MBA2626 Extended Interview: Rob Walling - How to Build and Sell Your Business without Regret

25:49I read all the books too. Every book you've named, plus the other five you read that we haven't named here. And I was always like, oh, the mechanics. I'm a very mechanical. I was a software developer. I'm left brain mechanics, mechanics, mechanics. I was so ill prepared for the catastrophic psychological toll that it took on me, that it took on my relationship with my wife, that it took on my relationship with my friends. I was just imploding the whole time thinking, I don't know who to talk to about this. And this is way harder than anyone has ever told me. And so as I got space from that, because I left that in 2018 and I worked for the company for a couple of years.

26:26And then my wife, who I co-wrote this, Sherry, Dr. Sherry Walling, is a clinical psychologist, but also a founder and executive coach. And she has coached dozens, if not 50, 60, 70 people through exits, through IPOs, through thinking about exits and not exiting through, you know, whatever. She started saying to me the same things over and over of like, people are not equipped for the mental strain that is coming. And it is harder than they think. And I kept saying, yeah, I have tiny seed founders who are exiting and they're feeling the same thing. And so where, what book should we, it was always, what book do you recommend?

26:59And it's like, well, obviously John Morillo's books. I love his books. And Before the Exit is great by Dan Andrews. But we found that there was a lot of thinking that we had that just wasn't out there. And we don't just want to say, be scared. It's hard. Good luck. Right. We want to say, be scared. It's hard. Here's everything we can tell you to try to backstop yourself with friends. family, co-founders, masterminds, and also just learnings, ways to think about it, exercises in the book of like how to ground yourself, what to do when this happens. We try to put as many quotes in, you know, there's the whole chapter of like the 3am what ifs.

27:34And it's like, what if my team gets screwed? What if this falls through? What if I'm selling and it's going to 10x from here? These are real quotes that we've heard from real entrepreneurs. And we want to level set that it is hard, but it's probably still worth doing. I want to just frame it a little bit because for those who are listening who've never been through an exit people don't realize why you're like why is this so emotional what are you talking about like well I'll just share a little bit of my story well when you're selling a business one you can't talk about this with a lot of people because of non confidentiality you can't talk about it with your team you can't talk about it with people outside the company it's even kind of risky talking to your spouse about it you know you just kind of you're conscious of the fact that it doesn't take much for a deal to fall through okay the other thing is is that you have like For me, I built a team that I work with.

28:19Some of the people that were on my team were there for eight years plus. I know that there's a good chance that their future is going to look different very soon. And I can't say anything. I can't talk to them about it. You're feeling like all of a sudden you're not on the same team anymore. You're now actually on the team of the acquirer, which reminds me of my teaching days when I went from being a teacher to becoming head of department. My colleagues were not the teachers anymore. My colleagues now were the principal and the vice principal and management, which is all of a sudden I got to change how I feel around them, which is really weird.

28:53It's a really strange situation when you guys been to war together. And then on top of all that, you have the accountants and the lawyers going through all the finances, trying to figure out how to make sure that you don't screw things up. Things are written properly to protect you in the future, whether it's IP or your likeness is another thing. Like for me, I was part of the brand. A lot of the videos had my face on it. So that whole rigmarole was needed to be sorted out. And then also like, you're about to get a lot of cash all of a sudden. What are you going to do with that? A lot of people don't think about the fact that I was one of those people.

29:26I didn't grow up with a lot of money. My parents are immigrants from Egypt. They came over. They struggled with finances all their life. They worked really hard, but they never got ahead of, you know, they never actually were wealthy. I would say we made enough money to live in a, I was the only brown kid in my high school, right? That was just the pinnacle of their wealth, right? But I say that because if you've never had money before, you don't know how to manage it. You can screw it up very easily. You know, we hear all the stories of the lottery. So I just wanted to paint that picture for a moment because a lot of people don't understand, like there's a lot of pressure, a lot of things happening.

29:55All of a sudden, it's just easier for you to be like, oh, I'd rather just continue to go through the grind and just work and hopefully everything works out. So you're actually transforming into something new and it's something that people don't talk about and I'd love to hear your thoughts on that. Yeah. So, you know, if you think about non-entrepreneurs, what are the biggest financial transactions in their life? Usually it's buying a car, selling a car, buying a house, selling a house. That's probably about it. Those are extremely standardized, especially in the U.S. I can't speak to every country, but there are just standard contracts for doing that.

30:27And obviously there's a, oh, should it be 2 % or 3 %? But it's like fill in the blank NAR, National Association of Realtors. And it's, that's it. Businesses, no. Everyone is like this custom this agonizing custom negotiation and you just don't know what the terms are and usually you need an advisor on your side to kind of help you otherwise i know you can either get taken advantage of because you're like i'll trust the other side or you're like me and you're super skeptical of everything and then you nitpick everything on the other side which was like six months of hell for me because i was like i don't trust anything they say oh that bullet i'm gonna i'm gonna and they're like rob seriously on these calls you have to stop questioning stuff because i was like for me as well this is the probably the biggest financial transaction of my life certainly up till that point and i grew up solidly working class my parents never had money more than just then you know the next month of living or whatever and so for me i was like no this is the i've spent my entire adult career basically culminating to this point so there's a tremendous amount of pressure it's easy to screw it up it's easy to screw it up and that is where it can get scary and the life-changing nature of it you know i've seen between sherry and i we've seen entrepreneurs get a huge bucket of money in and they either there's a spectrum they either are they've been cheap their whole life that was me and they're still cheap and it's like bro you have insert million ten million dollars in your bank account now you need to just relax and get the guacamole on your burrito at chipotle you really need to just do that like buy the shirt that you do you know it's like well i've never bought a hundred dollar shirt yeah like do something right like something you may you don't need to buy a porsche tomorrow but like ease up because you have earned this and over time like you need to enjoy it a bit and then on the other side unfortunately we have seen folks similar it's like a 10 million dollars in the bank three four years later they have like two million dollars in the bank and they they thought that 10 million was infinity million and neither of those is the case it's trying to how do you kind of have a sense of money because like you said people who win the lottery wind up usually being less happy they don't know how to deal with that money a lot of entrepreneurs don't either and so we do talk about it in the book but obviously there's financial planners and that you know there's there's other things out there but um you don't want to work five ten fifteen years for something and then basically piss it away but either be unhappy for one reason or another be unhappy because you don't want to spend any of it or be unhappy because you spend too much of it so i um go to a lot of conferences i like being part of masterminds things like that and sometimes in my circle are people that they're not sass founders they have a business that they're coaches they're course creators they write books they basically sell their knowledge for pretty good profit like their profit margins are huge and the more i have conversations with them the more i hear the same thing so what's the end goal here and they're just like oh i'm just gonna earn x amount of money and then I'm going to shut it down.

33:21I'm going to shut it down and just go on retirement and travel the world. And I'm like, why would you shut that down? Why wouldn't you sell it? Why wouldn't you license it? Why wouldn't you do... There's all these other options I'm thinking of because I've been in the SaaS world and understand that that's the reason why most people start SaaS businesses is to create an asset that they can sell. And they weren't exposed to that kind of methodology or thinking, and they just can't think of a way of packaging this into a sellable asset. What advice would you give somebody who's thinking about just literally burning their business down to the ground before it's done and dusted?

33:57Yeah, I mean, most businesses are worth something. That's the thing that I don't think most people realize is even like an agency, a consulting firm, or even my brother. So my brother runs electrical construction, like a contractor out in the Bay Area. And even that is worth, I forget what he told me what it's worth, but it's like, it's a very straightforward formula. And it's like one times their backlog for the next 12 months, which backlog, right, is how many deals you've signed or whatever, how many is coming. And so it's not, this is not TAS. This is not 5X, you're trailing ARR, but it's worth something because the backlog, maybe the backlog on a$10 million business construction firm is a million or 2 million.

34:36Like there's something there, you know? So that's the thing I'd say is like, Let's level set that businesses are worth something because, as you said, there's intellectual property. There is client and customer trust. There's a brand. There's something. Strategic partnerships, yeah. All of that, right? Now, again, it may not be worth 5 or 10x, blah, but it's usually worth something. The other thing to think about is, as we talked about earlier, everyone sells eventually. It is what happens. And everyone leaves their business eventually. How about that? You know, you can sell or you can shut it down.

35:12But if you've developed any type of, especially if you're a coach or an author, someone who's creating courses, like there is intellectual property there. Even if you're at the forefront of it and your name is on it, there is still some value to be created there. So if you have frameworks or other things that you are literally going to just bail on, there probably were something to someone, you know, someone who has a course business. And so it's going to depend on a lot of things. But I hate to see someone walk away from an asset that is potentially worth$50 ,000 or$100 ,000 or a million dollars.

35:47Yeah, totally. And the way I kind of look at it is that you have competitors, right? We all have competitors. And a lot of sales are just strategic sales or the competitor would love to absorb your customers, sell them their own products, sell them their own. Like, I mean, the cost to acquire a customer now, even in the course world is$25 plus,$30 plus,$100 plus. If they can just acquire your list of 100 ,000 people, that's at least worth, you know, a quarter million bucks or something. You know, like just acquiring the database where we don't realize you actually poured a lot of money into acquiring these leads.

36:24So that kind of first thing came to mind when I was having these conversations. The other thing that comes to mind is wouldn't you want your legacy to continue? your work to continue to live on. And that's, that's ultimately the kind of the thing that tipped the scales for us at Webinar Ninja was like, we knew that this thing would be bigger and better if we got acquired. And it makes me feel kind of proud that my baby has got a, you know, a good home and everything's going to be all right. And, and the things that we created, it's funny because I have a greater appreciation for Webinar Ninja now that I've sold it.

36:58Like, I look at that product, I'm like, this thing is incredible. I can't believe that we created this thing. And then obviously the company changes and all that kind of stuff. But I think that there's something that people should consider is like, how do you let your legacy live on? Yeah, I feel that way about Drip, actually. I still use it almost every day. And it's email service provider, marketing automation for folks who aren't aware. But we use it to run all my businesses. And I'm like, gosh, this piece of software is great. and it's they've changed the interface and stuff but it is fascinating and you know what omar you will you're not the ceo of webinar ninja anymore but you and nicole will always be the founders yeah always that never gets taken away from you it's a really fascinating thing and if it lives on for five ten fifteen years people still come to me where was i i all i'll do interviews with tiny seed or i'll do podcast interviews and people are like oh hey rob he's this guy who kind of does stuff.

37:56And then they wait, you started drip. I love drip. And I'm just like, that's what I'm known for. Like of all the things I've known for, it was a software product that I sold 10 years ago. But like, it really does these things if they keep going can can kind of transcend you in a pretty delightful way. I want to talk about that you said you sell drip. Did you have something lined up afterwards? Did you know what you're going to be working on? Or did you say I'm going to go to Bali for six months and pick up surfing? The reason why I want to bring this up is because Because when I was preparing for this interview, I don't know if the algorithm is so credibly smart, but I got fed this post on Instagram about the Loom founder who just sold this company for$975 million.

38:33And he wrote this post, and I'm going to read it off my screen here. It says, I'm rich and I have no idea what to do with my life. Life has been a haze this last year. After selling my company, I find myself totally in an unrelatable position of never having to work again. Everything feels like a side quest, but not in an inspiring way. I don't have the same base desires driving me to make money or to gain status. I have infinite freedom, yet I don't know what to do with it. And honestly, I'm not that optimistic about life. And it's very easy to read this post and be like, whoa to me, give me the$975 million, I'll show you what to do with your life.

39:10First world problems, all that is a disclaimer, we understand that. But this is a reality. I think this is applicable for both men and women, But I think especially men who perceive themselves as a provider, as somebody who once that kind of problem gets solved permanently, it's like, OK, so are you then if you don't work hard and and create good in the world and and provide for what are you going to do now? What's your role? So I want to ask you, what was your experience like when you sold drip? What was your kind of next step and how you were thinking about it? so back when i was an electrician working running pipe and wire in commercial construction sites and i was just bemoaning the fact that it sucked that's what my brother still does my dad did it for 42 years and i was like i don't want to do this anymore i kept telling myself if only i had a job as a software developer working a cushy office job then i'd be happy to nights and weekends library, teaching myself, reteaching myself how to code, Perl, PHP, HTML.

40:12Then I got a job as a software developer. And you know what? I was so happy for about eight months. And then I was bored. And then I said, if only I had my own revenue stream and I was a consultant or a freelancer, and I was in control. And you know what? I did that. And guess how long I was happy? Six to 12 months. Then if only I had products, you can see where I'm going. If only I had a SaaS, If only I had a SaaS doing$10 ,000 a month. If only I had a SaaS doing$100 ,000 a month. If only I sold for each of these things. It's called the arrival fallacy. And you keep saying, once I get X, then I will have arrived and then I'll be happy.

40:49And the fact is, you will be happy for about six months. So whether you go to Bali, as you said, whether you take 10 months off, which I did when my second kid was born because I happened to have the luxury, or whether you take complete six months. I retired for six months in 2018. but I knew by that I was smart enough by that time I had done this enough that I knew that it was a fallacy so when I sold when we sold drip because I had a co-founder I wasn't sure what I was going to do next but I knew for sure that I was going to do something interesting because Omar we're entrepreneurs we are people who figure this shit out like we work hard we have these minds that need to learn we need to go and expand and do something and you'll figure it out and so I I heard the Loom guy's podcast on Money Wise.

41:34I read that post. I saw it as well. He's going to figure it out. I know he's at a troffesaro right now. I have so much confidence. That guy is smart. You don't accidentally sell a business. That doesn't, it's not luck, dog. It's a billion bucks, yeah. No. He is smart. He has skills. He worked hard. He will figure something out. He happens to be in a troffesaro. He'll figure it out. I knew by this point, I was like 41 maybe when I sold. and I knew I don't know what I'm doing next, but I'm not scared of what I'm going to do next. And I figured I'm going to give it time. I'm going to let it breathe.

42:05I'm going to give myself six to 12 months of silence, stillness, no calendar, no schedule. I played my guitar. I revisited a bunch of hobbies that I had left behind. I started playing D &D again, tabletop games, hung out with my kids, played the guitar. I started writing songs again, none of which were any good, but that doesn't matter. It was just something to do. And on the side for 10 years, I had already been doing a podcast called Startup for the Rest of Us. And I had already been hosting this conference once, twice a year. And those things were kind of percolating in the background. I didn't know.

42:35I thought I might sell those. I actually got a seven-figure offer to sell them, to sell both MicroConf and my podcast and toyed with the idea for a while, me and a co-founder. And then I just kind of let it go. And this is the thing. You know, when you were in high school or college and you want a boyfriend or girlfriend and you're so stressed about it and you're just like scarcity, scarcity, scarcity and it doesn't happen. And then the moment you're like, you know what, forget about it. And then suddenly like there's more people there and it just happens, right? I'm not a big believer in fate or the universe or whatever, but it just is.

43:06There's something about the way you carry yourself, the way you feel. I think if you're like, what's next, what's next, what's next, what's next, it's not gonna happen. It never comes. Nope, give it space, give it time. Listen to some podcasts, listen to audio books, like give it space and let it breathe, especially if you have enough money that you can take some time off. You become a new person. You transform from the entrepreneur, the grinding. I need money. I need to change my life. Good. Done. That's all gone now. So you now need to reinvent. You are coming out of a chrysalis, right? You're becoming the butterfly.

43:36So now you're a butterfly. What does a butterfly look for you, right? So that's what happened with me, and I did in the end. I almost bought the number two tabletop gaming website in the world, started negotiating with them, and then I thought, there's no margin. This is a terrible business. I love tabletop games, but I do not want to operate. And eventually I was like, I've been doing startups and writing books and, you know, all this basically most of my adult life. And I was like, that's the rest of, for me, I think it's the rest of my adult career at this point. That is crazy, Rob. We have so many parallels in our history and our career.

44:07And the startup that had a desk across from me at the startup space that we were working out of in Women are Ninja, they were called FableTop. And it was a tabletop game with stories that changed every time you played and all that kind of stuff. I used to always think about, that sounds fun to play, but not fun to run as a business. I'm the same way. I got to use my hands? Oh, no. Right. All that stuff. One of the things that we kind of talked offline a couple of times about that I want to get into that you start thinking about what possibilities you can do, you know what businesses you want to start after your your exit one of the things i grew up is with like hard work as a badge like you got to work hard to get anything you start to realize that hard work is one form of leverage but there's so many other forms of leverage especially when you have some capital now you don't have to do it the hard way anymore right like you have to grind it out when you bootstrapping we bootstrap webinar ninja so so that that that totally makes sense so when when when you're thinking about that next thing there's that feeling of like one I'm tired.

45:14I don't know if I can do 10 more years of what I did. I want to do it differently. I want to do it smarter. I vividly, when I look back at my days at Webinar Ninja, I think of things like waking up at 2 a.m. to do a stand-up because it's just my turn to wake up at 2 a.m. because my team is around the world. I think about, you know, getting paid one of the lowest salaries out of the whole team because I want to get my devs that are highly qualified and super competitive. I think about waking up in the morning and getting an email learning that one of my team members got poached from one of my friends, right?

45:45All that kind of stuff, right? And I think, how do I do this again, but not so hard, not so gut-wrenching? And I feel like the reason why you become stronger in entrepreneurship is that you endure a lot of heartbreak. What advice you'd give somebody who's exited their company, they have a bit of capital now, they're thinking they have a pretty good idea to start something new, but they don't want to go through the fire again? It's really tough. And it is something that is common. It's behind closed doors of founders who've exited for a lot of money of them saying, I want to have an impact. I want to do really interesting things, but I don't want to go through the pain.

46:20And I don't think you can have both. You have to have a little bit of pain, a little bit of pain. Not as much pain as the first time, but a little bit of pain. And usually one of the keys that I see is number one, giving it space, giving yourself six to 12 months to kind of let everything settle and then think about what do I really want to do again? Because the gut instinct is, well, I'm a SaaS founder or I'm an agency founder. I'm going to start another SaaS or another agency. That may not be the right choice. And in fact, a lot of cases, why do that again? If you've learned what you wanted to learn from doing those things, why would you do them again?

46:55You know, so that's the first step is really kind of trying to sort out what it, where you're being pulled to, given that you are a new human now with new resources, right? The other thing to think about is it does depend, if you sell for, let's say you sell for like$3 million. So it's not never have to, in the US, it's not never have to work again money if you live in a major city. $3 million if you have a family or whatever, you can't do it. Versus if you sold for$50 million. You do have to take into account, what resources do I have? If you have$50 million, you can kind of do whatever you want and you can just sell funding.

47:27You can be like, cool, I'm going to drop$4 million into a business bank account. and I'm basically my own venture capitalist at this point. So you do have some luxuries there, but you can still get sloppy, right? At 3 million, you have to think about, do I want to maybe put one-tenth of my net worth, 300 ,000 in, I'm going to angel invest and then I'm going to raise from other people now that I'm a successful founder? Like just because you have 3 million in the bank doesn't mean you should put a million into your own company, right? So there's a thing about kind of having some risk involved that you're putting time and money in, but also still if you have a crazy idea and you can't convince anyone else as a second-time founder to invest in you depending on the type of business that's probably not a good sign like that you know what i mean like just because we the case in point sherry and i know someone who exited for i think they took 40 million away just themselves after the exit and on their next business they didn't they're like i'm not asking anyone for permission i'm not raising any money it was a really bad idea and they put like five or ten grand of their i'm sorry five or ten million of their own money and because no one was telling them no right they didn't sometimes the market forces of telling you no is actually um a good thing but the other thing is if i'm saying get some money in the bank money in the bank is in the business bank account always makes it easier yep in your personal life money saves you hours because you can hire someone to do your dry cleaning mow your lawn shovel your snow where i am in cook your meals yeah all these things dry cleaning in your personal life money saves you hours in business money saves you years it gets you there faster 300 000 i mean tell me when you start a webinar ninja if you and nicole had 300 grand 500 grand a million right i bootstrapped all i've started six companies five of them are bootstrapped the only one that's not is this venture fund i know the difference that money would have made even 100 grand 200 grand 300 grand because you could have paid yourself a little more you could have hired someone just a little more senior that's the way to think now if you're going to do this again is the biggest difference between my current effort which is tiny seed and microconf is that we raised a venture fund and therefore we have you know a seven figure multi-million dollar budget each year to spend so the first thing i did was i went out and hired a senior operator someone who i never could have afforded if i was bootstrapped it's tracy osborne you've met her right this is great and she's great and i never could have afforded boarded her if I was bootstrapped.

49:50And so she takes all the, all the pain, not all the pain, 90 % of the pain that I would experience building tiny seat is taken off my plate because she operates. So that is really, you know, it took me a long time to get there, but that's how I would think about is if you really want to do it and you want to do hard things, be mindful of how much money you actually have to invest. Do you need outside? Do you need your own, but then hire senior smart operators that can get stuff done and you, you know, are pushing kind of the vision forward. I want to talk about tiny seat in a moment, but I want to talk about, I just want to mention if you're thinking about starting a sas business if you are in the early stages of sas business if you're in the trenches right now growing i cannot recommend microconf highly enough i've been to microconf in vegas in 2019 i had the pleasure of speaking in the grove track and then just recently in uh in croatio when we went to dubrovnik and and microconf europe it's the best conference forget about sas in my opinion best conference to meet very nice interesting people Every time I go to this conference, I'm just shocked at how you're able to curate such humble, beautiful, thought-provoking, polite, not brash.

50:57Usually you go to these business conferences and everybody's like, you know, reciting their CV, right? They're constantly talking about their accolades. It was like the opposite there. I had to be like, wait a minute, hold on. How much do you make every year? That's crazy. You're amazing. What are you talking about? Why aren't you talking a little louder in this conversation, right? It's just incredible, humble, beautiful human being. So I just want to kind of put that out there for those who are listening and thinking about getting into SaaS. MicroConf is a conference that you want to invest in.

51:22It's a huge investment. When I say huge, not in terms of it's expensive, but it's a huge return on investment because you're going to meet some people that are doing incredible things that are just willing to be your friend, which is not normal in business. Most people that are doing incredible things are busy and they just are very selective. And I found that, you know, I got to meet some of my heroes and become friends with throughout the years. So it's definitely a conference that you've built that is incredible. And I want to just touch on that before I get into tiny seed. How did you do that?

51:51How did you create that vibe? Number one, thank you very much because I'm super blushing right now, but I really appreciate that. I think, well, I think like everything, there was a little luck involved. I also think it came from blogging and really podcasting. so the podcast is i had a co-host and then now i'm solo with it but it's my personality and the people who gravitate to my personality are not they say aggressive like show off like because i try not to be that and i think if you're aggressive and show off maybe you go whatever towards venture capital there's certain podcasts out there that are like that you know and that are really in your face and i think that's probably it is the people that gravitate towards it um really come from that And then the tone is set.

52:38And in fact, we did have, there were a few years at MicroConf where we had kind of, I've said this openly. So it was like Silicon Valley bros is all, I'll just use that phrase. And they showed up as a group and they were obnoxious. And I was like, these guys are assholes. And they came and they didn't fit in at all. And no one liked them. And they never came back. And I was like, you know, we've created this culture of like, hey, if you're here in this room, you belong here. First of all, like there's no like exclusion. Unless you're a Silicon Valley bro and you're trying to exclude everyone. And that's the thing.

53:07They were really doing the whole, what do you call it, alpha, or I'm going to neg everyone, be negative, of like, look how great I am. But they would do, it was funny. They would come in, and they hadn't actually done that much. There was a guy who'd written a book and a guy who kind of had a failed startup and stuff, and they came to MicroConf acting like they were big shots. And quickly, they're next to some super humble person, maybe like yourself, who's like, yeah, I'm doing$10 million a year with a SaaS, and I have 70 % net margins. And it just shocked them, right? So I think there's it's just been the culture.

53:38I think I witnessed some of that. It wasn't somebody who's super brash, but somebody who never met the person behind the company. I was having lunch and next to me was old friend Chris from Wistia, Chris Savage founded Wistia. And he didn't know who Chris Savage was, but he knows Wistia. And he sat down and he's like, you know, talking about, you know, his growth trajectory. And he's not trying to be, you know, a jerk or anything, but he was just kind of asking, where are you at in your business? and and chris is super humble and he's not going to be like you know sharing you know the incredible revenue they're doing but after a few minutes he was like so what's the name of the company he's like oh it's it's a video uh you know hosting platform called wistia and he's like oh and everything just changes his face and it's just like but the fact that chris didn't like lead with that and this is the type of people that you bring into the table and that was great and and i think that because the majority of the people that are there are not boasting about every single accolade.

54:31And I feel like I met some really interesting, good people that became my friends and became mentors from afar, whether it was Chris or Sal from Gumroad or people that are just doing incredible businesses, but just willing to have a conversation over coffee, which was something that you don't really get a lot of at these conferences. So I think that that's huge. And I think that if anybody's interested, just check out microconf.com. I want to talk about Tiny Seed and I want to talk about two different angles. Why did you start it from a creative expression point of view? But also, why did you decide to do it the way you did it in terms of building the next level of your wealth?

55:10You know, obviously, now you're leveraging other people's capital, other people's ideas, other people's intellectual property, the companies, other people's manpower, to be able to build this fund and be able to run this accelerator and also leverage your own experience in your own way to help these great founders and also works perfectly with microconf you know so why did you decide to like start this accelerator and why did you decide to do it from a financial point of view yeah so for folks yeah who are listening like y combinator is the first startup accelerator and they invest and then they also coach and that was a different thing a new thing in 2005 or 6 when yc started and so tiny seed is the first startup accelerator for bootstrap sass founders basically um it's for b2b sass founders who don't necessarily want to go on that i need to be a hundred million a billion dollar company where they can maybe sell for 20 or 30 or 40 million and like it's life-changing money generational wealth for them but also provides a return for for tiny seed because if you raise money from traditional venture or from yc they really do want you to go after the billion dollar outcome that's kind of what they need in order to make the model work i mean the short answer is the reason that i started it is i after i sold drip I was doing some angel investments in bootstrapped B2B SaaS founders, B2B SaaS companies, I should say, because they're just super profitable or worth a lot of big revenue multiple.

56:32And they're super capital efficient, so they don't need to raise a ton of money to get there. Unlike Google back in the day, which needed all this hardware, Facebook, which needed a lot of staff. There's all these things that you think of Uber and Instacart and DoorDat. They're these two-sided marketplaces. They're just very intensive. but to start a SaaS company and get it to 5 million, 10 million, 15 million, it's not that expensive. Like you can bootstrap these businesses. DoorDash is probably an unbootstrappable business. I don't think you could possibly bootstrap Facebook and Google. Like I just don't think you could do it.

57:03So I started writing angel checks, but eventually it's like, well, I have a chunk of my wealth tied up in SaaS companies and people kept approaching me like, Hey, I'd love a check. And I said, you know what? Someone should raise a fund for that. It was kind of the thing of like, someone should invest in B2B, bootstrap B2B SaaS. And people started telling me that. And I was like, yeah, someone should go do that. And then eventually I realized, oh, it's probably me, isn't it? I really didn't want to raise a fund. I had never raised funding in my life. Didn't want to get involved. Seemed complicated, you know.

57:32Then I found a co-founder, my co-founder, Anar Volset, who you met in Dubrovnik. He's the reason that, like, he and I coming together, he probably couldn't have done it on his own because he doesn't have the, it was the audience and the deal flow on them. and I really wouldn't have done it on my own because I didn't want to deal with it. And so he and I coming together is what happened. And we didn't know if it would work, man. I mean, it's a two-sided marketplace. Like you have to convince investors, hey, we're kind of starting this new thing. Give us some money. Our first fund was 5 million.

58:00The second one was 27 million. Like it got big quick. And then we have to say, all right, founders, bootstrap SaaS founders, take money and education and mentorship from us in exchange for equity, which bootstrappers are notoriously tight with. So we didn't know if the model would work, but we proved it out. Now we funded 192 companies. We just made another 14 offers. So we'll be over 200 companies just within Tiny Seed. And we're on our like 14th batch. We fund in batches. Been going for about six years. And then to answer your second question, which is like, why did I decide to do it in terms of wealth?

58:33I tell you what, I couldn't have done it. Like it is a long, I couldn't have done it without money in the bank because it is a long game. Like we still haven't returned. And this is how venture works. We still haven't returned our first fund. You know, like you have to pay back. Let's say you raise 5 million bucks, right? And you invest it. You have to invest it in 20, 30, 40 companies. As returns come in from exits and stuff, you return 5 million first to the investors. Then everything above that 5 million, tiny seed gets 20%. The investors get 80%. That's how it works. That's 2 in 20. That's how venture works.

59:08we are six years in and we still have yet to see a dime of return but the early we're doing really well like we're in the top 10 of venture funds that started in 2019 so right 90 to 100 is where we are like really really good and yet we still haven't returned the entire fund that's just how venture works it takes a long time so that to me it's a long game of like oh over the next five years we'll see the returns from fund one with no additional work the work's already been put in you know what i mean like we mentored them came along we'll have content there yeah yep it's all there and then it's not something like if if someone was like i want to start a venture fund or i want to start an accelerator i'd say get enough money in the bank that you kind of never have to work again and then do it because if i was trying i mean i take a salary below market so do so does anar that's really all we take out of tiny seek you know the the only other money coming in is more from like microconf which sells ticket you know it sells info products and then i sell books I actually do quite well with self-publishing.

1:00:06So Tiny Seed to me is a big bet on the future. And it really is asymmetric. It's asymmetric upside, dude. If Tiny Seed as it works, I'm betting it'll work, but it still is an if. If it works, it can be millions, tens of millions over the next five, 10, 20 years for us. But it's not something I would have wanted to do without the success that I've already had. What was it like asking for money from your friends and people in your network? it was kind of scary at first it's gotten so much easier because now we've proven it it wasn't just asking for the money it was saying put money in this fund for this idea we're going to do y combinator for bootstrappers and they would say will that even work i don't know but i'm gonna try it this is much like being the entrepreneur of just like i'm gonna take a flyer and build the product product business company like the product is this thing that hopefully you know these terms that hopefully founders will accept it was a little nerve-wracking at first but what i also realized you know you have to be an accredited investor which means you have to have that worth of a million bucks or more people giving us 25 grand 50 grand it was always like only give us what you're willing to lose what you're able to lose because that may happen just like every angel check i've ever written my wife and i have 20 personal angel investments in addition to the you know 192 tiny seed investments and it was always like once i write that check i'm prepared for it to go to zero and anything you know anything above that is great like i literally write it off our net worth you know and so when wp engine was our first angel investment so when that check came it was like oh boy that that went from zero to a lot real quick you know so it was to answer your question it was stressful but i think you get used to it and people realize they only people giving you money from what i've seen they only get angry if you like piss it away or make stupid decisions or don't go all in.

1:01:55But like we've gone all in and we've funded good companies and we've built a great org and we've built a great brand. And so if it doesn't work, it's kind of like, it's not for lack of trying. That's what I tell founders I invest in or tiny seed invest in, because some of them have failed, right? There's like of 192 companies, I think we've had like five shut down, very small number. And they're kind of devastated. And someone will do a call with me and be like, I'm so sorry. And it's like, sorry, like you put four years of your life into this and you owned 90 % of the equity, I'm sorry for you.

1:02:26You know, like you're going to, like that's four years of your life. Obviously I wanted it to work out, but you didn't do anything wrong. It's just what happens, you know? Right. That's a good one. You get a lot of applications for Tiny Seed, hundreds and hundreds. Every time you guys open up, you go through interviews. When it comes to finding that company, approving that, what are the things you look for when it comes to, okay, this has the potential to be a great investment, but also the potential to kind of be a sellable asset at some point. We look a lot, the first passes at the numbers. And since we only did, this is the luxury of basically saying B2B SaaS, that's it.

1:03:01So it's SaaS, software as a service that sells to other businesses. I can look, you can give me your churn, your average revenue per customer, your general industry, and I can tell you that's a pretty good business or not and give me the last six months of mrr growth and just whatever like you get a sense real quick because we've seen literally thousands and thousands of them now um so that's the first thing is kind of a numbers check and an industry check the other thing though because then then we do interviews and and what's funny is there's an application and then there's a kind of a pre-interview and then there's 20 minutes where Me, my co-founder, A &R, and our program directors are on the call.

1:03:45And we get 20 minutes. And then we decide, do we offer this person or these founders between$120 ,000 and$250 ,000? That's it. We got 20 minutes. If we really have questions, we could reach out to them. But when we do 35 interviews in a week, we kind of need to make that mistake. We do. And so the entire interview is just, I have your application here. and I'm just trying to figure out where the yellow flags are. What's going to break? Did you screw up your cap table? Are the co-founders on the call talking over each other? Are the co-founders super low energy? And when I give them feedback, hey, I'll often say like, your pricing's a little off to me.

1:04:26In my experience, I would tweak this, this, that. And I just listen for what they say. And some of them are like, you know what? We already knew that. We're kind of thinking about that. Or that's amazing feedback. We'd totally be open to that. Or, you know what? Our customers will never do that. And our competitors are, you know, it's reason after reason. Yep. So it's coachability versus not. And then there's a little bit of, you know, do I want to work with this person for a year? Because our accelerator is a year long. And it is evaluating the founders as much as it is the business itself, I'll admit.

1:04:59And we do look out. Founders' attitude. Are they going to take action? Are they going to get stuff done quickly? Because they don't need to be right all the time. But if you don't do anything, you're never going to be right. That's a good point. I'm looking back at my own experience, my own history. And yeah, I think that that's spot on. The more open I was to feedback, the more I was willing to kind of explore different pieces of advice. You know, we hired Dan Martell as our SaaS coach when we were trying to get to the point where we can be acquired. And I could think those things like, uh, I don't know, that's going to ruffle some feathers.

1:05:33But my response was always kind of like, OK, why did I hire this guy again? Because I I admitted that I can't get it to where I wanted to go by myself. I need their help. So that's good advice for those who are listening. Like even if you're just getting advice from a mentor or friend or you're watching a video on YouTube and it's confronting, it's really confronting sometimes when it when the advice is telling you you're doing something wrong and it's like, oh, but I'm working so hard and we conflate working hard with decision making because you could work hard as all you want and make the wrong few decisions.

1:06:02And it's just really throws your whole business down the wrong path. You've written many books and I know anybody who has been on the show that has written a book, they're like, okay, this is my last book. Writing a book is a lot of work. I don't want to do this anymore. But your latest book, you coauthored with your wife, Cheryl, Dr. Cheryl. And tell me a little bit of that experience of writing a book with your significant other. So this is the second book we've written together. This one was a more pleasant experience. The first one was a lot of conflict. We are very different. I'm very left brain.

1:06:39She's very right brain. She is a psychologist. I'm a developer. And we just everything we do professionally, we go about it in different ways. And they're both probably right. We're both quite successful. But trying to mesh that into the first book, it's called The Entrepreneur's Guide to Keeping Your Shit Together, How to Run Your Business Without Letting It Run You. It's a good book, but man, it took a lot out of us. Exit Strategy was much better. We hired a writing coach slash mediator, not a mediator, but we hired someone who basically would kind of take all of our thoughts that we had together and Sherry and I would record these together.

1:07:16So we'd almost do it like a podcast, like a private podcast. We'd outline all the chapters, like here's the whole outline. Oh, it's 14 chapters. and then each chapter detailed outline of what we thought we had to cover. We'd hit record in Zoom and then she and I would talk back and forth. We're both podcasters anyways. Like I have 770 episodes. She has three or 400 of hers. So we're good talkers. And we would keep in mind, this is going to be a book. Like it's not going to be, we're not going to speak like it's prose, but we do want to organize it so you can kind of go through it. And this one was much easier because it was conversation.

1:07:52She would say something. I would give an example. It, we figured out, I'll just say, we figured out a way to work together better on this one. And then the writing coach would take it and she would ghost write bits of it, right? Take it, make it more into prose, give us a first draft, and then we would go through and edit it. So this book is far better because we collaborated on it. Now, my book, right? But this is my fifth book. The fourth book is called the SAS Playbook. That is like all me. And it's very left-brained and it's very compact and like i wouldn't have want i would have ground a co-author would not worked because i knew what i wanted exactly from the day one you know like i want it to be this is that nice but exit strategy needed this touch i think if i'd written it my on my own it would have been too dense not enough examples not enough quotes not enough emotion frankly and then i think if sherry had written it on her own it would have been whatever it would have been too much of that maybe i you know i don't know like we hold each other it really is nice rob no yeah i know i know but you know that thing of like diverse opinions and we are so i mean when i was reading it i was like oh this is cheryl talking right now i get it yeah like you know like because i know you so well like this is not rob right yeah right this part is cheryl throwing in the the sprinkles that we need to hear when it comes to preparing yourself emotionally uh i actually think this book is a great book for anybody to read, even if they're not even entertaining the idea of selling.

1:09:19It's kind of like you should know this stuff before you even think about it, because it might even inform your decision on if you want to sell or if you want to, you know, ride into the sunset or it, you know, for me, I wish I had this book beforehand because it would actually help me mentally prepare for what is about to happen, because there's a lot happening. Like when you're selling, like we mentioned, like you're dealing with the drama of it, all the stakes of it, You're also running your business, trying to make sure it continues to grow as you're going through the negotiation. And you're also thinking about the future, but you also don't want to think too much in the future because it's not done yet.

1:09:55And all this stuff is happening. You're spinning all these plates. So this book kind of would help people just ground them to be like, OK, listen, you know, these are things are going to go through emotionally. This is what's going to happen. This is what you're going to think about. These are these are the challenges. And this is why it's challenging. Like this is what I found helpful was just like, OK, it's not just me. I'm not a weirdo here. I'm not like broken. This is a logical reason why this is hard. Would you sell another business? Yeah, I would because I'm not going to ride my businesses until I die.

1:10:25That's doing them a disservice. And it would be much easier this time. I know it would. And that's not like, oh, it's because it's second time bias. I'm just more prepared to do it. And whether it was microconf or whether it's TinySeed, I don't plan to start another business ever. I never say never, but it's like, I think I'm done. I think I'm ready to tap out. Like, these are legacy businesses for me that I can run. Like SaaS companies you start and it's like, do I really want to run this SaaS company in 20 years? Most of the time, not. But like, MicroConf and TinySeed are like communities. You know, they can, I think they can survive another.

1:11:04We've already, I mean, MicroConf has been around for 15 years now. Do I think it can go another 20? I totally do. And I don't think I need to get the home of it. I mean, if you survive COVID, that's amazing. I know. For real. Yeah, it almost did a sin. So yeah, I would sell, although not on my radar, you know, at all at this point, because I'm loving what I'm doing. But I'd imagine the opportunity might I just I don't think anyone should ever say they, they won't sell. That's just a, you don't turn your mind off to it, you know, I love it. Well, I just want to close off by saying you mentioned, you know, the crowd that you bring into in micro confeder conferences, people that are approachable, humble, and you're spot on you model that behavior.

1:11:41As a person that I've met several times, spent some time, break bread together, talked about work, life, everything. And it's crazy that it's the first time I'm having you on the podcast, but I feel like this conversation was so healthy because I know I can trust Rob. I know that he is coming from a good place. I know that he's got my back. And even if I am not ready to kind of, you know, explore a certain area or not, not ready to kind of maybe do something right now with my business in the future or whatever. And right now I'm just focused on the podcast and doing things. I know that like in the future, if I ever need Rob, he's got my back.

1:12:17And that is not so common in our world, especially in a world that things are changing very quickly. People are looking out for themselves, you know, people have political views and all that kind of stuff that makes it all messy. But I just want to say that it's not easy to find people like that. I think that's your number one like asset is like you as a person is somebody that you can trust that I know that you know, you're no bullshit and you can, you can, you stand on what you say. Thanks, man. That means a lot. I really appreciate it. Love that conversation with Rob Walling. I meant every word, every complimentary word that I mentioned in that episode, go out there and buy this book because this is really, really worth checking out exit strategy to pick it up.

1:13:00Just go to exit strategy book.com really well worth the read, but also really worth the reread as you progress in your business. Also, I am not joking. If you are in SaaS, if you are in software, or you want to get into software, buy tickets to MicroConf. It's the best conference I've been to in the industry. Really amazing people. I love attending. I love speaking there. I think that he pulls an amazing event together. So go to microconf.com and see if you can grab some tickets to the next one, or at least get on the waiting list. if you want to learn more from rob walling check out rob walling.com that's rob rob w-a-l-l-i-n-g dot com there you can find links to all his books the podcast the youtube channel so you can continue your journey learning from rob thanks rob for your time really appreciate it and if you enjoyed today's episode if you got something out of it share it with a friend don't keep it to yourself let other people know that you're thinking of them and you have their best interest in mind I'll check you in the next one.

1:14:03Take care.