249 - He Almost Bought TikTok with Mr. Beast (Here's How) with Jesse Tinsley

0:00Our last valuation was roughly$750 million. Oh my god. Yeah, not bad for the strap company. I think it's possibly at$500 million ARR run rate by this time next year. I thought there'd be a chance to do it. There's lots of great people we had in our bid, like Mr. Beast. Nothing short of ambition. Now I want to go build the next$100 billion plus accounting software platforms.

0:26Okay, Jesse Tinsley. you have had the craziest 12 months of any entrepreneur that I have ever personally known. And like, you know, you read about these stories, Rockefeller or Elon Musk, et cetera, but you know, you don't actually get to know some of these people. So let me just recap. Since we last spoke, this company called Bench, which was an accounting firm announced to its customers, it was closing down on a Friday. By Monday morning, you had announced that you were buying Bench and you had had no prior conversations with them. Boom, already nuts. Then like the next week, you put together a group, including Mr.

0:59Beast, to buy TikTok. You didn't end up buying TikTok, but it was an incredible bid. Then you go on and you've bought several other acquisitions. Cap, I think was the name of the company. You've rebranded to Main Street. Dude, you have probably a more than billion, probably approaching a couple billion dollar enterprise value company that you've built. Kind of out of nowhere. You've made yourself a billionaire, not through inventing Facebook. And that's my words. How are you doing it, man? Generally, if you have big ambitions and you can actually have a track record of producing operational efficiencies and closing on deals, people tend to want to back you.

1:36I was actually joking recently. It's easier to go raise$100 million than it is to raise five. I'd much rather go raise the 100 because there's a lot more larger check sizes, whereas five, you might have to cobble it together through 25 investors. You might raise the whole hundred from one person it's a different scale and scope and the audience is very different so I think yeah I think TikTok's a very new concept I think and also too right that's you know one of the most popular social media like company in the world at the time and I don't think that's a hard one to raise on so I'll take some credit away from myself but it was fun it was a really fun process the group internet getting in is obviously world class with Sysquana and A16Z and Silver Lake and all of them.

2:17Just, yeah. So how did you even get in the room? Like, like no, no offense to you, but most people outside of maybe your small circle know who Jesse Tinsley is, right? They know who Oracle is or they know who Microsoft is, but then all of a sudden this guy, Jesse Tinsley comes out of nowhere. He's leading a group that has a real chain, like 20 plus billion dollar bid to buy TikTok. How did you even get in the room? Generally there's like a flywheel effect of momentum, right? Once you get certain things in process, more people want to join, right? And so we're obviously really fortunate enough to have worked with some great folks like Jimmy and his team and David Pizuki, the CEO of Roblox and folks like that.

2:55And Nathan McCauley from Anchorage, and just really amazing folks, which is a lot of fun. So I think the more momentum you have, it's just like a, just kind of things kind of fall into place. Lots of synchronicities, I'd say. So, but it was a lot of fun. Well, let's go back. You, in the fall, you bought employer.com and, and transition there. And then Christmas time rolls around and everybody on Twitter was kind of running around with their hair on fire. Yeah. Because bench accounting, bench accounting shut down. They were done. They announced to all their customers on a Friday. They're like, sorry, we can't service you anymore.

3:28They were going out of business and you, you didn't have an inside line on bench, right? Like you weren't already talking to them. Yeah. just take one, one step back actually from that. So what happened when I originally started my first business was a services business and my co-founders, David and Ben and I got together at the end, towards the end of last year and basically founded what was going to eventually become employer.com. So we didn't actually pick off that, like start that business, which acquired my first company and acquired bench and acquired all these subsequent businesses and started to grow pretty massively until about November of last year, October, November of last year.

4:03So that's when we really went all in on what's now rebranded as Main Street, but, and then obviously led to the acquisition of Bench and all the subsequent brands. So business has basically only existed about a year, just to put it in context, first off, insane. And this is kind of a, a very interesting story on the bench side. I think I was on, it was the weekend between Christmas and New Year's and sort of like the most dead weekend probably exists in business, at least in North America. So it basically was, I didn't even see the news till Saturday and I was on the East coast. And so I woke up and had a few messages from folks.

4:38And what was interesting is I'd actually talked to our CTO Ben about, we needed some like general ledger, like accounting tracking software, either through a partnership or building ourselves. And I was like, wow, this is like really fortuitous timing. Cause like things like you could probably buy this business that does the exact thing that we need to integrate with our other systems. And so I reached out to a mutual connection that kept me with the board. And those conversations evolved very, very quickly. Yeah, things kind of took off from there. Happy to dive more into the story, but that's the...

5:10And you just reached out on LinkedIn, right? You reached out to somebody on LinkedIn who was kind of a mutual and then they put you in touch with the board. Yeah, exactly. Yeah. One of their... You freaking out. Yeah. I was like, he kept me with the board directors and yeah. So how big was Bench? Because they were VC-backed. They were a tech platform that all of a sudden just said, we're out of business. How many customers did they have? Do you know how much ARR they had at the time where they said they were going out of business? It's like very healthy business, very unfortunate circumstances, obviously, for many people.

5:41But I think roughly looking like, I think it's like 11 ,000 customers and 40 million ARR. something. And I think according to like some of the like articles that have been released, apparently we paid 9 million in cash for it. So how big was your company? So let's, I'm just going to call it main street just for simplicity sake. I know it was kind of a lot changing, but at the time main street, if you were to compare 40 million ARR with bench to main street, What was Main Street doing? Not that. Not as much, not really as much. We were doing... We just started 20s? Yeah, we just started... Okay.

6:20So like other than rolling in, like we acquired, we were in the process of acquiring a few other companies and we were probably right around one fourth or one fifth the size of the company. Something smaller, it was much smaller, a lot of ARR basically. So like way smaller. My first question to you was, I remember us talking about it, was like, how? Like this bench is way bigger. it's a distressed asset and it's not necessarily something that was in your core competency so like to me it was it's mind-blowing like how did you even a figure out a way to buy it and then b figure out a way to actually integrate and onboard a company of that size with 11 000 customers first off i would say we had a broader vision prior to this stuff like a full end-to-end like smb like back office automation which included like originally the idea stemmed from like going after the payroll, like your space, that was like less appealing as we dove more and more into it.

7:13I mean, like there's a lot of comp competitors that are really great at like deal who we just did this deal with for cap base and gusto. And there's rippling and workday and velocity and paychecks where the list goes on. There's tons bamboo H.O. Exactly. See, everyone can name a new one on top of that. There's payroll providers, but there's not very many accounting, like software companies. There's really, if you looked at the top ones, you're looking into it, Xero, FreshBooks, Main Street, and maybe like NetSuite on the enterprise price side or Wave. Those are really the only big ones that have a lot of scale and scope.

7:48Everything else is much, much smaller. So if you compare that to other sectors for like back office SMBs, we thought that was a really, really big opportunity. So when this came up, we were all hands on deck and we kind of built our operating model where like our CEO could plug in and actually to run companies day one. Like, and we pre-cut that thesis out in a very short 36 hours that we can.

8:13It reminds, when you were telling me the story, it reminded me of, there's a famous story of Elon. Elon over Thanksgiving, they're flying and he's asking how long it would take for them to actually move their server center in Sacramento. And one of the members of the team was like, oh, weeks. and Elon's getting like more and more irritated because they're telling him a timeline that he doesn't want to hear and so he's like screw it let's go to Sacramento right now and so they turn around over there they go to Sacramento they land and Elon's there with like a freaking knife he lets the guy the security guard lets him in and they like move racks that weekend that story reminded me of this bench story because it's a bigger company and in one weekend they went from we're going out of business to then sending an announcement Sunday night or Monday I can't remember, hey, actually, employer.com is going to be servicing you from now on, and you're not actually going to lose access.

9:05Congratulations, you're still going to have ongoing support. It was mind-blowing, but the thing that is the most mind-blowing is that your customer, I guess, satisfaction has not gone down. How has the experience been of bench customers that have transitioned to working with you? Yeah, I think like all things, we're always striving to improve. like make it better and better. I think part of that was too, is just our NDS obviously gone up. I think churn's gone, gone down quite substantially. Can you say that one more time? Sorry. It's NPS. What does that mean? Net promoter score. So like, like how your users and customers would give you feedback, like feedback based on what their, their overall sentiment is.

9:45And, and so that's been like a, a great, I think turnaround story with we've actually taken the business from, I think they lost like 40 million roughly on a PNL basis, like in 2024 to, you know, you know, positive cashflow, free cashflow positive, but also like an EBIT of like somewhere between 12 and 15 million just on that business alone. What? It's like roughly a 50 plus million dollar swing with less, less people and also like really, really high increased like efficiency and better like outcomes for customers. And we're obviously still working on while improving that. But I think part of that's like a mindset shift and they can tell an interesting story.

10:26Like, it was like week one of owning Bench, but it's been, it's been, we've been running a lot of business. What's the week one of owning Bench? So there was a situation where like, obviously, we were in this sprint to get Bench up and running. I basically told the board that we weren't interested, basically went into Monday, because we knew that it was like a melting ice cube in the summer. Yeah. All your customers are gone because every competitor in the world is reaching out to either run, you know, campaigns on, you know, it's running bench, searching bench, you know, logged in and you go like that, right?

10:57So you have tons of, tons of churn if you don't start to fix this before your business starts. So long story short, our team sprinted through it, got a gox done and, and started, we got like the servers online some point, you know, Monday morning, Eastern at like four or five in the morning, something like that, which is, which is how to connect time from there, which was a really, really great turnaround. And then I think like part of that, like, it's much like a Elon story, right? Elon, I actually can, I don't know that that, I've heard that story before and we've worked with, we worked with Twitter and he was doing that turnaround too.

11:34So I've seen how he's like operated very direct, like very direct, like from, you know, one or two layers removed, but nonetheless, like he obviously moves with some urgency and does things that are probably unorthodox to others but similarly week one basically had i i bought him to figure out what the customer experience was i think it's like tuesday wednesday of the following week and i basically submitted form like basically you know customer service request and saw what response was i just kind of going through that workflow to see what it was like and it's like hey sorry you know because whatever we're going to get back to everyone in like seven days and so i immediately called up the vp of customer success and said hey you're going to change this you're going to do it and going to say it's going to say in the next 24 hours and they're like that's that's impossible and i said no it's not i don't care like who asked to answer tickets like get everybody up on the all team so they're engineers or whatever i don't care like just keep in mind like they had laid everybody off on friday yeah tuesday so we had to rehire everybody monday and to onboard sheeple compliantly you know with all the different like you know bureaucracy that goes with that and then then fix the customer issues once we've onboarded ramp people up into new systems right so it's not like as simple as just turning things back on we have to go sign up for a new i think every customer basically submitted one or two tickets or like 10 000 customer tickets and like you know that time frame give or take and we we got through all of them not in 24 hours so maybe our up customer success was right it's probably impossible but we got it done in like 26 or seven hours and which was oh my gosh are there like way faster than it ever would have been you know in previous you know leadership i think because they're supposed to drive perversion to do so do you think that was necessary to kind of set the tone with that team of like hey there's a change here right like not not only is bench gone because because like you said they got laid off and then all the customers were told they're going to lose access then they had to go through this whole rigmarole.

13:31They're re-onboarded, like you said, new systems. But sticking your flag in the ground, was it as important for you that the customers be answered as it was sending a message to the team, or is it only in retrospect that you realize? Yeah, it wasn't so much like sending a message to the team. That wasn't the objective. I think generally what I share with our team is if I had stack rank, and my team probably would not like this, but stack rank customers above team because take care of our customers by proxy i can take care of my team right and keep them employed and like we've you know been very historically good and not like having layoffs or having issues because we run profitably right so it's very like it's a kind of a self-fulfilling cycle where you take care of your customers and do well for them have high like nps and good like customer satisfaction you're you're basically in a double take care of your team at a very high level and so that's like the priority right we wanted to make sure in order to maintain a profitable and growing business with bench that we took care of our customers so that, you know, they're staying and, you know, obviously becoming that positive customers and referring to friends and whoever it's bench as well, long-term.

14:33So to go from losing 40 to making 10 to 15, a$50 million swing. Like that's not just, Oh, we came in and realized some operational inefficiencies. There's, there's definitely a cultural and a mindset shift in there as well. So yeah, I don't know that, that one, that story just kind of resonates. Yeah, definitely. I think like even, even at scale now, if we continue to grow, kind of the same operational mindset, we're free cashflow positive, we'll operate heavily probably in the black, we reinvest a lot in go to market R and D, but for the most part, focused on maintaining at least break even. I get that the buying bench made sense from a strategy standpoint, because you were like, Hey, we looked around, we realized we didn't want to play in the payroll space, but we really liked the accounting space bench comes up, we got to move quickly and take advantage of it.

15:22But they were a company that was five times your size,$40 million in error and distressed. How did you pull off the financing of the deal? And then probably the thing I'm more interested in is how did you pull off the freaking integration? It's just really hard to integrate companies. Yeah, definitely. Kudos to my co-founders and our team. They spent a lot of time on their integration piece and everything else. I think in terms of financing and everything else i there's many ways we get pretty creative like how we do deals we generally don't lever a lot of debt and use free cash flow or other means to basically to buy companies so i think generally it's just it's a question like balance sheet item it's a balance sheet item question like we use free cash flow debt and obviously equity in most cases but yeah so that's the context for you is just getting really creative with bench it was like hey this is kind of the combination that we can do this.

16:15It wasn't necessarily here's a blank check I'm rolling in. Yeah, obviously I think that like it's tough. It's very tough to fully diligence a business over a weekend and you're trying to get you like, you tell us and full diligence and make sure you're not going to get to have all sorts of like on mitigated risk. So yeah, so it was a, it was a very unique situation. I'd say like all in all that one is an outlier compared to everything else we normally do in terms of like we actually just for context like we usually don't even bid on deals that are distressed as a rule of thumb and separately like we won't bid on competitive bids so like recently there was the who was it it was the monster and career builder bankruptcies and that was like one deal they had a ton of ARR I think it was like well I'm not sure but I think it's fine to say they had a lot of ARRs very very very cheap comparative like uh comparative like multiple right like if you just bought it and just cash flow to the business you'd make a killing okay and so but we got because we're known in the space for like doing like acquisitions in a very short time frame we had three three different parties approach us to join their bid like hey do you guys want to put in like 20 30 million on this this is like right up your alley right it fits in your brand portfolio of mainstream employer.com cougar.com right and we passed on it because we actually want like we get lots of criteria deal flow, not because it wasn't a good investment.

17:39We thought it was a really great investment just from a pure like cash flow perspective. But we didn't actually want to do it because we didn't want to have conflicts with deal sourcing. It's a little like Berkshire, like Warren Buffett's been pretty like, like similar model to him right over the years. He's like, he won't jump into processes that are highly competitive because he doesn't want to burn bridges over winning one deal. Right. So I think playing that long, the long, the long game there has benefited us a lot. And also built a lot of loyalty with folks that rolled equity in our deals like Greylock and Signal Fire and some other VCs.

18:09We've done, I think, really well and outperformed what the expectations were. So I think that also helps build goodwill. And that's one of the reasons we actually got benched. So it does tie back into what we were talking about. One of the investors at benched, I think, was traveling at the time. And this, it all happened on Saturday. And they were on a plane flight internationally somewhere for a trip they already had planned. I think I talked to him at 2 a.m. Eastern, like Sunday morning. And he's basically like similar questions. You're like, who are you? Right?

18:42So that was like, it's good to meet you too. And long story short though, he actually had his first, his first company he had done back like 20 years ago was angel invested by one of our, our lead investors or like large shareholders from Greylock and long story short that instantly gave us credibility. I'm like, yeah, you can just back channel, you know, XYZ person like that's our GP there, like talk to them. And anyways, point being is playing that long-term game really helps, right? Because like, that's actually how we bought Main Street and others is, you know, we have VCs like, hey, we have this company, we'd love to plug them into you, we'd love to roll equity, right?

19:18And that helps kind of build that flag wheel effect. Hey, I don't know if you remember this, but when we started this podcast, we entered into a social contract. I would spend time, energy and money producing this podcast, interviewing these individuals and giving you insights into how to build, buy, start, grow your business. And you would like subscribe and leave me five-star review. Now, out of that, we both get to talk to really cool people and hear really cool insights. We both get a ton of value, but I just want to help you keep your word. So would you do me a favor? Will you go leave a five-star review for me on Apple or Spotify?

19:52It would really help. And if you want, even share this with a friend. Can you tell me how how Bench is doing. So it was 40 million ARR when you got it. What's it doing today? It's doing really well. I think we're collectively across the entire business. We're projecting to have over 200 % growth across all things, which would include Bench, obviously, for the year or so. Well, just putting Bench in perspective, let's say $10 million of free cash flow, and let's assign a 10X multiple, which I think is fairly conservative. you turned bench into a hundred million dollar asset in less than a year i mean i know you can't say like exactly what is that i'm just i'm just doing back in the envelope now i actually tell you our latest valuation the last valuation was we did on a deal we're roughly i think valued it right around paraphrasing not exact numbers but roughly 750 million oh my god oh my gosh that's across everything or that's just bench that's across everything across all things yeah not bad for bootstrap companies it's insane it's insane a year ago we talked and like your company was 20 30 million dollar from what i remember right i could be off a little bit but in a year's time 20 to 750 and it's not like you invented uber like you just went out and bought good assets at discount prices yeah and i think we'll be closer to about in the next few months will i think likely surpass like well over well into the 10 figures range so i think we'll be a billion plus in the next you're so stupid that is where dude that is where it's ridiculous that's where did so okay you do bench bench has turned it's incredible but it was in and of itself a crazy story and then we were texting and you were like ha ha ha tick tock's next i'm like what the freak i was probably i was probably more joking when i texted you that Yeah, well, I don't know, man.

21:48You put it out to the universe and the universe was like, Jesse Tinsley, you deserve TikTok, young man. And like all of a sudden it was happening. Like I can kind of understand going from, hey, we got a$20 million business and we just got this$40 million ARR business. It was a stretch, but we figured it out. We got some, I don't know, maybe we got some financing together. We have the team. We did the transition. But then from that to TikTok, one of the biggest apps in the world, a multi-billion dollar asset that's being divested from the Chinese government. And you are in the same breath as, like I said, Microsoft and Oracle.

22:22How, Jesse? My tiny brain does not comprehend how that happened. My tiny brain feels the same way a lot of days. It's different when you're in a flow state. Right. You have like a flow state resident there. And it seems like how did that, sometimes I'm like, how did I end up like buying this couple? Like, you know, it's just like, it can happen. But it's all like the micro interactions throughout the day, everything compounds. Right. And I'm, you know, if you looked at my calendar and like general, like calls and texts throughout a day, like talking to 50, 60 people there, you know, that compounds into those deals like taking place.

22:59And I think that that's the, it's hard to look back and actually have like kind of introspection on like how things are happening. But I think that I'm really good at like seeing where the future is and how to like work backwards from the end result. So if I go, let's say buy, let's say something extreme, like the New York Yankees, right? I would go and build a plan around, okay, these are the owners. How do I get engaged with the owners and then build everything back from there? I don't think, honestly, it's only the New York Yankees that want to buy them. I wouldn't put it past you, but okay.

23:29Has to have a willing seller. I wouldn't be a willing seller. but nonetheless that's something i'm really good at like competitive chess growing up and other things and like i can see and connect dots from oftentimes my team will be like confused like hey how did you get from this this result to this result before we're missing the middle context and i can go from a to z and then well give me some of the middle context for tiktok like was there a person or a conversation that really set it in motion where it was like oh once i talked to this fund or once I talked to Mr. Beast or whoever it was, where then it became its own self-sustaining thing with the flywheel in effect.

24:08Was there a single conversation like that or situation? I think there was a single conversation, obviously. There's lots of great people we had in our bid like Mr. Beast, but I think that there was no one inflection point that stood out more than the rest. I think that every conversation led to a half dozen new conversations. So it was pretty wild, right? I think, you know, that was a pretty ambitious bit, obviously for all intents and purposes and got nothing, nothing short of ambition. Now I want to go build the next, you know, a hundred billion dollar plus accounting software like platform.

24:40It's kind of my goal right now. Let me ask you this. Did you know, did you feel like I'm not going to get TikTok, but this is going to be really good for me because I'm going to meet all these people. It's going to be good name recognition. The secondary and tertiary effects of this situation is just going to be good for me? Or were you like, I'm freaking buying TikTok and you were pissed when you didn't get it or somewhere in between? I thought it'd be a chance to get it. So that was like my main goal is on winning that. Now I'd say like, I didn't really, a lot of people thought I was doing it for a publicity stunt.

25:11I really didn't care. And I actually prefer to be pretty, if you see how many like podcasts, everything else do, I'm pretty incognito as a general strategy. I don't want to self-promote for the sake of self-promoting, like if there's something to talk about, I'll talk about it, but otherwise that's not my, my MO honestly. So, but, but that said, I think like, obviously it's had those effects and met, met some amazing folks. Like the ones I mentioned earlier, but a ton of others that were in that, that bid that I have a ton of respect for, and we'll be doing lots of business with over the coming years, hopefully.

25:42And it was definitely not a bad outcome. I think, yeah, just met some amazing people and happy that they came up with a solution that's actually works well for, for everybody involved. And he said, they've got some great backers in that, that bid. So the rest of the year has been a blur. You've done multiple acquisitions since then. You're rounding out this thesis that you kind of created a year ago. Here's my question though, because I think sometimes an entrepreneur might listen to this and be like, oh, that's TikTok. I'm not buying TikTok, which is true. Only Jesse Tinsley and two other people are like in the conversation for buying TikTok.

26:14But the thing that I'm like most interested in and really impressed with is acquisition led growth is really hard. Obviously, organic growth is hard, but acquisition-led growth is really hard because you're buying other assets that already have a culture and an ethos. There's already just momentum going with the way that they're operating, and you've got to bring them in and change habits and reorient them and onboard. It's a lot. So when you're sitting here telling me$20 million last year, kind of a year and a half ago, ARR, to a$750 million valuation this year, or maybe it's ARR. I can't remember.

26:53But$750 million. $750 million would be amazing. It would be worth$10 million. Valuation. Valuation still. Like, how did you onboard that? I don't think people understand how hard it is to successfully onboard and integrate. what are you doing man like how do you do it there's a few things we built around like first principles we'll generally get like alignment like because cultural to point us to your point the most difficult part is the people right so like culture assimilation expectations for larger acquisitions we'll generally let that business be a standalone and then we'll have alignment from leadership top down and let that run somewhat independently but then build the products into one platform so that's the first thing is like look at the cultural alignment we'll pass on deals if they're too misaligned, because that's obviously going to cause a lot more issues and friction over the long term.

27:41Have you passed on deals? I can't believe you've actually passed on a deal. Have you actually said no to deals? I'm doing for the deal. Yeah. Like so many deals that you have no idea. Yeah, we see stuff from like, you know, biotech and med device, all things. Just things are completely out of that deal, right? We obviously pass on. I couldn't value that business. I tried, even if you were giving it to me for free, I have no idea how to run it. So step one, you stick with your buy box. Yeah, exactly. And there's a certain scale of scope we go for now. I think that's why I posted actually something went viral a few months ago.