Money Rehab with Nicole Lapin - Should You Sell Your Business? with Meghan Asha, Foundermade

Episode Date: January 14, 2022

Even if you’re your own boss, you can’t get away from the dreaded “where do you see yourself in five years?” question. So… where do you see yourself in five years? Are you going to stick it out as CEO of your company? Or sell your business baby to a parent company? Today, Nicole is joined by Meghan Asha of Foundermade to talk over the many paths a founder can take.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Even if you're your own boss, you can't get away from the dreaded

where do you see yourself in five years question. So where do you see yourself in five years? Are you going to stick it out as CEO of your company? Are you going to sell your business baby to a parent company? To help you think through some of these questions, I'm bringing on Megan Asha. Megan's company, Foundermade, helps up-and-coming companies get matched with large retailers. Think Whole Foods, Target, those kind of places. Today, we're going to be talking about the different paths a founder can take and where they may lead. Megan, welcome to Money Rehab. Oh, I am so happy to be on Money Rehab. I want to dig into your company. You just sold your company. This is so exciting. And I

think a lot of our listeners want to understand how that even happens. So before we get into how you did that with FounderMaid, for folks who don't know, I don't know what they've been doing with their lives, but can you explain what FounderMaid is? So FounderMaid is a thing like if you guys are familiar with big trade shows, we are a trade show company that features everything from food, beauty, wellness products across the spectrum. We highlight all the best innovations and then we bring them to retailers. So if you are a consumer brand, you have to exhibit at our show. You'll meet all the right people in D2C. You'll meet all the right investors. We are the curated

platform for these products to get discovered and to connect to the right resources. So we work with companies like Target, Klarna, Shopify. I mean, you name it. We've had all of these great, great brands and sponsors. And when I was building this company originally, I didn't even know we were a trade show company. So back in the day, I thought we were... I was in tech and I built this just as... I started as a dinner series, really, when I was working in VC and tech. And I just thought I was going to do this as a fun dinner series where we would just do dinners and connect people. And then it turned into an investment conference.

And then quickly, we figured out that a business that was basically a trade show. And I'd never been in the trade show business. I didn't understand it. I thought it was super old school. Come to find out, it actually is an incredible business. Even post pandemic, guys, even post pandemic when we're not allowed to see people. We really transitioned the business. A lot of our other, I'd say, collaborators, competitors that were working in 2019 are no longer around. So we're known as the unicorn of the industry because we totally

pivoted the business in the midst of pandemic when we had millions of dollars of revenue on the line and couldn't fulfill for our customers. It's been a really fun two years of building this business and couldn't do it without our team. Well, it's longer than two years that you built the business. But the last two years, you pivoted like a freaking champ and made people care about trade shows, which are normally IRL. You made them care about it URL. And of course, everybody does still need, whether you're in a pandemic or in lockdown or not, consumer products, goods.

I wanted to just before we continue, get to some of those acronyms because you mentioned D2C. I just want to define those for anyone who might not know what they are. I love that. So CPG, consumer packaged goods, right? And then D2C, direct consumer products. So anything that you are buying online that's direct consumer, where you're having a direct relationship with your consumer.

Versus at a big box retailer like Whole Foods or Target or some other aggregator. And then the consumer packaged goods would be anything like snacks to makeup. Okay, so you pivoted the business and then you sold it. If we rewind though, you started this business as a dinner series at first. How did you learn how to even create a trade show? I didn't even know what I was doing or that it was supposed to be a business. I'm just going to be really, really honest because I was just doing this for fun as a side hustle.

Like, you know, there's the girls, you know, do female founders dinners or any of these types of things. I just loved listening to an inspirational story and bringing the right people around and doing this. And so I just kept doing these dinners just because I was depressed working as an NVC. I was like, I'm too, I'm too young to be, uh, to be on the investing side. I wanted, I want to be on the operating side, but I don't know what I want to do. And FounderMaid started as dinners. And then I just kind of went into it going, okay, what's the,

what's, what are people getting from these dinners? Let me turn this into a, you know, a shark tank for wellness. And then, and then it turned into bigger trade shows. And so it didn't know really anything and just did it very startup-y. We did raise a little money when we started. We had great angel investors like Priyanka Chopra's manager and Angela and Gary Vaynerchuk. And we had some really great consumer founders and great people that bet on... I think when you start off with seed capital, it's really like your network and who you... And they're just betting on you. And they're like, this girl's got a lot of energy. She's great. So much energy. All of the energy. One of my angel investors came from my gym class where I was jumping really high. And she'd seen me jump for so long that she said, maybe me and my husband should invest in you.

I think what is the most exciting part of being an entrepreneur is you start with an idea and you don't know where it's actually going to go. And then you look back years later and you're like, whoa, that started from dinners. That started from dinners. And then someone wanted to buy us, or actually a lot of different people wanted to buy us. And there's all these different decisions that you have to make along the way. And so you do need that support system to help you. And just, you know, it's also pattern recognition. So being able to see other people that are further along their journey and listening to their stories sometimes will help you make the right decision.

Hold on to your wallets, boys and girls. Money Rehab will be right back. Now for some more Money Rehab. I mean, listen, sister, I've been to many of a founder or entrepreneur at dinner, and there's a lot of like, rah, rah, go grind. I mean, with all due respect to one of your angel investors, Gary Vee, but like that kind of mentality and everybody's doing great and everybody's one-upping each other. And that's not the case at FounderMain. You've done such an amazing job really keeping it real and being honest about the struggles and being helpful from that place of honesty. So I no doubt know that you're going to continue to use that honesty when talking about selling your business because, you know, oftentimes people use a lot of soundbites and make it

sound glorious and glamorous and, you. And others looking at it might feel bad about themselves. So to keep it real with that same sensibility, tell me about selling your company. We had brought in a CFO that helped us, that came on about 5 years ago, 4 or 5 years ago. And he said, listen, I don't work with any companies that I don't think are going to sell in the next 3 years. And that was, and it's so funny because, you know, I didn't even think, I wasn't even thinking about that, but then he got me to think bigger because he had basically been a part of these other trade show companies. He kind of knew the formula that would happen. He could put together all the financial operations, you know, and cause we really, I mean, we, we had no idea

what we were doing when we started. I mean, I just blatantly that our, one of our first shows was a complete disaster. I'm not going to lie. It was a disaster. I was, I've listened, but from a trade show perspective, no, we always had the right people. We always had everything, but from just an operations, because I think when you scale and you try to scale fast and you don't have the right people involved in operations and finance, it makes it really, really challenging to scale in a bigger way. So fast forward, pandemic hits right before... I wasn't even thinking about selling the company.

We were doing really, really well, kind of doubling, tripling in growth every year. And then pandemic hit and I met somebody for coffee, just a random coffee in February before everything shut down, before we shut our office. And so you just never know. It was like, it was such a random meeting. You know, it was one of another friend in the industry had just said, can you please meet this woman for, you know, a coffee at Crosby Hotel? And we met and I hadn't thought about us selling or anything. And then literally we're 3 months into the pandemic and I'm sitting there with millions of revenue, but she's seeing us pivot the business. So it's May, May and June. And she's seeing us and she's like, listen, I'm still

really interested in your business. And I work for a much bigger trade show company and hadn't thought about it. They gave us an offer. We actually had a bunch of other people and other show industry media companies approach us during that time as well. And so it was just, it was an interesting thing. It's almost like you're getting courted. Normally when people go out for acquisition, they use a banker or they use a third party that goes out and go out actively. I think for us, we were in a different place and I just, we never hired a banker. And again, like I, I, my advice sometimes is if, if you can get the inbounds, get the inbounds and, and, you know, wait to, you know, pay a banker a bunch of money or do a bunch of different things, like, and try to, you know,

maybe if you have a really strong internal team, you can actually do all the diligence work and go through it. So we had a number of rounds of diligence. We did a lot of different courting with people and then came back to our original deal. And it actually was good that we held off because we could show that we were more profitable than we were when we started the conversations. We had created a completely different model. And it was awesome to have industry leaders that I looked up to say to us, oh my God, you guys are like the unicorns of the industry. Everybody else in events are just holding off until they can do live events. And you guys are just deciding to continue to keep going with the same revenue goals for your shows that you would have.

When and why would somebody want to sell their business? I mean, it really depends on your goals. I think that I looked at where we were at, and I looked at the 30 years of knowledge that I would need to get to scale my business to the next level. So this company that acquired us, they've been in the industry for 30 years. They've seen the ups and downs. They've seen 9-11. They've been through the pandemic with trade shows happening in Dubai and China. And so I think for us, it just made perfect sense where I was like, okay, how can we turn this into the next CES? And so I think we just looked at all the shows they were doing.

We looked at how their footprint internationally and what we want to do long-term. And it made sense. So I think from a scalability perspective, I would say, if you're an entrepreneur and you have gotten into a certain place and you don't know, and especially for us, we were in the middle of a pandemic, I wanted to de-risk this business. And I feel like we really did by finding the right partner that can help us amplify the growth. But look for partners that you can work with in an acquisition realm that can help you scale your mission. So being acquired by this group, Tarsus Group, what does that actually mean? Can you help us

follow the money trail here? Typically, when a founder has their company acquired, do they just get a lump sum payment and boom, they're no longer in the business? Or do you stay on? Or how does the money work? Yeah. So I mean, for us, we're in this for the long haul. I'm chairminding the business and we have a great executive team that's running the business and doing an incredible job. No, we're all incentivized to grow the business is basically how the money trail works. And how does an earn out work? What is an earn out? An earn out is over a certain amount of time, a certain time period. So anywhere from two to five

years. And it can even be as short as one year, you have certain KPIs that you have to build, you have to drive the business towards so that there's... So we all... KPIs. KPIs. Hi, KPIs. Key performance indicators. Okay. We're right. Okay. So example would be you have to get to a certain amount of revenue. Sales or revenue, right. EBITDA. Ding, ding, ding. EBIT revenue sales or revenue right ding ding ding earnings before interest taxes depreciation amortization or whatever

version of that so like earnings before a bunch of other shit is taken out this is a big deal i love being on money rehabhab. We love having you. And so you consider yourself a Hindu? Yes. I mean, we've seen Payal from ClassPass sell her company. We've seen a lot more minority women sell their businesses. Yay. What more can be done to increase those numbers?

I think that making sure that these stories get out to the broader public is really important because it is... I think that we used to think M&A was a man's game, right? Mergers and acquisition. Sorry. M&A, mergers and acquisition is a man's game. And I think that it's not. I mean, I think you can... There's so much opportunity for, you know, depending on, you know, what, what you want to do with your company there, there's an opportunity to sell it, to build it, but just getting these stories out is really important. For today's tip, you can take straight to the bank. One of the ways Megan has been helpful to new brands is by encouraging them to get their

products in front of big retailers. Take her advice. If you're making a product, be it chocolate, candles, paintings, whatever your jam, maybe it's literal jam, whatever it is, get your product in front of a big retailer. Do a little online stalking and find the press contact for some of these mega companies and ask for the best mailing address to send some product. Why tell someone how great your product is over email when they could see it or taste it themselves? The proof is in the pudding or jam. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy.

Huge thanks to OG Money Rehab team Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.