Fund Stuff - Episode 1

I'm going to start releasing some audio + video content. I don't want to call it a podcast just yet (it is a podcast).

Anyways, the very first one is a chat with Roman from Due Dilio and The Business Inquirer.

If you'd like to hop on the pod, let me know! We can chat about ... Fund Stuff.

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Full Transcript

[00:00:00] Andrew: [00:00:00] Hey, so apparently I'm starting a podcast and apparently this is the first episode. And so naturally I totally destroyed the introduction which I'm, I'm redoing now. We are going to be talking with Roman today's the founder of Due Dilio and also runs business inquire a newsletter. And we've never chatted before. So this is he and I getting to know each other, but he's got some really interesting perspectives on acquisitions and yeah, that's about it. I hope you guys  Hey Roman we've never chatted before. And so if there's anything else that I'm missing , then please fill me in the background.

[00:00:37] Roman: [00:00:37] Yeah, no. I mean, those are probably the most interesting things. I'll start kind of a bit of a background traditional finance background. I was an equity research analyst for a mutual fund company for a long time that did investment banking and really started my entrepreneurial journey. I'd call it around 2014.

[00:00:55]I started a consulting company selling alternative data to hedge [00:01:00] funds. Yeah. Yeah. So a very non tech enabled business, right? Just the traditional, you know, consulting service service business ran it for a couple of years and sold it to a big, a market research firm. Nothing, not nothing life changing or anything like that.

[00:01:16]Just  small exit it's and then me and my wife started a legal tech company called transactionally. And it's a very niche little staffs that basically does project management for transactional attorneys, a project management tool for them. And I've always been involved involved in kind of the Boston startup ecosystem.

[00:01:36] I've always been interested in small businesses. Yeah, I think right now, and really, I think over the last, you know, year or two I think it's never been easier to start a business. I think it's never been easier as a non tech person to start a tech business. Yeah. So that whole ecosystem is just super interesting.

[00:02:00] [00:01:59] And I wanted to learn about what type of businesses out there what's changing hands, learn about the different business models. So I started browsing all the online marketplaces, like the micro requires empire flippers, and so on flip up and I think that's a lot, you can. You get a good pulse of the market.

[00:02:19] You learn about, you know, what types of businesses selling for what? And I think a, you learn B, I think it's actually very inspirational. It's just very inspirational to see what other people have started and what's possible. And how they're operating it. Thought I see some listings are more detailed than others, but like, you're up to me like seeing your listing that has a lot of detail.

[00:02:41] That's a that's our basic and I decided to start a newsletter where I basically highlight interesting businesses. I come across. So I was doing this anyway, just for kind of myself decided to documented at first I didn't really think anyone would sign up. And now we have over 600 subscribers [00:03:00] it's called the business inquire and it's just a free substance.

[00:03:06] And it's been a, it's been an amazing experience just from a, you know, from a learning, from a networking from a lot of different angles. And through that, through the newsletter I got a lot of requests from people from subscribers asking to connect me with someone that can help them analyze a business can kind of talk through an acquisition.

[00:03:27] Whether it's a content website or Shopify SAS, or whatever it may be. And you know, I got kind of enough of these pings where I thought that there should be something out there where you kind of. Post post a project or, you know, easily schedule a time with someone that can help you kind of think these things through, we have marketplaces for everything like anything you need.

[00:03:54] There's a marketplace for that. But I saw that there really wasn't something that was focused on due [00:04:00] diligence. Feting businesses, that part, and you know, kind of a light bulb. Went off and really just decided to watch it myself. So that's kind of how the idea for two Dalio was born threw up a simple WordPress website.

[00:04:17] That's that's the, that's the extent of my coding coding. Know-how using, Elementor get out. It's just two forms in there and launched about two months. We have over 70 experts on the platform. We facilitated about I think 19 now, 19 to diligence requests and yeah, so we do get about one to three a week all through just word of mouth and kind of organic.

[00:04:46] Andrew: [00:04:46] Yeah. There's a bunch of stuff I want to ask you about it. I all data to selling all data to hedge funds. I have one failed business idea in there. Finding only, only one. I mean one. Yeah. I tried to see you. That's that's good. [00:05:00] That's a good, that's a good track record. If it's moving. I have, I have a lot in my graveyard, but only one selling, trying to sell all data to have.

[00:05:08] I was trying to do selling podcast data. So we would run it through transcriptions, run it through several machine learning models and try and get like directional indicators on, on different stocks that were mentioned or brands that were mentioned. And I got on enough calls and it was actually one of the worst sales calls I've ever had.

[00:05:21]One of these like quant guys, I don't know how the hell he got put on the calendar. And by he, like, not only didn't understand it, but was so like demeaning and so dismissed. But I just thought like, man, I don't know shit about this industry. Like I'm going to. I'm going to put this one, like on the back burner for now, you know, it's funny.

[00:05:43] Roman: [00:05:43] I, I agree with you. I think selling into that industry is super tough until I started selling to lawyers. And then I realized, well, Hey. Maybe not that, that it's okay. I've never [00:06:00] heard that, you know, no disrespect to lawyers say that about lawyers before. Really? Okay. Okay. Yeah. Anyways, we'll put that. It's just me.

[00:06:10] Maybe it's just me. I don't know. Yeah. Maybe you've got the magic touch, but I think the part that I, I want to get your thoughts on is the concept of buying the business. Was not native to me. It was not intuitive. It was something that like someone had to show me and very deliberately point out and be like, Andrew, you know how you're spending all of this fucking time building shit.

[00:06:35] Andrew: [00:06:35] And then nobody buys it. Okay. So like, if you just buy something that already has revenue, you get to skip all of this pain. Like somebody had to very deliberately. Show me that, but it sounds like it was much more intuitive for you to look at these marketplaces and say, Hey, maybe I should just buy something as opposed to building which you've done before.

[00:06:57] Roman: [00:06:57] Yes. I'm so sorry. I, you know, I think like [00:07:00] a lot of people, I read a book by Jen bides and built by the belt. Yeah. So I think that that kind of got the wheels turning and I think that's when I started really going to marketplace and seeing, Hey, what's like, what can you buy? Like, what exactly is there?

[00:07:17]So, so yeah, for me, I think that was the moment. I've I don't know. I I've I've started, I don't know, maybe 3, 4, 5 different businesses that have failed. So I think only after experiencing failing or do you really start, like, thinking about, okay. Is there an easier.

[00:07:38]Andrew: [00:07:38] Oh my gosh. I remember we bought, we bought three so far in our little buying group.

[00:07:43] I remember after we did that first one just logging into Stripe and seeing money. There was like, I felt like the king of the universe. I felt like the smartest man alive. I was like, oh my God, this is so much better. I've been such an idiot. Like I'm just going to buy things from now. [00:08:00] Scratch. It's too hard. Yeah.

[00:08:03] Roman: [00:08:03] Yeah, for sure. Yeah, I love your blog on the website because I think it actually paints there like a very real process. Like you share your ups and downs because I feel like. Like liquids, everything on the internet. That's too much hype around like, well, which everything's perfect. Right? You see everything on, you know, from Instagram to Twitter and everyone's everyone's success, everyone, everything goes smoothly.

[00:08:31] And one of the things I love about what you're doing. Is like, you know, you highlight the things that are this. We tried, this didn't really work like this isn't working diligence. We thought it's going to be a lot easier. Like, just talk to your locker,

[00:08:56] you know, getting someone to share the code with you. And so [00:09:00] like, I love that word tickets. It's.

[00:09:02] Andrew: [00:09:02] Well, thanks, man. I appreciate it. It's you know, I, I don't trust people anymore that just give me like the full, positive story. It's like, when you meet somebody and they're  too nice and, and you're , what are they hiding?

[00:09:15] You know what I mean? Right. Yeah. So I'm perfectly happy saying. This first fund, just because we're doing it with our own money. It's totally fine to say, like, listen, we bought a dumpster fire. It's going terribly. And I regret this whole fucking thing.  That is a perfectly acceptable thing. And if, if people are actually reading this and thinking about doing it,  if you just look on, you know, Like you said, everything is just so damn positive.

[00:09:41] You're like, oh, this is like shooting fish in a barrel. You can't lose. It's , no, you can lose these things can go to zero. Right. And, and yeah, this is much more of a realistic picture of  play by play, how things are going, you know? And then there's tough times too. Like in any company, even when things are going well, like y'all slow.

[00:10:00] [00:10:00] And sometimes those slow months mean nothing. And sometimes they mean, actually the industry is like shifting underneath you and you need to move really quickly to fix it. But it's very hard to tell in the  moment.

[00:10:09] Roman: [00:10:09] Yeah. It's extremely hard. I mean, there's so, so many things that can go wrong. Internal and external factors.

[00:10:17] Andrew: [00:10:17] Have you bought any products?

[00:10:19]Roman: [00:10:19] I have, yes, I purchased a productized service business digital product and the parts I service business. And I don't know Tobar last year, I think. And, and do you know what, it's, it, wasn't a good, it's not a good story where I purchased his business and I honestly, I, I lost interest in it.

[00:10:40] I purchased it. I realized that like, it's not really what I want to be doing first. Number two. Yeah, it's lots of projects. We're way more interesting that I was working on at the time. And I think it kind of, [00:11:00] maybe it's just me, but like feeling of a lot of people fall into this trap of like seeing a shiny object for sale.

[00:11:07] Like, oh my God. Like this crazy. You kind of jumping in without thinking everything through and kind of analyzing all the other options. So I, and I'm still, honestly, I'm still trying to figure out what to do with that business. Interesting. I'm still in it. And still try to figure out kind of the steps or, I mean, there's, there's two.

[00:11:33] Andrew: [00:11:33] Thoughts I have around that. One is, is you as an individual losing interest, we have a group of four people. So like it's a little bit easier. Cause one of us can pick up when, on somebody else's gets busy or whatever life happens, et cetera. But whether you lose interest or the reality is like, if you want to keep doing these, you can't be CEO of all.

[00:11:51] And so one concept we're kind of, I'll probably do a post on this. Eventually once we figure it out or not, if it goes very wrong, but I was at a [00:12:00] venture studio for a number of years where the concept was, we build it, we get it to a certain place. We hire a CEO and it spins out and that has a life of its own.

[00:12:08] Yeah. I really love that concept. The venture studio, it never ended up working but I've gotten it to work with a product as service that I started. But only because the gentleman Mikey, that, that his CEO now is awesome, right? Like it, it was all about finding a really great operator and finding really great operators is just fucking hard.

[00:12:29] So all this is to say that we're trying to, at the moment for one of our companies find a CEO to run it. But the problem with micro SAS is that oftentimes there's not enough cash flow. To pay somebody, especially a US-based person some kind of reasonable salary to do it. So we're at this weird spot now where it's like, it makes 60 grand a year.

[00:12:52] That's not enough to do hire anybody, but like a recent grad out of college. Right. And especially today. Yes. And then there's no [00:13:00] cashflow to pay for servers or like marketing. There's no marketing budget. It's a really tough spot to be in a day smaller ones, which is why we're trying to raise a fund and like kind of move up stack.

[00:13:09] Because if you have, I dunno, let's say 200 K in cash flow a year then. Okay, great. You give somebody like a decent lowish, but reasonably market salary for a micro SAS company and give them five, 10% equity, right. With some, some, some upside. But that model of finding an operator I really like, I hope you get it to work.

[00:13:28] I've gotten it to work once, but. It was very, I got very lucky finding the right person.

[00:13:33]Roman: [00:13:33] It's it might be, I have to think about kind of how. Chats, yes. Tips for this particular company. Cause it's just like very little cashflow coming from it. It's pretty much on the ground floor.

[00:13:46] You have to see your points. It's hard to do it without some cash flow coming in from entity.

[00:13:55] Andrew: [00:13:55] And that might be one of the differences between SAS, which has been historically my background [00:14:00] and like more of a service thing, which I my product as service is like, that was the first service I. But it got to like 10 K a month in cashflow pretty quickly.

[00:14:10] It took me like three months to get there. So like with a service business, sometimes the price points are like higher. Right? Cause it's all people processes. The markets can support a higher price. Per customer. And so I had money to actually like pay somebody a decent, reasonable, like, okay, well, at least like your mortgage and some food is covered, right?

[00:14:26] Like you don't have to suffer. And that, and then I gave like a really, really fair equity structure for this. But I don't know if you could do it. It might be harder with a SAS, but we're, I mean, we're in the throws of trying this.

[00:14:40] Roman: [00:14:40] Yeah. Yeah. Yeah. How many businesses are you running now with your,

[00:14:47] Andrew: [00:14:47] my S my shit's a little complicated.

[00:14:49] There are three in the group that we've bought, so we bought three companies and then I have the product I service and I don't know other stuff.

[00:14:58] Roman: [00:14:58] Alright, got it. Got [00:15:00] it. Yeah. Yeah. I guess, how do you manage your time? It's a four things that you're working on. Is it like every week he kind of create a to-do list?

[00:15:14] Is that okay for this business? I need to do these three things this week for this business. I need to do this thing. Like, how do you think about it? That's one, that's one of the things that I struggled with to figure out kind of how to structure that. For me, it is mostly a shift. Okay.

[00:15:32] Andrew: [00:15:32] The product I service slow.

[00:15:34] So I started that in like October by January, I had found Mikey, he who's now running it. And January, February, March, where me resisting, letting go really. And, you know, it was very difficult for me to like build my baby and then just like give it away. Right. But when I finally did Mikey and I check in three times a week an hour each time, and that [00:16:00] is the head space that it occupies for me.

[00:16:02]And then the acquisitions group really w the way that I think about it is like, when we buy these things, they're distressed assets, even if they don't describe themselves as such, but on the engineering side, it's it's we have yet to buy something that I look at the architecture. Oh, we're good for like another, you know, we could 10 X and I don't have to change anything about the code, but what happened that has, that has happened zero times.

[00:16:26]And so right now it's like we have, you know, just like broadly we have to like, do the engineering and then we have to do like kind of the marketing. And then it can start to be on a path. Of like, okay. Incremental feature, incremental marketing, incremental growth. And once we get it to that place, then I think it's a lot less time, but we're stuck right now, frankly.

[00:16:48] And the engineering side, because each one of the properties that we bought is in a different programming language. So like there are four of us in the group. Three of us are developers. But between us, we only are really good at like three or [00:17:00] four different languages. So I think moving forward, we're going to be a lot more strict about the tech stack, just because it has been so painful for us to, again, because there's so little cash flow, you can't even really go into Upwork and find good people on Upwork to go pay to do it.

[00:17:14] You got to go find. A new person on Upwork, that's like $14 an hour. Right. And fucking, you know, pull like magic out of that person. It's an improbable and impossible task. So we're, we're like in the throws of that right now. And some of these are just coming into. The marketing phase where we're like, okay, channel experimentation, what kind of channels are converting?

[00:17:41] Which ones should we try? Which ones should we kill? And then I think it's a certain point. We might just try and hire like, maybe even just a virtual assistant, if this thing doesn't work, ideally each company has a CEO. Cause that's what the thing we're finding is like every single one has to have a CEO.

[00:17:57] It has to occupies occupy one person's [00:18:00] head space and it has to be a upon it. And yeah. And it can't be us almost by definition if we're doing a fund. Right. So we might get like a VA to, to grab, like once we have the playbook, just have somebody go execute against the playbook, but we don't really need them bringing, you know, new ideas.

[00:18:18] Obviously that would be amazing, but just need like an executer against like every week you said. 500 emails, right? Here's where you find them or here's like a process for that. Here's the copy. Do not change the copy. If you'd like to change the copy, please talk. You know what I mean? That of an ABC playbook.

[00:18:36]Then once we get into that, then I could really think about like I don't know what comes next because buying three at a time was just, it was stupid. It was so died, you know? Depends on the water pool. That's right. But back to back to the stuff that you're working on inquire one thing I do see though, is that even though there are a [00:19:00] lot of marketplaces and there are marketplaces for everything, I still find it remarkably difficult to say of all the possible deals on the internet, which ones are in my tech stack and our price range that I want that are actually a pure SAS that don't have like a Like some kind of platform dependency, like the Shopify apps or whatever.

[00:19:20] I know a lot of people are into those. Like, I don't have a comfort level with e-commerce and none of us at our buying group do so, like we don't really, we haven't dabbled in that yet. I still can't find a marketplace that will just let me filter and send me everything. So I almost feel like there needs to be an aggregator of some kind.

[00:19:38] To go through and just pull, pull grade listings.

[00:19:42] Roman: [00:19:42] Yeah. So I think there definitely are, I think a couple of aggregators like Centura, Erica has one called MarketWatch then there's another one built by Mike Roubini. I'm trying to think of the name I told you remember Mike I don't know what it's called, so there are a [00:20:00] couple of aggregators, but I don't think those are even going to help you because in order to filter by the details that you're, you know, you're talking about, I think you need.

[00:20:19] to extract more information from the listing. You need to extract more information from the seller. And I just don't think that's being collected right now. I generally think there's a lot of opportunities for even new marketplaces. I think there's still tons of opportunity there. I've been thinking about it.

[00:20:37] Both marketplace. Cause I think that's, that's interesting. I think, you know, I love what Andrew's doing. Andrew, create the playbook for how to start a marketplace, you know? Hm. But I think, you know, he's, he's creating a startup market. Maybe he started with micro SAS, but today, you know, you know, you probably, I don't know if you saw the update that you posted [00:21:00] today, which is like, which is awesome, that he's so transparent, but you know, the revenue size of these companies keeps going up and up and up.

[00:21:07] I think there's even, you know, there's still an opportunity for a Microsoft. Marketplace. Yes. So even with that arena, I think there's still, yeah. A lot of, a lot of things that can be done. So we recently listed one of the properties for sale one because we're just thinking, okay, let's consolidate and really focus on the ones that we know we can grow.

[00:21:30]Andrew: [00:21:30] And we got to, you know, kind of pick one to let go of, and so we decided on one also just to test liquidity because the, the part that I'm not certain yeah. As a, both a buyer and an eventual seller, what kind of liquidity is there in the marketplace? Like really like obviously, you know, selling a business.

[00:21:46] It's not like, like private stock is not a liquid asset. Right. But, you know, I wanted to just test and see what the actual appetite was at what price range and how real that was. And, you know, lo and behold, frankly, a lot [00:22:00] of the marketplaces, it's just a bunch of fucking tires. You know what I mean? Like really unsophisticated hires.

[00:22:05] Like somebody literally asked me to send them the data and I was like, oh yeah, let me just send you the data, which I've conveniently placed in the fucking spreadsheet. Right. And let me just share the data with you. Awesome. That's a lot of that, but the, the part that I, I still feel like is a huge gap is like when you're, when you're selling a company or even buying a company it's really story-driven.

[00:22:30] So if I share, and we just went through this the other day, if I share our Stripe revenue for one of our projects it's going to look lumpy. The reason it's lumpy is because we have a lot of people on annual plans, but if you just look at Stripe and a graph, it'll say we went down 20% last month when the reality is, is like the month before we just hit a bunch of those annual subscribers.

[00:22:51] Right. And then like two months from now, it's going to be another jump because that's when we did a big marketing push two years ago or whatever the case may be, that story is [00:23:00] totally lost when you just do like, oh, well here's my Stripe. Like here's my Stripe dashboard, right. Or here's my Google analytics traffic that can also be really misleading and totally devoid a story.

[00:23:11] So I agree an opportunity in the marketplace to like better tell the company's story. Yeah. Are you draining into a chronic tie service? And again, I forgot what it's called, but I can, I can share it with you. That a person basically just writes listings for, for sellers. It helps the right to put together, you know, the presentation put together the package.

[00:23:32]Roman: [00:23:32] And I wonder how popular that is. I wonder how Like, I think something like that would be if you incorporate it as part of a marketplace or it's some kind of a partnership, I think that would be very, very interesting, right. Because. I think that's one way to solve kind of for, for your you know, lack of, lack of story is just to have someone who can kind of tell it and put it together for you.

[00:23:59] Andrew: [00:23:59] Yeah. I [00:24:00] wasn't. I was talking with Andrew guest techie. I was on his podcast.

[00:24:06] One of the things he's trying to do is make this more like normalized. So maybe that the real answer is like, it's actually a confidence. So people list the sites. I have a lot of confidence that they can actually sell something. So they put in the least amount of effort, right. Buyers are like, just getting into this space.

[00:24:24] Most of them, at least from what I could see are first time buyers. So there's not a lot of confidence there. So they're when they request info, they don't know what the fuck they're asking for. They don't know what to look at. Right. And so maybe it's just gonna take time for some confidence on both the buy side and the sell side to increase enough to where people put effort into those, into the list.

[00:24:44] Right, right. That's interesting. Yeah, I mean, I think, you know, it seems to me like No we're maybe in the first or second inning of this movement right. Of this movement. They, you, you can buy a micro SAS. You can, you don't, you don't need 5 [00:25:00] million to buy a startup. You can buy something, a small project and grill and.

[00:25:05] Roman: [00:25:05] Yeah, I think we're just getting started with them. I think that, you know, that was also the impetus for starting to delete. It was, I think as transaction volume increases, I think there's going to be more and more demand for vetting for due diligence. I agree. The way I was in that is on the technical side, because that is something that's, I don't know that we have it figured out, but we've made quite a few mistakes so far.

[00:25:30] Andrew: [00:25:30] That we're going to avoid. And we have an ever larger doc that we use to, you know, just benchmark against when we're doing diligence. Like one pretty nuanced. One was we were looking at server logs through like, during the diligence process, obviously it's a zoom screen-share. And it looked fine.

[00:25:50] Right. But like, the reality was is that like every like six or eight hours, the whole thing was crap. But like, we did the diligence of like looking [00:26:00] at the server logs, but you didn't know. I mean, it's still unfathomable to me that you would, as like a CTO, have a product that has like crashing every six hours, but now it's the thing I'm going to look out for.

[00:26:13] Roman: [00:26:13] Right? Right. You'll live. You learn, you live, you learn.

[00:26:16]Well, anyways, Roman, thank you so much for for joining us. Where can people. Where can people reach you? So Due Dilio is just a  dot com kind of like it's like it sounds and the business required that sub stack.com. And of course you have LinkedIn Twitter, all the, all the popular channels I'm on there.

[00:26:40] Well, thanks so much for your time. It was really great chatting with you and it's great to connect. All right. Thanks, Cedric.