The Exchanges

Q Okay, and during that period, 2004 to 2009, public filings, so you grew basically from zero to seventy million dollars in revenue. Help us understand how you did that. Any tactics you used then that are relevant for founders today looking to grow that fast?

A Sure, so what we realized early on is that you have to You have to have multiple stages of product offerings in order to generate significant amount of revenue in terms of selling a low-priced product and then sell a middle-priced product and an expensive product, meaning something costs 20 bucks, something costs 50 bucks, and then something costs 203 104 hundred dollars, and so we created a path where consumers can buy something at the introductory price at, let's say, 20, 30 dollars, and then they would be offered other products that are more expensive, and we found that their elasticities Is material. You can go from 20 bucks to a thousand dollars if you just ask. And so what, what we found a lot of companies out there didn't know how to ask. And, and, and we've learned from their mistakes. We've learned from our mistakes and we started asking for more money. And so we saw a significant increase in revenue and profitability.

AI assessment note: “You have to have multiple stages of product offerings in order to generate significant amount”

Q really deep in these things. I mean, you secured a thirty million dollar line from Sunflower Bank when interest rates were starting to skyrocket, right, in 2022. Many founders right now are terrified of debt, or they don't even know it's an option. Why are you happy to pay nine or 10% interest instead of giving up, you know, 10% of your company to a VC for free, no interest?

A Because I value the equity far more than I value the debts. Very simple. Like, why would you do that if you, if you think your business is growing and your equity is growing, arguably your amount of equity you're going to be giving up is, is far, is worth far more than the money that you're going to be borrowing. And unless, unless you're, unless you're selling Uh, equity into your own equity, into the equity raise, meaning you're part of the equity that buying is yours, and, and you're able to, you know, get some liquidity, that, that might make sense. And so, we've done that as well. It's not like we don't do that. We've done that. And so, it's a combination of a time, opportunity, um, what the board wants to do, and, and, you know, how the company is scaling. All those factors come into play of how you Raise capital. It's not one thing. It's many different things.

AI assessment note: “Because I value the equity far more than I value the debts. Very simple.”

Q Very cool. Um, we rarely have guests on that of taking companies public, so I want to ask one or two more questions there before going back to Business Hangouts. What was the biggest thing that surprised you about taking company public that people just usually wouldn't interpret or wouldn't think about?

A It's just a lot of process when it comes to legal and accounting. You don't really comprehend it until you're in it. You, you have to spend a lot of money. You've spent probably close to half a million to a million dollars just getting the company ready to go public. And so there's a lot of scrutiny. There's a lot of oversight. You have to have all of your, you know, ducks in a row. You've got to have all your, um, you know, financials in place. You've got to make sure that your accounting control processes are all in place, and you've got to make sure that your product works and that you can get a lot of complaints on the internet. Like, everything is scrutinized. And so, Um, the SEC, who reviews these underwriting, ah, processes, and reviews all your applications, is very, ah, you know, runs a tight ship, and so when you submit your application, you're gonna get comments back, you have to respond to them, and so, those things are brand new. I, I, I was, you know, relatively young when I started the company. I was in my, ah, you know, mid-thirties, and didn't have any experience running a public company, and so it was quite a shock.

AI assessment note: “It's just a lot of process when it comes to legal and accounting.”

Q Got it. Got it. How, what happened to that company?

A So the company was private, uh, from 2003 to 2007. In 2007, late 2007, September, we took the company public. it's been public on nasdaq till 2012 and in 2012 it got bought out by a uh big direct marketing company here in los angeles and it's since been since been since then been private were you the sole founder of the business i was uh a co-founder i had a partner who uh helped start a company in 2003 and why'd you leave it i left the company because i Pursued our initiatives. I needed to take a break. I was heads down focused on this business. Working crazy hours and taking a company public, and if you're ever taking a company public, it takes a lot of out of you, a lot of energy out of you, and you need a break. I took a break for about six months, and then I got involved in a bunch of new startups, and I was helping a company in Silicon Valley, a virtual private networking company called Anchor Free. I helped them go from three hundred million users to four hundred million users. Grew revenues from zero to twenty million a year in about 18 months. It was very exciting, and then I started Business Hangouts in 2016.

AI assessment note: “we took the company public. it's been public on nasdaq till 2012 and in 2012 it got bought out”

Q That's incredible. So as a capital allocator, how do you think about using that money? Is it just plugging into new acquisitions? What if you can't find a good deal? What do you do with the money?

A I have plenty of opportunities for M&A. I have a multi-billion dollar pipeline. So we're looking for bigger deals now. So before we were doing deals under a hundred million, under fifty million. Now we're more interested in deals that are a hundred million plus. There's just, there's a lot of one out there. A lot of flat companies not performing. We're not generalists. We're very specific. We're only focused on consumer privacy and security. And, um, we like synergies. We don't like buying businesses and just like letting them exist on their own and prove them on their own. We don't, that's not what we do. We, we buy it Generally, it's a product and technology that we're buying and consumers, and then we take them and integrate them into what we already have. And so we have our own billing stock, our marketing stock, our AI stock, and then we have products that benefit each other. So I can take a VPN product and sell that into my identity protection product, you know, suite of, you know, of a category of consumers, and vice versa, and then they compound each other in terms of growth, and that's how we make this work. You know, building businesses that are standalone entities and growing them individually is not an efficient use of your time and your resources, because they benefit from each other more than they benefit just from your technology that you bring it to the table.

AI assessment note: “I have plenty of opportunities for M&A. I have a multi-billion dollar pipeline.”

Q So using debt to grow the business, since you took it back over in 2017, you bought it for under ten million bucks, under one X ARR. You've now grown it to 60, seventy million of ARR. I asked you a question on the, at the last company, you said you diluted down to 30%. How much equity do you still own in the business today?

A It's, it's, it's, um, Less than 20, and, and the reason is, is because when we started the business, we started with multiple partners. It's not a, it's not a dilutive effect that took place. It's actually dilutions with mineral. It's, it's, it's about a structure of the organization of the investors and, and, and operators, and we're all, um, sort of operators, because the investors are actively involved in companies' operations. So it's, it's, it's very different than before. Before it was just me, and then, you know, investors, VCs, and private equity, and debt, And it's, it's very risky to do it that way too. Like you have to look at it from that perspective, right? So, um, and you spread the risk and also build a bigger business versus trying to do it all on your own. So think about that and take on a lot of risk.

AI assessment note: “It's, it's, it's, um, Less than 20”

Q Mm-hmm. Makes good sense. And you have a lot of different pricing plans. Instead of trying to dive into kind of each one of them, what is the average kind of customer paying you per month?

A So, most of our customers choose the, ah, what's called the Business Hangouts Pro Plan, which is 63 dollars per month if it's billed annually, and, ah, if it's billed on a month-to-month basis, it's only 79 dollars, and that allows you to have up to a hundred attendees and one presenter. But you also get other benefits, ah, I'm not going to get into all of them, but some of the most key benefits is that when you have a, when you do an event online, what you want to have is a A page that you can drive traffic to and have your participants registered for that event. Well, we allow you to create a customized event page so that you can have your logo, your branding, so it will look like your company. And so when you're doing these presentations, webinars, or web conferences, we will allow you to fully customize the user's experience. So to your, to your participants, it looks like it's your own technology, like your own company. So We make that very easy. Our competitors, Zoom, Web, WebEx, GoToMeeting, they don't have it. Built this way. They're purely focused on web conferencing. They, they sort of separate the capabilities of webinars and web conferencing and make it more challenging for average users to use a platform.

AI assessment note: “most of our customers choose the, ah, what's called the Business Hangouts Pro Plan, which is 63 dollars”

Q is a good time. Just teach your audience quickly in case someone listening today in four or five years is public and they do want to, you know, take a loan out against their business to go do a massive takeover What was your stock worth at its peak and, and how did the lenders look at it? What was like the max loan you could get against your stock?

A Well, you, you just asked a lot of questions. I mean, let me break down that the concept first. First of all, it's, if you, you are not borrowing necessarily against the business, you could not, that's a, that's a recapitalization concept. And we talk about that separately, but if you want to borrow against the stock that you own, let's say you own 20% of the publicly traded stock. And you want to borrow against it. You can go get a loan. There are lenders out there who will say, collateralize your stock. We'll take your stock and put it in escrow. And if, if, if it falls below a certain dollar amount, then we sell it so that we don't lose money in our investment. If it stays above certain amount, then we don't sell it. And you get your stock back when you pay back the loans. It's really simple. And these loans are sometimes no reports loans, meaning you're not personally liable. It's just the stock you're collateralizing and you can pay back Interest only or no interest, and they just sell certain amount of the stock over time to, to collect on their interest. There's lots of ways to structure these loans, and that the money you receive from these loans is not income. It's debt. So you're not paying taxes on it. So it's, you know, eventually going to pay taxes on it when the stock is sold, but you are, um, in a relatively good position to do that without incurring a lot of, uh…

AI assessment note: “let me break down that the concept first.”