Build The Damn Thing: Sell The Damn Thing

Sell The Damn Thing

Jan 11, 2023

Episode 8: Sell The Damn Thing

When the time comes to transition away from your business, know that there is more out there for you. It may be a new business or a new opportunity but whatever the case, as the saying goes change is good. In this the season finale of BTDT learn the upside to walking away and at the right time.

Guests:

Heather Hiles | Founder/ Entrepreneur

Cheryl Contee | Impact Seat

Lisa Price | Carol’s Daughter

Hafeezah Muhammad | You Me Healthcare

Laura Weidman Powers | Base10

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Kathryn Finney

Website: https://www.kathrynfinney.com/

Twitter: @KathrynFinney

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Genius Guild

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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

Full Transcript:

Kathryn Finney
When the time comes to transition away from your business, know that there is more out there for you. It may be a new business or a new opportunity, but whatever the case as a saying goes, changes good in this the season two finale of build a damn thing. Learn the upside to walking away at the right time.

Selling a company often is an art rather than a science. And there's a difference between you wanting to sell your company and someone wanting to buy your company, meaning you might have a lot of offers to buy you versus you deciding yourself, I wanna sell. One of the things is if someone is approaching you to buy you, you have the upper hand versus you wanting to sell. You don't have the upper hand per se. So that's really important to note. If you have someone wanting to buy you in your interest in eventually selling at some point, you want to really think about that.

Cheryl Contee
It's ideal if you can have multiple companies bidding for you, that tends to drive up the price, such as for WhatsApp, which I think sold for like a billion, more than like 19 billion, some crazy amount. But that was because a whole bunch of different communications companies and software networks were bidding for it. So ideally, you have done your research on the market, you have a sense of how your product would fit within the types of corporations that could, that have enough resources to purchase you. And another fundamental thing that if you're a corporation looking to acquire, it's a build or buy decision.

I'm Cheryl Contee, chief Innovation Officer at the Impact seat and chair and founder at Dub. Big Things today. I sold my company attentively in 2016 to Black Bob. They have decide is it cheaper? Is it going to be cheaper and faster to build it internally?

Do we have that expertise? Or more likely is innovation slow within this giant slow moving company? Will it be cheaper and faster just to acquire this technology and integrate it into our product offering? So you want to make sure as you are designing your exit, that you're making a really good case for build versus buy, right? Why buy you? Why is it going to be hard for them to build? And I think we made a compelling case to Blackboard for why it would be very difficult for them to build it, given the relationships and the expertise that we had put into our product.

Kathryn Finney
So with the budget fashionista, we had offers to buy us very early, particularly around the 2008, 2009. Many of us remember that was the great recession, the great crash. And so we had a lot of people wanting to buy us. I wasn't ready to sell per se because I was in the middle of doing television and I thought if I sold it, I wouldn't be able to do tv. Now, fast forward, you know, 14 years later, I know that's not the truth. Unfortunately for me, at that time, there were no black woman that I had known of who had sold tech company. There was just none. There was no black woman who had sold a media company at that point. So there was very few people I could turn to. There was no information, there was no mentorship, there was no one for me to turn to, to, to ask for guidance.

It's very different now, but at that point, there really wasn't. And, and I think if I would've had that mentorship, I would've sold earlier. And because there was so much heat and interest in what we were doing, I would've sold for a significantly larger amount of money than I eventually sold it for. And I sold it for good money, but it, it would've been, it was a larger amount of money, but I did not know that I could do sort of both at the same time. So before you sell, when you get an offer to buy, I always suggest reach out to people in your industry who have done it. And they might not be people of color, they may not be women, and most people who have sold will be very open to talking with you about like what did they sell? Um, maybe sharing the price in which they sold for, and if they won't share it, ask them like, here's what someone's offering me for it. Do you think that's a fair price? Most will tell you whether or not <laugh>, they think it's a fair price or not. But really reaching out to people who know that is so important

Cheryl Contee
When you're exiting, I think it's important to have a game plan and to have a design. What's your walkaway point? What's a deal that you would just say, Hey, you know what, that's not even enough money. I'd rather this thing burn to the ground than take that. Like it's not, it's not enough. What is your goal? Do you just want to pay back investors ideal it at some kind of multiple and arrange some kind of great entry? Most of the time you are looking at an acquisition and your team is going to be slotted somewhere within a large corporation. How high are you the entrepreneur within that organization? Where does your team live? What's going to be the trajectory of your software in the roadmap of them? How much authority are you going to have going forward besides no salary, stock options, bonuses, et cetera. So I do think it's really important to be thinking about how you're going to exit with whom you're going to exit. Again, do you vibe with those people? It's not just about the money. The money is important, but is there a cultural fit? Do you share the same values? And that's important again, because you are getting married basically to this other company, you wanna make sure your new spouse is on the same page with you on a number of different fronts. Otherwise there's friction ahead for sure. You don't wanna just chase the dollars.

Kathryn Finney
Another thing I would say is also making sure that you have attorneys who understand merger and acquisitions. Um, especially if you're gonna have what is called an earn out, which is simply you work for the company that buys your company for a certain amount of months or years, mostly to ensure that revenue is consistent and that staffing stays on or to help transition new staff or what have you. If you have that, you need to make sure the terms are very, very tight. Um, so having a lawyer who understands acquisitions I cannot stress is super important. You cannot just have your normal personal attorney do that. They're going to miss some things. They're not gonna know the details, they're not gonna know the sort of fine and print that you need to know, um, and some of the opportunities and things that you can add onto that. So I would really, really suggest that if you're looking at selling,

Lisa Price
One of the things about Carol's daughter that is interesting to some people is the fact that we went through an acquisition, myself and the investors who were in the brand at the time, we sold the company to L'Oreal. And that was something that a lot of people, particularly people in the black community who were, who were my customers, didn't understand why I did that. The assumption is, is that once you are acquired, you are no longer a voice within your brand. You're no longer present. Um, there was concern that it would no longer be products that were made for us. So I realized when I got backlash for selling to L'Oreal that one of the things that I needed to do with the rest of my, you know, business career is to educate people, particularly people that look like me, that that's okay. It's okay to be acquired by a larger company.

And I, I was just at an event on Monday night and someone at that event said that they look forward to the day when there are black conglomerates like L'Oreal, so that when black entrepreneurs sell, they can sell to a conglomerate. And that when she said it, I remember just sitting there and closing my eyes and thinking, oh my God, what would that feel like? What would that feel like to be part of that acquisition? And that is the future. But until we get to that point, we're gonna have to be comfortable with more people choosing to sell because it's how you build wealth.

I am Lisa Price, the founder of Carol's daughter.

I think acquisitions can look different for different people. You know, I'm still involved with my brand when I finish this. I'm recording the Thanksgiving message for our Instagram, you know, for the company. I wrote the email that's gonna go out on Thanksgiving. I prepare a holiday gift every year for my staff. I write education manuals. I write, uh, holiday gift guides. I still create product. So it, it is still that labor of love that I do every day. It just looks a little bit different. So because you are acquired doesn't mean that you have to exit. At some point I will exit because I don't wanna work for the rest of my life and, and I want to pursue other things and travel and, you know, enjoy my life. Um, but that time isn't here yet. Uh, when I exit, I'll let you know what that looks like, but I have definitely been around people who were acquired and three weeks later they were out the door <laugh>, you know, so ev everyone's path is gonna be different. Eight years later, I'm still with my brand. So that was my story.

Kathryn Finney
I think too, you know, really having an idea of what you wanna get out of the sale and how much money you wanna get, that's realistic. And this is what comes from, again, talking to people who sold before, even if they're not like directly selling the same type of product or company that you're selling, I think it's really helpful to talk with them to get a benchmark so that you're not underselling yourself or overselling yourself. Like people I sell for a billion dollars, I'm like, well, okay, so who else in your space has sold it for a billion dollars? Like, what's the benchmark for a billion dollars? What do those companies look like? And does your company match in terms of revenue, in terms of customers? Like real basic sort of things so that your own expectations are realistic. Um, and then two, as people of color, you know, making sure you have a good personal finance person to help guide you and a good banking is really, really important as well.

Um, so that you know what to do with the money because how you sell it and, and the way you sell it can also impact you in terms of taxation. So your regular, you know, personal finance person may not have any idea what to do when you're selling a certain amount. And usually if you're selling your company for more than 10 million, that kicks you into, um, high net worth territory. Um, and so you get different services, you get a personal banker. Um, and I can't tell you, there's nothing like having a personal banker and somebody, you get this bloop, bloop, you know, <laugh> like, Hey, I got yesterday, can you help me out? You know, like, and, and so, but you don't know that. And we are not taught that as people of color that there are these services available because most of us have never even thought of that. There's nobody in my family that has ever had a pr a private banker. I am literally the first person who's ever had that. I would say like, uh, my entire extended family, I don't think <laugh> anyone has ever had that or knew any. I didn't know about that until someone told me about that and that we could get that because of the amount of, you know, money and things like that.

Hafeezah Muhammad
I started off early at, um, Verizon in 2004 and I saw that how the company was built from like a, a kind of more like a startup on steroids because they were like a 1 billion revenue company and when I left it was a hundred billion revenue company. So being able to see that the processes and tools they put into place to be able to get to that level, I was able to see that this is possible for you, me, healthcare, that I can start small, but then I can get there.

I am Hafeezah Muhammad, the c e o of yume Healthcare.

And why not be able to have a vision for those that follow me to let them know that it is possible. Like how many people I know, I'm originally from St. Thomas Virgin Islands. How many people I know that have like build a company that's skilled it to be a national company? And I definitely wanna make sure that I can be able to be an example for those that come after me. My mom and my dad were entrepreneurs, but they definitely had struggles in, in life, but they've always stood their ground. And one thing that they pushed into me was that you can become whoever you want and you shouldn't be limitless. If you decide you wanna do something, you go big or you go home.

-Commercial Break-

Kathryn Finney
There's a chapter in the book where I talk about this is that Digital divided was really six years too early. That was really our problem. But without you doing that initial work, there would've been no possibilities without Project Diane, which we got $0 for, which was like me and 12 Ukrainian data collectors doing the very first project, Diane, there would, there would be none of the progress. I mean there, there really wouldn't be. I don't think we would would've seen substantial investments in black entrepreneurs. If I'm gonna be the VBC community, I think point blank. And I don't think anybody in the space would say otherwise that project Diane didn't have this like, massive impact in that sort of way or that digital divided and what we did show the path. But then when, when I was ready to leave, I left, um, and it was really propelled to leave by, uh, someone in the organization.

I was close to leaving, um, two people and I was like, I, they're leaving not because they were mad at me or anything, they were done with sort of the space. And I realized, yeah, I'm really done with the space too. <laugh>. I was like, they, I actually used, they gave me the key to leave. I was like, I don't wanna build this with, these are people I've spent so much time with for the past six months and some longer. And they were done. And I was like, you know what? I don't wanna build this with somebody else. This is like, I'm, I'm gone too. And it was like nothing anyone could stay to make me stay. Like, and it had nothing to do with the organization or really it was more so I was done and I was done being a martyr and I wanted to do something different.

Heather Hiles
Oftentimes the reason that companies are looking to acquire other companies is because it provides the most cost efficient means to growth. You're either acquiring a combination of great talent, um, in those companies and customers and revenue stream and maybe some brilliant technology that you need. The company that bought Pathright Cengage Learning was the strategic investor into Pathright at the time. And we were solving a lot of needs for that company. I actually had the intention of growing Path Bright from serving the college university market and serving the enterprise sector and wanted to raise a series B round in order to serve that market properly. But Cengage was very passionate about acquiring Path Bright and uh, and actually it became really hard for me to get the space and to be able to raise more venture capital rather than selling to them. And I wish I didn't have to sell it, but my investors were really excited for having the exit and having the outcome that we got.

My name is Heather Hiles. I founded Path Bright in 2012 and sold that company the end of 2015 to Sendage Learning.

And so what became most important to me was to make sure that I could get the best outcome for all of my teammates. And when you're looking at a hundred people who all have mortgages or rent to pay and families to feed, that becomes a really important obligation I think of any c e o. So, like I said, while I wish I could have gone on, I wasn't willing to fight everything and jeopardize my limited control and limited control over the outcomes for no control over the outcomes.

Kathryn Finney
So I learned a lot of lessons. I mean, in hindsight, the lessons I learned one about you don't need to be a martyr, like stop being a martyr. Like stop taking everything that happens is not your fault. Um, let people own their own shit and their own actions. You don't have to assume that for people, even if that's what they want you to do, you don't have to assume it. Um, these are all things that I had to learn and I, and I've learned and big lessons I took from that. And it makes me happy to see how well the organization is doing. Um, post Me, like anyone who ever builds something, you don't build it for it to end when you end. I build institutions, I build things that are gonna last. I'm not interested in building something and then I decide to do something else and then it collapses. That is not of interest to me.

Laura Weidman Powers
So I made the decision to step down as c e o of code 2040 in late 2017 and I formally stepped down the following spring. It was a really difficult decision because it was the organization at that point. I spent six years building it, it meant a ton to me and I saw such huge potential. But I knew that I had started Code 2040 not to create a home for myself, but to create change and something that would outlast me. And that it was really important for the organization to go through a leadership transition to sort of ensure that it could weather that kind of change and survive and even thrive.

My name is Laura Weidman Powers. I am the head of impact at Echoing Green and the operating partner at phase 10, uh, venture firm in San Francisco.

To be honest, I was burnt out at that point.

I mean, doing racial equity work is tough. Doing it in an environment where the first few years of Code 2040, we we're trying to convince people that it mattered and then trying to absorb all the interests when folks started to buy into the fact that it did. And so I was really thrilled that I had a successor. So I felt I could take the organization to the next level and it gave me a chance to kind of take a step back, take a break, and then keep doing the same sort of work, but from a different, a different vantage point.

Kathryn Finney
I think the reaction as a black woman for you to say, I'm doing something for myself cuz I don't wanna do it. I don't care what you want me to do, I don't wanna do this. It is shocking for people saying no as a sentence. Not no, no, how dare I do that? How dare I do that? And it was just experiencing that. But what I did was I, I left everything <laugh> I left did with nothing. I didn't get any money, I didn't have severance, I didn't have anything. I just left. And I was like, you know, I could take six months off because the thing that people didn't realize is Bec cuz they didn't know my whole story is that I sold my company and I have my own money.

Lisa Price
Starting a company in your kitchen in Brooklyn with a hundred dollars and then selling your company to the largest beauty company in the world is an amazing feat and took so much work and 22 years of building to get to that point where actually good enough for that to happen. That was another misconception that people would have. There was this assumption that you're struggling, you're not making money, everything's falling apart. So, oh, let me go get this check and I'm just gonna sell to them cuz I've, I've gotta get out of it. I can't do it anymore. And acquisitions don't work that way. Things have to be humming. It has to look good. It's, this is not like somebody buying a house and then they're gonna flip it. It it's not like that. So I was profoundly proud of myself for being in a position where I could do that.

Not just for me, but also for my family and also for my staff because when, when we became a part of L'Oreal, the entire staff went with me. So no one was losing their jobs and they were moving into a company that could give them even more than I could when it came to benefits and opportunities and things like that. And there are people who become serial entrepreneurs, they start something, they sell it, they turn around, they start something else, they sell it, and they just keep going. I don't know that I'm a serial entrepreneur. I started when I was, you know, 31. Um, I've, I'm still a part of my company now at 60. Uh, I might do something after this, but I don't know, you know, that I, I would call myself a serial entrepreneur to see the organization succeed and grow and

Kathryn Finney
Get to the next level. Um, it's exciting for me and I, and it's, and it's exciting to see that and to know that, like, I built that like, and then the next person's coming on and they're building it, you know, it's like I built the bungalow and somebody's turning in a two family, you know, two story family colonial, right? Like, hey, they're taking, but I built the foundation, I built the first floor, I built the, you know, landscape, the backyard, all of that. And here's this person coming in, they're gonna build a second floor, they're gonna build, you know, the two car garage. Like, and so, and at a pool,

What I hope that people take away from this is that you can actually build a damn thing and that you can do it, it may be a little bit different, the path may be different from us, but there is a way to do it and there's a way to do it while still maintaining who you are that still maintains your core values and what you believe in. And I think that's really, really important. Having been in a startup community for a while, there's this belief that you have to be, you know, excuse my language, an asshole or you have to be this sort of type of person in order to be successful in this space. And I don't believe that at all. I think you can be brilliant at your work, but you can also be a good person too. And so what I'm hoping that people take away from this is not only the details of building your personal advisory board, how to raise money and things like that, but how to do it while also maintaining your own integrity and your own core values.