Fund Stuff - Episode 3 - Brent Sanders & Colin Keeley from Verne

Episode 3 of Fund Stuff  we're talking with Verne (https://www.vernehq.com/) about micro private equity, venture studios and more!

Audio

Transcript

[00:00:00] Andrew: [00:00:00] Hey everybody, Andrew here. This is episode three of fund stuff. Today. I'm talking with Collin Keeley and Brent Sanders of Verne. They're also a micro private equity company and we get into what it's like , operating these on a day-to-day basis and just kind of have a. Meandering conversation of what we're seeing and what we're finding interesting in the space they also gave me some good tips on how to do intros for podcasts which we then promptly uh, messed up so without further ado please enjoy episode three with Colin and Brent from Verne.

[00:00:34] I'm Andrew Pierno and I have with me today, Brent Sanders

[00:00:43] Colin Keeley: [00:00:43] yeah. Colin Keeley here. Yeah.

[00:00:45] Brent Sanders: [00:00:45] And I'm Brent Sanders.

[00:00:47] Andrew: [00:00:47] All right, there we go. And these are these guys are from Verne and we're going to be chatting about Verne, micro, private equity, and just a  conversation about what's what they're seeing in the space and what's caught their interest of late.

[00:00:57]But yeah, I know next to nothing about you guys, other than [00:01:00] what little research I did on Twitter and listened to a few of your podcasts and yeah, we'd love to hear your background and how you discovered. Discovered by and stuff instead of just investing. Cause you guys were both VCs before and yeah.

[00:01:13]Brent Sanders: [00:01:13] Collin, you can give that he's constantly the one that has done the identification of this space and like really dug into it. And so far sourced all of the deals, all two of them, but Yeah. I'll give a quick background. I'm a software engineer by trade and worked at a, it was sold a software agency development agency had built for her 15 years to a venture capital group that turned into a fund Collin and I met at that fund.

[00:01:39] He was working through the fund and we actually founded a startup together. What, two years ago, three years ago, we started working on this idea around this company called avocado. And they're actually where we started the podcast. That is gone by the wayside. It's still is running on fumes right now, but we've got really into, I think it gave us an opportunity to work together, [00:02:00] give us perspective into what and how we can compliment one another.

[00:02:04]And yeah, I actually, we didn't really talk about it. Con what guy you into the. We talking about the micro PE stuff. And I guess who knew it was always around. I feel like talking about Andrew Wilkinson kicked off a lot of these conversations.

[00:02:15]Colin Keeley: [00:02:15] So how did we get into. So we were at a venture firm is also like a startup studio. So w once or twice a year, we'd spit on new companies and everyone does it a little differently. And so I became a student of just the whole model and how everyone else is doing it. And through that process stumbled on Andrew Wilkinson and tiny up in Victoria. And I wrote an operating manual, basically listened to all the podcasts that he was on and got that playbook down.

[00:02:40]He came to town, he was in Chicago, grab food with them and he was like, yeah, this whole, studio model is really hard. It's really hard to go to from zero to one, but it's like pretty established and much easier to go from three to 10 and turns out. Yeah, definitely is. Through that process, he recommended it and then it took it to Brent, found our first deal.

[00:02:59] And we just been [00:03:00] off to the races since then.

[00:03:01] Andrew: [00:03:01] Did you guys raise a fund before you did that? Or did you just do it with your own cash?

[00:03:06] Colin Keeley: [00:03:06] Yeah, the first one was just our own money. This next one we'll be bringing in investors and now we're very much figuring out as we go. And as we're talking about on our podcast, creative stories but yeah, thinking about raising a fund and how to structure it, and everyone does it in different ways, but talking with LPs and figuring out what works for you.

[00:03:22] Andrew: [00:03:22] Yeah, that's interesting. You brought up the studio model cause I was head of engineering for a small venture studio here in Santa Monica for a couple of years. And we had, we did, we had money to do three companies. What ended up happening is like one of them was the clear winner and then everything else just fell by the wayside.

[00:03:39]Even like the studio itself was like, oh, we shouldn't focus on the studio. We should focus on the which doubled down on the thing. I don't know what your experience was, but like what were some of the operational problems or problems in general that you saw with the studio model?

[00:03:50] Cause it was,

[00:03:52] Brent Sanders: [00:03:52] yeah. I love that you do dive right into the problems. Cause that's all there. They're pretty much where there is a lot of problems, but [00:04:00] no, in all seriousness, running an agency is hard enough, but then having, so when I built that business, it was. A great cash business, right? We had, at the time I sold it, I think we only had seven engineers, but it was enough that, three to four people working was enough to break even for everybody.

[00:04:16] So just half the team working, you could have people working on other stuff. And so I had dabbled in doing like convertible notes where I give a highly discounted rate, basically do at cost. And gain equity that way, or at least a note around it. And my. Getting into that more formalized VC group where we were the studio model.

[00:04:39] It was around that same idea where we'd have portfolio companies. And so the thing that it would afford me was I hated to do sales and line up new work, and I wanted to work on the projects. And the upside of it was we had a lot of projects to work on. The downside of it is everybody needed everything really fast.

[00:04:57] It didn't have the budget for their appetite [00:05:00] and. I was pretty strict about charging. It was like a cost plus model was our costs fully burden, advertise hourly, which still ended up at similar to what you would pay a international sort of shore hourly worker, which, and you had them in your office.

[00:05:15] We shared space with everybody, things that, a lot of it worked to get people from zero to 0.5 stuff that really didn't work was like their reliance on us is we at first were. Adding a ton of value and they wouldn't hire people. They didn't see the point in hiring somebody when they could pay somebody less.

[00:05:30] And then it went downhill from there. There were just big challenges with scaling that out and then keeping a paid work coming in, which was, that was the whole thing. It's you got to still have external clients to pay for these other people. And, balancing that was really challenging and balancing of sales.

[00:05:46] So our head count ballooned to I only 15, but it was still. Larger than it, it was initially. And then we got overburdened what we were always doing at cost's work. So we were just running from thing to thing and almost at times, trying [00:06:00] to find work for people last minute. And it just became a little hectic at the end of it.

[00:06:05] It didn't feel like we were adding a ton of value. It felt like we were just grinding through, work and the portfolio company. I think the smarter ones eventually, they grew out of human being reliant on us. That was an inevitability eventually, but we did keep serving people and tried to make it work.

[00:06:20] It was just really complicated. That's probably the short answer.

[00:06:25] Andrew: [00:06:25] Yeah. Yeah. Did you guys. The bringing in outside work to like fun cause, even at 15, that's a hefty monthly overhead. That's an unpalatable number at times, right? Just to let, in terms of burn.

[00:06:35]Yes. W our solution was to collapse into one company and then go raise as that single company. So like CEO of the venture studio came over as CEO of the portfolio company for all intents and purposes, the venture studio, that was the only way we were able to overcome it. And then all deaths came to the individual company because it's still alluring, right?

[00:06:55]Oh, we're gonna work on all these ideas. I have like idea add, and I love working on new projects. We're [00:07:00] gonna have all this shared code. And I was supposed to be that guy, oh, we're gonna have all these shared resources and based projects that everyone, like no one starts from zero and it just never fucking worked like that.

[00:07:09]Like after two weeks they were just totally divergent and you're like, okay.

[00:07:12]Brent Sanders: [00:07:12] Yeah. The only basis part is starting the framework from the beginning. They were like, Hey, we're going to use rails or Django. And that's the beginning point. And even from there, there's just so many minor pieces that, that start to diverge things and move, but yeah.

[00:07:26] It was the, I feel like between the founders, we had the right idea. It didn't necessarily, I shouldn't say it didn't work because we still have portfolio companies that are continuing to raise and growing. So we did launch some great companies, that being said, we're not doing it anymore.

[00:07:40] And I do think we had the right idea on our shoulders. Like we could have raised more money, but I think it was, we couldn't do it with the conscience of knowing that Hey, we're just slowly losing money or it's this is a dying game. It's in less we're able to provide services and stay afloat without the portfolio companies and have that sort of internal and [00:08:00] external work.

[00:08:00]We weren't able to do it. And I think, maybe somebody, a younger version of myself with more appetite to put in, I was gonna, at the end of my rope, I, when I sold the business, honestly I was done with it. I was like, this is a way I can continue to, find a good exit for me, but also.

[00:08:15] Stay involved in transition over a four year period. And that's kinda how it went down where I was just so tired by the end of that four years, I was just like, ah, I don't want to fight for this. I'm just going to go do my thing. Yeah.

[00:08:28] Andrew: [00:08:28] Is any of that informing your guys's operational strategy now?

[00:08:31] Because two moves I see by company let the depths go depending on how big the deals are. Our deal size is but so generally, like our deals are not coming with developers, but if we had a pool of devs that would be super helpful for us, or, and this is this might be a little far out, but it's like Andrew Wilkinson ask, take this product that is not profitable with three devs, put it in no code.

[00:08:57] And suddenly now it's profitable because that kind of [00:09:00] cost center goes away.

[00:09:02] Brent Sanders: [00:09:02] Yeah. I think we're looking at deals where. There are developers and we want to keep them right. If we can, if there's a serious inefficiency, and it's because the development team's too bloated or there's a product issue, we'd probably pass on the deal.

[00:09:15]If there's a rewrite in the if you have to deal with something like a rewrite or moving the platform to somewhere else, like that's not necessarily deal killer. We have that with one of our deals where one of them. We've ha we have two platforms. We need to unify it into one and it's that's a surmountable thing.

[00:09:29] But I think the takeaway is like we definitely don't want to build too big of an internal service pool and be billing back to the portfolio companies like that. I feel like it's, they should have the resources to thrive internally. I don't know. Collin, do you have any perspectives on that?

[00:09:45] Cause we haven't really dealt with that yet, but in my mind, it's switching a platform it's probably would get killed and diligence, but then if we have developers, we'd likely keep them and find probably other ways to make it work. Like for example if a company needed three developers [00:10:00] just to stay alive.

[00:10:00]But it was making money. You could pay for them. And there was a strategy where, we could apply our playbook and grow it or your 10 exit then, we probably keep those things around. But I guess the lesson learned from the studio model is don't have all these resources on the fund side that like wait around and, have to be built back to somebody eventually.

[00:10:20] Colin Keeley: [00:10:20] Yeah. So I really want to become like the acquire of choice here and acquiring something and firing all the team is not a great path to do that. So I don't want to become known for that. So like our ideal thing to buy, it would be like a bootstrap business, like a really lean team, really talented, super profitable, probably under investing in sales and marketing and keep everyone and invest in sales and marketing would be like our ideal place.

[00:10:46] We've looked at venture orphans or like these third core tile, VC backed companies. So they have product market fit. They have customers that love the product and they just have like wildly bloated overhead. And they're just burning capital. And [00:11:00] I have a lot of friends in VC and they're like, send me some of these businesses.

[00:11:03] We, we looked at them, we'll entertain them. I really don't want to do that. I don't want to walk in there. It's a lot more work to deal with that. And it's not like a super fun day to show up and Hey, we got to radically cut down this team to make it realistic. So maybe we pick up some of those companies, like after they die and salvage them, but their customers.

[00:11:21] But our path forward is really focusing on these bootstrap.

[00:11:25] Andrew: [00:11:25] Yeah, I didn't mean to say that we come in and fire everybody. I just meant to say that we're acquiring stuff. That's so small. There's one or two dudes or, whatever. And that's it right? And they want out and when we buy it there's just nobody left.

[00:11:37] It's just us. And so we got to figure out a shit, how do we, right? How do we deploy this code for this thing? And how do we run this thing?

[00:11:44] Colin Keeley: [00:11:44] Yeah, we're much more operational and blink sale than I think either of us would like to be going forward and companies like, as you acquire more and more stuff, it's just like unsustainable to be doing all the work yourselves.

[00:11:55] But we're in that position right now where I'm doing like the marketing, Brent's doing the tech and we [00:12:00] have like contractors and stuff, but we're definitely pretty, we're doing support tickets. I think I sent Brent like to today, to try to solve.

[00:12:06] Brent Sanders: [00:12:06] Yeah. It's not high leverage work, but it's also I think for these first couple, we want to.

[00:12:13] I especially, I don't speak for you Collin, but I really want to get my hands dirty on this project, just to understand where the points of abstraction might be, where can we step away? Where do we need to stay involved? And so one thing that I'm learning with this is like design UX.

[00:12:27] And so the first thing we did when we bought blink sales, we emailed everybody. And your Collin did, he said, what's the most annoying thing about blink sale? W what bugs you about the product? So we got a ton of great feedback and. Dovetailing with that doing support. Tickets is another way of finding out what annoys people and what do we need to fix?

[00:12:43] Cause we were given this product. It works good, works great. For some people, it's super sticky, it's working, but what do we need to do to grow it? And the main thing phase one for us is like making sure we don't have a leaky bucket. So I think this is, I don't intend to get as involved in the next one, but I do [00:13:00] like the ability of getting involved if you need to write and that I think.

[00:13:04] Part of, it's a selling point, but I'm hoping not to go there on the next deal and the deal after that.

[00:13:10] Andrew: [00:13:10] Yeah. And one of the things we're trying to nail down with us right now is, we're probably going to do something like you guys are doing just like a fundless sponsor thing, right?

[00:13:17] Just like raising money for a single deal. I didn't do a few of those before we raise a formal kind of. But there's a number here where makes sense to keep people on or like a company can sustainably fold one dev, I don't know, one kind of like CEO type person. Do you guys have a number in mind for like your minimum acquisition size?

[00:13:37] Cause I think we went way too small initially. There's like we can hardly pay anybody, anything for any of those. Unless we pull money from wanting to do something for the other, which we've done and that's not cool either. It's fine for us cause it's just, we just own it between three people.

[00:13:51] Do you guys have a minimum number acquisition size you're targeting?

[00:13:55] Colin Keeley: [00:13:55] Yeah, we're thinking around 300 K. Is [00:14:00] like the minimum and going up to 3 million ARR is probably going to be our sweet spot. Like anything sub $5 billion, acquisition price is less competitive. Like before the big boy private equity firms buy it.

[00:14:12] Like the goal would have to have that directly responsible individual for each company. So if you had 300 K R a R, you have some money to play with, you could hire some folks. And we're not going to be the ones doing all that.

[00:14:23] Andrew: [00:14:23] Yes. One of the experiments I want to run, I don't know if it will be on the next one or just pull our current resources and do it.

[00:14:30] But I'm playing with the concept of a junior CEO. So I was talking with somebody who used to work at sure. Swift. And they were saying basically you turn obvious knobs, right? Like conversion rates, like, all right, what is it? Oh, does that suck? Okay, let's like tweak a few things to just get it normal.

[00:14:44]But you're pulling obvious levers. And so going back to your like playbook comment, could we have a playbook that somebody that's just young, hungry doesn't necessarily have all the experience, but they're just running tests against a playbook, bringing back data too much each week.

[00:14:58] And they're able to make [00:15:00] two-way door decisions, anything that's reversible, they can make that decision, but like any kind of one-way door decision, they have to come back to us and ask about, but I'm curious if you could actually. Run these things with somebody that's I don't know, paying somebody like under a hundred grand doesn't have the experience yet, but if they just have a playbook to go operate against versus the obvious answer, which is if you can afford somebody that's been there, done that, like amazing do that, make that decision all day, right?

[00:15:24] Colin Keeley: [00:15:24] Yeah. We call that more. Like it's silly to call them a CEO when they're managing like some contractors. So we call them like a director of operations or something, where they are in charge of the product they're in charge of pushing the KPIs forward, but not really a CEO in any traditional sense.

[00:15:38] Andrew: [00:15:38] Totally. The only I'm abusing the term CEO, because I think it helps with recruiting. For example, like when we would, when we were to recruit for a portfolio company under the venture studio, every job posts would always go out under the venture studio name, because like people would see the word venture and they're like, Ooh, sexy.

[00:15:54]I want some of that. And I think CEO would be the same thing.

[00:15:58] Colin Keeley: [00:15:58] Yeah. And maybe you're [00:16:00] having like 23 year old CEOs, 25 year old CEOs, but whatever it gets to the people in the door, I do think my understanding is sure, swift made this mistake in the early days where they would have a bunch of products under one person, and some things will get neglected.

[00:16:11] And I think they shift their plan and now it's one product, one person. So there is someone, on the in responsible for each thing.

[00:16:19]Andrew: [00:16:19] And, I don't know when that jumping off point will be for us, but we have one property that we could do it for us and XYZ company.

[00:16:26] And frankly, we did like garbage diligence and we bought like a steaming hot dumpster fire of a product.

[00:16:36] And yeah, we might try with that particular one. Talk about replatform. We've had to. Had to replatform two out of the three and all three of them were in different programming languages. And just one-on-one, that's been our experience so far. It's just these like stupid, obvious mistakes that make for really good fodder for blog posts.

[00:16:52] Colin Keeley: [00:16:52] And. So yeah, as you get bigger so I always poke Brent with this, but all software tastes like chicken. That's what a [00:17:00] Robert Smith Vista equity says. So once you're, with the big boys, you're a bunch of developers on to you. You could do that. You could acquire all these different things.

[00:17:07] The tech doesn't matter, but boy does it matter in the early days? Oh yeah.

[00:17:11] Brent Sanders: [00:17:11] He's not wrong. Like clearly he is an expert and knows what he's doing and he's a bad-ass, it hurts my feelings a little bit. Okay. But, I'm curious what of the lessons learned? I think that I would share that you haven't really talked about is, all, a lot of these deals, there are existing tech teams, whether they're contractors or, part of the company, I would say so far, our experience like.

[00:17:33]Keeping the people around that were working on and know where the bodies are buried. That's helpful, but. Keeping an arms length with them as well. I just, I think that was the one thing with blink cell that we found is the pass tech team. They really were so heads down on the product for the last year or so, and have a lot of really strong opinions.

[00:17:52] And they're great that had a really good job, like full test coverage and everything, but it just, when we wanted to make some changes and I started talking about, would you guys be [00:18:00] interested in collaborating on this? And we just got. So many opinions of this should be this way because of that.

[00:18:06] And it was like, ah, this is part of, what we're coming in with this new perspective. So I think that's one of the challenges, like where do you keep those insights? It's you definitely want them, you want to know who made this commit and why is it here? And how's it gonna affect things.

[00:18:19] But then also. You don't want them approving or not approving poll request or whatever, because, they don't like something or it goes against their vision. I would plan on most of these is plan on those parties, just assume they're not going to be around assume even if they stay, they want to be involved just as soon, they're not going to be around.

[00:18:36] And if it works out great, but if not, don't get your expectation set it.

[00:18:41] Andrew: [00:18:41] Yeah. That's a great point. I also wanted to get your guys' opinion on how you're thinking about a who's above us. I'll group us together. Who's above us when we go to sell these things. Cause we, I put something on micro choir, one of our three, just to test liquidity.

[00:18:57]What does it look as a seller of one of these things [00:19:00] and unsurprisingly, there were just a shit ton of time. And then the second question, I'm curious how you guys are thinking about like how you guys will make money. Are you guys thinking you're going to hold forever? Are you guys thinking about you just reinvest the cashflow and then exit in a couple of years?

[00:19:13] Or how are you guys thinking about how the fund will make money?

[00:19:18] Colin Keeley: [00:19:18] That's a great point. Yeah, we've been really hung up on this. It's really hard to plan an exit at the beginning. Like we're just getting started and do we want to plan for 10, 20 years out? And we talked to our former GP at the venture capital fund and we're like, yeah, we want to do this holding company that holds companies forever.

[00:19:37] And he's what were you doing 20 years ago? Like, why are you even thinking what you're going to be doing 20 years from now? Which I thought was a really good point. I think we're not really sure. Like I'd love to hold things forever. And if we start acquiring them, there's always ways you can do that.

[00:19:49] You could recapitalize, you could pay out dividends, you could raise a new fund that just acquires the assets from the old fund or just the best assets. I guess the answer is we're not trying to be too [00:20:00] prescriptive and like day one, Yeah.

[00:20:03] Andrew: [00:20:03] Yeah. That our numbers are again, quite small, so maybe it's just a fact a function of us just being too small, but there's, sure.

[00:20:09] Swift has like mailbox money, right? Every month, like you invest, you get mailbox. There's just not that much cash to go around. Like after everything's all said and done with these small ass companies, there's just not that much money left over. And it's like, all right, sweet. I'm going to get 12 cents a month for 80 years.

[00:20:24]And then I'll get my money back. Cool. That's not going to work. Most of the money is going to come at the exit. So I totally get how do you start a company or buy a company and think about the exit, but also that's where most of the money is going to come back. That's where most of the fund is going to get paid back is when these things turn over.

[00:20:38] Colin Keeley: [00:20:38] Yeah, and there's definitely a multiple arbitrize like in this micro space you could acquire for super low multiples. And if you grow it and it's a growing company at all, and you can flip it for a significantly higher multiple, especially if you hit like the next level where it's a bigger PE firm buying you or like a strategic or anything like that.

[00:20:56] Andrew: [00:20:56] Yes. If you buy with that, let's say you buy from some [00:21:00] bootstrappers. You put the team in place. The company is sustainable with that team and you package it as. A real company with a real team and some profit leftover that becomes attractive of market from us. I could totally see that working.

[00:21:13] Brent Sanders: [00:21:13] How how small are the, like what's the revenue of the companies that are doing to the one that was in YC. They were just like on fumes and just about to close up shop and you're like, Hey, we'll take this and turn it off.

[00:21:23] Andrew: [00:21:23] This one is this one. I wanted this because I wanted it on our pitch deck to say like a YC company got burned out on a product that they brought to 65 K net a year, which is something, not nothing but not that much. Their VCs told them that opportunity they were chasing was too small.

[00:21:41]And, rightfully so for a VC model, right? There's the power laws again, right? Like they have to have an outsized return. Otherwise it just doesn't, it doesn't work for them. So they abandoned that product and went on like a product exploration for a year or two, think they had something and discovered that they could sell off these assets.

[00:21:56] And so I, Statistically [00:22:00] they're likely to go to zero. Like they found something, made it profitable and now they have to go have a second miracle. Like I don't buy the two miracle theories, like one miracle, right? Like that your product works. And and so we bought it because we just wanted to say we bought a YC company because they wanted to go chase these big VC dreams.

[00:22:16] And that's cool, but like high likelihood of failure, we took this tiny little thing, quadrupled that and sold it in two years for, I don't know, whatever, some great IRR number. Yeah, so that's, that one makes like 65 a year. Our run rate is like 10 grand. Between, okay. Yeah. So we have one that's we've tripled one that one's doing 15 now.

[00:22:35]We've doubled another one that one's doing like 16 and the toolbox is doing the rest.

[00:22:40] Brent Sanders: [00:22:40] I guess that's the thing it's as you look at these companies, like this is the fun place to play. The thing that I struggled with at the venture studio that has struggled with in venture as well as even a colony, I, spinning up a company.

[00:22:52] It's just that zero to one is really hard and there are. Certain, aspects to it. That, to me, there's a fair amount of luck, [00:23:00] to be honest, it's like timing, luck and luck is an aggregate of all sorts of different factors. But it's the way my head works. And I think this is coming from more of a pragmatic approach of dollars and cents.

[00:23:12] And, you're making more than you're spending and this. You can, you have the luxury, once product market fit has been achieved to like actually worry about those things. And so that's my favorite thing about this space. That's my favorite thing about working with these types of businesses is that you're not like, oh, are people actually gonna buy this thing?

[00:23:28] Or is it worth anything? And after spending so long on those questions, it's really refreshing not to have to worry about.

[00:23:36] Andrew: [00:23:36] It does feel like a small miracle when you log into Stripe and there's like history and like money coming in and you're just like, oh my God, I was so foolish before. Yeah.

[00:23:47] Colin Keeley: [00:23:47] It's really nice.

[00:23:48] When all your decisions, like actually matter, like actually impacts people because in the zero to one phase is hopefully all these little decisions make a difference. There's no promising that they actually will.

[00:23:57] Andrew: [00:23:57] Wait, how do you guys think about like buying [00:24:00] revenue and by that, is it in your wheelhouse to think about buying something that's been like woefully overbuilt over engineered, so to speak and woefully under monetized, right? So you might be buying A small MRR number, but actually the opportunity that you see as quite large, meaning like the bet you're making is actually in growth versus paying a bit more for more revenue.

[00:24:23] How do you guys think.

[00:24:25] Colin Keeley: [00:24:25] So the way we value things is based on cashflow. So you're getting all that stuff, all the products, effort just tossed in for free. And that's how we're valuing things. We haven't really looked at just acquiring a product that isn't based on their revenue or their cashflow.

[00:24:38]I don't know, brand 2d ever. Oh, yeah.

[00:24:40]Brent Sanders: [00:24:40] I feel like we have, I feel like we have looked at things. Everything that starts out, it's oh, this is overbuilt or there's giant warts on it. They're going to take, a fair amount of capital to, laser off to use that awesome analogy.

[00:24:52]It's yeah, absolutely. Like I think that's where we're trying to find our niche too. It's what [00:25:00] is painful enough? But not too painful to get this cashflow and grow it because, is there an opportunity in a new market where you could two X, three X or greater? I think that's right up our alley.

[00:25:11]That being said, looking at the diligence and if it's this is a steaming pile and it needs to be rebuilt. That's where I won't go. That's definitely the red line. There's no reason. If we're going to be rebuilding something, even if we have the customer base, it's generally like the tech diligence has failed and we're not going to move forward on it.

[00:25:30] Colin Keeley: [00:25:30] Yeah. Yeah. I'd say we definitely look at it and we like seeing that upside, but if people aren't trying to be valued on financials, it's like their expectations are going to be wildly out of whack for what we're trying to acquire the value for.

[00:25:45]Andrew: [00:25:45] No know if you guys encountered this, but I find this all the time where founders will have been irrational, just number in there.

[00:25:50]And so there's maybe you guys are just above us a little bit, so you don't encounter this as much, but there's a number in somebody's head at that. Like they won't go below whether it's based on cashflow or [00:26:00] not. And I think a couple of times, two times we've overpaid slightly based on like just a pure cashflow model.

[00:26:05] But the reality is they're not going to let it go for 30 grants. Like they're just not going to sell it. Even if that means the multiple is in line with the market, like they don't give a shit and they're just not going to sell it for 30 grand. So sometimes wealth could pay like 50 just cause.

[00:26:18] 50 is the number they had in their head. And that's how.

[00:26:22] Colin Keeley: [00:26:22] Yeah, that may be a function of size where 30 grand is just not worth like all the effort that it felt like they put in. But at a certain point, it is you have to be valued based on your financials and people, understand that a little bit more.

[00:26:35] And I always try to make an offer and look, this is how we think we're going to get our money back in three years. And so if they come back with another offer, it's okay justify that to me in reality, like our goal is to get our money back. How do we do. Based on an offer like that or whatever number they're thrown out and the money,

[00:26:49]Andrew: [00:26:49] back in three years, things. We say too, when we talk that language too, but the reality is like that two years of money with we're spending it on shit, right? Like we're spending it on marketing we're spending on servers [00:27:00] is that three-year payback period. Is that real cash to GPS or is that just operational cashflow?

[00:27:05] You're considering that like the total value of cashflow that came in is now more than the money we spent acquiring.

[00:27:12] Colin Keeley: [00:27:12] Yes, it's the second one. But it's wonky. It's like a best guess. And then you don't really know where things are going to go. Like the first thing we acquired, they had no sales or marketing whatsoever.

[00:27:22] Zero blog posts at all on their website. Like they just have people sometimes randomly, typing in the address. So it's hard to predict, like, where's that going to go from there once you actually start testing out CAC and everything?

[00:27:34]Brent Sanders: [00:27:34] We'll yeah, what's next? So I think the first thing is continuing to grow the businesses that we have make some, we have one dealer we're have under LOI that we're hoping to close soon.

[00:27:44] And and then. Figure out the fund model. I think that's our big question. And I think for you as well, it's you want to have, everybody wants to see track record, but also cash is highly available right now. And I'm balancing these two realities and I think Colin and I [00:28:00] balance these out each other out pretty well.

[00:28:02]I'd say colony you'd have to be the optimist in this scenario, but I think potentially a fundraise in the next couple of weeks, months, years, or, but definitely some acquisitions in the upcoming months where we're excited to, keep that going full speed. How in whatever form we have to

[00:28:19] Colin Keeley: [00:28:19] yeah, exactly.

[00:28:20] Wrapping up the acquisition we're working on now and then, raising capital and doing a lot more supplant here.

[00:28:25] Andrew: [00:28:25] Excellent. All right. Great to meet you both. Thanks again for your time.

[00:28:29] Yeah. Thanks for having us.