This Week in Startups - Tim Cook’s $50M pay cut, CEO compensation packages & Acquire.com's CEO Andrew Gazdecki | E1658

Episode Date: January 16, 2023

Molly and Jason dive deep into the recent news of Tim Cook, the CEO of Apple, taking a $50 million pay cut. They discuss this move's implications and whether CEOs are worth their large compensation packages. (1:24) Andrew Gazdecki, CEO of Acquire.com, joins Jason for a fun interview discussing Acquire.com's rebrand and the acquisition marketplace. (24:47) (0:00) Molly kicks off the show (1:24) CEO of Apple, Tim Cook takes a $50M pay cut (11:51) LinkedIn Marketing - Get a $100 LinkedIn ad credit at https://linkedin.com/thisweekinstartups (13:21) Are CEOs worth their compensation packages? (23:18) Notion - Sign up for FREE at https://notion.com/jason (24:47) Andrew Gazdecki of Acquire.com joins Jason (40:45) Formulate - Get 25% off at formulate.co/twist (42:02) Serial sellers, Acquire.com’s growth and M&As FOLLOW Andrew: https://twitter.com/agazdecki FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody, happy Monday. We hope you are enjoying MLK Day here in the U.S. We have a great show for you today. We have an accidental conversation about equality. We're talking about Tim Cook setting an example potentially for the rest of the big tech world by taking a 40% pay cut. That, as you might imagine, leads to an in-depth discussion over whether these CEOs deserve their massive comp packages and whether in the age of austerity, CEOs are going to have to signal their commitment to austerity by cutting their own pay. Then a great conversation between Jason and the founder of Acquire.com, Andrew Gazdecki. Overall, it's going to be a fantastic show. Stick with us.

This Weekend Startups is brought to you by LinkedIn Marketing. To redeem a free $100 LinkedIn ad credit and launch your first campaign, go to LinkedIn.com slash this weekend startups. Notion. Notion is the one place for notes. projects and everyday work that goes way beyond a wiki. It started for free at notion.com slash Jason. And FormulaE.

FormulaE matches you to a personal chemist to customize your products and solve your hair, scalp, and skincare goals, like thinning, itchiness, and flakes. See how they use robots to custom mix each bottle and get 25% off by visiting formulate.com slash twist. All right. It's Monday. It's Monday.

Happy MLK Day, everybody. Yeah. I hope you're out volunteering, everybody. Yeah. We're off today, but we pre-tape this. So we have a little content for you. And in case you're thinking, I saw that outfit on Friday. Yes, you're like, wait a second.

Wait a second. My cute rent the runway dress. Anyway, yes, we got some news for you, though. We're still here. Well, right off the top, Tim Cook's austerity measures are kicking in. Yeah, at the top. What a concept. There you go.

You have actually been predicting that some of these austerity measures could result in pay cuts. And it had not occurred to me to say, I wish it had. Clearly, I still got to work on my populist cred. I wish I had thought to say, you should start with CEO pay. Absolutely. And now Tim Cook has just shined the spotlight. I mean, he is so clever how he does this, right? Because it's like, he's still going to make $50 million.

But he has just set an example for all of the rest. of the industry by taking a 40% pay cut in 2023. He takes his total compensation from about $99 million overall, $83 million of that is in stock awards, $12 million in incentives and $3 million in salary, down to a total package of $49 million cut that in half. We did the math and determined that Apple at $150,000 ahead could save about 333 jobs with that 50 mil. interesting.

So for people who don't know, the way this happens is on a public company, you have what's called a comp committee, compensation committee, and they will theoretically act as a judge and jury on how much executives, top executives should get paid. But the inside line is those folks tend to not be shareholders of the company or the largest shareholders of the company. they tend to be appointed by management and they're in a dance with management to get everybody paid. There are some companies that had boards where the boards owned no shares in the company had never put a dollar and bought any shares in the company

and they served only to, you know, line their own pockets. And when an investor buys a large chunk of shares, they are called activists, which is very weird. I think the way these companies should work is some, large percentage of the board members, certainly the comp committee, should be by the percentage

ownership in the company. I agree. Everything about corporate boards, I think is so fascinating. If anybody has the exact perfect book that I need to read about corporate boards in America, please tell me because it's such a fascinating and, like, arguably quite corrupt part of governance. Yes. But it is very interesting.

The Compensation Committee at Apple, which is comprised of Art Levinson, Al Gore, and Andrea Young, Joan. J-U-N-G said it reached out to institutional shareholders, actually, to ask how they felt about Cook's pay. And in 2021's what they call it, they call it a say-on-pay vote, 64% of shareholders approved of his compensation, and that was down from the 95%

that approved it for Apple's 2020 fiscal year. And they said, based on these important conversations, we've made changes to the size and structure of Tim's 2023 compensation. What I also think is interesting is that his compensation compared to some of his peers is not wildly high. So Sundar Pichai at Google, his 2021 total comp was $6 million, but his 2019 total comp was

$280 million. Okay. And that was based on some stock awards, I'm sure. On stock awards. Yeah. I mean, it's sort of like all over the place based on stock. Zuckerberg seems pretty consistent at, you know, 2019 was 23 million total, 25 million total, and then 2021 was 26 million in total comp.

Yeah. Andy Jassy in 2019, I mean, this guy, this is where, this is where Amazon's going to have a hard time credibly selling many more riffs unless they take a look at Jassie's compensation because in 2019, it was 348,000. But in 2021, it was $21212 million. quarter bill quarter bill in the last three years

quarter bill yeah I mean right there these are non-founders in I think three of the four cases right Zuckerberg's the only founder

and so it's not like there's Zuckerberg sitting on 25 50 100 billion in equity right right so they do there is a competition for these executives

and you know losing Satya Nadell or losing Andy Jassy losing Tim Cook to another company, which is a possibility, you know, if an Airbnb or an Uber

wanted Andy Jassy picking, you know, like a random company. Uber, DoorDash, you know, if either of those companies, you know, needed a new CEO at some point. Let's just say those CEOs decided to move on voluntarily. I'm not saying they should be removed,

just to be clear here. Yeah. And you wanted Andy Jassy. Well, how do you get him to work at a, 50 to 100 billion dollar startup. Yeah, you give them a quarter billion dollars in equity comp, you know, and Amazon doesn't want to lose them. So small price to pay overall, but optics is when this has an issue.

And Amazon just laid off 28,000 employees total. 18,000 white collar. They laid off 10 and then another 18. No, 10 and 8. I think the 18 number is the total. I think it was 10 and then they added 8. It's for a total of 18. We'll check.

We'll check. I'm 99% sure about this. If he took a, you know, 50% compensation cut, they could keep a thousand. An interesting way to look at it. Which is, I mean, look, and they may not need to keep those employees at all. But if you are talking your book on austerity and your total pay comp was $212 million, and to be clear, Nadella at Microsoft, 2020, $44 million, $202, $49 million, $22, $54 million. like this guy is the goat of all CEO goats

and he's making a quarter what Jesse's making. Yeah, seems cheap. 18,000 total. Seems underpaid. I mean, I know it's obnoxious to say $50 million a year seems underpaid. You have to understand.

If you take one of these jobs, it is all encompassing. It's basically the end of your life. Like, you cannot do anything else. The amount of pressure you are under the tenure of these CEOs, you know, maybe five to 10 years. People who do that at lunch.

for $50,000 a year. So, like, I mean, you know, people work hard. I'm saying people work hard at lots of different salaries. Like CEO, like, company launch or a company. Yeah, there are people who consider this job

all encompassing for like a lot less money. I mean, a lot. I know, but you don't have to be responsible for a million people. Yeah. I'm just saying when you're talking about salaries that are like, a thousand, 100,000, 10,000 times, 100,000 times that of your lower.

was paid employee. Like, I don't know that the workload is 100,000 times harder. I, you know, I can take the counter

of this. Like, you, these jobs are so hard to reach this level of accomplishment to be able to run one of these companies.

And then you are under so much pressure. If you're but an employee at Amazon, I'll take lunch out of this, but, uh, because,

yeah, it's hard to work for me. A thousand times, I guess, not 100,000. But if you are an employee at Microsoft, you can just F off anytime you want. You can take two weeks off.

You can take a leave of absence. It's just, yeah, you're under whatever stretch you're putting yourself under. I'm not trying to come super hard at CEO pay. But you do have to acknowledge this as a conversation that is occurring. And there have been ongoing questions for years because CEO pay has increased, you know, like, many, many times faster than, for example, wages, which have been stagnant for 40 years, right?

Like, that's not an area where wages are stagnant. And I don't think that you would argue that the job got that much harder over the last decade. Yeah. I mean, these big numbers, it's a marketplace, is the way I would say it. And the marketplace was paying tech workers in Silicon Valley at these same companies. $250,500,000. Yeah. CEO pay has increased

1,322% since 1978. CEOs were paid 351 times as much as the typical worker in 2020. So CEO pay is up 1,300%. That kind of makes sense to me. The average American wages have been flat for 40 years, have been in that same period,

effectively flat. That's so, I'm just saying from a math perspective, that is the conversation around CEO. Like, you can't pretend that conversation is not happening. Yeah, what I'd say is the value of these individuals. Did the job get 1,300% harder? I would say the value of these individuals, this is about value. The value these individuals, these elite executives provide is even more valuable than the

percentage more they're getting paid. The average employee at Amazon versus Andy, if he gets paid 350 times would they get paid or even a thousand times, I'd say he's 10,000 times more important than the average employee. His ability to do that, just like Steph Curry is, you know, a thousand times more. I mean,

you know, I believe in the power law when it comes to talent. This is like a power. I do. I do. Yeah. A hundred percent. I really do believe that. It's a nuanced conversation.

Right. And it should be a nuanced conversation. Like, talent is real. And a lot of people want to pretend that it's not. And want to pretend that it shouldn't be compensated accordingly. I am not one of those people. Yeah. There are definitely people who are more talented than others and they should be paid accordingly. If you are a business to business marketer, B2B, your needs are unique. You know that B2B buying cycles are long and your customers face

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Terms and conditions do apply. I think where this, where CEO pay and Tim Cook has quite cleverly made it an issue, where it's going to become an issue is in this, the thing that we've been talking about, right? Where you have this like managerial class being like, you're all entitled and spoiled and there are too many of you. Yeah. And you have workers doing this kind of revolt.

like you've been treating us like crap forever and you won't let me bring my politics to work which, right? Like everybody's, everybody's side is debatable. And into that,

Wade's Tim Cook being like, I'm going to take a $50 million pay cut. And all of a sudden, Andy Jassy is going to be like, you bastard. I mean, here's the truth. Here's a truth.

Uncomfortable truths. Yep. It is a marketplace. If you are worth more, then go prove it. And here's what Andy Jassy or Tim Cook could prove immediately to Amazon shareholders and to Apple shareholders. They could prove immediately that they're underpaid by simply going to Uber or Airbnb.

Again, in this hypothetical, I'm just picking a company worth five or ten percent of what the trillion-dollar companies are worth. If you put that executive on that team, the shareholders of that company would give you 10% ownership in that team. percent ownership in that team to land that person. Because they're Michael Jordan, Steph Curry level talents. Serena Williams level

talent. If you can get the number one executive, you would literally give them a billion dollars in shares. If I was, as an Uber shareholder, as a Amazon shareholder, as a Disney shareholder, I would give $1 billion to Tim Kup to come to Uber. And that's no dick to Dara. I think Dara

would be like, we can get Tim Cook. That'd be like Clay Thompson saying we can get Steph Curry, right? This would be like Scotty Pippen or whoever, you know, Shaq saying we can get Kobe, right? Like they're all all-stars, but some all-stars are, you know, better than other all-stars. That's the market-proof. And the market-proof for the rank-and-file at Google, replaceable, instantly replaceable. And that's where this discussion is uncomfortable. Right.

Maybe not every. I mean, everybody. The thing is, almost all. It's uncomfortable and also, I was seeing here trying to figure out with the highest paid women CEOs, it is uncomfortable and also the assumption of eliteness is itself sometimes flawed. And I certainly do not mean to suggest that Satya Nadella is not elite. I mean, Sundar Prachai seems like you might be elite. Tim Cook is definitely elite, right?

Like Andy Jassy seems very elite. Like Sundar Pichai is obviously a genius. Who else could do? I always come back to who else could do that job and who else would get paid that much. And the fact is, like, we don't know and we have some structures that mean that some people will never get that shot.

The power law is not evenly distributed. Highest paid female CEO in the world is a really interesting... I know, and you can't find... Like, all the stories that I found are, like, from 2015 or whatever. The CEO... Like, there's... Yeah.

Yeah. I mean, why don't we know that? Highest pay, yeah, I'm literally like to ask Chat JPTA who is the highest paid. Lisa T. Sue, 29.5. $29.5. What company is she from? She's Intel. Is that right?

Uh-huh. No, wait. Not Intel. She's. AMC. AMD. AMD. I knew it was Chip.

I knew it was chip. I mean, that's a legit salary for AMD, yeah. I don't know what AMD's micro. I mean, what you could also do here is very simple. And I bet you this is very similar to compensation for males and female leads in superhero films. I bet you they're taking the box office, i.e. market cap. And they're looking at box office, which equals market cap in this. And AMD has a market cap of $113 billion.

She gets $29. She gets $30 million. Airbnb's market cap is $100 billion or so, right? So you just look at those and just say, where do, where does the, and the market cap for Tim Cook, if he's getting 50 million a year and he was getting 100, that's a $2 trillion company.

So he should be getting, on the market cap size, it's a 20 times larger company. Interesting. And in terms of profitability, it's massively more profitable than. General loader is way smaller market cap, I think, right?

Mary Bear is at $29 million. Adina Friedman and NASDAQ is over $20 million. Interesting. Yeah. Yeah, it's a $50 billion company. So one might argue they are overpaid or maybe there's a floor for CEO pay. Yeah.

But I think the boards are acutely aware of this in 2023. And they would probably err on the side of, I don't want to say overcompensating a female CEO, but making sure it was fair, just like I think Disney wanted to make sure it was fair. I would hope. Yeah. Like, what did Captain Marvel get, Bree Larson? I wonder if, and then in comparison, didn't, I think, Captain Marvel. Marvel did really well at the box office.

I think so. She talked about, she talked about pay disparities, I think, though. Anyway, it's, you know,

I don't mean to, I'm not trying to, like, I'm not trying to insert this into every conversation. I just think, like, we make a baseline assumption about who is elite that excludes a lot of people because we're just like,

well, you can't possibly be, I mean, like, I'm, you know, I sit here and chafe constantly about like, I said that thing that Friedberg said,

like two months ago, or I said Sastoration before sex tweeted about it, right? But like, who gets credit for that? They do. There's sort of like a, there's like a, there's baseline stuff that, you cannot sit here and tell me of all people this doesn't happen. Well, no, I mean, I think in the, in the, in our business of like opinions and hot takes, you know, it's just very hard to figure out who had the hot take first. A lot of times I'll hear our contemporaries.

I'm using that as but one example of a large societal issue that you cannot pretend does not. You cannot pedant your way out of assuming that this larger societal issue does not happen. The women are not taking that seriously. The people of color are not taking that seriously. That they're not given the same opportunities. So you're literally making a face as though you have never heard this before. I think generally historically that's been correct. And then what I like to do is look at individual verticals and then confirm that for myself. Like it would be good to confirm it for CEO pay. Like if we're going to make that statement, okay, women's CEOs aren't paid as well as male

CEOs. I think actually just looking up the data is a good first place to start and see if that actually still exists because we've now had the law change in California about boards. And then, you know, with Marvel films specifically, I know that this has been like a massive discussion. So I'd be very interested to see what Brie Larson got since Captain Marvel made a billion dollars. Like, did she get? And then what did Robert Downey Jr. get paid on his first Iron Man, right? So for a billion dollar lead superhero film, I'd like to see the data actually on female leads versus Mal leads versus Chadwick Bozeman paid back

Panther? She spoke out about demanding more. She earned $5 million for starring in Captain Marvel. And that was more than Robert Downey Jr. and Chadwick Boseman got for their own first standalone Marvel

films because she was like, you got to ask for what you deserve all the time. Yeah. But wait a second. They got, she got they only got five million for a billion dollar film. Dude, like, if you want to make real money in this world, do not be a movie star. Well, no, you know what this is? Oh, it's always the first one.

They don't. It's the first one. And then you kill them on the second and third. Yes. If it works. I guess I think that's the tradition. So she has been out very loudly advocating for equal pay in the other movies too. Because she's doing a second one.

That's coming. Yeah. Yeah. I would like to know what her chat chippy-t me? What is she making for her second? Chat Chip-Tee. Oh, here we go. Captain Marvel 2 will reportedly,

make Brie Larson the highest paid actress in a superhero film. Good for her. Good for her. Because she's like, she's a warrior for it too. Like, you know if she's been a tough negotiator. Scarlett Johanson made $15 million for Black Widow.

Wow. Wow. That's that big cash. And she kind of had to sue to get it though, right? No, I think that was a lot of money loss of. Iron Man one, Robert Downey Jr. made $500,000 with an unknown cut of back-end profits. But that was the first one ever.

No, but you know why? There's a backstory there. Oh. he was uninsurable because of his previous issues. Issues in his personal life. And he said, listen, I know that you don't want to bank on me. I want to bank on myself. And I think he was like, I'll do this essentially what is for free or close to free in order to and I'll take it on the come, you know, give me the back end.

And then I think he got 250 to 500 million. for whatever that last deal was. Yeah. It was like a quarter billion dollars to do like six appearances across films. All right. We got to go. What a great episode. And a great discussion about fairness and pay on MLKD.

A great time to have that discussion. It actually is. You're right. We totally talked about equality on MLKD. You guys, that was a total accident. And next up, actually, super great interview that Jason did with Andrew Gazzdecki of Acquire. formerly known as micro acquire. Yeah.

Talking about the rebrand, market market. Yeah. All that good stuff. Yeah. All right. All right. All right.

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started with a free Notion account at Notion.com slash jason. That's right. Make sure slash jason is all lowercase. Notion.com slash JASON to get started for free right now. All right everybody. We're going to talk about mergers and acquisitions right now with the king of acquisitions, Andrew Gazdaqi from Acquire.com previously microacquire. How are you doing, Andrew? Doing good, Jason. Thanks for having me. Well, thanks for coming on the program. It's 2023. There's a ton of M&A going on right now, and I thought we would chop it up and talk about it. I say your name

Gazeki with a lot of emphasis because you have done one of the most brilliant you have done one of the most brilliant marketing campaigns ever. For people who don't know, on Silicon Valley, there is a guy named Russ Hammerman. He's played by Chris Diamantopoulos?

Diomontropolis, yeah. Dea Metropolis? Matt Odea man I think I got that right I'm sorry sorry Chris if you hear this Sorry Chris Now he plays Russ Hanamie who was a iconic character

But you With Mike Royal Quoher decided When you were gonna make announcements Who would have Chris do these I guess you got through to him on cameo Yeah so the first one I've been just a fan of the show It's oddly realistic

I'm sure you can relate And Yeah Before I launched my group where I saw, I just typed in like, is there anyone on Silicon Valley? And Russ Annaman was on there. And then I selected him.

And I believe he was like 500 to hire at the time. Now he's like 7,000 a year or so. He's doing pretty good. Yeah. Good for him. Well, anyway, just for the audience, here's an example of these brilliant cameos that you've done and just hiring him to make announcements.

Let's listen for a minute. All right. Andrew Gazdecki. Not a very musical name. Not a very sexy name. But it's a name that gets shit done. Clearly, Andrew. Let's talk about what you're doing right now.

You just launched a startup helping other startups find startup buyers. Startup, startup, startup, startup, startup. I like it. That's today's startups. You're trying to find buyers to get startups acquired. That's cool. That's like ROI. R-O-I.

radio on internet. I thought of that, I made a B. You didn't, don't feel bad. You thought of startup to find a startup to get the buyers bought up for the startup with the startup to get acquired by the startup with the startup. So you want to start up, don't start up with me!

One day, you, Andrew Gazdechi, are gonna make it to 3 Comas. I believe in you. I believe in you. Andrew Gazdeki. So don't start up with your startup that's helping other startups find startups. Come on with this guy.

My head hurts. Well, classic. And he just, he's made, everybody now knows how to pronounce your name. Now, do your friends call you Ghazdagi? They do. Yes. I wish I got those videos in middle school because it would have saved me a lot of pain in terms of pronouncing my last name. Try having a last name, Calicanus.

People are callaginus, Calacanus. And people get it all wrong all the time. All right. Let's talk about, I think people know what Mike Rochquart. Now, Acquire.com. Congratulations on getting the domain name. That's like a million dollar domain name, huh? Thanks.

We paid 200K for it. For Acquire.com. Good job. Yeah, you want to hear the story behind it? Yeah, I do, actually. I'm a domain aficionado, as it were. Yeah, so I was trying to get it for about two years, just telling, you know, in communication with the owner, and then I was on vacation, so no work vacation.

and the funny part is I was with my wife's parents and the owner reached out and said, hey, we want to sell it. Kind of, you know, told them the story. Things aren't going good in the economy. Here's my offer. It's $200 pay, take it or leave it. And I got the domain.

And then I go back to, you know, hang out with my family. I'm like, I bought a domain for like $200,000. And everyone's like, wait, are you, like, have you been drinking? Are you okay? like for a domain, but we got a really good deal because they were asking six, 700,000 just years prior. Yeah, I mean, anything that's in the dictionary that's under 10 characters is going to be, you know, a couple of hundred grand.

Com.com famously. Alex, uh, two got that for like 150K, 200K. I got inside.com for 60K. You know, sometimes you get lucky. But a dot com of this stature is absolutely fantastic. So microacquire is now Acquire.com. Yep, that's correct. I heard angel.com went for like a million bucks.

You know, they offered, I offered like $250 for it. And somebody who is, I think, like Angel Studios. I'm looking at it right now. I tried to buy it when my book came out. Some company, a software company owned it. They found a broker and I guess, I think they sold it for three, maybe for 400 or 500K. a little bit above that,

but Angel Studios owns Angel.com and good for them. But I think it's like religious programming kind of situation. Like if you want to watch Christ and you accept Christ into your heart, go to angel.com.

Some rich person started that. So yeah, you can't get everything. And then I was going to buy jason.com, but some developer bought it and he's jason.com. right now. I thought that would be a nice one to have, but it wasn't like a must have for me. Jason Greenwald, I guess he's from Florida. He's a rich developer. One domain I almost bought is we're just getting started.com.

Oh, I like that one. Yeah, because every startup is like, we're just getting started. We just raised like a Series D. We're just, we just IPOed. We're just getting started. So I always joke about that, but they wanted a thousand bucks, but like through a check. I was just like, okay. know. Anybody wants a domain, you could probably get it. He owns a Tesla too. Look at Jason Greenwald.

He follows me on Twitter. Oh, he's a Bitcoin guy. That's it. Master of coin. Yeah. So good for him. I think he made a bunch of money in Bitcoin and then bought a killer domain.

So let's talk about what's going on in MNA. Obviously, we have a cataclysmic series of events. People raised a lot of money at high valuations. Now funding has driven. dried up. A lot of people are sitting on businesses that can't raise money, but that do have a business. And they're kind of caught in a valuation trap. They may have raised that 50 million when they had no revenue. Then they got to 2 million in revenue. And the market says, hey, 10 times 2 million is 20 million. That's what we think this company's worth, whatever it happens

to be. What are you seeing in the data? Because if people don't know acquires a marketplace, you can list your company. If you're a person like me who likes to buy companies or buy things, you can pay, I think, 400 bucks or so for an account and I think there's like a new

premium account for $800. I won't make it a commercial for it, but the buyers pay a subscription, which is demand and missing cost, but I guess it keeps the lights on for you. You don't take a transaction fee, right? No transaction fee. No, but we have plans to in the future.

What we've been doing is, you know, streamlining all the parts of an acquisition from the legal docs to due diligence to creating a P&L. And once that workflow is completed, we'll add a small transaction fee, but it'll be lower than an investment bank. How do investment banks charge and select which companies they want to sell? Right.

Because you're trying to disrupt that sort of process, I assume. Yeah, that's a good question. I actually worked with an investment bank to sell my first company, business apps. They typically would charge a percentage fee and then a minimum fee, and then they have what's called a tail. I'm sure you're very familiar with this. So their minimum fee was $800,000. We didn't end up selling.

I was 25 at the time, and I still just had gas in the tank, so I kept going, and then eventually sold to a private equity firm. But I remember being in their offices in San Francisco and saying something on the lines of like, you guys have the coolest job in the world. I do all this work,

and then I come in here, and you guys just take like a, you're going to get like a nice fee off if this all works out. Yeah. And so I think that was probably like the first moment I was like, this would be a cool business to, you know, be involved in or, you know, potentially disrupt. Yeah, I mean, if you are a major firm like Allen and company,

those are like the big firms or catalyst, they will sell things that are worth billions of dollars. Then there's sort of a mid-market in a small or more boutique kind of space. and these bankers charge something in the range of 5%. They might want a retainer of 5 or 10K a month to, you know, kind of work on your documents and try to find buyers. They run an auction and like I said, they want a minimum of 800K, let's say, in a sale.

If you sell for only 10 million, if you sell for 10 million, that's 8%. If you sell for 100 million, it would be a lot less. But then they would kick in on their like 3 or 4% fee and try and get 3 or 4 million. So it's like, I guess, selling your home, you're kind of like, well, what do they do for 5%? What do they do for 6%? So when you do charge your percentage, what are you going to charge, you think?

And try to keep it to 1 or 2%? Yeah, it would probably be like 2, 3%. And then we'll have different services that we offer. Like, if you want more of a hands-on approach, because when you sell a business, it's a very emotional. You know, sometimes you need, you know, a business, M&A expert all the way to a therapist. So depending on like the level of complexity of the deal or the size of the deal, we'll probably just go off like a Lehman scale or something like that. And a Lehman scale is just basically, you know, decreases based on the size of the deal. But we haven't made any determinations on exact percentages.

But that's probably where it'll land. The larger the deal, the smaller the percentage, and then the smaller the deal, the higher the percentage. Let's talk about what businesses are selling on the marketplace quickly. What are buyers looking to buy as we sit here in early January of 2023? If you see a company come up on the marketplace and it sells in under 30 days, what would that business, what would the qualities be that it has? Yeah, definitely. So we focus primarily on profitable SaaS companies.

So if you have a 5 million year bootstrap SaaS company, it's kicking off 2 million in profit, that'll get multiple offers within two weeks, like a feeding frenzy. Yeah. And what would the multiple be on that? You have 5 million in top line revenue, 2 million. Public comps are trading at, you know, whatever, five times. It's really rough out there. But for a small company like this, what would somebody expect you got 2 million in profits?

what would they expect the multiple to be? What are you seeing today? Yeah, typically we see, we release a report every six months based on all the acquisitions that we see. So on average, we see any recurring revenue between 4 to 7x. If it's a really profitable company,

we've seen multiples on profit from like 6 to 11. Depends on the growth rate, the type of business, is there a strong management team in place? There's a number of different factors that'll, you know, sway that multiple. But that's kind of the ranges that we see. So it's kind of in line with public comps, I would say.

So 2 million in profits times 6, 12 million times 10, 20 million, something in that range. And that when the markets were really hot, maybe two years ago, you started seeing very weird behavior, didn't you? Yeah. Well, actually, so what we've seen is something kind of nice. So in last years, we saw founders coming on listing companies for, you know, a million in revenue, but pricing it at like 50x or something like that. And so there was a big issue of getting deals done because seller expectations were here and buyer expectations were here, very reflective of the venture markets.

And so this year, we're actually seeing acquisitions accelerate because founders are starting to realize, okay, my business, you don't just take annual recurring revenue and just times by 50 or something like that. I wish it was that way. I really do. Sure, we all do. But yeah. The acquirer has to figure out a way to make their money back.

And they're looking at it, I would think, okay, can I get my money back in three, four, five years of running this business? Do I have a thesis on how I could grow this business and pay back the money and then some, right? Yeah, exactly. And then it's also important to point out. You know, there's typically two types of buyers. There's financial buyers, then strategic buyers. So a financial buyer will be a private equity firm, sometimes, you know, an individual buyer.

It really depends. And they're going to be mostly focused on the profitability, like you said, like, can I get a payback within four years? Then you have strategic acquires. So we work a lot of different, you know, public companies, corp dev teams, and they might be acquiring a company that it's just a team. Like their revenue is low, it's minimal, but they'll still pay an outrageous multiple on that revenue because you're requiring the team and the IP, etc. So it also depends on just the buyer and the reasoning for buying the company. What's the sweet spot in terms of sales right now on a marketplace like this? Obviously, if you're going to sell a company for a billion dollars, you're going to go to Allen and company or code advisors or catalyst or something.

Where do you think your marketplace winds up in terms of the. sweet spot, things that are not too small, that it's not worth the time, and things that are not so big that you're going to put a team of bankers from Goldman Sachs or Allen and company on it. Yeah, that's a good question. I would say, um, upwards, we can handle, we have buyers that can transact up to, you know, nine figures, like hundreds of millions of dollars of values there. Um, so very large private equity firms, you know, public companies, but when you get up into, you know, acquisitions of that size and that complexity, I'll be the first to admit,

go hire an investment bank. This is a life-changing transaction. You probably have investors involved. Maximize that outcome however you can. But with that said, we have a network of M&A advisors, investment banks that we actually work with. So we'll actually refer you to the best bank

or the best MNA advisor based on the size of your company, e-commerce, SaaS, whatever it might be. But directly on the market, marketplace. So that would be kind of like an off market sale. And then on the marketplace, I would say probably 10 million is probably where the revenue kind of caps out, you know, if you're looking at list directly on the marketplace, on your own. But we have facilitated acquisitions ranging from as small as, you know,

10K all the way up to, I believe our biggest is somewhere in the range of, you know, 15 million or something like that. We haven't gotten past that yet, but if the value is there, we do a buyers that can transact in, you know, much a larger amount. Let me tell you about a radically new type of solution in the skin care space. Formulate offers customized hair and skin solutions like shampoo, conditioner, moisturizer, scalp serum, and more. But here's what makes them different. Formulate will act as your own personal chemist.

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I mean, we have like domain speculators who will buy a domain like acquire or inside. they'll develop it a bit and then they'll look for a buyer. Yeah, it's been surprising. So when I started this business, and this is like a bug within micro-acquire, is you can only sell one business per account because I thought who has like five startups. I mean, whatever. You know, but people do. And so we've had multiple serial, we call them serial micro-acquirers.

We probably got to get a new term now that it's Acquire.com. But yeah, we've had people sell five. six businesses and not just for 10k or 50k, but there's one individual who in total has sold, I believe, I think the record is nine and combined revenue or combined transaction value of all those businesses is in like eight, nine, ten million. So he's made 10 million off Acquire.com by selling all these businesses.

And sometimes he'll buy businesses and then flip them. Like, he'll improve them and flip them. Oh, wow. So he's like, he's like somebody who's really good at buying homes and flipping them in a way. And I'm only thinking of one person. This is a very common thing that we see is people will buy assets, resell assets. So we, yeah, we see definitely multiple and serial buyers and serial sellers. So both sides. How do you, you know, help facilitate the transactions?

It seems if somebody put something up, you know the buyers. Do you kind of polish things up and then email folks and say, hey, you should probably know about this. This just came on the market. Do you have people who will dial and say, hey, do you want me to set up a meeting with this person? Because marketplaces need a little bit of a flywheel starting, right? A little grease on the wheels. How do you get that going? Because that's sort of like custom services in the marketplace, yeah? Yeah. So these are things that we're probably going to start charging for in the near future, but we do quite a bit of stuff for free. So if you're looking to sell your startup right now,

I'll start a plug right now, Jason, but no, that's fine to do a little mini plug, sure. It's completely free. And so, what? What we do is we'll put you in a newsletter that goes out to over 200,000 buyers. So those are just people who have registered, people who have subscribed. Yeah, I get these. Yep, we create social media posts that go across, you know, Instagram, LinkedIn, Twitter. We have a private buyer group that we share the deal with. In certain cases, we will actually smile and dial.

so we'll create a sim for the business. So we do quite a bit to get what's a set? As many eyeballs on the company as possible to ensure you have the best chances of... What's a sim? You said you create a sim? Yeah.

You know, a sims, it's just a dumb acronym for confidential information memorandum. It's basically like a pitch deck but backwards for selling your company. Got it. I may have heard that. I mean, I've heard memorandum, but I've never heard the term sim.

But yeah, there it is, sim. So are people getting frisky or are they licking their wounds, the buyers? Tell me about the buyers in a recession. Yeah, so I would say it's too early for me to make a prediction in terms of where this market is going. But I can speak to what we have been seeing. So we've been seeing an increase in buyers registering. Like last month was our highest month of registered buyers. signed up, I believe, actually we, I know, it was 12,000, 42 or something like that.

And we average around like 8,000 per month signups on buyers. And then on the sell side, we also saw like a 34% increase in terms of the amount of sellers signing up. So startups registering the seller business. And then we saw a 38% increase in offer sent to startup. basically what I'm saying is we're seeing more buyers sign up than we've ever seen. And this isn't from increased marketing spend or anything like that. Yeah, it makes sense.

Yeah. So I think what we're starting to see is, you know, we went through last year where everyone's just kind of what's going on, where's the bottom. And now I think with buyers, they're seeing opportunity in the market. And I think we're also seeing, unfortunately, startups in the market starting to realize, you know, maybe it's time to see. if we can find some sort of acquisition? Yeah, it makes sense. You know, this reminds me of, Andrew, like real estate. I remember when real estate markets, you know, having bought, I've bought two, three, four,

five properties in my life. And over five transactions, you know, you learn a little bit each time. And in the down market after the great recession, 2008, 2009, time period, you know, buyers who had bought, you know, at X price were really having a hard time accepting X times 0.7. And then the buyers on the other side were like, well, this house is worth 0.6. This is what I'm willing

to pay for it. And oh, and you're seeing that right now, right? Like hot markets like Austin were getting $2,000 a square foot. Now the same homes that I've been looking at. I've been looking at the same homes because they're considered a move to Austin are now going for 1,000. Like literally people are going, 50% off in some cases.

But it takes a while for people to kind of get there. And I think for some folks, if they can't raise funding, this is what I see from my side. If you can't raise funding and you've tried everything and you're on fumes, you're going to try selling because it's better than shutting down.

Yeah. And I would also note that we've been seen a dramatic increase in the amount of venture-backed businesses than we typically have before. And again, we typically service companies that haven't raised capital. And I think that's a great thing because typically, you know, when you run out of money, you just kind of shut the company down.

Yeah, zero-returned. But you have great IP, you have great customers, there's something of value there. Yeah, a team. And so even if you don't, you know, become a millionaire or whatever as a founder and your investors don't, you know, see everything, at least just getting something back and having the company live to fight another day. I think the part, it's obviously not the most ideal outcome for a startup, but it de-risis is entrepreneurship in my view.

Yeah. You may not have achieved the goals you wanted to, but yeah, we're seeing a lot of those types of businesses that are just looking for, you know, what I'd call like a soft landing, acquire, buy the IP, take the team, what have you. Yeah, I think it's very wise for founders to try and make your investors whole and you can always do a carve out. So let's say you've raised $5 million for your business and somebody's willing to pay $5 million for it. okay the founding team gets nothing then and the investors get their money back to get their money back you can always go to your board and say hey listen we got a five million dollar offer would be okay for us to carve out a million of it and you guys take 80 cents on the dollar and the team gets a million bucks and incentives or whatever and you know we see this over and over again so i think

having that mature conversation with your investors and then what that does is if you even i've had people return 10, 20, 30 cents on the dollars, Andrew. I think, oh, they did right by us. Because I've seen other people with six months of cash in the bank be like, yeah, you know, I'm going to give everybody six months severance and shut this down. And I'm like, you're not going to even try to sell? I'm like, yeah, I emailed three people. I'm like, did you really do your job then?

And it just put you in a bucket as an investor. You put that founder at a bucket of like, well, I'm probably not going to fund them again because they didn't go down swinging. I like to see a founder go down swinging. I'm not saying you have to spend burn two or three years of your life going down swinging, but six months going down swinging, I'd like to see you battle to the end.

You never know. Yeah, I completely agree with you on that point. And I think, you know, to defend maybe that founder in just the slightest bit is acquisitions are hard and complex and can take a long time. And, you know, maybe they don't even know where to start. And so with Acquire.com, you know,

even if you're not looking at, to sell right now and maybe you don't know if you're going to be able to get to that next fundraise, you can still start building those conversations and those relationships now, just in case you need them down the line. I like that. Yeah, you do like a little soft sell, do a little like check, test the markets. Why not? You never know. Tell me about the difference between, we know what software businesses go for. What about content businesses and services businesses? I see a lot of people with services businesses, you know, they build websites for people or people who have content or community-based sites.

How did those get value? Are those popular too? Are there buyers for those? Yeah. So when I first launched microchoir, quire.com, I'm going to, gosh, I got to get used to saying that. Yeah, you'll get there.

Yeah. We were only focused on, I should say just me, but I was only focused on SaaS businesses. So we just started listing content businesses. So I don't have too much data to really speak on that. but they sell also like crazy because the transfer is so much easier if you're just thinking about it's just a website

and a domain and traffic and ads and there's literally public companies that just roll up content websites yes like there are PE firms that are extremely profitable and they just have content websites I did not know this this is just a completely different world of tech

and it's just content websites I mean look at CNET and CBS and Yahoo who in AOL, that Jim Lanzone's running those assets. You have Bankoff with Vox who bought Recode and Curbed in a New York magazine, a bunch of assets over there. He also bought Weblogs Inc when he was at AOL, my company. And then there's John Miller who was Jim Bankoff's boss. He bought Wikia and Wikia bought a bunch of assets.

In fact, I think they bought some of the assets that were owned by CBS and CNET for a while, including like Metacritic, which I wanted to buy at some point because I saw that's very cool website. Yeah. Another, another trend that I think is really cool is existing businesses buying media companies. Like we saw HubSpot by The Hustle.

Yes. We saw Stripe by Indie Hackers. We saw Zapier by MakerPad. And there's been a number of others. And I think that's really fascinating. That's going to continue as well. Salesforce is buying all-in podcasts for $100 million. Yes.

listed on Acquire.com, biggest acquisition. Andrew Gadsdaggy made his $10 million chip off of that. I mean, it is, yeah, it's hilarious. The hustle is amazing that the HubSpot bought that. But if you think about it, if HubSpot is spending a bunch on advertising and they're spending whatever $10, $20, $30 million a year

on podcast advertising, if they buy a podcast or they buy an event and it works out, maybe they will wind up saving money. they have their own property. I know the HubSpot team reached out to me over and over again. They were like, hey, well, this week in startups join the HubSpot podcasting network. I'm like, you have a podcasting network? What?

Okay. Interesting. No, no, thank you. It's very nice of you, but not for us. I mean, unless you. I think it's a great move. If you're, you know, a venture back business and you have capital, because we have a number of different newsletters, communities, assets like that that you can purchase, like specifically

one that comes in mind is we have a number of different like sales communities and if you're a sales tech company, those I see those and I'm like, oh man, you're going to get acquired by sales. Big VC back sales makes that company, but

what about things like a LinkedIn group or a Facebook group, things that are built on other people's platform? Has anybody ever tried to sell those? So back in the day, and this is a true story, I sold, I can't, I won't say the handle name, but it was on Instagram and it was a picture, it just was an account

with like 5 million followers for dog pictures. Great asset if you're an e-commerce company selling dog food or something like that. But other than that, we don't sell because I think it's against LinkedIn's terms of service and Facebook

Twitter and then also all say that you can't, but I have talked to Elon about it and we've talked publicly about it. There will be an aftermarket for handles on Twitter. Twitter used to not be able to sell handles. So there would be like this, like, oh, I'll hire you as a consultant and throw in the handle, right? But they should be auctioned off just like domain names are, right?

So if somebody wants to buy at Jason for a million dollars, like I'd consider it, I guess, and go back to at Jason Calacanas. Yeah, I don't know. I mean, they have a lot of value. Especially if they have the audience and the reach. Yeah. That makes perfect sense. I'm happy with that, Jason on, I have at Jason on Twitter, Instagram, and I have Jason on

Tumblr. Yeah, you know, you know I'm after at Acquire, so I'll be building. Well, you know when that, I know you see me in Elon about 17 times. Thank you for that. No, I think what it does, I think what their, the plan is to have an, I mean, Elon's been pretty upfront about this, is to just let people resell them and then take a cut, right? So if I want to sell at Jason and the platform gets, I don't know, I'm picking a number 25% of it or 30% of it. Like, that seems fair to me. Twitter has then an aftermarket. And if you haven't used your Twitter handle and just a premium, like, you know, out of Acquire or Atacquired or whatever

it is, like, sure, why not let you and the Acquired team go at it, right? And make, you know, and have a bidding war for it. Why not? I'm, I'm all for anything that is acquisition, so that's, yeah, I like it. All right, well, listen, continue success with the business. If you're out there

and you're looking to sell your company, check outacquire.com. And where can we see a super cut of all these Russ Hammerman, or Chris's, uh, Andrew Gazzdaki video. So they all,

I wish there was a playlist somewhere. I guess you just got to follow Microacquirer and look on the media tab. Yeah, if you go on YouTube, you can just type in

Russ Hanan. Yeah, Russ Handen and Microw and you can find a few. But if you want to learn more about Macquarie.com, just go to our website, sign up,

and we'll be happy to assist you. Congrats on all the success. And for my founders out there, you know, if you can get me back, 50 cents on the dollar, I'm going to think a lot better of you

than if you get me back zero on the dollar, you know, because I have LPs and, you know, like getting something is better than getting nothing. So give it a shot, you know, try to get a save if, uh, you know, if it doesn't work out.

We expect seven, eight out of ten of our investments to go to zero. So why not try to get a win out of those, you know, you get a win out of a couple of those. It's, uh, it helps everybody. All right, Andrew,

good luck with everything. Everybody check out acquire. com previously known as FCA microacquire. Take care of Andrew. That's that. That's your, my honest. and check you soon. Cheers. Bye.

All right, that's it for today, everybody. Enjoy the rest of your MLK day. Hopefully you're doing some service in your community. We will catch you tomorrow for more tech news. Bye-bye.