Founders who raise capital are committing to a sale, not a lifestyle business. You need to identify potential acquirers from day one and build a customer base they actually want, or you'll waste years and money rebuilding. One founder learned this the hard way when an acquirer only valued half his customers.
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You need to know where you're trying to end up with your business. But like when you're defining that for a startup lifecycle, is that always acquisition? Is it just personal business alignment? Like I see a lot of people define that differently. How do you help someone to define the end of their startup and what, like what it's supposed to become?
If it's a lifestyle business and you're building a business to live off of it, then your end destination is a certain amount of monthly revenue to yourself, right? If you're raising money, your investors, you have to sell to get the money back to them. So that already defines it. When you decide you're going to raise money, you are selling your business because otherwise no investor is going to give you any money because they'll never get it back.
Yeah, that makes sense. So it, and it seems like that's a common trap founders fall into of like they start as a lifestyle and then they decide to fundraise and they kind of switch between the end outcome. And really they're just trying to build a thing. But if you don't understand the end implications of those decisions, then you just end up screwing yourself early on.
Yeah. Yeah. If you raise, if you, as soon as you take money on board, you're selling your business. That period, you know?
Yeah. That's interesting. So it sounds like the startup's lifecycle's really critical. Like how was your experience building your startups? How many startups in do you feel like this Framework clicked for you?
Man, once I was doing the research and once I started to look into the research and really dig in, I had realized that about halfway through my career is when I started to realize that you have to start with the end in mind and that you have to understand who your acquirers are and who their customers are and who their personas are in order to make sure that you're onboarding customers that match their customers. So as an example, if I'm trying to sell a product to Google, do you think Google cares about my 1,000 customers, 5,000? They have hundreds of thousands of customers. What they care about is growing the lifetime value of the customers they've already paid for, meaning their customer acquisition costs, which grows the customer acquisition cost to lifetime value ratio, which means I spend a dollar and I make 10. So it's all about growing lifetime value. It's all about growing the amount, the share of wallet you're getting from your customers. So if you don't know who is going to buy your company in advance, you could do what I did about halfway through my career, which was I built a company without knowing that. And I went to the acquirer and they said, half your customers we're not interested in, but we'll pay you for the half that we are interested in. Well, I spent a lot of money and years acquiring that other 50% that they were just going to throw away. So I had to go back and rebuild the company with only the ICPs and personas that they wanted. I mean, that's a huge setback and a lot of burned cash and time. So if I had known that when I started, which is, I learned that lesson, right? If I had known that when I started, that would've never happened. I would've sold the company 5 years earlier and I would've sold it for all the customers I had. So it changes things dramatically.
Yeah, that's a really painful lesson when you're like, you go to sell your company, you're selling it to someone and they just don't care about a big chunk of it. And so you gotta step back and reassess, rebuild, or just take the loss and say, hey, you know, they like some of me, but not all of me.
Yeah, exactly. Because ultimately when a company buys another company, what they're trying to do is they're the majority of the time, it's You know, these are synergies, right? It's either to make or save money. The majority of the time it's to make money unless it's a really bad bear market and then they're trying to save money. But the majority of the time it's to make more money. And the whole model for a synergy model that's making money is to grow the lifetime value of the customers they already have, sell more stuff to the customers they have. Now, if you think about this, this is not new. If you think about a, you walking into a store, The products on the shelf increase lifetime value, and they do that all the way to when you're in the checkout trying to sell you gum, candy, magazines, everything they can do to try to get more share of wallet. So think of the acquirer as buying you as another product that sits on the shelf.
