Ep#89: Why Most Founders Wait Too Long to Think Like a Buyer - Aaron Alpeter

And I have to have a $3 million seed to figure out if my idea is real or not? The answer is no. You should be able to do this with AI these days for no cost, right? You can put a website up there, you can put some renders, you can help find things. It has never been easier to start a company than it is right now. It's also never been more difficult to, than to raise money than it is right now because the bar has been raised so much higher.

Welcome to Startups Decoded, the show that gets real about what it takes to build a successful startup. I'm Andy Walsh, 2x exited founder, advisor, I'm Andy Walsh, founder and your host. Each week I talk with great founders and top investors. We unpack the plays that drive real traction. If you're building something bold, this is where you'll get earned insights to scale with confidence. Let's keep growing together. Hit subscribe and share with your community. It would mean the world to me. Hello and welcome back to Startups Decoded. My name is Andy Walsh. Today we're looking at exits, but not the actual exit process itself. It's everything that happens in between to make sure that you're ready and being ready today Looks very different. And the way that you actually pull all that information together is very different as well. And I'm really lucky today to have Aaron Alpert with me. Aaron, welcome to the show.

Andy, thanks so much for having me.

I love people's stories. I realize it's one of the things that I've grown to love most about this podcast. It's not just the content we talk about, but everyone has a great story and people don't tell their stories enough. And once you ask a few sometimes loaded questions, you can get to the heart of someone's story. And you all started in multinational corporations, Unilever, Big places, and now you're working with startups to take what they've got at a global skill level and help people take that thinking, but do it in a very localized way. Um, can you tell us your specialty in a sentence almost? How would you sum up what you do today to help startups?

Yeah, absolutely. We, we help founders build a business worth buying. That's the core ethos of what we've got. Uh, we've got 3 different companies, Isba, Sourcify, and Slotta, that each do something different. But the north star for everything is helping people build something that somebody else wants to buy.

It's so fascinating. And in that time, the R&D part of multinationals, they would've spent a lot of money. M&A feels like it's become such a different component now where an acquisition process of a company that's got traction is such a, almost feels turnkey in a way that it's very well-trodden path now. So being ready for that acquisition is really important because it feels like there's more companies looking to acquire that next generation of product innovation.

Yeah, you're absolutely right. And for a couple years there, it was kind of tough sledding when it came to acquisitions and deals that were happening. But you're starting to see the market open up quite a bit. There have been several hundred million dollar deals, several billion dollar deals that have come out. And it's, it's really one of these things where people are, are looking for what's there. And so there's a window where if your company isn't prepared, that acquirer is going to buy something. And it's either going to be your company, it's going to be your competitor. So the M&A market is starting to open up again. You're starting to see lots of 9-figure deals, some 10-figure deals that are coming through. And the reality is, is that there is a window for an acquisition. Both the company has to be ready as well as the market or the acquirer has to be ready. And if you're not put together and you're not prepared for an exit, well, when that acquirer comes knocking on your door, They're going to talk to a lot of other people too, and they're more apt to acquire your competitor as opposed to you. Yeah.

Okay. That's a great foundation to start. Being acquisition ready is in my mind, a methodical process that you move through from day zero in having your data room ready, thinking about your category, thinking about scale, competitors. There's a lot of things that go into being ready. Do you have some things that you would say foundationally are some of the big ticket items that you would need to think about in that process to be exit ready?

Yeah, absolutely. So I think that the way I would start is that this isn't something you do 6 weeks before you want to sell, right? This isn't something you do when you get an inquiry. This is really about understanding what it is that people are going to be purchasing and how you're prepared for it. I would say like one of the big things is that you have to understand what it is an acquirer is going to be purchasing. You know, they're basically looking for 3 things. The first one is you need to be profitable. Right? If you're not profitable in 2026, like, it doesn't matter how great your brand is, you're probably not going to be acquired unless you're an AI startup or something like that. But like in, in normal CPG, in apparel, in medical devices, you got to be profitable. So that's, that's objective number one. The second thing is that an acquirer is often going to be looking for some unique capability. This could be a patent. This could be unique distribution. This could be that your team is really good in a new channel. And that's something that they're interested in looking at. And the third piece is there's gotta be meat on the bone for the acquisition. And so this is where it starts to get into a lot of strategy where maybe it's not in the best interest of the startup to expand globally while they're, while they're still private, because the acquirer's gonna look at that and say, hey, you're doing really well in the US. I know that if I plug you into all my channels, I can take you to 47 markets in the next 3 years. And it helps me pencil out the deal a little bit better. And so those are like the things that are looking at. I'd also say that it's, it's really important for a, a founder, a company to understand what the objective is. For a different stage in their lifecycle. We've, we've done a lot with different brands. We've created about $2.5 billion worth of exits for the founders that we work with. So we've just gotten really good understanding what a supply chain should look in any given part of the lifecycle. And so understanding that when you're first launching, especially let's just take a food and beverage brand, you're probably going to launch on D2C. But the point isn't to build a big D2C business. It's to learn about your customer. It's about getting enough data points so that you can qualify to get into retail. And then it's about building a big retail business and, and, you know, making sure they're self-reinforcing. But then eventually you're gonna get to a point where you are no longer betting the company on every decision that you're doing and you need to start protecting what you have. You start building in a deeper bench, you start building in resiliency for what's there. And so I think a lot of difficulties that brands will have is they try to do too much too soon in the wrong order, and that ends up spending a lot of time and wasting effort that they don't need to.

Love that snapshot. And the part, one of the ones in there that I love is the distribution element. And I obvious example, if you look at something like Poppi and Pepsi and like that acquisition was significant, but again, like in, in just Pepsi's world, global distribution is an absolute strength of theirs, right? Just, just knowing like shipping, distribution, local warehousing, local retail relationships. They've got a well-oiled machine with a lot of experience behind it. So from a business case perspective, they can take your data and look at what you're doing now and cost of goods. They can look at how they can scale that and drive profitability Even from a marketing and sales component as well. But within it, the part that I find fascinating too though is then the cost savings. And it's one of those commercial beasts from a capitalism perspective, unfortunately, is that like when you are acquired, you also need to be prepared for the next stage as well. And I'm always fascinated on once you do get acquired, what an exit looks like and an earnout and what you stay in and What you have to be prepared for. So like, I'd love to tackle that in the sense of knowing your business model inside out. Like, how do you get structure and strength around understanding that data? So when you do have a conversation and start thinking about engaging folks that may acquire you, being prepared to articulate that story, because that you need to be buttoned up on that component, right?

Absolutely. And keep in mind, these acquirers are really smart people as well. So they're going to come up with their own hypothesis, but it is important for them to understand What your thesis is, right? What is the team currently organized around? I always like to look at this in terms of like 3 stages to a play or 3 acts to a play. You've got the part where you're building your business, and that's where all the things you're talking about come into play, where you are acquiring customers, you're being profitable, you're figuring out all these different elements that are there. Then the next phase is after the deal is done, there is an integration piece. And that is where most integrations are made or made or lost, or you make or break it. And then the last part is after you've gotten through that initial integration piece, how does the acquirer pull out all of the context and, and the value that they're looking to create? And so it's really important that as a founder, you think about what you need to do in each of these 3 stages, even if you're only gonna be around for the first 2.

Yeah. And there's an element too, from a personal side, and I won't dwell on it for this episode, but the, the ego check of you go from maybe CEO founder to all of a sudden you might be an SVP and have a functional role and seeing your baby being like completely flipped and turned into something that it never started to be. So there's a level of pragmatism that you need to have at a human level. But being aware of that process is important because I feel also it informs a lot of the planning and decisions that you're making early on, right? Because you need to be prepared for that path all the way through. And I don't know CPG intimately, but you know, if you're— doing some kind of exit out, you might have to stay on for 4 years, 5 years quite often. And that can be quite a harrowing few years of working for somebody else. Yeah.

I would say that when it comes to ego, most people who have successful exits have checked their ego, right? And, you know, I'd say if one of the things that acquirers are screening for is if someone's egotistical or not, if they are highly egotistical, they're probably not going to sell their company if they believe in it. If they have a high ego and they're trying to sell your company, that probably suspects that, you know, maybe there's something that's not quite right underneath it. It might be lipstick on a pig, for example. And so I think that who the founder is, who the executive team is, is really important to get a sense of, you know, are you buying something that's durable and useful, or is it something that it's just its moment and it's the flash in the pan and, you know, things are there. And so I think that that's like a really important piece that Often doesn't get talked about a whole lot.

Yeah. And I've had some conversations a few times now, actually on this podcast. And we talk about founder tradition, uh, transitioning rather into a CEO and, uh, they're very different roles, like being an early stage growth hacking founder and then becoming a CEO and leading a large team and thinking about strategy. You're, you're not going to have your hands dirty anymore on all the little things. It's very different. And That cultural element of what you can create to scale is something that those companies are looking at as well. It's like, how have you built the machine behind the machine to be able to make sure that you can scale your time and still be the leader that you want? And in some of those cases too, quite often they're buying, probably not so much in CPG, but they're buying the talent as well. It's not just the product and the way to capitalize. It's like, who are the people that sit around the table? And we've seen a lot of that happen more in AI. Where the knowledge that you are actually acquiring is the people, not just the tech.

Yeah, absolutely. And I, I think that the, the challenge that is there is that people grow at different rates, right? But sometimes your company grows faster than your ability to, to grow. And so that can be a difficult thing. And, and, you know, I'm sure that you've met founders, I've met founders where they're actually an impediment to the overall growth. of that company. And it's not because they don't care about the company. They actually probably care quite a bit, but there might be certain situations where their identity is too interwoven with that company. Like their own self-worth is tied into being the decision maker or the head honcho at X company. And what I'm finding more and more is that founders are becoming more aware of the fact that these are likely going to be multi-year decades, maybe sometimes multiple decades worth of work in order to get to the exit looking for. And so 2 things are happening. The first one is they're looking at this and saying, well, what part of this business do I actually enjoy doing? Right. And I want to just focus on just that part. And so they will work on hiring other people around them. In many cases, I see more people hiring a CEO, hiring a general manager, Because the founder's always gonna be the founder, right? Like that, that's the case. Like that you can't take that away from them. And not people, not many people know as an example that the founder of Dr. Squatch was not the person who led Dr. Squatch to be acquired by Unilever, right? He was able to step back, still owned a sizable chunk, was still on the board, was still involved in the way, place that he wanted to be. But he found other people who could take that brand to the next level and ultimately reach its potential. And so I think that there's, again, coming back to this humility element, the best founders have to be aware of what sorts of things they really enjoy, what things they're really good at, and to be able to take a step back and say, you know, this thing has gotten about as far as I can get it to go. Either the company's going to have to slow down while I learn and catch up, or let's see if we can find someone else who is aligned with me who can take it the next little while.

Personally, I would look at someone, and I don't invest in late-stage companies, but I would look at that as a strength within a company. If a founder has the humility and awareness to understand their strengths and weaknesses and then build a team that is built for growth and for a future state as well. For me, that's not unheard of, but I don't think a lot of founders have that self-awareness.

Oh yeah. I mean, you see that actually more and more with growth stage companies where one of the signals that they will do prior to working toward an exit is about a year and a half before they're targeting something, they will make sure that they have transitory relation or trick. They'll make sure that they have a leadership transition in place. So that means that they will go out and hire a CEO. They will go out and fill out their executive team of people who weren't necessarily there from the beginning, because one of the risks that an acquirer has is, let's suppose I'm gonna pay 9 figures for a brand. If I'm gonna give the executive team each, uh, you know, 8 figures worth of exit, you know, what's the likelihood that one, they're gonna stick around, or 2, if they do, They're gonna be highly motivated. And that's just human nature, right? If, if I were to say, hey Andy, I'm gonna give you $10 million, but you gotta hang around for a while. You're like, I get the $10 million no matter what. Like, okay, maybe, maybe it becomes $20 million if I, if I, you know, work really hard for 5 years and get there. But like, $10 million sounds great. Like, I'll take that, you know? And so, um, one of the, the best things you can do is to find people who have experience building these companies, scaling them, um, you know, integrating them, which is a pretty important piece, um, and who have signed up to say, look, I've only been at this company for a year, year and a half. I've set together a 5-year plan, which is really good. And that just de-risks it so much for an acquirer to look at this and say, you know what? I like these people over here because I know that when we purchase them, the management team is there. They're not going anywhere, right? They're incentivized for this exit to happen. They're incentivized for this business to continue to grow. And we're just gonna, it makes it so much of an easier arithmetic to say yes, as opposed to kind of looking at this and saying, well, if this person leaves, who do we have on our side who can come in? Do they have talent, you know, on their bench they promote up to, and it just becomes more risky for that acquirer.

What's typical today as far as the actual like roles, but then also from a performance-based bonus? Like on my first exit, we did 51% and then the balance, the 49% after 3 years, and it was performance-based. So there was a multiplier on, on EBITDA. What, what is standard now to give people a financial incentive as a founder from an acquirer? To have them motivated? Because the plan is one thing, as you described, but if you know there's money in your bank and you are just buying time to get out of this company and you start to lose motivation, like if you've been doing it for a long time, as you called out as a founder, that can be pretty like tough to sustain. One, the energy, but two, momentum. But the financial component feels like that there's something there that mutually benefits both sides if they carve that out. What is that? What does that look like today?

Well, I think we first need to recognize what an earnout is, right? An earnout is basically the acquirer saying, I don't necessarily trust that this business can survive in its current trajectory without you, right? Let's just, that's what it is. And so, you know, we have clients that we've worked with that they have built their company and they sold it for $100 million and then they were done, right? They signed the papers, next day they were done and that company continued to grow. And that came down to how they went about building it and structuring it and making sure that the business didn't run through them. It, it ran, you know, because of them necessarily. We've got other companies that we've worked with that, you know, they, they weren't done building. The acquisition was more around the idea of we want additional capabilities, we want additional resources, um, but we want to keep doing exactly what we're doing. And so in that case, the acquirer, the, the founder was like, hey, Yeah, you're gonna buy my company and that's awesome. And you're not gonna share this, this burden with me, but I'm gonna roll over a bunch of my equity. I'm going to continue to want to work here for the foreseeable future. And so I think that like you have to look at both those, but in most cases when an earnout is being asked for, it is because the, the acquirer doesn't trust that the, the, the business is going to survive on its own. Usually what happens if, if it is built correctly is there'll be some sort of consulting arrangement. And so the, you know, the founder will still be on the board. Uh, you know, they'll have a lucrative consulting contract where they're like, oh yeah, here, I'll help answer questions. I'll transition over, you know, for the new CEO and stuff like that. But this is why working toward an exit and thinking about an exit and preparing for an exit is so important from, you know, when you launch a company and you're just getting started and you can't do these things, you know, 6 weeks before you look to exit.

Yeah. And it's one of the things that I love about your thinking because getting a banker or a lawyer, whatever it is, to go through the mechanical part of an exit, That's just, that's just probably, you know, 10% of it, right? The rest of it happens a long time ahead of that in decisions you're making. And even that, you could have 2, 3 co-founders. One could decide that they want to tap out immediately and you can have a structure for that. You can have one that wants to continue that career and keep working for that company indefinitely into the future. So their structure looks different. You have one that doesn't exit after 3 years. And so you've got 3 co-founders, 3 different deals, understanding someone's life circumstance and personal situation.

Yeah.

career ambitions, whatever it looks like. Like that takes a lot of nurturing and conversation, but also it takes a lot of education. And if you're a first-time founder, none of them have any idea about even to have that conversation, let alone have it.

Yeah, you're absolutely right. And I think that, you know, it has been more difficult the last 5 or so years to raise money, to start companies and things like that. And so you're seeing a lot more bootstrapping. You're seeing a lot more focus on profitability. And I think that that is a net positive for the ecosystem, right? There was a lot of froth before COVID where it was really easy to raise a bunch of money, you know, and it was, you didn't really have to think about building something that was going to survive after an exit because most founders were making their money on secondary and you were just kind of going to the next round. But now that we have higher interest rates and, you know, just more stringency in terms of acquirers are looking for, the vintage of these companies coming out is just so much stronger, right? You have to have your fundamentals in a good spot. You have to be able to be there. And what I'm also seeing is that there are now smaller deals that are opening up because, you know, if you're a bootstrap founder, meaning you own all the company and you get an offer to sell for $50 million, like that sounds amazing, right? And you may consider that, whereas maybe 10 years ago, if someone offered you $15 million and you'd raised $10 million, well, that wasn't going to be a good exit. You would say no and you would kind of hang on maybe longer than you should have, or push yourself harder than maybe the natural velocity of that business should look like.

Yeah, the dilution element is a really important layer as well. And for the people that are shortsighted, I would say to a certain degree, to continue to push through rounds of fundraising, whether they need it or not, And capital for capital's sake, being strategic in a reason to fundraise for scale. And let's just, again, use TPG as an example, like scaling manufacturing. It's a known entity to a certain degree, right? Like if you can see a way that you can scale distribution, sell more products, then you need to scale manufacturing. You can run a business model on that pretty easy and run out cash flow. And it's like, well, do we actually need to raise? Or maybe if we do, Is it just a smaller portion to build a facility? And even in that case, you can sometimes do debt financing that can be non-dilutive, and you know that you're paying an interest rate over a period of time and retain it. So when you get to an exit situation, you've actually got more capital that can come out in your pocket because you haven't diluted. But even those alternative ways of funding, I see a real gap in education in that for founders too.

Completely. I mean, I think that, uh, you know, we, we still have a, a whole generation of founders that are tied to venture capital, right? And I, I have to have, uh, a $3 million seed to figure out if my idea is real or not. And the answer is no. Uh, you can, you know, you should be able to do this with AI these days for no cost, right? You can put a website up there, you can put some renders, you can help find things. It has never been easier to start a company than it is right now, but it's also never been more difficult to raise money than it is right now because the bar has been raised so much higher. What used to be a seed round is now having criteria that you would normally see in like a Series A or a Series B, where a lot of these investors are saying, hey, I want to see traction. I want to see positive unit economics. I want to see profitability. Whereas in the past, people were willing to kind of let you just play startup and figure these things out.

Yeah, it's interesting, the data. And I just dropped an episode September 28th with Vanessa Larko, and she came from product background and then went into the NEA as investor and is just launching her own fund. And we were talking about that literal conversation about the reason why you need to raise, but also some of the fake data as well. And what I mean by that is revenue that's being counted as revenue and it's not real. And particularly in AI, where if you have an enterprise that's doing a trial, it could be a loss leader. It could just be for a short period of time, but being clocked as annual recurring. When it's actually not. And all of a sudden you can have a cliff on your pipeline because people just don't stick around and the churn is significant. I, the latest data I read was around 40% of companies spending on AI platforms are retaining, like they churn quickly and they move on. They're not seeing the upside. We've seen it long enough in market now where they can track the benefits. So you've gotta be really buttoned up on, on revenue because the timelines have shortened, right? The ability to get to market is faster, sell is faster, marketing automation, all of these things mean you can start making profits sooner. So these elongated product builds and development that used to be the case isn't key. So you're right, the filter from investors is bigger and shorter timelines, right?

And I would say too that AI is obviously transformational, but it only helps people get to about 80% of the answer. And so I think that, you know, yes, it is easy to start a website. It's easy to design a product. It's easy to create a brand, but there's still a very real human element that comes to all this. And what I'm finding in folks that are, you know, successfully preparing for exits and getting ready is that they are not neglecting the human in all of this. They're being very intentional about where they are surfacing AI to their consumer. They're being very intentional about what what it's doing, it's not doing. How is it a guardrail versus something that's there? I think one thing that's very interesting is we start to see the, in CPG, we start to see the emergence of kind of a 1 or 2 person companies. And they've built an enormous ecosystem of agents. And, you know, there's a lot of things that are happening very quickly and it's truly like awe-inspiring and impressive. But these businesses are somewhat unacquirable because if I'm a Nestlé or Pepsi or Procter& Gamble, and I look at this, even though you might be doing $50 or $100 million in revenue, you're like, I don't know how to consume this, right? Because it's agentic. It's first, there's very few people who can step in and say, yeah, here it is. And so it's an interesting push or pull because what you're finding is that these companies in preparation to working toward an exit are actually diluting their margins by hiring more people so that their companies look a little bit more like the companies that would be acquiring them. And that way you can get the sense, does the margin actually tie out here or is the fact that you have an appropriate margin just an artifact of the fact that you don't have very many people at all and it's all robots running it?

Wow. Do you think that these large corporations can spot that as far as structure of team margin, et cetera? So say you are higher margin with less people and/or you are lower margin with more people on a more traditional structure from a role perspective. Are you saying then that typically the latter is more desirable because they need rigor on what they're doing and trusting some system that, I agree with you, AI does 80% and you still need human intervention to do it properly. And that nuance and skill and experience is really critical. It feels like it's on less stable foundations is how I would describe that.

There's certainly risk, right? There's key person risk. And so again, the same thing we talked about where if these founders are going to walk away with an 8-figure check, who's to keep them, what's to keep them around to monitor the agents and to do things and things like that? What I think you're finding is that they're eventually people will figure out how to manage this, but right now they're not sure how to price in the risk inherent of an agentic company. And there's very few of these out there, right? So we don't have a whole lot of data on there, but what I would suspect is happening is that, you know, they're looking at this and they're saying, all right, well, because You don't have X, Y, and Z functions. And we know that if we bring you in, we're gonna have to put an IT budget on you, an HR budget, uh, you know, all these other things. They're probably discounting the revenue and, and trying to look at what the margin could be when they project it out. And so as a result, that founder's not getting as high of a multiple as they would have if maybe they were a little bit lower revenue, but had all of those processes and functions baked in. And it gets really just this question of like, what are you acquiring? Are you acquiring a brand? Are you acquiring a, a system to acquire customers? Are you, are Are you acquiring a supply chain? Are you acquiring patents? And so I think every acquirer is going to look at things in a different way, and based on how they answer that first question, will choose to value it in a way that makes sense for them.

Yeah. And the valuation component then, if you're looking at a fair market value assessment, it's an old term, but it feels more niche now. Well, nuance is probably a better word rather, where people who are looking at it, they know it needs to complement what they've already got because If you are building, as you say, something within a larger corporation or scaling something, there's a lot of different reasons why you would acquire. So the valuation feels like it's case by case more so than something that is consistent across the market.

Yeah, I mean, there's rules of thumbs that are out there. Occasionally you'll see something that is just a ridiculous valuation, but that makes sense for the acquirer. If someone is just looking at Acquiring future cash flows—that's a fairly standard way you look at it. It's a multiple of EBIT. If there is a core capability or a core audience or market they have, then people are willing to be a little bit less rational about those sorts of things. But that—that's really how people look at it again. It's what does the acquirer see is worth buying? And this gets into as you're building your company, what is it that's super interesting about it? You know, client of ours, Hero Cosmetics, which was acquired by Church and Dwight. One of the key things that. that Church& Dwight was interested in was the fact that their business was built on Amazon and they were so good at selling on Amazon. And so yes, they built a profitable business. Yes, it was growing quickly. Yes, it was doing great, but they chose in large part to really acquire Hero because they knew that they could acquire this team who was very good at selling on Amazon, and that could percolate and spread throughout the rest of their business. And, you know, you get all the best parts and that business has exceeded both sides' expectations. And so it's like an example of a fantastic exit and integration in large part because I think Church& Dwight knew what they were acquiring and was able to value it appropriately.

I love that too. And you're talking about processes and things you can build and like IP, and it's not a patent or a trademark, but it's an understanding of a market of how you get global distribution and scale through an existing platform. And some people can be reluctant to go in, all in rather, on the likes of an Amazon because Like we've heard stories and probably all read stories around Amazon Basics, just duplicating a lot of products. And because they see the growth on their own platform and they, they look at margin and just play the numbers game as well. But if you're able to scale that across a whole company and, and, and look at that infrastructure as a way to multiply your whole business, not just the one company you're acquiring, like that is exponential. And it comes down to how buttoned up that team is in that process and how that can be translated and adopted across the business, right? Yeah.

Yeah. And I think that a lot of people forget the acquirer in this equation. And, and the acquirer is essentially saying, we want to change in some way, right? For most of, most of these cases, um, there are some examples where, uh, people just want the bolt-on acquisition and they don't care about the people or things like that. But those are typically smaller brands that have stagnated, that aren't doing very well. And so the thesis there is, I've got a process, I can, I can plug people in and we'll just operate your business better. But I would say 90% of the acquisitions that are out there are because the acquirer is looking to change in some way. And that might be access to a new demographic. It might be access to a new technology. It might be access to a new capability like we talked about. And so I think it's, it's really worth thinking about as you're a founder and a brand is like, what is it that's gonna be so unique and special about us that someone else is gonna be like, you know what, I wanna be more like I wanna be more like them to the tune of $500 million, right? That, that's really the key thing to think about.

I love that. And I mentioned Poppi before with the acquisition and I saw, must've been an ad somewhere, but there was a prebiotic Pepsi-Cola that had come out off the back of it. So it wasn't just an acquisition. They were looking at the whole process of how the product was made and adopted it and leaning into a trend that had clearly been hugely successful for Poppi, but then applying it into product innovation across some of their marquee brands. So that kind of thinking Yeah.

And a lot of times, especially what we've seen over the last 10, 15 years, is that large CPG companies have been, they'll do R&D on a certain technical element of it, or, you know, trying to prove a claim is really where R&D is focused, but their M&A strategy is their R&D strategy, right? They're kind of either have venture funds themselves or they're just kind of looking to see where things are taking traction and then deciding, you know what, it was, it's worth us to spend 9 figures to acquire this brand who has already proven that consumers want this technology. They've already built a business at scale. They already have a brand, they already have infrastructure. And so now let's go do that. Because these Fortune 500s, they're not dumb. Like they know what to do. They could probably come up with these things as well, but it's much more difficult to get excited about a $5 million business that they've put $3 million into. Than it is to say, hey, we've acquired this business that's doing $50 or $100 million in revenue.

And I'm going to talk about fintech for a moment because what we've seen there is that the incumbents of the old banks, et cetera, they had market share and they've got so much capital and they're not going to go away anytime soon. But the next wave of innovation that's come through with the likes of Stripe and Ro and these brands that get really quick market share and Stripe is a beast. And for Stripe to be talking about acquiring PayPal, It's crazy, right? Because what that is, is one, there's technology in the product itself, but there's also innovation in a way of just how someone thinks about running a business. If you're at Pepsi and you've been operating for such a long time, you're a publicly listed company, you have shareholders to deal with, board members, investors, and there's a lot of politics that goes into that. So typically it means to go in a new innovative direction, it's a slow burn, whereas The next generation can do something so quickly and so nimbly in just the way they build their company structure, do distribution, production, all of those things. So you can actually become that next wave of companies by acquiring one and starting to roll that up across the business. So I see it in fintech and I assume that's part of what we're seeing in CPG now as well.

For sure. I mean, the, the Harry's merger that never was, was along these lines, right? So Edgewell, had put out a bid to basically merge with Harry's. And the idea there was that they loved the management of Harry's and said, please come in and run Chick and everything else that was going on. FTC obviously said no to that, which is why it didn't happen. But you're starting to see that more and more. You know, Lesser Evil was just acquired by Hershey's that already owned a popcorn brand. And it's one of these things where like, well, here, let's, let's look at this and let's own snacking. Let's try to see if we can find a different approach to manufacturing or quality that we want to learn from and try to share.

So good. And from a value perspective, you talked about this resurgence of CPG. Well, what do you think is happening in the market right now where all of a sudden it's become hot? Because I was reading that the deal value has doubled in 2026. What's driving that shift?

Man, there's, there's a ton of stuff going on. I think part of it's regulatory. The FTC has, is signaled in the second Trump administration that they're more open to deals. And so you're seeing things that are happening in other industries that kind of percolate down through. I think the other part is that you just have stronger companies that are ready now. And so whether these are investors that are getting to the end of their fund that say, hey, it's time to go, they're pushing them like there are just better things to look at. But I think you also have this massive restructuring going on with these strategics. You know, Unilever sold their entire foods division and sold their ice cream division, which when I was there, I remember very distinctly the CEO of Unilever globally saying, We will never sell Hellmann's mayonnaise. It's $1 million in profit every day to the company. We will never, we'll be a beauty company and mayonnaise. And yet here they are, you know, 10 years later having sold the thing. And so there's this giant reshuffling that's happening. You're getting some more streamlined purpose-built CPGs. You're getting assets that have been spun off and put together. So the decks, the deck chairs are being reshuffled if you look at that. And then you're just starting to see natural stuff. I mean, the other megatrend that people aren't paying attention to is the boomers retiring. And there is an enormous amount that's happening in the PE space in particular, where people are rolling up all of these businesses that have been around for 30, 40 years that are profitable, that are doing well, that are there. There's just no succession planning. And so what you're starting to see is companies coming in, buying these legacy brands, taking them into e-commerce, seeing where they can sprinkle in AI to make efficiencies and things like that. And now you're starting to see the fruits of that where people are looking at this and saying, all right, we know that if we have a good durable business, there'll at least always be a private equity buyer. Or we talk about exits in the long term of selling something. An exit could just mean that you're working less and you're collecting checks. I mean, we've got one client that just took on a large majority investment and he's got $20 million in his bank account and he's working a couple hours a week. And like, that's an exit, right? He still hasn't sold the company completely, but it's just paying for his lifestyle. And that's why it's gotten minimal. So I think that, you know, people look at and define exits in a lot of different ways. And it's just about being honest about what do you want? You know, do you find, do you find your business as a means to an end? Do you find it as like your life's mission and purpose? And there's really nothing you would do that would keep you from working on this problem.

And if you're honest about that, you start to build your business in a different And one of the consistent questions I ask on this show of people that are in a space where they've been surrounded by exits, whether they're VCs or founders, I would say that 3 quarters, if not more, of founders who have exits in any capacity where there's a large financial event that happens and whether they still work there or not, they might go and do the beach lifestyle and get the boat and the car and everything, but they typically come back because they're bored. And it's You are wired a certain way as a founder. You typically have a high-risk appetite. You can take things on and move through the world and you see the world differently. So all of a sudden going from all in to having so much downtime, I go crazy. My first exit, I went back to Sydney and I was going to take some time at the beach and do nothing. And I was, I'm sure I annoyed the hell out of everyone around me because I was literally losing my mind wanting something to do.

Yeah. Um, there's only so many times you can ask people to go surfing on a Tuesday, you know, midday sort of thing. Like, dude, I have a job. I, I have other stuff I gotta go on. Um, but you're absolutely right. I mean, I think that, that people have to be busy. Uh, you know, I was just catching up with a friend last week who sold his company and he did that for about 2 weeks and he's just like, all right, what's next? Like, what do I wanna go do? And the thing that's nice about second-time founders is, um, not only do they have the the resources in most cases to take their time and to think and to be like, all right, well, what do I wanna learn? What do I wanna figure out? Um, that's kind of their startup, uh, for, for a period of time. But they also have this confidence about them of like, I've done that. I, I know what I would do differently. I know what I would do again. Um, I know that, that the game has changed a little bit. And so, uh, they just look at this and say, all right, I know that the most valuable resource that I have is my time. And so maybe, uh, I think, you know, one of the reasons why, uh, second-time founders are so successful building companies at exit is they understand the parts of the business that they want to do. And then they, they already pencil in and say, okay, well, I'm going to hire an ops person, marketing person, finance person. I'm going to basically bring this suite of people along with me that can do these things that I know they're important that I don't want to do. So I can focus on the things that I want to do. And that might be that, hey, I only want to spend 4 hours a day working on the startup because I have other interests. Or it might be like, I'm really only going to focus on design and that's what I'm going to do. And I'm going to have other people working on it. So, So when you start to build about, build on these things in this way, and you start thinking about doing something beyond just yourself, then you start to build a much more durable business from day one.

I love it. And I go back to my first experience. I worked in music tech and creative technology, and I did it because I was passionate about the music industry and was creating art with the latest technology and always pushing innovation as far as we possibly could. And I loved it. But the nature of the beast is that you get bigger, you end up managing people, managing cash flow, managing tax. And the things around it. And I go back to my purpose all the time and what are the things that I love doing? And I didn't have a multimillion dollar exit, far from, but for me it wasn't life-changing. But I go back to it. We were just talking before the show. I work with lots of different startups now and have the podcast and I love lots of things that I do, but I perpetually have this itch where I just want to jump back in and get my hands dirty and be a part of something because I love that energy around it. And I've done, I guess, 3, nearly 4 startups now, depending on how you define a startup. But for me, every time I come back in, I'm getting so much more confidence and conviction and I can move faster, more effectively. And I use that to help other people, but now I'm like, hmm, how do I do that to help myself?

Yeah. Well, I would say that every exit is life-changing, right? The money may not be life-changing, but even the companies that I've had that I've shut down or turned away from, those have been life-changing lessons for me. And I just, you approach things so much differently. And so I think that in In our society today, we kind of tolerate perfection, right? And if, if things are not up and to the right, if I don't get straight A's, then, you know, I'm a failure. And I, you know, one of the things I try to tell my kids all the time is like, I want them to learn how to fail, right? Because if you are not failing, that means you're not trying hard enough. You're not, you know, you're only playing it safe. And I want them to fail in a safe space because then they'll be more calculated about what risks they take and things like that. And so I, I would argue that every exit, whether you own the company or not, is, is life-changing because of, of what you can take with it, which is the experience and the knowledge.

I love it. The word failure for me, I have a real love-hate relationship with it because for me it feels finite, whereas a lesson is something that you learn if something doesn't work out. And maybe it's an optimism inside of me, maybe it's just the Australian. For me, it's trying to be positive, but I love it. Same thing. If you are sheltered to hard times, you're never going to grow. And scientifically, there's a curve of complete overexposure to hard times or underexposure The sweet spot is actually right in the middle of you need to have both to self-optimize and grow and learn. And that means having exposure to both sides of that same coin.

Completely agree. And, you know, I think that's probably the biggest thing about founders is, you know, we talked a little bit about when does your business outpace what you're able to do. And I think that, you know, being a founder is hard. You're always in that period where you're uncomfortable. A good friend of mine described it in this way that I think made a lot of sense to me many years ago. He said, when you're a founder, you're stressed out when things aren't going well and you're stressed out when things are going well, right? It's just, it's constant stress you're figuring out. But I think there's a point here where you've got to always be cognizant of where that stress is. Is it a healthy amount of stress or is it burning you out? And I actually just had somebody on my podcast last week who was talking about how she got to a point where, you know, it was, it was, it's just kind of overwhelming on her. And it was, there's just so much stuff going on. She felt so, burdened by it and eventually got to the point where, you know, she said, okay, these problems that I see, they're out here. Maybe I need to sell my business. But as she was going through that diligence process and was teaching people about like, yeah, here's the company, here's the thing. She was asked, you know, well, if, what do you think they're going to do when they buy your company? She said, they're going to do these 3 things. Like, well, why don't you do that then? She's like, you know what? I will. And so she walked away from signing that deal and is now like, reinvigorated and building, you know, version 2.0 of her company. And it seems a lot happier for it too.

I love it. And quite often you need someone to play devil's advocate in that conversation just to have a bit of a reality check because it's overwhelming and it's sometimes it can feel too much for all the reasons. Quick growth, decline in sales. There's a lot of triggers that go into that. So I love it. So I would love to hear if we can, we've, you've got 3 companies, Isbar Group, Sourcify, and Slotted. Can you tell us about the work that you are doing?

Our, our core thesis across all 3 is, is helping founders start, scale, and exit. ISBA is an end-to-end supply chain consulting company. We will help founders with the day-to-day blocking and tackling they need, as well as, you know, fractional leadership, augmented teams, things like that. Uh, really the, the core piece of what we do is we like to take messy, unstructured processes, standardize them, get them fixed, and then hand them back to the brand. So you have a full internal supply chain team when things are done, and so we typically work with people on projects or multi-year engagements. But again, the core thing is how do we help you work toward an exit? Sourcefy is a highly curated network of factories across 17 different countries. We basically help people improve their innovation process, improve their product quality, or just get around tariffs and help find a factory. So we've got boots on the ground in each of those 17 countries, and we work a lot with people who are just starting out up to about. about $30, $40 million from the Hero products, and then brands that are, you know, above $200 million afterward. And then the last is a software product that we built called Slotted, and it helps normalize fulfillment center RFP data. Um, so one of the things that we've done over the last 10 years, uh, you know, we, we do about $150 million worth of fulfillment contracts each year on the consulting business. We've seen a lot of edge cases and we've recognized how painful it can be to reach out to a brand or reach out to a provider and a completely different format in their RFP response for each provider that you have. And so what our tool does is, one, helps the 3PL extract all the data that they need so they can figure out, is this a type of deal that fits well with, with my business? And then 2, it helps the brand normalize all of the responses they get back.

Love that. And it's, it's interesting when you're living and breathing in an ecosystem, the opportunity you see for everybody else and to be able to build that at scale. And it takes all of that breadth To be able to plug it in. So it makes sense. And I'm fascinated with manufacturing. I recommend anyone listening to check out the episode I did with John Frankel, who's a partner at FFVC. And a lot of it was around manufacturing and robotics and AI and talking about a lot of facilities being built back in the US again. And because the cost savings of going to China, Taiwan, et cetera, are nowhere near the gap that they used to have, and we're starting to see an uptake in manufacturing back here as well, which is good for the local economy and jobs. But the innovation that's happening is just fascinating.

Absolutely. Yeah, there's, there's so much we can talk about, not just the US manufacturing, but North American manufacturing in general.

Aaron, this has been so good. I have a deep background in CPG and I, I'm fascinated by the space and it's interesting to see it start to surge Again, but it makes a lot of practical sense when you hear what you're talking about. So genuinely appreciate you making the time. This has been a fantastic conversation.

My pleasure, Andy. Thank you so much.

Thanks for listening to Startups Decoded. If today's conversation helped you think differently, share it with a founder in your network. And don't forget to subscribe for real-world startup insights every week. We really value your support. If you're interested in sponsoring Answering the show, email hello@startupsdecoded.com. I'm Andy Walsh. I'll see you next week.