Aug 25, 2021
In this episode of Build The Damn Thing, Genius Guild CEO Kathryn Finney shares how to successfully exit a company -- something many entrepreneurs can’t imagine -- and how to start something new. For the first time she gives a behind-the-scenes account of her own experience selling her first start-up and what that was like for her.
Learn Kathryn's process of selling her blog, The Budget Fashionista, and how the proceeds from the sale gave her enough capital to start her next big venture. Plus get inspiration and insight on how you can do the same.
Kathryn Finney is known as a pioneer in the fashion blogging community thanks to her blog “The Budget Fashionista” which has helped thousands of women dress chic and cheap. Kathryn not only has built a huge blogging community but also has been featured among "America's Top 50 Women In Tech" by Forbes and is greatly recognized by books like How to Be a Budget Fashionista and The Ultimate Guide to Looking Fabulous for Less. In fact, Kathryn is the living definition of a businesswoman who is always trying to generate new ways to share her knowledge about fashion and entrepreneurship just like she does through her platform the Genius Guild which apart from having the podcast “Build that Damn Thing”, invests in companies led by Black founders.
Insights from the Podcast
- Understanding that it is okay to outgrow something and want to
do something else
- How to pivot and venture into something new
- Understanding that it is okay to leave your job, not because you
were treated a certain way but because you want to do -the next
thing
- Understand the full arc of acquisition and how start-up work
- How to sell and move on to the next and start another venture
- The 4T’s on buying a tech company:
Technology: it has technology that would be hard for
the corporation to create quickly
Talent: they have a core group of founders
Traffic: it has a large community behind it
Taxable income: the company has a ton of money
Quotes from the show:
“It is okay to outgrow it, as an entrepreneur we are like ‘I created it, it’s my baby, I have to stay. But you don’t always have to stay” -Kendra Bracken-Ferguson, Guest Speaker, Build The Damn Thing Episode #4
“One of the challenges that we have in the black community is that we overstay, and I know why: because there is security” -Kathryn Finney, Build The Damn Thing Episode #4
“In our community, there isn’t a language about exiting positively: usually when you leave your job, it’s because they were treating you in a certain way or you got a better job” -Kathryn Finney, Build The Damn Thing Episode #4
“A start-up is a temporary organization that is designed to discover a solution to a problem and in the process to also discover a profitable, scalable and reputable business model and while doing that, to grow as quickly as possible” -Brian Laung Aoaeh, Guest Speaker, Build The Damn Thing Episode #4
“Venture capitalists look for and invest in start-ups. They look for companies that are doing something uniques, that they are solving a problem that hasn’t been solved yet” -Brian Laung Aoaeh, Guest Speaker, Build The Damn Thing Episode #4
“One of the things about not selling when people come to you is that the price changes” -Kathryn Finney, Build The Damn Thing Episode #4
“I think it comes back to who are the people around you? Who do you trust when it’s hard and you have to make a decision? Some of it is guy, and you have to listen to your gut, and some of it is having the right group that will tell you when you are not thinking correctly” -Kendra Bracken-Ferguson, Guest Speaker, Build The Damn Thing Episode #4
“We constantly have to move and pivot and we have to find our own validation from within as entrepreneurs because you are constantly told it’s not gonna work or you should do this or that” -Kendra Bracken-Ferguson, Guest Speaker, Build The Damn Thing Episode #4
Stay Connected:
Kathryn Finney
Website: https://www.kathrynfinney.com/
Twitter: @KathrynFinney
Instagram: @hiiamkathryn
Facebook: Kathryn Finney
Genius Guild
Website: Genius Guild
Twitter: @GeniusGuild
Instagram: @geniusguild
LinkedIn: https://www.linkedin.com/company/genius-guild
Subscribe to our podcast + download each
episode on Google Podcasts, Spotify, and Apple Podcasts.
Credits:
Produced by Genius Guild Content Studios
Executive Producers: Kathryn Finney and Darlene Gillard Jones
Post-Production Company: Prosper Digital TV
Post-Production Manager: Joanes Prosper
Post-Production Supervisor: Jason Pierre
Post-Production Sound Editor: Evan Joseph
Co-Music Supervisors: Jason Pierre and Darlene Gillard Jones
Show Music: provided by Prosper Digital TV
Main Show Theme Music: "Self Motivated" Written & Performed by Tamara Bubble
Special thanks to Forbes Advisor
Info
Season 1 Episode 4
Aug 25, 2021
22 mins, 35 secs (21.7MB, Audio)
BlackExcellence #Entrepreneurship #FashionBlog #BloggersUnite #Startups #BlackWomen #KathrynFinney #BlackOwned #TheBudgetFashionista #BlacksInTech #AfroTech #BlackAuthors #Discrimination #Incubators #Lissen #Exiting #VentureCapital
Full Transcript
Kendra Bracken Ferguson
Catherine was really, you know,
when I was going through the transition between digital brand
architect, CBA and starting brain trust and really in this place,
she said to me, it's okay to outgrow it.
And I think as an entrepreneur, you're like, I created it. It's my baby. I have to staybut you don't always have to stay. And she helped me get very clear with it being okay for me to have outgrown something and wanting to do something else. And that's really been such an anchor for me.
Kathryn Finney
Diverse
entrepreneurs often feel like they haaave to stick to what they’ve
built, but what happens if you wanna do something different? How
does one even begin? How do you sell a company? In this episode of
Build The Damn Thing, I share with you how I sold my first
start-up, and started something totally new.
Yeah. One of the challenges that we have in black community is this whole thing about leaving something, right. We overstay. “Stayy.” And I know why because it's security, right?. And so when I sold The Budget Fashionista, I called my grandparents and I was like, "I sold my company. I'm gonna give you guys a little something, something. I'm gonna hook you up with something, something." And my grandmother was like, "Are you okay? Do you need moneyUm ya know Because in our community, there's not really a language about exiting positively. I realized that. Usually when you leave your job, it's like, "Oh, you left because they were treating you some sort of way." Or, "You got a better job." "No, I'm leaving because I want to. I'm leaving because I'm having money for leaving." like I’m going to the next thing.
John Schmidt
Selling a company can
mean a couple of different things, but fundamentally it's about
seeing some return on the investment of time and money you put into
building your company
You could also sell a company in a sense by going public like you do. When you have an IPO, this allows you to offer shares of your company to the general public, which can also let you cash in on your investment. And then hopefully lets them cash in on any future growth
I'm John Schmidt and I am an investing and retirement editor with Forbes advisor.
Companies typically IPO in two main ways, a traditional IPO where the company files a ton of paperwork and financial disclosures with the sec and then gets listed on an exchange like the New York stock exchange or the Nasdaq, or they might choose to, to be acquired by a special purpose acquisition company or SPAC.
A SPAC is essentially a public company that is already listed on an exchange and was created with the sole purpose of buying a private company and bringing it public through that acquisition
Kathryn Finney
And your family,
particularly black families want you to be safe. They want you to
be secure. They want you to be happy. They want to make sure that
you are able to feed yourself. And so for my family, I totally got
where it came from. It wasn't like, "Kathryn, you're not great." It
was like, "We want to make sure that you can eat. Do you need us to
send me some money? Do you want to come home to Minneapolis?" I was
like, "No, I'm good. I'm really good. I'm going on a month-long
trip to the South Pacific too. I'm good. I'm really, really
good."And so I think for us as a community, getting comfortable
with exits and leaving, and I think the language has definitely
changed quite a bit since 2012, which is when I sold The Budget
Fashionista, I think people are getting more comfortable.
There are great examples of women who've exited their companies and moved on to something different people like Cheryl Contee, who was one of the first Black women to sell her company to a publicly traded company.
Cheryl Contee
I think there's a lot of misunderstanding in the
community around, you know, what selling your company really means.
So for example, you know, have the pioneer behind Shea moisture and
he ended up, you know, selling to one of the big, I think it was
Procter and gamble or Unilever, or one of those, some people might
accuse him of, of selling out, you know, selling his grandmother's
recipes. Right. And, that's a fundamental misunderstanding
about how capitalist markets work.
I'm Cheryl Contee Chief Innovation Officer at the impact seat and chair and founder of Dobigthings.today. I sold my company attentively in 2016 to Blackbaud.
if the goal is to build generational wealth, if the goal is to, you know, create the kind of wealth that then can be used by angel investors who happen to be black, to support other entrepreneurs who happened to be black or brown, if we're talking about, you know, getting to those board seats, where, oftentimes in an acquisition, such as Jay Z, selling title and getting onto the board of square with Jack Dorsey, that's a big deal. That's a place where we weren't invited before. So, I do think that as people see and understand the full arc of how startups work, what happens when you acquisition, (music should naturally end around here) why you're acquired, what happens when you versus IPO, which is very rare, most companies are not going to IPO. So an acquisition is the natural life cycle, of your average business. If, if you're very lucky,
Kathryn Finney (00:59:24):
Usually when someone buys a tech company, they buy it for
one of four reasons, what I call the four T's. It is either for the
tech. It has some sort of technology that would be hard to develop,
or it would be hard for a corporation to create quickly. So it's
cheaper for them to just buy it and buy the company. It's talent,
it's, they have an amazing founder or founders, or they have this
core group of engineering talent that's so hard to find, that we
want to buy it for that talent.
It's traffic. And that also means the community. It has a large community, it has a lot of heat... has people paying attention into it and a corporation or another company wants to get that, "It's cheaper for us to buy this company and get that versus for us to, to create it ourselves." And last but not least is taxable income, aka revenue. "And it is this company has a ton of revenue. It was just making money, hand over fist, it's - it’s got amazing margins. And so, as a company, we want to buy it."
When I started The Budget Fashionista, there there were no options for venture capital for what I was doing. uhhmm so I didn't raise anything for The Budget Fashionista. And it was actually towards the end when I start to think about where I was going to go next that I had this choice between either venture capital or private equity or just selling it. Aaand I took some initial meetings with a number of private equity funds, umm as well as a couple of VCs, and what I realized that in order for me to stay, eh- in order for me to take this money... If I took it, the expectation would be that I had to stay. In fact, I would have had to sign a contract that said I would have to stay for two to three years.
Heather Hiles
Venture capital is a
particular type of capital. There is working capital or, cap ex
money, which can be really useful to small businesses of any type
that are in need of some money in advance so that they have the
money to build and provide the services that their businesses
provide.
For example, if you're wanting to bring a grocery store to market, or you wanted to bring food service, a restaurant to market, you might need advanced money to get up and going, but that doesn't mean you would be eligible, or it would be ideal to raise venture capital
My name is Heather Hiles. I founded Pathbrite in 2012 and sold that company at the end of 2015 to Cengage learning. I'm currently the managing partner of black ops ventures, a seed-stage venture capital fund for black founders
Private equity is completely different. Private equity is, let's, let's say I have a consulting shop and I build websites. and, I've been doing that with some old technology., and I have a good book of business and I've been running it for maybe a decade, but now the new technologies are so much more advanced and people are requiring machine learning and AI and their websites. And I don't have the talent for it. I don't have the knowledge base. And also maybe as an owner, maybe I've been an entrepreneur for 30 years now, and maybe I'm looking to cash out in some ways. And, semi-retire or pass on my business. Private equity is wonderful for taking stock of and making the most of the existing assets and then, turning them up, maybe doing kind of a think of it as re renovating a house kind of, and bringing in the right technologies and bringing in the right kinds of talent and that sort of thing.
Kathryn Finney
And so I knew in
order for me to sell the Budget Fashionista, I needed to focus on
at least oone of those four T's, um ‘cause I didn't want it to be
talent. I knew it wasn't going to be talent because I was not going
to come with it. I was done with being the Budget Fashionista.
I knew it was going to be technology because we used at that time, WordPress, and everyone was using WordPress as the backend. So I couldn't sell the technology. So I knew that it had to be about the community that I had built and it had to be about the income and revenue that I had. In order for it to be about the revenue and also the community, I had to prove that the community and the revenue would stay, even if I left. And that was something that I set out to do. And it took me two years. I had to build a team. I hired editor in chief. I slowwwly started to write less and less for the website, started to do less and less. I still did my spokesperson work, but I did less and less for the website and the editor in chief did more and more.
And I slowly started to pull myself back.
Um I think the thing now, as an investor, as a venture capitalist myself, I think what a lot of people don't realize, particularly in the Black community, is how venture capital works.
Brian Aoaeh
I think in order to
define venture capital, one first has to understand what a startup
is,
a startup is a temporary organization that is designed to discover his solution to a problem in the process to also discover a profitable, scalable, and repeatable business model, and while doing that to grow as quickly as possible.
My name is Brian Laung Aoaeh, I am a co-founder and general partner of REFASHIOND Ventures, and I am the co-founder of the Worldwide Supply Chain Federation.
Venture capitalists look for and invest in startups, so typically we're looking for companies that are doing something unique, they're solving a problem that has not been solved yet, and depending on the stage at which the venture capitalist is making the investment, they might have discovered a business model, or they might still be searching for a business model, so the earlier the venture capitalist makes the investment the less likely it is that there's already a business model in place, and then the idea is you know hopefully these companies succeed, the founders do well, the venture capitalists do well and the investors in the venture capitalist funds also do well.
Kathryn Finney
... And I was like,
"I'm not interested in that, I want to be done. When I'm done with
this. I want to be done. I don't want a boss. I just want to be
done."
We had a number of people at Alford to purchase the site. The first offer came right in the middle of the television stuff that I was doing. And it was actually quite a significant amount of money, but I said, no, because I was in the middle of the TV stuff, and I realized, now I could have sold the website and its assets and still kept the name, and use that as a negotiation, but I didn't know at that time, because again, I didn't have a lot of advice. No one was really doing this.
And one of the things about not selling when people come to you is that the price changes. And I learned that. So ya know I made good money because I owned 100% of the Budget Fashionista but I didn't make the money I could have made if I would've sold that when this person wanted to buy it, this company wanted to buy it. And so I went back to them and said, "Hey, I’m - I'm ready to sell." And they were like, "Okay, well, we're always interested in buying. It's not going to be the same price." And I was like, "You know what? At this point, if I don't have to stay, then I'm ready to go." All the other offers were contingent on me staying. So there was a number of private equity firms who wanted to buy the Budget Fashionista and put it under like a slate of websites that they had that interconnected and helped sell from some of their um retail brands and things like that.
and I would have to stay for another two to three years before I could exit out, or what we call an earn out. … So I'm going to sell to this person. Yeah, it's less money, but then I'm done. I take it. The wire comes in. And so I sold it
Patrice Grell Yursik
The first
time I heard about Kathryn Finney and The Budget Fashionista
She was already established and she was one of the first adopters, she was one of the first Black women who I knew to be out there in the blogging world speaking about style, about fashion, about ya know, her interests.
So I remember very clearly when we discussed that and then when she did it, it was like, oh, like this is what a CEO might do, or somebody who was in charge of a corporation might do, sell and move on to the next and build another one.
My name is Patrice Grell Yursik and I am the creator of Afrobella LLC, So I am a writer.
That was where it was kind of a light bulb moment for me like, oh, this is not your diary that you write in forever. You don't have to keep it like that, you can do something different with it and you can interpret it in different ways. And I think Kathryn always had insights that this was not just a passion project and something she was doing for a labor of love, this was- this was business always.
Kathryn Finney
it was the
day the wire came in, and Tobias and I were getting ready to go on
a massive bucket list trip to the South Pacific, to Australia, to
New Zealand, to Fiji, just entire South Pacific.
And so I was going to the bank to get some cash. And
there was a brotha who was at the teller and he pulled up my bank
account. He was like, "Wooo! Ooo sister, you are doing well for
yourself." And I'll never forget that. He's like, "I am so proud of
you. You are doing well. This is you. You are doing well." And I-
and ya know I think some people might be offended if a bank teller
says that to them, but it was- it was like, "I am doing well.
I did- I earned this. I built the Budget Fashionista. I did not
steal from anybody. I used my own ideas. I did not stomp on anyone.
I did not put anyone down I built it based on my own ingenuity and
my own work and amazing bunch of people and supporters like Tobias,
and Darlene, and my family who didn't know what the hell I was
doing, but sure enough bought the books, and bragged on me,
There's a group of us who are successful black woman leaders who
are leading in spaces where we don't see ourselves a lot. And we
have the same mindset. We have the seen belief system and we have
become very, very close friends and we lean on each other for
advice and for guidance and for feedback. Um, when it's sometimes
hard for us to get it publicly, I am a public person. So there's
not that many people I can turn to.. But Kendra is somebody I can
turn to.
Kendra Bracken Ferguson
I think it goes back to like, who are the people around you, right?
Like who do you trust when it's hard, when you have to make a
decision, some of that is gut and you got to listen to your gut.
And then some of that is having the right group that will tell you
when you are not thinking correctly, or when you need to think
about something else,
Name is Kendra Bracken Ferguson. I'm an entrepreneur founder
advisor investor, and the founder of brain trust. I sold my company
brain trust to CAA GBG in 2017 and the first company I co-founded
digital brand architects, otherwise known as DBA to UTA in 2019. I
literally, you know, started my second company brain trust as this
really exciting thing for me to be able to get back to working with
brands. Cause my first agency, digital brand architects, we were
the first agency to manage bloggers as talent. And so I had a
good foundation I recently just started a company with Halle Berry
called re spin.
And so for me, it's always been about, you know, understanding the journey. ...
If I can learn something and carry that with me into the next business, into the next opportunity into the next deal, then that's success, right? Because we constantly have to move and pivot. And we have to find our own validation from within, especially as an entrepreneur, because you're constantly told no, or it's not going to work, or you should do this, or you should do that.
And I have to say that Kathryn was really, you know, when I was going through the transition between digital brand architect, CBA and starting brain trust and really in this place, she said to me, it's okay to outgrow it.
Kathryn Finney
And so having this moment of success. I'm working really hard. Even
though people told me, "Flat out," I wasn't going to win because I
was Black and a woman, and then ended up winning and I owned 100%
of this. This was 100% mine because they didn't have the vision. It
was an incredible… it was incredible. It was an incredible moment.
I could fly first class to Australia, New Zealand and Fiji,
and stay at Four Seasons and stay at these resorts at the best
five-star resorts. And I could do all of that. And that was because
of this hard work that I didI could send money to my family. I
could ya know have money in the bank. I could pay off student
loans. I could do all these different things because of this hard
work and because of their support.
Kathryn Finney
Me selling The Budget Fashionista just meant that I was going into
the next step. Kathryn was always Kathryn, and I used the resources
from The Budget Fashionista, from selling it to actually start my
next thing, which definitely had a fundamental impact on the Black
community. But I wouldn't have been able to start my next thing, if
I had not sold The Budget Fashionista, if I had not had the capital
that came from selling The Budget Fashionista.
Patrice Grell
even though the impact that Kathryn had on the space to me cannot
be underestimated, because from looking at Kathryn and getting to
know Kathryn in the early days of blogging, she was already
understanding that this was a business and she was already
understanding that some of us were unfortunately being taken
advantage of. So she was extremely savvy. And I would say extremely
ahead of the curve, because she recognized that the ways that we
were being compensated for our productivity was not commensurate
with our value. And I mean, she was one of the first people to
leave. She was one of the first people to sell and be like, "I'm
out of this blogging thing. I'm done."