now. Over 1.5 million happy customers. And so what you see is, I don't know what type of tree this is, but it's like a grown tree that's purple. It does look beautiful. It looks, it's a beautiful tree. And, uh, I just think it's hilarious. You'd, uh, you'd hate to live inside the house.

Flowering trees are it. That's like, you know, like the, like Gen Z people, like he is him, she is her. Have you seen this? Like this trend? The flower trees are it.

This is awesome.

I mean, it's, it's a really defensible business. It's cool. Kind of no one would really expect something like that to be that large. Right.

And so what do you buy? You buy a tree that's mostly grown already and then they come and plant it.

I think you plant it. I think it shows up and then you plant it.

Oh my God.

In your property. So if you want, if you want a tree to like for more privacy, say privacy hedges or something similar, or just trees in general, this is where you go.

How much revenue do you think they do?

Get your fix. I have no clue now. Again, I'd be really surprised if it was less than $100 million.

In revenue?

This is crazy. Yeah, I'd say probably close to like $150 million.

And what type of, what type of net margins would this be? Or net income or EBITDA?

I'd be really surprised if it was below 20%, probably closer to 20%, 25%.

This is crazy. And they probably don't, they probably aren't buying too many ads. They had a couple of Google ads, but like, it seems, I bet you this is a type of company that they, I mean, they called their company Fast Growing Trees for a reason. I imagine that was a search thing.

Yeah, yeah. It's an older company. It's been around for a while under a few different owners. I think a private equity firm owns it now.

And who would have thought that, like, you know, when the internet came out, it's like, yeah, people are going to be able to like buy things online. It's like there's some guy out there who's like, they'll buy trees online. It's like, no, no, no way. No way. Why would I buy a tree online? That sounds like the most far-fetched thing. And then here we are, $100 million. Selling fast-growing trees online. You could buy this, by the way. Look at this Italian cypress. It's like the—

that'd be perfect for the Airbnb, Sam. Yeah, I am—

I'm looking at this and I think this is pretty awesome. Like, I— like, it's— they have some beautiful hedges. There's like, uh, fruit trees. I mean, this is pretty amazing. I understand this. I'm getting to the age now to where I appreciate a good tree.

Yeah, this is this is pretty crazy. Okay. I like this one. Give us another under the radar business.

Yeah. Um, what seems more appealing to you? The first?

Well, let's do the Betty's one and then we've talked about this CSC generation thing and we should, but you have more info on it than we do. So let's do Betty's and then do the CSC.

Yeah. So Betty's is really interesting business. What I love about it is strong IP moat. So if you go to their website, um, you can tell it's not—

Let's explain what they do. What do they do?

It's like a bed cover thing for kids. I actually don't know how to explain it very well, but it may— it's so your kids can basically change the bedding really easily, but they have it, it's patented and they have proper IP mode. And when you go to their website, you can tell it's not very optimized, but they've been crushing it. Totally bootstrapped, great people, a very healthy EBITDA margin.

And you know, that IP mode, it's a duvet cover. It's a duvet cover that's easy to zip. Which I have a Zip duvet cover as well. Duvet covers are a pain in the butt to, to, to, to do.

It's meant for little boys, so that makes sense. Um, so this, uh, they bootstrapped this to $40 million. That's pretty impressive.

Yeah, I'm pretty sure it's right around there. Um, yeah, that's pretty good. And you can tell it's all PMF, like killer product market fit, killer product, killer IP moat. And, um, they've done a really good job with that end of the business.

What do you think are some of the, like, uh, I, I don't think this is like, uh, everything can perfectly do this, but I think that when you like look at like a software company, you think, all right, so what are the attributes of like a great software company that could scale? You think like, well, they have to have good net retention, meaning most people come back constantly. Uh, ideally you can have, it's an expensive enough product that you can afford to hire a sales team. Uh, things like, things like this, like there's like a handful of checklists and then there's lots of examples of things that don't check. Check the checklist that still succeed. But what are the handful of, of checkboxes that you have when looking at, uh, or building a D2C company, particularly things that people don't think are true? Like for example, like in the cool kid circle, and when you're 22, you want to create like, you know, cool shit that Gen Z buys. You're none of nothing that you've mentioned fits in that category.

Right.

For us, what we found is the most consistent moat, and some people are, are different, right? It's just the moat that's worked for us is that operating moat. So Anything that requires physical manufacturing, it has a good reason for the manufacturing to be in the US or Mexico is great. And we found that, like, I'm not sure if you guys are familiar with lean manufacturing. It's just like a philosophy behind, I guess, running a manufacturing operation.

Toyota thing, right?

Yeah, exactly. It ports over very cleanly from company to company, but marketing does not, right? What worked with your paid ads for a company with, let's say, low AOV, but really fast consideration period. So You know, something like clothing. I see clothing, I buy it. It's very simple compared to the marketing side for something with a long consideration period. That's very different, different teams, totally different strategy. Nothing will really carry over cleanly, but on the manufacturing end, it carries over cleanly company to company to company. So for us, that's, that's our favorite moat.

So to summarize, you, you want a low consideration period and you want something that can be made in America because it has some type of manufacturing moat. Anything else?

Well, sorry, we don't actually care about the consideration period. Um, I think it's just like a natural challenge in any vertical that you get into, right? Um, if, if that's there. But for us, we only really care about the manufacturing end now. And then obviously the way we enter the deal is really important too. Um, and that just, you know, if you pay next to nothing for something, the odds of making it work and making money on it are much, much higher than if you overpay on entry.

I want to talk about this agency stuff because, you know, the interesting thing about, you know, people like you in the D2C world is they're oftentimes really, really good at acquiring customers because it's kind of like, like the D2C folks oftentimes are pretty good now. Before it was the gaming companies. So like if you met someone from a gaming company or from the ad tech world, like that meant that their internet marketing chops were like pretty good. Now that, uh, D2C or now that Facebook is harder to buy ads on, the people who are succeeding oftentimes are quite good at that. And Sean and I have a bunch of friends who are starting recruiting companies and—

Right.

Which is really interesting because recruiting companies isn't new, outsourcing isn't new, but people are putting sexy new packaging on it. And I guess what, from what I'm guessing, because you have it on here, is they're doing a really good job, or historically they've done a poor job of acquiring customers and you wanna apply that to that space. Is that right?

Yeah, I just think it's a really interesting space in general, but, uh, I, I think some of these agencies are really heavily focused on, say, the Philippines or other countries in Southeast Asia. Um, we've noticed there's a lot higher quality talent in places like Mexico, and you don't lose the same negatives associated with hiring in the Philippines are not there in Mexico. So for example, you could build an office out there and fly out and be there in person in a few hours if you live in Texas, right? And the wage disparity is not as high as you would think for really, really good talent. You're only paying a— this is a large number, but you know, it's not actually that bad— 30% more than you would be for someone who's great in the Philippines, maybe 40% more in Mexico. But again, you can visit them in person, which is really big. You can have them fly out. And again, it's big for us because we do a lot of manufacturing, right? So they can actually understand the product or interact with the team in person. So your retention goes up, the quality of work is much higher. And we found the quality of applicants is much, much higher in Mexico too. So if I did start an agency, it would be focused on solely talent in Mexico. And just for example, when we're hiring a customer service role, like any manager or director, we're getting people who used to head up Uline. Are you guys familiar with Uline?

I just use it to buy like boxes.

Yeah, we use it a ton for like when we had our warehouse.

Yeah, so their customer service is awesome, but we got one of their former directors And his salary ask was really reasonable. It was like, I think, $5,000 a month, but his talent was the equivalent of someone who's $200,000 in the US. I can't find this client info.

Have you heard of HubSpot?

HubSpot is a CRM platform, so it shares its data across every application.

Every team can stay aligned. No out-of-sync spreadsheets or dueling databases.

HubSpot. Grow better.

Yeah, you have one agency idea on here that I think is a no-brainer, which is site speed. So we have this problem with our store, but I think everybody has this problem. Like basically if you're selling something on the internet, one of the easiest levers, the biggest levers you have is your site speed. Because if you have a slow loading thing, you're just gonna lose traffic. You're gonna lose customers. As you have a slow loading page, you're also gonna suffer in terms of your Google rank because Google takes into account your page speed as well. And it's really easy in the e-com space to have slow pages because what happens is you start with a Shopify store, you install 15 plugins just to get your, your Shopify store to do anything. Cause like you, you can't basically run a Shopify store just out of the box. You have to, you're gonna end up installing a bunch of apps and each app injects a bunch of code into your page. And even if you delete the app, the code stays. There's no, like, you have to like manually clean that up, which is kind of insane and probably a business of its own. But basically site speed is a problem that we, I think we've hired 3 different folks to try to fix our site speed and all of them, I'm like, they claim to do something. I have no idea really if they're, if they're doing a great job or not. Um, I don't think that they are because the next guy comes in and says, oh man, your site speed sucks. Let me fix it. So, um, so I think this is a, this is a product that I wish existed and I think could clean up because it's a, it's clearly accretive to the person, but explain your thinking on it. What did I miss?

Yeah. So it doesn't really require much in terms of dev skill. It's not like you don't have to be great at the dev end to actually do most of these changes. And it's almost like a checklist that's very portable company to company to company. It applies very cleanly. So for example, changing the order in which your pixels fire for Google Analytics, Facebook Ads, et cetera, you can delay some of those very slightly and dramatically increase site speed, and it won't really hurt the business that much. That's just an example of one quick fix you could do, or certain apps do not compress images properly. So Judge.me, the review app on Shopify for a lot of sites, it does not properly compress images. So if you just apply more compression to those images, your site speed goes up at the product display page level or wherever those reviews are.

So how would you acquire new customers for this?

Um, honestly, I would probably just, just go, um, have you guys used BuiltWith before?

Yeah, we love it.

Yeah. Just go to BuiltWith, pull a list of websites, make sure they're doing a certain amount of revenue, or at least have meaningful revenue coming in. Um, just cross-check that against, um, something that shows traffic, right? Like Alexa or something. And, um, from there, I think you would just handle if their site's slow, right?

Yeah. Just cold email, I think is just the way to go with this. If somebody out there wants to do a site speed, uh, shop, just DM me because this is a no-brainer. I'll be your first customer and I'll help you get the next 10 because you could even just charge this.

You could charge purely on contingency too. It's really cool because you can see a black and white effect.

Yeah.

Um, if you've done a good job, and again, it's really easy to do a good job. It's just nobody specializes in this for some reason. So, yeah.

And it's a moving target, like, uh, you'll do it and then like 6 to 12 months later they'll need it again because they've installed a few more things. They hired somebody who didn't know how to compress images before putting it up. They started using this new tracking software for, for heat maps. And then boom, now you need it again because you, you've gone from an A rank back to a C, C rank on these, like these site speed graders that are, that are out there. I'm surprised the, the site speed graders don't have these agencies, or maybe they do. I haven't actually looked, but like, does GT Matrix or one of these companies that have the, the site speed score, do they not offer a button that says, by the way, we could fix this for you?

No, they should though, to your point.

Oh my God.

Really easy, especially. If all these e-commerce sites are on Shopify, right? It's very, yeah, checklist.

Yeah. So that's the other move. You should buy that site. You should buy the SiteSpeed site that checks the speed and then just add this button at the end. That's the agency service to, uh, to fix the problem. If they don't do that already, that's kind of crazy.

Um, how are you, uh, how are you balancing your time? It seems like you've got a bunch of stuff going on and these, I mean, you know, ideas are worthless, but it seems like a pretty good idea to me when I hear, when I'm hearing this, I'm like, oh, that's kind of an interesting, I actually seem like that has legs. You've You got a good network. You could probably spin something up fairly quickly and scale nicely. How are you balancing doing everything that you're doing?

About 15% of my time's on the investment end and managing our minority equity and credit positions. And then the rest of the time's just spent on the floral business. There's a pretty big lever that we're pulling right now with booting up another operating base, like a manufacturing base in Mexico, and that'll get our EBITDA to kind of $5 or $6 million. And then from there, it's a pretty good valuation. So we just want to get that over the hump, then I'll probably slowly phase out. But my co-founder's solely involved in that company.

That's the, that's called Solo Wood Flowers.

Yeah. Yeah.

Sam, when I met Maytab, I heard what he was doing. I was like, um, I told him two things. I think I go, how do I invest in this? Because, uh, if you're willing to go down and move to Mexico and build your manufacturing facility, you're going to win. Like, uh, Paul Graham has this, uh, essay that he wrote called like Schlep, and he basically describes the guys from Stripe. as being willing to do, do the schlep work. And he's like, you know, and a lot of businesses, there's basically some amount of schlep that you have to do. And for Stripe, they had to do all this like banking stuff that was kind of like annoying and bureaucratic, but they didn't really view it that way. They weren't, A, they were so young, they didn't really know what all was gonna happen. They, they didn't really realize how much they would have to do. And B, they were just willing to do it. And, um, and you know, you, you are willing to do the schlep, like you're like, oh, You know, you're like, I am looking for operationally intensive things. That's the opposite of what I'm interested in. I'm like, I want the least operationally intensive thing, but I get why you would want it because it's super defensible once you have it. It's very valuable once you do it.

It's very simple once it's fully set up, if that makes sense. Once you've— once you have like the best practices from lean manufacturing running, it's very simple to keep the manufacturer running versus like a D2C brand that's really reliant on the marketing end, right?

Yeah, exactly. And so I told you, I remember being like, hey, can I invest in your Mexico thing? Like your facility there? I think that's a great idea. And then I also told you, I was like, man, I feel like you play the game on hard mode. You're super smart. And, uh, you are like, I'm going to go do distressed turnarounds of D2C businesses. That's like multiplying 3 hard things together. Um, and I was like, why do you do this? You could just, you know, there's easier options. And you were like, No, I like this. I like, you know, it's fine playing in the mud.

Once you get a really good deal, you can't go back. I'm Indian. I need to get a good deal. I need to get a good price.

So yeah, I think that's actually what it is. I think it's genetic that you're like, oh, you know, the best deal possible, a company that's burning to the ground. Exactly. You can get it for nothing.

You're also, um, I'm trying to find it, but so your website's really good. Um, but you have this blog post or you have a bunch of blog posts on Medium. So Karta Ventures, Karta with a K. It should be on Substack now.

I killed the Medium, so—

Oh, well, I found it on Medium, but, um, but yeah, it looks like it is also on Substack, but you're really good with language. So like your thing starts off with like your, your first sentence is just, it's just good. This is a guide intended to give distressed e-commerce heavy business, uh, to give distressed e-commerce heavy businesses with $10 to $15 million in revenue, a high-level overview of turnaround management basics and resources to dive into. That's a great first sentence. You're telling me exactly what I'm getting. And then you do a really good job of explaining kind of your background with Alex, your co-founder. You say you started these things in your early 20s, you took, uh, passive roles or you sold them, and then you like help turn around ice.com, which is now called Ice Trends. You met on Reddit, uh, and then you say, we welcome complex opportunities that others are unable or unwilling to tackle. As a result, we can invest in non-control opportunities. We can grow quickly. Uh, but you just basically say, oh, here's another good line. My team and I are responsive, discreet, and avoid pointless formalities. We understand how critical speed is both in turnaround and high growth environment, and we could tell you within 24 hours if we're a fit. And so you like, you just do a really good job of being very crystal clear about what your offering is. And you are direct, but you're not rude. And it's just a, you, you have a really good voice and you also like cite a lot of the, books that you've read. So you talk about Turnaround Corporate Artistry and you have like a quote from the book. And so anyway, your language is wonderful. Sean said he pays attention to vocabulary. So do I. You, you have really good words. You, you're, and your rhythm is nice. What did you read to kind of come up with your perspective? And, uh, how did you, how did you become a good writer? You're, you're, you're quite good at explaining complex things.

I think we all grew up during the era of hardcore. I don't know what it was, but for some reason copywriting and being into copywriting was really popular from 2010 to 2015. 13, maybe earlier.

What did you, uh, what did you learn for that? Or who, where'd you turn to for that?

Um, one of my friends was just really into it, so I got dragged into it too. And just reading random books. I think there was a compilation of like 100 of the all-time best sales letters. That's back when like people used to distribute swipe files and stuff like that.

Right.

Um, so you'd just be on a, in a random group and someone would just distribute it and you just rip through it. And that's kind of how I picked it up.

It's good. You're, you're very good. And what, what were some of the other books that you read to learn this topic? Because you, you learned this at a very young age.

Yeah, I'd say Corporate Turnaround Artistry is one of the greatest books ever, but it's written by my mentor Jeff Sands, and that guy's an absolute beast. He's turned around a handful of fairly large 9-figure industrials, like manufacturing companies, everything from bakeries to, I think, large restaurants, restaurant groups, et cetera. And that guy is in his 50s, I think. I hope he doesn't kill me if I got that wrong, but, and he just, he just shows up. So he's done like lumber mills, et cetera. He just shows up and turns the operation around within 6 to 12 months. Absolute machine. And his book gives you— it's probably the most value in a book that I've read in a really long time. It's just like tip after tip after tip, and you can just take it and apply it. Even if your company is not distressed, it'll just juice profitability, if that makes sense. Really awesome. The guy's just a complete machine. I'm convinced you could drop him into anything and he'll just make it more profitable in 6 months.

And that's because what? What is he like world-class at doing? What does he do when you drop him in?

I'd say he's just very fast at making decisions. He doesn't hold back. In a lot of ways, running a turnaround is like running a startup. You don't really have the benefit of sitting around to make decisions, right? Like, you're not going to hire McKinsey to run a full-blown study to see if you should do something. You're just going to go and do it, right? And maybe you have some light directional data, but you're not going to wait for a ton of data. You're not going to run some crazy Qualtrics survey, right? You're just going to go out and get it done. And that's, that's what he's really good at, is just taking action. He'll show up. For example, when he turned around that Canadian lumber mill, he's American, so he just, he moved and, you know, keep in mind he has kids, et cetera, but he still just moved, showed up to a lumber mill in the middle of nowhere, Canada, and turned it around. He just got it done. No one else will really do that, right? And there's a premium for that.

What part of this brings you joy? Why are you doing this other than that it makes you a lot of money?

I'd just say it's really satisfying and it's fairly repeatable. So, And I think the speed at which you learn is really, really good, right? And it doesn't require a lot of equity to keep scaling, if that makes sense. So for example, you can probably buy a relatively distressed brand doing $100 million for maybe $10 to $15 million in equity.

I, we had, we're friends with Moïse and Souli Ali. So they, right, Moïse started Native Deodorant and I was like, Moïse, we're in San Francisco, why are you selling deodorant? Why not like do software and be normal and make more money? And he goes, I'm a merchant, man. I'm a retailer. Like, this is just, it's in my DNA. Like, I just, exactly. I make products and I figure out how to make them.

I'm a merchant.

That's what he said.

I've been working on these t-shirts. Uh, I've, I've been working with the t-shirt designer to do things and now I'm just on the lookout for these quotables. I'm a merchant. Is it good?

That's what he said. He goes, he goes, I'm a merchant. What's that say?

It says Kartakov. And then, uh, this is a banana that says IRR, like internal rate of return.

That's so funny. Well, and Moise also said, he goes, My second phrase, or he goes, uh, my first favorite phrase in the English dictionary, distressed asset. Uh, and it was funny, but he goes, he goes, I'm a merchant, man. Like I, and it says, I don't know if it's like a, like an immigrant thing or what it is, but like his, cause I know their, their family also owns homes, like lots of single family homes that they rent out and they own gas stations. And a lot of my Indian friends and Pakistani friends all do that. They have, uh, gas stations, things like that. And I'm like, I don't know, man, maybe it's just something in the culture where you just like, you're just geared towards small business. But yeah, and like for you, is it the product that you like or is it just like, I just like making stuff, something that provides value and I just like optimizing it for profit? I mean, what do you think is driving you towards this?

Yeah, it's in distress. So it's really interesting because it's like a game of chess with the existing creditors, existing cap table, and kind of figuring out how to squish it together to make it work. Right. So maybe you have like really angry senior lender and just convincing them like, hey, you know, give me the position at a decent price, I'll come in, I'll turn it around, and eventually you'll get right side up, or at least you'll make more than you would just liquidating these guys. And then convincing the guys that you're getting the company from, because they're often really upset, right? Like say company's doing $20 or $30 million, it's still run by the original founders in most cases, and they'll be really emotional about it, rightfully so, right? So kind of figuring that side out is really, really interesting. Then obviously the operating end, I don't like it as much as my co-founder. He really loves the operating end. But that can be a lot of fun too, just coming in, getting rid of the bad apples very quickly and then building out a team and kind of reviving the culture.

There's a story of what's the, what's the famous, the famous hedge fund guy who's probably in his 90s now, but you guys will know him.

Carl Icahn.

Yeah, Carl Icahn. He tells the story on YouTube and he's like, I bought this company and it was not doing great, but I thought it could do great. And so we owned like 12 floors, uh, in this one particular building. And I just went from, in one hour, from floor to floor to floor, and I laid off the entire floor. And he tells this story laughing. He was like, it was the greatest thing ever. And the, the audience was like, why? You know, you're ruining jobs. And he's like, but I'm making it better. Like, we're gonna, we're gonna have a better outcome. And like, I go both ways with that. I'm like, well, you're kind of just, you know, um, like these hedge fund guys. I'm like, you're just like an Excel monkey and you're just like squeezing every juice you can. You're not providing a lot of value. But I do understand the satisfaction of just like getting something that's not fulfilling potential and achieving potential. You, you know what story, you know what story I'm talking about where he like, yeah, I know the exact one. Yeah.

I was gonna watch the same video.

Did I get it wrong?

No, no, you, you nailed it. You nailed it. Yeah. He goes through floor by floor and he does exactly what you said.

And he's like glowing with like, he's like pride. I'm like, Carl, you're just like ruining these people's lives. Carl, you're blushing. Yeah.

He's like layouts just get him hot and bothered.

Yeah. He's like, I'm getting a semi just laying these people off. Uh, but yeah. And I guess you're, you're kind of in that position a little bit.

I guess it really depends on the company, right? A lot of cases you have a few really good apples, people left who are really passionate about the company. They want to see it succeed and they're the last people left. And then you have all these people who are more or less just leeching off of like the corpse, right?

What do you think about how Elon's done this with Twitter?

I think it's great. I think a lot of those people are really self-entitled and they have no perspective on anything. In a lot of ways, they're kind of like the modern version of this. Companies in the 1980s that were really fat and just overpaying executives, et cetera. I don't really feel bad for someone who's making up $100 grand losing their job, right? It's more so people working blue-collar jobs where they're making $40, $60 grand and they're working their ass off. I definitely don't feel bad for any software engineer making $300 grand who's upset they have to work 10 hours instead of 6.

I don't disagree with you. I just wish you'd be less of an asshole when he was doing it.

You don't? Yeah, yeah, yeah.

That was kind of pointless. Like, I think he made fun of someone who is disabled or something. That's obviously horrible. That's inappropriate.

And you mentioned something about, uh, being in America and how, like, you know, you like things that are in America. When I, uh, does it ever give you, like, do you have any sense of pride around, like, creating American jobs? Because I know on your website you said we've created or saved 200 different jobs in America, let alone overseas. Do you, are you into, like, that whole made in America thing for, like, the sense of pride thing, or is it strictly like this just— this— if it makes sense, it makes dollars.

Yeah, I think it's a mix of both. I think it really does make sense. And I'm Canadian, but I'm obviously grateful for the opportunity that exists in the US. You know, Americans are just much more gung-ho about entrepreneurship. They're more willing to write a check and just get involved than Canadians are. If you go to Vancouver, where I'm from, it's a lot of older real estate families. They're not really willing to write a check and get into something the way Americans are. They love taking risk. And I really appreciate that about the US.

Yeah, man, there's a, there's a thing I've noticed recently about, um, what I call like the North Star formula for, for a business. And so, um, I like when you can boil down a plan into like a very simple equation. So let me give you an example. Um, like Sam with Hampton, um, I think I texted you this, but I just said 10,000 times 10,000. So you just need 10,000 CEOs who are going to pay you $10,000 a year and you have a $100 million business. 10,000 times 10,000. So it's like, can I provide enough value where somebody is willing to pay 10 grand a year? And then can I get 10,000 people to sign up for that value? Your whole business comes down to that one equation. 10,000 times 10,000. When I met— when we were hanging out with Andrew Wilkinson, I was like, how much equity did you put into Tiny originally? And I think it was something like, you know, don't quote me on this, but I think it was something like $6 million. He's basically turned $6 million into like $600 million, just as round numbers. And $6 million into $600 million. If you want to be the next Tiny, you can just take that thing. I'm turning $6 into $600. Okay, how are we going to do that? Let's work backwards from that simple formula. Well, I think I would need to compound at 45% annually. Okay, how am I going to do that? Well, I need to buy businesses on these terms at these prices, right? A formula can be very instructive. We have some friends that just raised $18 million and we're all just like, what are you gonna do with that $18 million? And they go, we're just trying to figure out how we could turn, uh, we're like, the goal is take this $18 million of equity and turn it into $10 million a year of free cash flow. It's like, okay, like that's a, a clarifying equation. And, um, I'm curious, Mitab, for you, like in a best case scenario, how will this have played out? So like you, you, you go to the start, I don't know how much, how much equity did you and your co-founder put in as like your seed capital to get your whole business off the ground?

Well, it's kind of weird for Cardax. We both had a few exits beforehand, like he'd sold a company that he got kind of low eight figures in his early 20s. He put a bit of cash, but we put in, I want to say, a couple hundred grand, like $200,000, $300,000 to start making investments.

So you— and so— and maybe you've put in more over time. I'm not sure, but like, whatever that—

yeah, we reinvest everything. More or less.

Yeah, but like just the out-of-pocket, like initial— not, not reinvestments from the proceeds of what you've been doing, but just have you had to take something out of the checking account or savings account just to, to, to re— to recapitalize the business in any way or no? It was like $200,000, $300,000 and then anything else we put in was reinvestments from what that $200,000 or $300,000 has made us.

It was reinvestments from what that $200,000, $300,000 that we put in initially was.

Okay, amazing. So you're going to go from, let's say, $300,000 And like, if this all plays out the way you want, you know, fast forward, I don't know, 10 years or however long you plan to kind of do this, what would be the big win for you? How much would the portfolio be worth for this to be like a, you know, a home run outcome for you guys?

Yeah, we are really goal-driven. We're a little bit weird that way, but we both want to tackle increasingly large distressed deals. That's what we get pleasure from, I guess, just kind of fun doing it and we'll just keep doing it until we don't have fun. So our goal really is get this floral company, I think, can easily get to $100 million in top line. Um, like our allowable customer acquisition costs will go up by 30, 40% once we finish with a few manufacturing transitions. Hold on.

So you don't, you don't have, you're not goal-driven. What does that mean? I don't even, that's like not English to me. How do you, how do you function without, without goals?

I just like to do hoodrat stuff. Just whatever is fun, right?

Dude, he's like a dominant, you're like the dominatrix of PE. You just get, you just get pleasure. You just get, you get, you get pleasure for like, like Oh yeah, you like that?

Iba da.

Oh yeah.

That's going on. That's my new LinkedIn subheader.

Yeah. You just love the act, man. You just, you just like the act of, uh, you know, someone, um, uh, you, you, you whisper, whisper IRR into your ears and you're gonna get weak at the knees.

Well, it's just fun because you get to learn from people like, like you two or, or hang out with other people that are really interesting. Um, and, and that's really exciting too, right?

Like, but don't you, but don't you, don't you have, um, like a, like a, you know, every, a lot of people who get in business, they have like, one day I want to make all this money so I can buy, you know, 1,000 acres, or I want to create a school that does this, or I want to be able to make sure that everyone in my family never has to pay medical bills.

A dream and set a goal. My initial dream, my initial dream, and my co-founder's dream, this is before we met, it just turned out we had like the same target, was to make like $5,000 a month. That was it.

That's how it starts, man. That's how it starts. And then you realize that, uh, and then you realize that, you know, you know what I've noticed? I have all the same goals.

Hold on, hold on.

What I'm noticing is this, dude, you didn't start like this. I had the same thing and the goals always change.

But you said when you started, you guys have had wins under your belt.

So, no, no, I mean before that, like, oh, okay, okay. Like early on, like when I did my first thing, I was like, I'm going to be stoked if I make $60 grand a year.

Okay. Yeah, of course. Of course.

Of course.

But what about now? You know, like what's like the, what's like the vision, the long-term vision that you, you, that kind of keeps you excited. Maybe sometimes it's buying shit, giving shit away, helping your family, whatever.

Right. I think getting this one portfolio company to the next level, either selling it or re-leveraging it, taking out cash and then raising a large fund is probably like our immediate short-term goal the next 2, 3 years.

Dude, that's so— when I was in college—

that's so not what I thought it was going to be. Sorry, go ahead.

When I was in college, one semester, me and my buddy Trevor and our our other friend Dan, we, we had read the card counting book. This was before the movie came out, 21, but oh my God, the book Bringing Down the House was out. And, um, and we were like, oh, not only are we going to count cards, we decided to create an underground blackjack club on campus. And so we started preparing and we were like, and because we had read this card counting book, instead of just doing the obvious thing of being like, cool, let's just invite some, some friends over. To play blackjack at low stakes. Let's see how it goes and we'll go from there. That's how you would do it if you had any, like, any ounce of IQ in your brain. Instead, we were like, okay, let's go buy this, like, fancy blackjack table. Okay, cool. We get— we— now we're in the hole and we've got this, like, fancy thing. And then let's run all these practice simulations to see how bad we could get beat. And then what if somebody comes and counts cards?

How—

what's our security going to be? We were worried about all this stuff that didn't matter. And we spent— no joke— we spent, like, the entire semester at college, which is like like that semester cost each of us probably like 40 grand just to be there. And instead of focusing on the 40 grand that we put into being there, we were doing this thing. And I remember one night we were calculating, we were like, oh my God, if we do this, we could make $3,000. And then we all started giggling like, ooh, like, can you imagine that? Like, we were like, dude, what if we made $3,000? And we just like, that's $1,000 each. And we were so pumped about this. And it was like it just took over our minds like a mind virus for, for, for 3 or 4 months. It made no sense, but it was like, you know, it was the humble beginnings of scheming. It was like the— it was the first of many schemes to come with this same group of people. We ended up starting a company together and did many more things together. But like that first taste of the scheme and how hilariously bad your plan and your goals are, like now when I look back, I look back with a lot of fondness on that.

Totally. Yeah. It makes sense. It's always start small.

And then you, what are you like, you bought, you bought the safe to keep the cash before you even had the cash and the cash never even came.

We never, yeah, we never even ran the, ran the club because we like, we were too worried about getting kicked out of school. Cause we found out how illegal it was. Well, basically we had one simulation where I was the, again, we were big into these simulations and I walked in and I played, I lost $100. And then I go, give me all the money or I'm going to tell people about this club. And I was like, oh yeah, what are we going to do if somebody does that? Like at any point in time, somebody could just literally take all the money because there's no recourse. What are we going to do? Call the cops and tell them that somebody stole from our illegal gambling club? And we were like, oh, this won't work.

Before I sold my first company, I was using some type of like mint.com style service. And there was like a thing where you could manually, you know, you connect all your accounts and it shows you your net worth and whatever. And they had this option where you can manually add something. So I manually added this really big number and I would log into this every day, like 6 months in advance. And I'm like, sick. This is awesome. And I remember like when the money then actually came in, I was like, damn, I kind of like felt most of that joy in that 6 months leading up, just like I kind of tricked myself into already believing this was real. The simulation kind of gave me like a lot of the joy. It's pretty cool. You can kind of like trick yourself into believing these things are true and you get a significant amount of satisfaction from that fake thing compared to the real thing.

Yeah, you— because what people want is the feeling. You don't want the thing. If you ever say, oh, I really want X to happen, why do you want X? If you just keep asking, why do you want that? The obvious answer why you want anything, a relationship, money, whatever it is, to have a six-pack, whatever. It's some feeling. It's a sense of accomplishment. It's a feeling of relief, of real, of less anxiety, less stress, whatever it is. And then you realize, oh, it's not the thing I want, it's the feeling. And then you might be able to get the feeling through literally like faking it. You might be able to get the feeling through something much simpler that's not going to take you, you know, 7 years and a bunch of heartache. To get there. And, uh, and also if you've never had that feeling before, even when, when that thing happens, it'll be your first time having that feeling and you'll suck at it, which is why a bunch of people feel after they get success, they get like kind of let down because the feeling wasn't as great as they, they wanted it to be. The anticipation was better than the result. And the reason isn't because the feeling is actually a letdown. It's because it's the first time they've let themselves try that feeling and the muscle's just very, very weak. And so, uh, yeah, big, big life tip is to realize like what you want is the feeling and then start practice having that on a daily basis through like much smaller things.

Yeah, it works. Um, Maytab, you, I'm looking at you on Twitter, you have 5,000 followers. I think that being popular on social media doesn't really matter in most all of business. It, it, in fact, sometimes it's like negatively correlated to how popular you are. But in your case, I, at least I know with Andrew, like when he's buying a lot of companies, having some, um, like, you know, it's basically being on Twitter as a billboard for him. So when he reaches out to someone, they're like, oh, you know, I think I've heard of you. Fine, let's have a conversation. For how good it seems like you're doing and how smart you are, your, your social presence is significantly smaller. Is there a reason for that?

No, I just don't really like it. I just like to post content about stuff that I actually care about and I'm fairly open. And then I guess too, on the distress side, when you're buying a business, they're more of a forced seller, right? And when you're talking to a lot of these senior lenders who you're working with, it's a lot of guys that are in their 50s or 60s and they're very conservative, traditional, like banker types, right? They're not, they don't really care about social media or anything like that. So, I mean, I'm sure it does help with deal flow on the growth equity side or buying healthy businesses, but I've just never really been into it. Yeah.

I mean, you have, you have, you do tweet interesting stuff. It looks like What's a Daniel Roth watch? It looks like a pretty fancy, fancy watch that you just—

I'm just a nerd about like neo-vintage and vintage watches. And then as well as some newer brands, but mostly smaller ones. It's just kind of, it's a lot of it's like angel investing. It like if you buy into an early independent brand, which is just like a watchmaker basically going at it, sometimes they can appreciate in value significantly and you get a pretty cool watch for the money. Plus you support a small business, they'll build you whatever you want. So it's like a win-win.

Yeah. Your, your social media is actually pretty cool. I'm going to follow you, but you have some interesting stuff, but like compared to some of the stuff you're doing, I know a whole lot of people in the D2C space that are significantly bigger than you and are much more of a little pipsqueak and don't ever walk the walk like you, like you are, you know what I'm saying?

Yeah. Yeah. I know what you mean.

Uh, leave us with this example of this Weight Watchers thing. So, uh, explain, explain what happened with Weight Watchers, then we'll wrap it up.

Super high level. Weight Watchers was not doing so well. And this guy at this tiny firm, not, not super small, but relatively small, he convinced Oprah to join them and they absolutely crush it. That's the very high-level overview of what he did.

And so this guy, uh, what, what, what, like, what were the numbers? So they, what did they buy?

I'd have to go pull it up.

And then what was it?

I'd have to pull it up.

Okay. Um, so how did this guy know Oprah, by the way? That sounds like, you know, oh, it's simple. He got Oprah on board. That, that's not, doesn't sound that easy.

Yeah. 2015 Oprah is, uh, was a big deal.

That's Pete.

Yeah, that's Pete Oprah.

That's like 2012 Obama, like, yeah, that's peak Oprah. So in 2015, he did a deal with Winfrey to acquire a 10% stake in Weight Watchers. Since then, the company stock has soared by almost 600%. They sold $1 billion of Weight Watchers stock, and Oprah gained at least $400 million so far. Okay, that's pretty impressive. Um, it will go down as one of the best private equity deals ever. Over the 19 years, they put $226 million in to Weight Watchers and got $5.37 billion out, $4.7 billion of realized profits.

Yeah, it's pretty good.

Uh, that's pretty good. Not including the stock that they still own, but they only bought 10% of it.

Um, I thought they bought more. I think they kept buying more over time. I thought they kept deploying more and more cash into it.

Dude, we have to do a pod on Oprah.

Like, I, I love her.

I grew up watching her and like, I, I, you know, she's 70 now. I just looked her up or she's 68 or something. Uh, we forget, or I forget, like how big of a baller she is. I'm like just Googling. It's like Oprah buys another 1,000 acres in Hawaii.

She came from nothing and she bootstrapped, like she basically, you know, got, got her net worth to be something absolutely insane.

Yeah.

What's her, what's her story? So, uh, what, what do we know about the beginning of her story?

Uh, born in a really poor town, abused growing up, et cetera, and then absolutely crushes it. And she should run for president. I would totally—

I think she, I think she was born in like an abusive family. And like, I think, I think there was even like—

she got like pregnant at 14 or something.

Yeah. And I think that there was some like sexual assault or some, some, some like some horrible, uh, tragic stuff. And then at age 24, I think she becomes like a weatherwoman or like a, like a, whatever they call it, where you're a news person, but you're not actually in the office. You're like out on the streets. Yeah, she did that. And then eventually when she's like 32 or 33, she gets a talk show, but it's not like a hit right off the bat, but it slowly starts picking up. And then eventually she like makes some like groundbreaking deal. She did like one of these groundbreaking deals, sort of like Michael Jordan did with Nike, what Lucasfilm did with Star Wars, where it's like, you know, we'll just take a percentage of the upside. And, and then that like turned out to be like one of the most, you know, one of the best deals of all time.

And, and it's worked out and And she did this all back when people were very, very racist. It's not like now.

Yeah. She's from, like, I think it was out of Nashville, Tennessee that she's doing this. So in the South, and she kind of killed it.

We need a How to Take Over the World episode on Oprah. What's going on? Where is our definitive Oprah episode? Why have you not done this already? It's a real question for you, Ben.

Put it on the list, Sean.

You put on the list, you put it at the top of the list. Let's do this after this episode is done.

Yeah, you got it. I'm buying my Oprah. I'm on amazon.com buying Oprah biography. Is there an Oprah biography? I would totally buy that. Of course there is. There has to be. I mean, she's, she's the best. I'm a big fan of her and she like did this all out of Chicago. So I think she still owns like the penthouse in the Sears Tower, which is like, you know, one of the largest buildings in the world. But no, she's the best. You know, I always forget about this. So like, I'm in Austin and there's all these nerds talking about crystals. You know, you go to a therapist and they like recommend a crystal. Like, there's like pretty woo-woo shit out here. She was pretty woo-woo, but for some reason she made it very, very likable. Like, you guys remember that book The Secret where it's just like, it's like if you think about it enough and like put it in place in your brain, the universe will grant you this. Yeah. And like, she like would— she was talking about that stuff before any of that stuff was even popular. And for some reason, when she does it, it's very tasteful. Other times my friends do it, it looks like, you know, they're one of those women wearing like a Coachella brown hat, like, you know, and it's not cool at all. You know, I'm talking about those wide brim hats. When I ever see one of those with turquoise jewelry, I run away. I'm out.

Good choice.

You know, if you work— if you're wearing cowboy boots, turquoise jewelry, I'm out. Yeah. No wide brim hats for me. I'm out. If you wear one of those things, I'm not part of this. But for some reason, When she does it, I'm in.

Well, that's what I wanna know. Like, I think the, the story I've heard is like, grew up in these terrible conditions, overcame and became super successful. But I literally wanna know like, what was the successful part? Like, uh, meaning how did she get her break? And then like, what led her, what was she doing? Was it literally just better content? Like, was she just that damn good and dynamic as a talk show host? Was it like the Microsoft-IBM deal where they like, you know, how did Microsoft take over the world? It's like, well, they cut this really great deal for the operating system where they could be, you know, with multiple providers at once. And then they use IBM to bootstrap and that's how they got bigger. Like, it's like, was there like a growth hack? Was there a, um, a smart, you know, deal that she struck? Was it, uh, the timing? Cause like, you know, those show, you know, cable started spreading into every home in the country and like she was one of the top 3 shows and just like she got to surf the cable wave or whatever. Like, I want to know what actually led her to the mega, mega fame. What were the actual, those things? It's not like a simple answer, but that's what I'm actually curious about because you could, like, in the topics that I know about, those stories are always the most interesting. And I feel like when I go into other topics, like I was like, oh, Maytab, like what happened? He was like, oh, started off bad. Now the best. It's like, yeah, but act 2, the middle part, uh, that's the part anybody who actually wants to make shit happen in their life, you want to focus on act 2. Like Hollywood focuses on act 1 and 3, right? Like the, the bad origin and then the, the happy ending. But it's the montage, the training montage, when like you go from like scrawny to strong. The training montage that they speed up through is the part where all the interesting shit happens.

I already told Eugenio, I go, Billy of the Week on Wednesday. Oprah. I'm on it.

Yeah.

There's this really cool book, um, called Messy Middle. Have you guys read Messy Middle? It's by, uh, what's the, uh, Scott Belsky. Yeah. The most dreamy guy of all dreamy guys. Scott Belsky is the man. Scott Belsky basically started, um, there's a guy named Scott Belsky. He started Behance, which is, uh, where developer, uh, designers could host their portfolio. He started it, bootstrapped it, had $175 million exit. Before it became very successful. He said he had like $50,000 and he invested like $15,000 into Pinterest at a $3 million valuation, $15,000 into Uber at a $3 million valuation. Each of those, you know, $50 to $100 million outcome. Plus he owned 75% of his company when it sold for $175 million. So very, very, very successful. And now he's— it's looking like he's going to become the next CEO of Adobe. So huge deal. He's got this awesome book called The Messy Middle. And it talks about how like, you know, starting things can be somewhat easy, but once you start that, then there's, uh, once you, you start it and then there's the middle and you have the end and the end's the kind of the easy part.

Right.

You know, things are just kind of working, but the messy middle is that 10-year period where it's like, is this working? Is this not working? It's a really cool book on how to like navigate that period. And it's, and, and I love that title, The Messy Middle.

Yeah.

Great title. Great guy. He came on the pod once a long time ago. We should bring him back. Um, But yeah, he's on your like Mount Rushmore of dreamy dudes. I feel like, uh, you got Huberman up there, you got Belsky, who else? It's basically like successful, good looking.

Yeah.

You gotta have jawlines. Yeah. Yeah. You need a, you need a good jawline and a clear cut jaw. Dude, have you seen Scott Belsky's jaw, man? He's got a strong chin.

I know what I'm Googling after this.

Talk about, talk about not a distressed asset. That guy's chiseled.

Yeah, that's a blue chip stock right there.

Uh, yeah, he also just dresses well. And I feel like dressing well is this like really easy thing to do that nobody does. And, uh, and he does an amazing job of it, especially in tech.

I know he's, he, he's the man because he lives in New York, dude. All those guys are stylish. He lives in New York.

Yeah.

So he's got that leg up.

Dude, I've never been to his house, but I've been to his house. I know exactly what a guy like that's house looks like. It's basically, I can picture it so clearly in my mind of how immaculate like the design is of that guy's house.

He invested in The Hustle. He wrote us a very small check and I've got the paperwork for where to send the docs to. Immediately I looked up and I like saw the house and I could tell you, I could tell you off air. It's exactly what you're describing. You didn't even, you didn't even describe it other than using some big words and it's exactly how you're describing it.

Sam, you want to hear something funny? I tried to, uh, in 2018 when we were hunting for deal flow, I like stumbled across the hustle. I'm like, this is awesome. I should try to invest in this. So I messaged you on Facebook, but no reply.

So, oh, I'm sorry.

You can go, you should go pull it up. It's just kind of funny.

This is your revenge.

No, sorry.

Sorry.

It's, it's kind of funny. If I would've got, that would've been a good investment.

But it would have. I'm sorry. And maybe you would have known Scott. You know, I could have helped you connect with my boyfriend Scott.

Maybe you too could have Zillowed Scott's house.

Wow, this thing's awesome.

Yeah, we're friendly. We're not friends, but I've Googled his house. He's not Googled mine.

Yeah, I can tell you what type of couch he has though. But dude, thanks for coming on, man.

Thank you. It was fun.

You're awesome. I'm going to go and find that. I just pulled up Facebook. I'm going to find that message.

It's just kind of funny. It's from 2018. Hey, uh, I'm an angel investor. Please let me invest. I like what you're doing.

What's your, is your, does your last name start with a B? Yeah.

Yeah.

Bogle.

If you just type in B-H-O-G-L.

Oh yeah. I see it. Sorry about that.

There was, there, see, good deal flow would've been there. I should have messaged you more. Well, you're, should have asked you, dude.

I saw a, um, a post on Reddit yesterday. It was a map. I don't know if this is, this might be fake news, but it was the top, it was like one of the most popular, popular posts on Reddit yesterday. It's a heat map that shows the average life expectancy by town, and there's literally a 20-year age difference between like New York, uh, California versus like the South. Um, it's like, you know, people in the South are dying at like 60-something, and people on the coasts who are living like, you know, sort of the yoga and salads lifestyle are living till they're 80 on average. And And then you can see these small pockets, like in Florida. It's like the retirement community where people like migrate into. Yeah, like they're also living for a long time. Yeah, the Jewish New Yorkers who moved down there, they're living for a long time. Everything around it is surrounded by the walking dead of people who are gonna die at 60-something.

And there's like, it's like Boca Raton kills it, and then like Fort Lauderdale is like, it's a 30-year shorter life expectancy.

I asked my data guy, I said, please overlay a map of Chick-fil-A's, and it was a perfect sequence. To like to the dying early crowd, which is unfortunate for me because I love Chick-fil-A.

Chick-fil-A is not healthy. Oh, we're screwed. Um, dude, thanks for doing this. We appreciate you.

Yeah, no worries. Thank you.