Episode of My First Million with Sam Parr and Shaan Puri.
Transcript
Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.
Kind: captions Language: en [Music] this one comes from dylan dylan asks how do you negotiate the value of the company you’re selling so how did you come up with the price how did you get to a price with you with your company when you sold it i made a huge mistake i made a classic mistake i said the number first i said these companies typically sell for blank x and blank x and of course the first offer they asked you like what’s your what are your expectations or what’s a brain what do you what price would you be happy with what are they how do they ask it i don’t even know if they asked it but i said oh you know i think i said like look like it’s i’m not i said i’m not gonna mess around like so these companies typically sell for blank to blank so if you’re in the market let me know and the first offer was the low number of that and last offer was it the high number or somewhere in the middle in the well so it was in the middle but like the thing is is that when we sold the company the hubspot stock was 350 and basically a week later it was like you could look it up it was like 550 and then like three months after that it was like 850 right so like it changed the sale price was one thing but it pretty much changed quickly but it was like right in the middle of that number but um i made a huge mistake i should not have done that and as soon as i said that i was like [ ] [ ] [ ] and you say you get an email did i say it an email i think you said i think i don’t know it sounds like the story you’re sending it you saying you said it in an email i don’t remember uh no i think i said it on the phone and there’s the woman who i’m now friends with who was doing the deal [ ] lashed onto that like a shark and she told and i knew it and afterwards i i i’m friends with her now she doesn’t even work out spot and i’m like you you got me a badge like yeah like you said the number and the great thing to do is after you negotiate a deal go talk to the person once you’re once your pals and you’re on the same team say look we’re on the same team for sure uh but man negotiating that was so you know confusing for me uh what did i do poorly you know like what would you have what do you think you would have gone up to make me hate myself what would you what do you think you could have gone up to and you just ask a bunch of questions to try to suss out what got them interested what made them hesitant how they figured out the value what they were willing to negotiate to what mistakes you made in negotiation because you get so few reps at negotiating it’s important to do that but it sounds like to answer dylan’s question you did two things you said first you looked up comparables so you found out comparable sales so that’s how you got a range and then you made the [ ] up in your actual negotiation of that range to like you you you actually set up the proper range and it probably cost me it cost me many millions of dollars right it’s like that one decision you made actually was more important than like the previous two years of operating probably yeah yeah how did you do it um we i did not say a number right away um i [ ] up in one regard which was i let my emotion so when we so the way we decided to sell was there was nobody coming knocking on our door saying you we need to buy you you’re the best uh we we we’re we want to be in the business of you i was basically frankly i saw the writing on the wall for my business i was like okay i think this is not zero but it’s not gonna be huge so what do i wanna do do i wanna ride out a middle of the pack like small like medium sized outcome for the next five years or can i just go flip this thing now and i decided i wanna go flip this thing now i was also really tired because i had been doing i’ve been trying to find product market fit with different startups in our idea lab for like six years i was ready for a change in general and so i told my investor my co-founder i said hey i want to sell this thing i think it’s time and they were like okay if you want to sell then let’s sell and i said all right let me let me run a process i’m going to try to sell this in the next 45 days so first that was good because i time boxed it but i also you know like uh it added a lot of pressure and so the mistake i made when i was figuring out how how to sell i was i let my emotions of the day dictate how i sold how how hard i sold the company so what does that mean at first i was super confident they’re going to want to buy us so i went to two or three companies with my super like swagged out uh like cocky cocky like pitch basically which was sort of like yeah everybody wants us but like you know so if you guys are interested you know you you basically like uh you got to let us know because this is moving fast with you know these other people so you we we got approached we’re interested we might go that path you’re either going to get on the train now or you’re going to miss it so i was like kind of cocky confident that was like working but then like two days would go by where like somebody you know they didn’t text me back or they said they were gonna review the thing and email me and they didn’t email me so then i started to i have doubt creep into my head a little bit so then i would like kind of like it’s like a booty call like desperation reach out to some other company and so one of them was i reached out to facebook through somebody i know and i was sort of like hey like you know we’re going to sell this thing i used the word aquahire which was like the wrong word to say because aquahire means a specific range of what outcome you’re going to get and it basically means don’t value my company just value my talent and um i shouldn’t have done that i should not have said that there i was luckily able to recover because it was such a big company that by the time he made the intro to the person who made the intro i had like changed the narrative completely but the third guy was like yeah you guys looking at aquarius like i don’t know where the [ ] you got that no and it’s like i literally had sent an email and you know with myself saying that but i luckily was able to change it and actually they they came in with the facebook camera with the highest offer and so we and so i ended up recovering from that mistake but that could have been critically bad would you wish you would have taken the facebook offer no uh like the amazon offer ended up working out great but um you know whatever it was a good deal uh in the end i guess but but that was the main thing and i didn’t have a comparable i didn’t have comparables really i kind of the comparables i heard were such a huge range but i was like okay i just need to forget i heard any of those numbers because it’s too wide of a range it just means like it depends and so then i started negotiating i didn’t say the number first and we waited till we got offers they tried to get a number out of us but i was like not gonna do it and um i was anchoring in other ways besides saying the specific number i was like leaving little hints or kind of just like you know just making sure they knew that we had other interests and eventually once we got one offer i was like okay that’s a ballpark and then i basically just texted the ceo of twitch and i was like hey i’m gonna take this other offer unless you can match and uh he’s like you know give me some time let me give me some time i was like i don’t have time he’s like give me an hour and i was like okay i’ll give you the hour and uh and then he came back with an offer that wasn’t quite a match but it was good enough where i said okay all other factors considered we think this is the best because they were going to take more of our team and other stuff that the other one wasn’t going to do it’s such a stressful period yeah it’s such a stressful period yeah nobody teaches you how to do this and it’s like the most important thing you’ll do as the ceo of your company is land the plane but it’s like being a pilot and you learned everything about takeoff and flight and you’ve never heard anyone mention how the [ ] you’re supposed to land and so you’re like just kind of pointing downwards and you’re trying to land the thing based on like instinct and then like a few fuzzy messages you get from mentors or you use like if you use an investment bank it’s different but we were not at that size you got to be doing like 50 million to 100 million minimum in your sale price to be um to have a banker who does it for you dude i had this roommate named james and like he was like a stoner pothead and like like the first day of work at his new job he went and he had a teacher that said i heart weed i just really think i love wheat instead of i love new york and uh he um he was negotiating a salary for a company vungle jack’s company that i introduced him to and he’d been on unemployed for 10 months and he’d been struggling to find a company that he wanted to work at and i think he was using like his mom’s credit card to pay the bills because i would get like uh his statements and like so i thought like maybe things were going south for him i’m like dude i don’t know if you have much money left i don’t know how you’re gonna pay rent and vungle made him an offer for like a hundred and ninety thousand dollars to be an engineer at their company and he told me and he goes are you are you gonna take it and he like exhales weed and he was like i don’t know man i’m not sure if it’s worth my time i’m going to make him sweat a little bit and he i was like james are you kidding me dude i’m like you don’t have any money you’ve been interviewing and talking to kids for 10 months you’re screwed he goes yeah let’s make him sweat and i get a phone call from the recruiter who i introduced him to and like he goes dude james is like a hot engineer right now like i don’t know if we’re gonna be able to land him like he’s just bargaining so hard and i don’t think we’re gonna get this guy and i was like i put the phone down like oh james do you hear what they’re [ __ ] saying you better come to an agreement soon and i go well you know just give him what he wants like who knows give what he wants you just gotta land him and i hung up and they ended up upping his offer and he negotiated from a place of having nothing and you didn’t care at all and i learned from him that day that that’s actually a really good place to negotiate from so long as you’re willing to accept these horrible consequences yeah i got to actually say that that was the most useful thing like how we sold our company was i was totally okay if nobody bought it because i was kind of excited about just ending it and going and doing something completely different like i was kind of like a maniac in that way i was like okay look if i got zero millions out of this if i got zero dollars i’m actually kind of excited about that path too so i was like pretty free in that way whereas i think you had a real business that was producing real revenues and profits you didn’t have that option of like not a good like you know not getting a good offer you needed i felt that way though where i was like i’m done i’m out i was like like i just i need to get out of here so i i felt this the same way as you uh and i’ll learn a little bit differently how to run things so you don’t get burnt you