The Exchanges

Q to help their business grow. If you want to put your brand in front of this highly dedicated audience that's difficult to reach, I'm currently looking for a few strategic partners for the channel. To learn more about sponsorship opportunities, click the link in the description. Let's grow together. What is the most important thing that they need to know before they even make the decision to start that company?

A They, you know, they have a market and a customer base for their product or service. I find, you know, I tell entrepreneurs all the time, You know, you've got to find a problem that has enough people that need to solve that problem. And you need to do some testing of whether or not your service or product can solve that problem for them in a more efficient fashion, whether that be faster or less expensive or whatever the case may be. I think Um, a lot of entrepreneurs don't do the research as to whether or not they have what's called, you know, product market fit or, um, you know, and I think that's almost entirely, uh, true with the vast majority of unsuccessful founders. They, they, uh, they believe their own cooking, um, uh, before they find other people that are interested in, you know, uh, taking advantage of it.

AI assessment note: “They have a market and a customer base for their product or service.”

Q it's not exactly the same business, but essentially I went back to the old model that I was running where it was me and some contractors and very lean. Um, and so I pushed very heavily on people who say, I have an idea. My first question is, yeah, but have you thought about how that idea is going to impact your life? And, and is that going to vibe?

A Yeah, I agree a hundred percent. You know, in a lot of cases, you've got to determine You know, make a decision between the quantity of your life or the quality of your life. And being an entrepreneur, running a startup is a full-time job and it's a, a multiple full-time job. You are spending 80 hours. You are hearing nothing but rejection from investors, from, from partners, from, you know, uh, clients and customers. So I think it's a grind and, you know, you have to be wired a certain way in order to go without a paycheck, you know, um, You know, live on that ramen budget while you're growing something, whether it's bootstrapped or whether you bring on investors, because, you know, essentially when you were bringing on some early investors, many of them want you to continue to be eating on a ramen budget, you know, until they get paid. Uh, so I think, um, I would agree with that. You really have to really look inside yourself to whether or not you want to go through what could be a, a very long, difficult process. With, um, quite frankly, the odds against you.

AI assessment note: “You really have to really look inside yourself to whether or not you want”

Q For sure. So I want to focus more on M&A acquisition, because that's, I think those are more exciting than these earlier stage fundraisings. So I've spoken to people who run PE firms. I've spoken to VC investors. I've spoken to angel investors. I've spoken to business owners that have sold Everybody loves this idea of selling a business or acquiring a business. Why is it such a sexy thing?

A Well, I think it's sexy from a couple of standpoints. One, it is a way to accelerate your growth much faster. You can add new product lines that you didn't have previously. Going to new markets, whether different industry markets or geographic markets, so it provides that opportunity. And, you know, and the reality is the hope is when you do a transaction that, you know, one plus one equals three to five, not two. And I think that's the sexy part of it is be able to grow faster. Um, yeah, the reality is you can, you know, grind it out and grow your business, or you can buy revenue. You know, I spent many years working with companies that they did just that. You know, many years ago, we had a company that was in the, the analog, uh, wireless space. You know, when digital came out, what they did is they bought all the analog bandwidth around the country through acquisition. They, they acquired close to three hundred million dollars in revenue, none internally, all by acquisition. And then subsequently sold them on, sold the business to a very large private equity firm at a significant profit. So I, I think that's the sexy part of it is that you see, you know, the, um, the, the speed of how you can grow. Then obviously you've got to make sure you put together a good deal. It's all come down to terms. Uh, and yeah, you need to make sure that you, if you're going to get into bed wit…

AI assessment note: “One, it is a way to accelerate your growth much faster.”

Q Of all of the types of people that you work with, who are your favorite?

A Wow. My favorite ones are honestly the ones that don't need to raise the money, but may raise money. They've been able to build the business on their own. They have grit. Um, you know, in the early, early mid nineties, I left my eight figure job as an investment banker and ran a start, started my own business, um, with a partner of mine. And they were fortunate to have an exit, you know, you know, four years later. Um, but the reality is I didn't, I didn't raise a dime of capital. I just sold, sold, sold. Uh, and I think those are the entrepreneurs I like because at the end of the day, I think sales has become a lost art. Yeah, everyone relies on social media or paid ads or some type of model where someone's not on a phone call or not in a room with somebody asking them to give them a check. Um, those are the people that I like to work with because if they can, if they can ask those kind of questions, They can ask almost any kind of question that's necessary to succeed.

AI assessment note: “My favorite ones are honestly the ones that don't need to raise the money”

Q ask me questions that I would be asking me if I was going to be giving me money. And, and so I see that there's maybe the vast majority of these acquirers or these investors, they don't have operational experiences that they don't know what to ask, or maybe they just don't care. Like, I don't know what, what, what do you see that's like allowing these DDs to fail?

A Well, I think it's a, you know, a common, um, and you, what everyone has to understand is you have to look at it from the, the, the general partner's standpoint of a venture capital firm. Okay. Most venture capital firms get compensated on what's called a two in 20. Okay. They get a two percent, they get this management fee on the, they have the assets That they deploy. So they are motivated to deploy assets. Okay. Um, and, and honestly, they're, they're motivated to maximize profits for them and their limited partners. Um, you know, and I think there's, there's been a lot of changes over the course of the last couple of years, even more. So you hear a lot over the next, the last six months is that venture capital is changing. You know, that the old model is not necessarily working as well, but the model of investing in 10 startups Knowing eight could fail and hoping the other two give you the proper rate of return, you know, um, and there's a lot of pack mentality, especially with the large, you know, name brand venture capital firms, you know, it's, you know, years ago when I was teaching at the university, there was, there was this old, you know, a thing that came out about, you know, McDonald's spending a half a million dollars about where to put a McDonald's and then Burger King waited for the McDonald's to go up and put within a two mile radius. And I think in some cases …

AI assessment note: “They get a two percent... they are motivated to deploy assets.”

Q So if there was a service to help these, uh, VC firms, do you think that would be valuable that they would be willing to pay for an external partner to take care of that?

A They do. And they have, you'll find a lot of the larger. You know, venture capital firms and even smaller midsize, you know, firms, you know, will hire a consulting firm or an outsourced, you know, due diligence service. Um, I think that's, you know, that's a more efficient way to get it done. Um, uh, I, I, there's several companies that, you know, that I know of that, you know, I've used outsource and other, you know, contractors to, to do perform certain parts of it. Um, you know, at the end of the day, You know, the general partner has the ability to make the decision. Um, but the, in order to make proper decisions, you gotta scale a lot and look at a lot of companies. And sometimes, you know, the general partner can't necessarily be on hundreds of phone calls a month, uh, in order to find those one or two gems. So there's obviously several ways to, you know, uh, divvy up the, uh, those needs.

AI assessment note: “They do. And they have, you'll find a lot of the larger”