Sam and Shaan sit down with Mehtab, a 29-year-old D2C investor who buys distressed e-commerce brands at steep discounts and turns them around through operational improvements. Mehtab walks through his portfolio (Solara Wood Flowers, a succulent company, an apparel brand), shares a playbook for finding and valuing businesses with defensible operational moats, and highlights several under-the-radar cash-flow businesses like Josh’s Frogs and Fast Growing Trees. The conversation ends with a breakdown of the legendary Weight Watchers/Oprah deal and a spirited tangent about Oprah’s career arc.
Speakers: Sam Parr (host), Shaan Puri (host), Mehtab (guest, D2C distressed-asset investor, Carter/Kartar Holdings)
Cold Open: Weight Watchers Teaser [00:00:00]
Sam: It will go down as one of the best private equity deals ever. Over 19 years they put $226 million into Weight Watchers and got $5.37 billion out — $4.7 billion of realized profits.
Introducing Mehtab — D2C Distressed Asset Investor [00:00:15]
Sam: All right, what’s up. We are back and we got another episode. We got a guest here today — Mehtab is here. He’s a friend of mine who most people probably haven’t heard of unless you’re in the D2C world or you’re on Twitter. But I want to introduce you because you’re somebody who has helped me a bunch with my D2C brand — you know a bunch of tips, tricks, and hacks. I basically have a little scoreboard in my head and everybody’s attributes are there, and in yours it was like “business hacks” was filled all the way up.
Sam: And the other thing was — I don’t know if you listen to the show regularly, but you would send me little nuggets like “oh, you should talk about this, you should talk about this.” So I kind of got confidence, like, oh, I think he’s just got his back pocket full of interesting stories that are off the beaten path. Do you listen to the show? Let’s start there.
Mehtab: Yeah, all the time. Almost religiously.
Sam: Oh, that’s perfect. We are the number one ready-to-shower podcast in the country. Actually, millions of men lather to us.
Mehtab: So Sam, I sent him a picture of the Vancouver show — the theater was filled up — and he goes, “Wow, that’s a lot of virgins.”
Sam: That’s hilarious. So true.
Mehtab: My fiancée listens to the show religiously too. She wouldn’t use ChatGPT when I told her about it maybe a month or two ago, and then you guys mentioned it and she was sending me screenshots.
Shaan: Dude — the Dharmesh pod. I’ve been using it all again after talking to him. I implemented a lot of the stuff he was talking about. He got me hyped up.
Sam: A lot of people don’t realize — Dharmesh’s pods always get tons of views on YouTube. I finally texted the Dharmesh group chat and was like, “Hey, what are you doing?” And he goes, “Oh, nothing really.” And then he gave this very detailed list — like, “I’m just testing buying ads, $500 here just to test this,” and then “I’m just responding to comments.” Just the small stuff that you wouldn’t expect someone who runs a $20 billion company to be sweating. It is very tactical.
Sam: We don’t even do this stuff with our own podcast. People are like, “Oh, the thumbnail, the title” — we don’t see those. We don’t approve those. We’re not involved. We don’t do a lot of this stuff that we probably should. But he does it. They say the devil’s in the details, and I ain’t trying to hang out with him — he’s the man.
Shaan: He was like, “Oh, I’m not doing anything,” and then he had this really long list.
Sam: Have you said a phrase to me recently, Shaan? Because I called you and you said something I’ve stolen and I’ve just been saying all around town — even when it’s not really appropriate.
Shaan: I was talking to him, and I asked him something about his wife, and he goes, “Yeah, you know me — I look like I got beat with the ugly stick, but somehow I ended up with an awesome-looking wife.”
Sam: I thought that was so funny. I’ve been using “beat with the ugly stick” everywhere. I use it to refer to my business partner all the time.
Mehtab: It happens, it happens.
Sam: How old are you?
Mehtab: I’m 29.
Shaan: Wow. I’m really interested because you use words that most people don’t say. I pay attention to vocabulary. In the tech world — me and Sam used to live in San Francisco — you couldn’t poke your ear out the window and hear the word “EBITDA.” Nobody says that in San Francisco. But when you get into the cash-flow business world, that’s all you’re going to hear. Words like “dividend recap,” “distressed buyout” — you talk about all these things I frankly don’t know what they mean, how they work. But I know you come from a different world. I’m excited because I want to talk about some ideas from your neck of the woods. Where do you want to start?
What Mehtab’s Company Does: D2C Turnarounds [00:06:00]
Sam: Hold on, Shaan. I need a little background here. So you basically buy into, or buy entirely outright, distressed or underperforming D2C brands and make them great — is that the summary?
Mehtab: Yeah, that’s the gist of it. We’re less of a holding company, more of an independent sponsor. That just means we do everything on a deal-by-deal basis, so the equity we’re working with might be very different from deal to deal.
Sam: What do you mean when you say “sponsor”?
Mehtab: It just means we’re the ones making the investment. On one deal Shaan might be a co-investor with us, and on the next deal only Sam’s on the cap table with us.
Sam: And you run it, or you hire CEOs?
Mehtab: It depends on the portfolio company. Right now I’m day-to-day with one of our portfolio companies.
Sam: How many do you have?
Mehtab: There are three platform companies and then another eight to ten minority equity and debt positions.
Sam: What’s the total size?
Mehtab: The core platform companies — which are what I’d count as part of the revenue since we own the majority — are in the mid-eight-figure range.
Sam: Is the biggest one the flowers company?
Mehtab: That one is slightly smaller than the succulent company, but the flower company is the one I’m most bullish on. That’s Solara Wood Flowers — solarawood flowers.com. There’s a lot of room for merchant expansion yet.
Sam: So let’s give us the three platform companies. You said a succulent company, Solara Wood Flowers —
Mehtab: Solara Wood Flowers is like a wood or preserved flower company, made in India. People buy them for weddings because fresh flowers are super expensive, and these look really good but don’t cost as much.
Sam: What’s the third majority-owned company?
Mehtab: That one’s an apparel company.
Mehtab’s Origin Story: Spinal Stenosis to Seven Figures [00:09:30]
Sam: Okay. So you own these three. But before we go into the details on each of them, I want the origin story. You told me some interesting things — I think you met your co-founder on Reddit?
Mehtab: Yeah.
Sam: Take us all the way back. I heard something about getting sick at 17 — start there.
Mehtab: Quick and dirty version: I was diagnosed with spinal stenosis and degenerative disc disease when I was 17. So doing anything physical for work was kind of out of the picture.
Mehtab: I decided to learn more about e-commerce and entrepreneurship. I started a Facebook page called Guitar Porn — this is back when organic reach was awesome. You post something, people actually see it. It was like TikTok is now. I transitioned into doing guitar runs — semi-custom guitar runs with big brands, partnering with a retailer. Before brands would work with you directly, we’d sell out these pre-order rounds and take a cut. Eventually we cut out the retailer and became the retailer ourselves. That got to kind of low seven figures — really nice because there’s no capex, it’s all pre-orders.
Mehtab: After that I started a men’s hair product company — really ironic because I’m sick so I don’t cut my hair and I have a turban. That also scaled to low seven figures, along with the guitar pedal company, which scaled below seven figures.
Sam: Wait — you were doing guitars or guitar pedals?
Mehtab: The first company was an actual full-blown guitar retailer. The one that was really profitable was guitar pedals because the margin was insane. I partnered with a guy I’d met flipping guitars — he was a Grammy-nominated guitarist who plays in a band called Periphery, for any metal nerds.
Sam: Were your products any good, or were they kind of — you know my rub with a lot of D2C companies is they have pretty shitty products but slick marketing.
Mehtab: No, the products were awesome. I mean, I had 30 or 40 thousand posts in guitar forums by the time I was 18. I was really into guitar. I used to play six to ten hours a day. I definitely knew what it took to make a good product.
Sam: Did you go to college?
Mehtab: Yeah, I was in school and then I dropped out. It just didn’t make sense to stay.
Sam: What did your Indian parents think?
Mehtab: They were not big fans.
Sam: What was your dropout point? Was it like “I’m making X dollars and X was just too big”?
Mehtab: It just didn’t seem like the value was there relative to who I had the opportunity to interact with on the business end. And I was doing okay in terms of cash flow.
Sam: This podcast is called My First Million — how old were you when you made your first million?
Mehtab: In cash or equity? Probably mid-20s — like 24 or 25.
How He Got Into Distressed Private Equity [00:14:00]
Sam: How’d you get into this private equity style thing where you go buy distressed companies and turn them around?
Mehtab: In the Great Recession, when I was a kid reading about it, I always thought it was interesting reading about private equity firms that made money no matter what — if the company did well or failed. I thought, hey, that sounds great. I hate being an entrepreneur where if the company doesn’t do well you fail. So I started thinking about it more.
Sam: But why would it work whether the company does well or not?
Mehtab: Part of our thesis is essentially investing based on how much liquidity or cash the company can generate in a short-term basis. If you can invest today and pull most of your cash out within two or three months, there’s a lot less risk. Versus say you bootstrap something new — you’re always putting more and more cash in for working capital to fuel growth. With traditional D2C brands, you’re not pulling cash out for a very long time.
Shaan: So where most people focus on equity appreciation, you focus on liquidity — how quickly can you pull cash out — whereas most business people think “how do I make this worth more,” which often means putting more cash in.
Mehtab: Right. And that’s just one facet of it. We’re okay with holding for the long term if it makes sense. Sometimes we’re just a short-term partner.
Sam: What you just said was — you want to get your cash back in two or three months, so you’re buying at like one-sixth of cash flow?
Mehtab: Yeah, basically. So give us sample deal economics — we invested in an adult health and wellness retailer, which is a nice way of saying sex toys.
Sam: Sex toys — okay, makes sense. I’m in Utah so you know.
Mehtab: Yeah. We invested at a fairly far-below-market valuation because others were unwilling to invest in that kind of company back in 2018 — it was a bit more taboo then. The company was doing about six million in revenue. Market valuation for something like that would have been like $10 to $15 million, but we got in at roughly one million.
Sam: Why would a company doing six million in revenue sell for one million? That’s my question if I’m listening.
Mehtab: That one was a minority equity investment and we got really hands-on operationally. My co-founder jumped in and helped them boot up their physical operations — transitioned them from a drop shipper to holding their own inventory, made their first few hires, got the facility up and running in Utah. I helped them raise debt to fuel growth. That took them from six to about twelve million. Then we sold our equity as secondaries to a VC firm that invested later.
Sam: Nice. So then you go from “read about this in the Great Recession” — but you’d never actually done it. How did you go actually do it?
Mehtab: I just started posting on Reddit to try and find initial deal flow. I met my co-founder — who I still work with now, Alex — through the entrepreneurship subreddit. I also met a lady who was one of the first few engineering hires at UberEats. She retired eight months after we started working together when Uber IPO’d. And then I met someone with a very traditional background in private equity who taught me a lot.
Shaan: You just built relationships through Reddit DMs? That sounds like how you meet people on Twitter.
Mehtab: Exactly. The community there is very low quality compared to Twitter and private forums, so there was a lot of filtering to be done. But we sourced the succulent deal through there. That’s how Solara Wood Flowers was found too.
Under the Radar: Josh’s Frogs [00:21:30]
Sam: Okay. You sent us a doc with a few categories: frameworks, interesting ideas and opportunities, and under-the-radar companies. I want to start with number one — under the radar companies. You have things I’ve never heard of, and I’m pretty good at finding unheard-of things.
Mehtab: Let’s start with a simple one — Josh’s Frogs.
Sam: Okay.
Mehtab: This is one of my favorite companies. It has all the characteristics of a company we’d love to invest in, and I’ve been trying to invest in it since 2018 but he always says no. So — Josh’s Frogs does exactly what it sounds like. They breed their own frogs, they’re exotic frogs, and they also grow the bugs that the frogs eat, all in-house in Michigan, and ship it to customers. If Sam wants a frog tomorrow, he can order one from Josh’s Frogs.
Mehtab: They’ve scaled really cleanly, totally bootstrapped. Josh is awesome — I called him on a Sunday and the guy was catching frogs with his kids. I couldn’t believe it. I think he’s been doing this for 15 or 20 years and he still loves frogs.
Sam: Do you know the price of a frog?
Shaan: I don’t know what frogs are going for.
Sam: I’m looking at it now. I would have thought like — you could buy a chicken at Tractor Supply for like five bucks. Frogs are way more expensive. The most expensive one is $400. The average is like $60 to $100 for a frog.
Shaan: Beautiful, but these are for pets — people want a pet frog.
Sam: Later on you guys should watch the tour of his facilities. It’s really cool.
Mehtab: So you like this business because of the steep ops moat. No typical e-commerce guy is going to go out and boot up a frog operation. It’s just too intense. They don’t like physical things; they use third-party logistics. And it requires a lot of specialized knowledge. At the same time, someone overseas is not going to undercut you — you can’t really ship a live frog from China directly to the US. It’s just not viable.
Shaan: Thank God.
Mehtab: So with that there’s a very strong operating moat. You’re only really competing against other companies in the US.
Sam: Only people weirder than himself.
Mehtab: Exactly — only gonna be like three other dudes. Josh’s Frogs, Jack’s Frogs, Sam’s Frogs, and Herbert’s Frogs — those are the big four in the frog industry.
Sam: If you’re Josh from Josh’s Frogs, what would you sell this business for? What would be the threshold?
Mehtab: I obviously can’t say what his EBITDA is, but I would say your average D2C business his size might sell for 8 to 10x. He would get a premium of a few turns on top of that because of the operational moat — it’s not something you can just knock off.
Shaan: According to some articles they’re in the range of $15 million a year — in terms of frogs. I don’t know if that’s accurate but that’s what top searches are showing.
Mehtab: I think they’re bigger than that now.
Sam: There’s a picture of him on the About page and he just looks so happy. I hope to be as happy as this man right here.
Shaan: What’s cool — in the tech world, the discussion is always about the future dream. “What could this be if everything goes great?” What I’ve learned talking to guys like Andrew Wilkinson, or the guys from Enduring Ventures, or people who buy solid stable cash-flowing businesses — it’s not the pie-in-the-sky thinking you get in Silicon Valley. Instead it’s basically: what could go wrong?
Shaan: That’s why people love businesses like this. No one’s going to compete internationally because you literally can’t ship the frog. Locally, no e-commerce bro is going to want to take this on. So you’re competing against basically nobody. Extremely defensible. Just a different way of thinking than “can this become a unicorn?”
Under the Radar: Fast Growing Trees [00:27:00]
Mehtab: Similar operational moat — Fast Growing Trees. No one wants to be a tree farmer. It’s not sexy. No one’s going to go raise capital to become a tree farmer.
Sam: What do they sell — seeds or actual trees?
Mehtab: Both. The company was being sold six or seven years ago and I think it went for between $100 and $120 million. They’ve grown quite a bit since then — I wouldn’t be surprised if they’re worth closer to double that now. Their website traffic is almost three million uniques a month. Their H1 is literally “Flowering trees are it — you’d hate to miss out on the hottest trees of the season.” Over 1.5 million happy customers.
Shaan: “Flowering trees are it” — that’s like the Gen Z “she is her” thing. Trees are it. This is awesome.
Sam: I’m getting to the age where I appreciate a good tree. I understand this.
Mehtab: It’s a really defensible business. No one would really expect something like that to be that large. And what do you buy? A mostly-grown tree that shows up and you plant it in your property.
Sam: If you want privacy hedges or trees in general, this is where you go. What do you think their revenue is?
Mehtab: I’d be really surprised if it was less than $100 million. Probably close to $150 million.
Sam: Net margins?
Mehtab: I’d be really surprised if it was below 20%. Probably closer to 20 to 25%.
Shaan: And they probably aren’t buying too many ads.
Mehtab: They had a couple Google ads, but they called their company Fast Growing Trees for a reason. I imagine that was a search thing. It’s an older company that’s been around a while — under a few different owners. A private equity firm runs it now.
Sam: Who would have thought that when the internet came out, there’s some guy out there going “they’ll buy trees online” — and here we are, $100 million selling fast growing trees online.
Under the Radar: Betty’s (Duvet Covers for Kids) [00:31:00]
Sam: Give us another under-the-radar business.
Mehtab: Betty’s. Really interesting business. What I love is the strong IP moat. If you go to their website — it’s a duvet cover that’s easy to zip. Meant for little kids. It’s patented.
Sam: That actually makes sense. Duvet covers are a pain to do.
Mehtab: They bootstrapped this to $40 million. Pretty impressive. And you can tell it’s all product-market fit — killer product, killer IP moat. They’ve done a really good job. Not very optimized from a marketing standpoint, but they’ve been crushing it.
Shaan: What are the handful of checkboxes when looking at or building a D2C company — particularly things people don’t think matter? Nothing you’ve mentioned fits in the “cool stuff Gen Z buys” category.
Mehtab: For us, the most consistent moat — and some people are different, this is just what’s worked for us — is that operating moat. Anything that requires physical manufacturing and has a good reason for that manufacturing to be in the US or Mexico is great. We’ve found that lean manufacturing principles — that’s the Toyota philosophy — port over very cleanly from company to company. But marketing does not. What worked with paid ads for a company with a low AOV and fast consideration period is totally different from something with a long consideration period. Different teams, totally different strategy. But on the manufacturing end it carries over cleanly.
Mehtab: And the way we enter the deal is really important. If you pay next to nothing for something, the odds of making it work are much much higher than if you overpay on entry.
Agency Idea: Mexico Staffing [00:36:30]
Sam: I want to talk about the agency ideas because people in the D2C world are often really good at acquiring customers. Facebook used to be the domain of gaming companies — if you met someone from gaming, their internet marketing chops were great. Now that Facebook is harder, the people succeeding in D2C are quite good at it.
Sam: You have an agency idea on here. I’m guessing you think D2C people have done a poor job of acquiring customers in certain spaces, and you want to apply your chops there?
Mehtab: I just think it’s a really interesting space. Some of these agencies are heavily focused on the Philippines or Southeast Asia. We’ve noticed there’s a lot higher quality talent in Mexico. And you don’t get the same negatives. For example, you can build an office out there and fly there in person in a few hours if you live in Texas. The wage disparity is not as high as you’d think for really good talent. You’re paying maybe 30% to 40% more than you would for great talent in the Philippines — but you can visit them in person. Your retention goes up, quality of work is much higher.
Mehtab: When we’re hiring for customer service director-level roles, we’re getting people who used to head up Uline. His salary ask was really reasonable — I think $5,000 a month — but his talent was the equivalent of someone who would be $200,000 in the US.
Agency Idea: Site Speed for Shopify Stores [00:39:30]
Shaan: There’s one agency idea on here I think is a no-brainer — site speed.
Mehtab: Yeah. Basically if you’re selling something online, one of the biggest levers you have is your site speed. A slow loading page means you lose traffic, you lose customers. And you suffer in your Google rankings because Google takes page speed into account.
Shaan: It’s really easy in the e-commerce space to have slow pages. You start with a Shopify store, you install 15 plugins just to get it to do anything. Each app injects code into your page. And even if you delete the app, the code stays — there’s no automatic cleanup. You have to manually fix that, which is kind of insane and probably a business in itself.
Shaan: I think we’ve hired three different people to fix our site speed, and all of them — I have no idea if they actually did a great job. The next guy comes in and says, “Oh man, your site speed sucks, let me fix it.”
Mehtab: It doesn’t actually require much dev skill to do most of these changes. It’s almost like a checklist that’s very portable from company to company. For example, changing the order in which your pixels fire for Google Analytics, Facebook ads — you can delay some of those very slightly and dramatically increase site speed without really hurting the business. Or certain apps don’t compress images properly. Judge.me — the review app on Shopify — doesn’t properly compress images. If you just apply more compression to those images, your site speed goes up.
Sam: How would you acquire customers for this?
Mehtab: Honestly I would just go to Built With — get a full list of websites, make sure they’re doing a certain amount of revenue, cross-check that against traffic data, and just cold email them.
Sam: If somebody out there wants to do a site speed shop, DM me. This is a no-brainer — I’ll be your first customer and help you get the next ten. You can even charge purely on contingency because you can show black-and-white results.
Mehtab: Yeah, you can see the exact effect. And it’s a moving target — you’ll do it and then six to twelve months later they need it again because they’ve installed a few more things, someone uploaded uncompressed images, they started using new heatmap tracking software. You go right back down to a C on the site speed graders.
Sam: That’s the other move — you should buy the site speed checker site that grades pages, and then just add a button that says “by the way, we could fix this for you.”
Mehtab: That’s actually kind of crazy they don’t already do that.
Balancing Time and the Mexico Manufacturing Play [00:44:00]
Sam: How are you balancing your time with all this going on?
Mehtab: About 15% of my time is on investments and managing minority equity and credit positions. The rest is spent on the floral business. There’s a pretty big lever we’re pulling right now — booting up another manufacturing base in Mexico. That’ll get our EBITDA to five or six million. And from there it’s a pretty good valuation. Once we get over that hump, I’ll probably slowly phase out, but my co-founder is solely involved in that company.
Shaan: When I met Mehtab I told him two things. One: how do I invest in this? Because if you’re willing to go down and move to Mexico and build your manufacturing facility, you’re going to win.
Shaan: Paul Graham wrote an essay called “Schlep.” He describes the Stripe founders as being willing to do the schlep work — all the annoying, bureaucratic banking stuff. They were so young they didn’t realize how much they’d have to do, and B) they were just willing to do it. You’re willing to do the schlep. You’re like, “I’m looking for operationally intensive things.” That’s the opposite of what I’m interested in. But I get why you want it — it’s super defensible once you have it, very valuable once you’ve done it.
Sam: Once you have the best practices from lean manufacturing running, it’s very simple to keep a manufacturer running versus a D2C brand really reliant on marketing. Right?
Mehtab: Exactly.
Shaan: And I also told him — man, I feel like you play the game on hard mode. You’re super smart, and you went and did distressed turnarounds of D2C businesses. That’s multiplying three hard things together. I was like, why do you do this? You could just — there are easier options.
Mehtab: Once you get a really good deal, you can’t go back. I’m Indian — I need to get a good deal. I need to get a good price. I think that’s actually what it is — it’s genetic. You’re like, “the best deal possible means a company that’s burning to the ground — you can get it for nothing.”
Mehtab’s Writing and The Turnaround Playbook [00:48:30]
Sam: Your website is really good. You have a bunch of blog posts on Medium.
Mehtab: It should be on Substack now — I killed the Medium.
Sam: Your first sentence is just good: “This is a guide intended to give distressed e-commerce heavy businesses with $10 to $15 million in revenue a high-level overview of turnaround management basics and resources to dive into.” That’s a great first sentence — you’re telling me exactly what I’m getting.
Sam: And then you say: “My team and I are responsive, discreet, and avoid pointless formalities. We understand how critical speed is in both turnaround and high-growth environments, and we can tell you within 24 hours before a fit.” You have really good words. Your rhythm is nice. How did you become a good writer?
Mehtab: I think we all grew up during the era of hardcore copywriting culture — for some reason it was really popular from 2010 to 2013. One of my friends was just really into it, so I got dragged in. There’s a compilation of like 100 of the all-time best sales letters — back when people distributed swipe files. Someone would just distribute it in a group and you’d rip through it. That’s kind of how I picked it up.
Sam: What were some books you read to learn this?
Mehtab: Corporate Turnaround Artistry is one of the greatest books ever. It’s written by my mentor Jeff Sands. That guy is an absolute beast. He’s turned around a handful of fairly large nine-figure industrials — manufacturing companies, everything from bakeries to large restaurant groups to lumber mills. He just shows up and turns the operation around within six to twelve months. His book gives you tip after tip after tip, and you can take it and apply it even if your company is not distressed — it’ll just increase profitability. I’m convinced you could drop him into anything and he’ll make it more profitable in six months.
Sam: What does he do when you drop him in?
Mehtab: He’s very fast at making decisions. He doesn’t hold back. In a lot of ways, running a turnaround is like running a startup — you don’t have the benefit of sitting around. You’re not going to hire McKinsey to run a full-blown study. You’re just going to go do it. Maybe you have some light directional data, but you’re not going to run some crazy Qualtrics survey. You’re just going to get it done.
Mehtab: When he turned around that Canadian lumber mill, he’s American, so he just moved. He has kids and everything, but he still just moved and showed up at a lumber mill in the middle of nowhere Canada and turned it around. No one else will really do that. And there’s a premium for that.
Why Distressed Deals? The Joy of the Game [00:53:00]
Sam: What part of this brings you joy? Why are you doing this besides the fact that it makes you a lot of money?
Mehtab: It’s really satisfying and it’s fairly repeatable. The speed at which you learn is really, really fast. And it doesn’t require a lot of equity to keep scaling. You can probably buy a relatively distressed brand doing $100 million for maybe $10 to $15 million in equity.
Sam: We have some friends — Moiz and Suleiman Ali. Moiz started Native Deodorant. I was like, “Moiz, we’re in San Francisco, why are you selling deodorant? Why not do software?” And he goes, “I’m a merchant, man. I’m a retailer. It’s in my DNA. I make products and I figure out how to sell them.”
Mehtab: I’ve been working with a T-shirt designer. I’m on the lookout for quotables. “I’m a merchant” — that’s what he said. He goes, “I’m a merchant.”
Sam: Moiz also said his second-favorite phrase in the English language is “distressed asset.” And I don’t know if it’s like an immigrant thing or what it is, but his family also owns lots of single-family homes they rent out, gas stations — a lot of my Indian and Pakistani friends do that. Maybe it’s just something in the culture where you’re just geared toward small business.
Mehtab: For us on the distressed side, it’s really interesting because it’s like a game of chess with the existing creditors, existing cap table — figuring out how to squeeze it together to make it work. You might have a really angry senior lender, and just convincing them: “Give me the position at a decent price, I’ll come in and turn it around and eventually you’ll get right-side up — or at least you’ll make more than you would just liquidating these guys.” Then convincing the guys you’re getting the company from, because they’re often really upset — if the company’s doing $20 or $30 million and is still run by the original founders, they’ll be really emotional about it. Figuring that side out is really really interesting.
Mehtab: Then obviously the operating end — I don’t like it as much as my co-founder. He really loves the operating end. But coming in, getting rid of the bad apples quickly, and reviving the culture — that can be a lot of fun too.
Shaan: There’s a story of Carl Icahn on YouTube. He’s talking about buying a company that was not doing great, and they owned like 12 floors in one building. In one hour he went floor to floor and laid off the entire floor. And he tells the story laughing. The audience was like, “Why are you ruining jobs?” And he’s like, “But I’m making it better!”
Sam: I go both ways on that. Part of me is like, these private equity guys are just squeezing every juice, they’re not providing a lot of value. But I do understand the satisfaction of getting something that’s not fulfilling its potential and pushing it to achieve it.
Mehtab: A lot of cases you have a few really good apples left — people who are passionate about the company, who want it to succeed — and then you have all these people who are more or less just leeching off the losses.
Twitter / Elon Tangent and American Jobs [00:58:30]
Sam: What do you think about what Elon’s done with Twitter?
Mehtab: I think it’s great. A lot of those people were really self-entitled and have no perspective. In a lot of ways they’re kind of like the modern version of those companies in the 1980s that were really fat and overpaying executives. I don’t really feel bad for someone making $100K losing their job. It’s more so the people working blue-collar jobs making $40 to $60K and working their ass off. I definitely don’t feel bad for a software engineer making $300K who’s upset they have to work 10 hours instead of six.
Sam: I don’t disagree with you. I just wish he’d be less of an asshole when he was doing it. Like, he made fun of someone who’s disabled — that’s obviously horrible, that’s inappropriate.
Sam: You mentioned something about liking things that are made in America. Does it give you any sense of pride around creating American jobs? On your website you said you’ve created or saved 200 jobs in America, not counting overseas.
Mehtab: I think it’s a mix of both. It really does make sense operationally. And I’m Canadian, but I’m obviously grateful for the opportunity that exists in the US. Americans are much more gung-ho about entrepreneurship — they’re more willing to write a check and just get involved than Canadians are. If you go to Vancouver where I’m from, it’s a lot of older real estate families. They’re not really willing to write a check and get into something the way Americans are. They love taking risk. I really appreciate that about the US.
The North Star Formula and Andrew Wilkinson’s Six-to-Six-Hundred [01:02:00]
Shaan: There’s a thing I’ve noticed recently about what I call the North Star formula for a business. I like when you can boil a plan down to a very simple equation.
Shaan: Like, with Hampton — Sam, I texted you this — but I said: “Ten thousand times ten thousand.” You just need 10,000 CEOs who will pay you $10,000 a year and you have a $100 million business. Can I provide enough value that someone’s willing to pay 10 grand a year? And can I get 10,000 people to sign up? Your whole business comes down to that one equation.
Shaan: When we were hanging out with Andrew Wilkinson, I asked how much equity he put into Tiny originally. Don’t quote me on this, but I think it was something like $6 million. He’s basically turned $6 million into like $600 million, just as round numbers. Six into 600. If you want to be the next Tiny, you just take that equation and work backwards. “Okay, to compound at 45% annually, I need to buy businesses on these terms at these prices.”
Shaan: We have some friends who just raised $18 million where I was like, “What do you do with that?” And they go, “We’re just trying to figure out how to turn this $18 million of equity into $10 million a year of free cash flow.” That’s a clarifying equation.
Shaan: I’m curious — in a best-case scenario, how will this all have played out? How much equity did you and your co-founder put in to get your whole business off the ground?
Mehtab: It’s a little weird for us because we both had exits beforehand. Alex had sold a company for low eight figures in his early 20s. Honestly, we put in a couple hundred grand — like $200 or $300K — and then anything else was reinvested from what that initial capital made us.
Shaan: Amazing. So you go from $300K, and fast forward maybe ten years — what would be the big win? How much would the portfolio be worth for this to be a home run?
Mehtab: We are really goal-driven — we’re a little weird that way. We both want to tackle increasingly large distressed deals. That’s what we get pleasure from. We’ll just keep doing it until we don’t have fun.
Sam: You don’t have goals? That’s not English to me.
Mehtab: I just like to do hood rat stuff, whatever’s fun.
Shaan: He’s like the dominatrix of PE. He just loves the act. You whisper “IRR” in your ear and you get weak at the knees.
Mehtab: It’s just fun because you get to learn from people, hang out with other interesting people. That’s really exciting.
Sam: But don’t you have a “one day I want to make all this money so I can buy a thousand acres” or “I want to create a school that does this”?
Mehtab: My initial dream — and my co-founder had the same one before we met, we turned out to have the same target — was to make $5,000 a month. That was it.
Sam: That’s how it starts! And then you realize — hold on, what about now? What’s the long-term vision that keeps you excited?
Mehtab: I think getting this one portfolio company to the next level — either selling it or re-leveraging it to cash — and then raising a large fund. That’s probably our immediate short-term goal in the next two or three years.
The Card Counting Club and Fake Net Worth [01:09:00]
Sam: Dude, that’s so not what I thought it was going to be.
Sam: When I was in college, one semester me and my buddy Trevor and our other friend Dan — we’d read the card counting book, this was before the movie came out, the book Bringing Down the House — and we were like, oh, not only are we gonna count cards, we decided to create an underground blackjack club on campus.
Sam: And because we’d read this card counting book, instead of doing the obvious thing — invite some friends over to play blackjack at low stakes and see how it goes — we were like, “Okay, let’s go buy this fancy blackjack table.” Now we’re in the hole. Then, “Let’s run all these practice simulations to see how bad we could get beat. What if somebody comes and counts cards? What’s our security gonna be?”
Sam: We were worried about all the stuff that didn’t matter. We spent no joke the entire semester — and that semester cost each of us like $40K just to be there — instead of focusing on the $40K we’d put in, we were doing this. And I remember one night we were calculating, “Oh my God, if we do this, we could make $3,000.” And we all started giggling. We were like, “Dude, what if we made $3,000?” We were so pumped.
Sam: We never actually ran the club because we found out how illegal it was. In one simulation I was the robber — we were big into simulations — and I walked in and played, lost a hundred dollars, and then said, “Give me all the money or I’m gonna tell people about this club.” And we’re like, “Okay, what are we gonna do if somebody does that? We can’t call the cops and tell them someone stole from our illegal gambling club.” Okay, this won’t work.
Sam: But that first taste of the scheme — the humble beginnings of scheming. Hilariously bad plan, hilariously bad goals. I look back on that with a lot of fondness.
Mehtab: You bought the safe to keep the cash before you even had the cash, and the cash never came.
Sam: Before I sold my first company, I was using some mint.com style service and there was an option to manually add an asset. So I manually added a really big number and I would log into this every day for like six months in advance. When the money actually came in, I was like, “Damn, I kind of already felt most of that joy in the six months leading up to it.” I kind of tricked myself into believing this was real. The simulation gave me a lot of the joy.
Shaan: You can kind of trick yourself into believing things are true and get a significant amount of satisfaction from that fake version — compared to the real thing.
Shaan: Because what people want is the feeling. Not the thing. If you ever say, “I really want X to happen” — keep asking why, and the obvious answer is it’s some feeling. A sense of accomplishment, relief, less anxiety. And then you realize — it’s not the thing I want, it’s the feeling. And you might be able to get the feeling through something much simpler.
Shaan: Also, if you’ve never had that feeling before, even when the thing happens it’ll be your first time having it, and you’ll be bad at it. That’s why a lot of people feel let down after they get success — the anticipation was better than the result. Not because the feeling is actually a letdown, but because it’s the first time they’ve let themselves try it and the muscle is very weak. Big life tip: realize what you want is the feeling, and start practicing having it through much smaller things.
Mehtab’s Small Social Footprint [01:16:00]
Sam: Mehtab, I’m looking at your Twitter — you have 5,000 followers. I know with Andrew Wilkinson, having some presence is basically a billboard. When he reaches out to someone to acquire their company, they’re like, “Oh, I think I’ve heard of you.” For how good you’re doing and how smart you are, your social presence is significantly smaller. Is there a reason?
Mehtab: No, I just don’t really like it. I post about stuff I actually care about. And on the distressed side, when you’re buying a business — the sellers are distressed. A lot of the senior lenders I’m working with are guys in their 50s or 60s, very conservative, traditional banker types. They don’t care about social media. So I’m sure it helps on the growth equity side or buying healthy businesses, but I’ve just never really been into it.
Sam: You do tweet interesting stuff though. What’s a Daniel Roth watch?
Mehtab: It’s a pretty fancy watch brand. I nerd out about neo-vintage and vintage watches, as well as some newer independent brands. It’s kind of like angel investing — if you buy into an early independent watchmaker brand, they can appreciate in value significantly and you get a pretty cool watch for the money, plus you support a small business. It’s a win-win.
Sam: Your social media is actually pretty cool. I’m gonna follow you. But compared to some of the stuff you’re doing, I know a whole lot of people in the D2C space who are significantly bigger brands than you but are much more of a pipsqueak. They don’t walk the walk the way you do.
The Weight Watchers / Oprah Deal [01:20:00]
Sam: Leave us with this Weight Watchers example. Explain what happened, and then we’ll wrap up.
Mehtab: Super high level: Weight Watchers was not doing so well. This guy at a relatively small firm convinced Oprah to join them, and they absolutely crushed it.
Sam: What are the numbers?
Mehtab: In 2015, he did a deal with Oprah Winfrey to acquire a 10% stake in Weight Watchers. Since then, the company stock soared by almost 600%. They sold one billion dollars of Weight Watchers stock, and Oprah gained at least $400 million.
Sam: That’s pretty good. But they only bought 10% of it?
Mehtab: I think they kept buying more over time, kept deploying more cash.
Shaan: Dude, we have to do a pod on Oprah. I love her. I grew up watching her. We forget how big of a baller she is. Oprah buys another thousand acres —
Sam: She came from nothing and built something absolutely insane.
Shaan: What do we know about her story?
Sam: Born in a really poor town, abused growing up. I think she was pregnant at 14. Some horrible, tragic stuff. Then at age 24 she became like a weather woman — out on the street news reporter type. Eventually around 32 or 33 she gets a talk show, but it’s not a hit right off the bat. Slowly starts picking up. Then she makes some groundbreaking deal — sort of like what Michael Jordan did with Nike, or what Lucasfilm did with Star Wars — where you take a percentage of the upside. And that turned out to be one of the best deals of all time.
Sam: And she did this all out of Nashville, in the South, where people were very very racist. She’s the man.
Shaan: I already told Sam — Billy of the Week, Wednesday: Oprah. I’m on it.
Mehtab: There’s a really cool book called The Messy Middle — have you guys read it?
Shaan: By Scott Belsky?
Mehtab: Yeah. So Scott Belsky started Behance, which is where designers could host their portfolios. He bootstrapped it and had a $175 million exit. Before it became very successful, he had like $50,000 and invested $15,000 into Pinterest at a $3 million valuation and $15,000 into Uber at a $3 million valuation. Each of those was a $50 to $100 million outcome. Plus he owned 75% of his company when it sold for $175 million. And now it looks like he’s going to become the next CEO of Adobe.
Mehtab: He’s got this awesome book called The Messy Middle. It talks about how starting things can be somewhat easy, but then there’s the middle — is this working, is it not working — and the end is kind of the easy part. The messy middle is that period where it’s really unclear, and the book is really cool on how to navigate that.
Shaan: Great title. Great guy. He came on the pod once a long time ago. We should bring him back.
Sam: He’s on your Mount Rushmore of dreamy dudes?
Shaan: It’s basically: good jawlines and clear-cut jaws. You need a good jawline.
Sam: Have you seen Scott Belsky’s jaw, man? He’s got a strong one. He also just dresses well. All those New York guys are stylish.
Shaan: He invested in The Hustle. He wrote a very small check, and I’ve got the paperwork. You can tell exactly what a guy like that’s house looks like — Immaculate design.
Mehtab: I tried in 2018 to invest in The Hustle. I stumbled across it and was like, “This is awesome, I should try to invest in this.” So I messaged Sam on Facebook — but no reply.
Sam: I’m sorry, you and maybe you would have known Scott. I could have helped you connect with my boyfriend Scott. Maybe you two could have Zillow-stalked together.
Mehtab: We’re friendly, we’re not friends — I’ve Googled his house, he hasn’t Googled mine.
Sam: But dude — thanks for coming on. You’re awesome.
Mehtab: Thank you.
Shaan: I just pulled up Facebook — I’m gonna find that message from 2018. It’s kind of funny: “Hey, I’m an angel investor, please let me invest.”
Mehtab: Good deal flow would have been there. I should have messaged more.
Shaan: You should have asked, dude. I saw a post on Reddit yesterday — it might be fake news, but it’s a heat map showing average life expectancy by town. There’s literally a 20-year age difference between New York and California versus parts of the South. People in the South are dying at like 60-something, and people on the coast living the yoga-and-salads lifestyle are living to 80 on average. And you can see these small pockets — like in Florida, the retirement communities — where people migrate in.
Shaan: The Jewish New Yorkers who moved down to Boca — living for a long time. But Fort Lauderdale is like a 30-year shorter life expectancy. I asked my data guy to overlay the map of Chick-fil-A locations and it was a perfect match to the dying-early crowd.
Sam: Which is unfortunate for me because I love Chick-fil-A. Chick-fil-A is not healthy. We’re screwed.
Shaan: Dude, thanks for doing this. We appreciate you.
Mehtab: Thank you, Lawrence.