About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
Rob Walling is a serial startup founder, angel investor, and author. He has sold a few companies, wrote a bestselling book, been interviewed in the Wall Street Journal, Forbes and Inc., received a Wikipedia page, and reached hundreds of thousands of people through hundreds of interviews, talks, books and articles.
If you listen, you will learn:
- Rob’s early years selling goods to his classmates and what he learned from it.
- How Rob found his way into the world of coding and software development.
- How DotnetInvoice started it all. The system Rob developed to keep his companies and his profits growing.
- The 3 principles Rob looks for in any business endeavor. How Rob found purpose in his work.
- The purchase of HitTail and how it changed things for Rob.
- Why Google was a driving force to sell HitTail.
- Drip's origin story.
- The best advice Rob has ever gotten.
- The decision process for selling Drip.
- Separating business from emotion and how Rob kept his mind on his goals.
- Rob’s advice to the listeners.
Announcer: 00:09 Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: 00:16 Welcome back to the Life After Business podcast, this is Episode 79. If you were to start the process of selling your company right now, would you know what's most important during that acquisition and what would be most important afterwards? On today's show, we have Rob Walling who is tho co-founder of Drip who sold to Leadpages and is one of the top marketing automation tools on the planet. And Rob shares with us today how his core principles of freedom, purpose and relationships helped guide him through the growth and sale of HitTail.com and Drip. Drip was a bigger business than he originally intended. And because it grew and skyrocketed with popularity and subscribers, making sure that he was true to his principles helped Rob go through the negotiation, picking the right buyer which was Leadpages and understanding where he wanted to be after the acquisition. Rob has tons of wisdom as he explains how he came to a lot of these principles and the conclusions of selling to Leadpages. So without further ado I really hope you enjoy this episode with Rob.
Announcer: 01:23 This episode of Life After Business is brought to you by Solidity Financial's growth and exit planning. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your time frame to the right buyer at the price you want.
Ryan Tansom: 01:23 Good morning, Rob, how are you doing?
Rob Walling: 01:23 Doing great, thanks for having me on the show.
Ryan Tansom: 01:45 I'm super excited to have you on the show because I got exposed into your world a couple of years ago in my journey of building this podcast and the whole marketing automation and you got a pretty solid staple product out there in the market. But you know before before we really dive into it why don't you give our listeners a little bit of a backdrop of you know how did you dive into becoming an entrepreneur and what was the what was the event that happened where you decided that it was time to jump in with both feet?
Rob Walling: 02:13 Entrepreneurship has always kind of called me even from when I was young. I grew up solidly blue in a blue collar family. And in order to have enough money to buy batteries or comic books or stuff that I you know quote unquote need it back in the day I had to I had to make money. And the jobs you know... I lived out in the country and it was like mowing lawns and raking leaves was not an option because we lived miles from everybody. So I learned to sell to buy things and mark them up and sell them at school. And by the time I was you know in let's say eighth grade, I was making between 50 and 100 dollars a month just just doing that as a middleman. And it was it was it was a big deal it is kind of life-changing for me to realize all right this is the kind of thing I want to do. So when I got older I got out of college and I took a job after job. And I realized that I'm kind of unemployable like I'm everybody's worst employee. Not because I'm not good. The problem is I'm I'm quite good at what I do, but I'm also always unhappy with the way things are going unless I'm kind of driving the ship. And so that was when I realized I needed to do my own thing. I need to use my creativity to build interesting things and try to make a living for myself.
Ryan Tansom: 03:28 Well it's interesting too--professionally unemployable. [Rob interjects: That's right]. So it's interesting how you... So you're in the software development and coding space is where you started, so how did you go from a blue collar family into the world that you're in right now?
Rob Walling: 03:37 Yeah I mean you know my parents from the time I was young it was just an expectation that I would go to college. No one in my family before me had been so I was I was the second person. It was my older brother who was 4 years older than me and myself were the only two who graduated from college. But in our family it was an expectation and so wound up going to school. And I was already you know with that in mind I was writing code for fun kind of building text-based games and stuff when I was 8. My brother and I got an Apple 2E. This is the late I'm sorry the early 80s. And my again my parents just said here's this computer. We don't really understand it but we're sure you'll figure it out. And it was a crap load of money. I think they spent four grand in 1980's dollars - for an electrician you know and a homemaker - like so my parents really invested in us. And I have a lot of gratitude for that. They set us up to succeed, you know?
Ryan Tansom: 04:30 That's pretty sweet. So after you're starting to learn how to code and everything like that, you go to college... What was the first business that you decided to jump into, and then how did it all come to fruition?
Rob Walling: 04:42 After college... Man I was- I launched a bunch of really dumb businesses that were like trying to... because I knew web development by this time and this was the late 90s early 2000s and I launched a bunch of stupid things that never took off. The one that really started getting traction was a few, was about- took me about five years and I finally realized if I'm going to do this without raising funding and I just want to have a small business that generates even a thousand bucks, 2,000 bucks a month just to prove that it can be done, I need to build a real niche product that doesn't have a ton of competition and it needs to solve a real pain point. And so I started working on a few ideas. And then there was this software that was- I found on a forum that was actually for sale. The guys wanted to kind of exit the business and it was called Dot Net Invoice and it's the super niche invoicing software built in this technology - Microsoft's technology dot net - And I happen to know dot net and so I bought it from them and it was barely doing any revenue, it was doing maybe 500 a month. And I acquired it from him for eleven thousand dollars which was, it was all the money I had. I was like you know my business' life savings and that was the first time I took that business up to about between three and five grand a month. And that was life changing for me. Not even in the revenue it generated but in the mindset shift of like whoa this is totally possible. And if I did this once or twice more and I had a few of these, I could stop consulting and stop working for anyone. It would they would pay for my life.
Ryan Tansom: 06:07 That's fantastic so you got the snowball effect and you know when you're... go back to the comment that you said about it without raising funding and you're very very adamant about that because you've also got a book that's surrounding not raising funding so when you're looking at businesses you know where does that come from about the how you approach the financing of building these businesses?
Rob Walling: 06:24 Yeah I kind of discovered this process and in retro like retroactively I've named it the stair step approach to bootstrapping and what I realized is that I didn't want to... and A) I didn't have the credentials to raise funding. I didn't want to move to the Bay Area or Boston or you know Seattle. I mean there are only a few places especially in the early 2000s that you could go to raise funding. I didn't want to uproot my family. I didn't want to work the 90 hour weeks. I didn't want to lose control and get fired by my board like a lot people do. You know there's all these drawbacks to it. And maybe in my naivete, I said I can do this without that. And so what I did was like I said I took a small amount of money and then I build Dot Net Invoice. I took the profit from that because I was still working full time. Right. But then three or five grand a month that was socking away in a bank account. I used that then to launch my next thing and then I used the profit from that to buy my next thing which was a SaaS app called HitTail in 2011 and then I used all the profit from HitTail to start Drip which is probably why I'm on the show today because I exited I've actually exited HitTail and Drip in the past few years. But for me it was a parlay it was it was one thing to the next to the next because I didn't have you know a quarter million dollars or half a million dollars in venture funding and I didn't have family money and I didn't you know I didn't have any of that. All I had was this software development skills and the kind of entrepreneurial drive to build something.
Ryan Tansom: 07:40 Well it's interesting as you said it's the control factor when you're when you're bringing in money and you are you know signing up with another partner, it's marriage and it's no longer your creation to be able to do it. So I'm curious as you- You've been very very specific and intentional with some of these things. So when you say that the stair stepper approach makes a lot of sense because you're going from one company in the cash flow to another where - maybe before we get into the whole journey of the Drip and the HitTail and stuff - where are you... Where's the ultimate goal? What is the top of the stairs for you? Is there a certain area that you're going for a certain thing that you want that you're trying to accomplish?
Rob Walling: 08:16 Yeah for me the entire time it was three things: It was freedom, purpose and relationships. All right. And the freedom was the freedom to own my own time and to build what I want and work on what I want and not have to answer to a boss. Purpose was to do things that were interesting to me because if I could just sharpen pencils eight hours a day and make 150k, I would have no purpose. Right it would be so boring so I wanted to work on interesting things. And then relationships is just that I always want to work with people that I enjoy. And I want to maintain family relationships meaning I don't want to push any business so hard that it erodes my connection with my- I have three kids and a wife and so so those were the three things I was I was always seeking. And what I realized is with I had a few small software products that were providing a full-time income for me. You know this is in California. So it was between 100 and 150k a year and I was barely working. I was working like 12 hour weeks and it was fantastic. For about ten months. I had freedom and I had relationships but I didn't really have a purpose. And so that was when I realized I had I need all three of these things in order to maintain you know happiness.
Ryan Tansom: 09:22 I was just going to ask like how you got to that. So where were you... Cause you know the whole thing has been pushed down everybody's throats these days the four hour work week. And so how did you, you know... Were you sitting somewhere where you were just like I'm super bored or how did you get to that point where you realize that your purpose was missing?
Rob Walling: 09:40 Yeah I. So I read the four hour work week in 2007 when it came out and I already had these software products but I was also consulting and I thought you know if I could just work one or two days a week my life would be great. And I was right, to a point. So in 2010, by the time it was 2010 a couple years later I had enough software products were like I said I wasn't working very much. We had our second child and I hung out with him for almost ten months, eight to 10 months. And I would just walk around town. I would meet friends. I was kind of I was like a stay at home dad but I was maybe and I made these products. And it was fantastic and I have such fond memories. You know you can never get that time back right of all that time. He and I hung out together by the end of that eight to eight to 10 months. I was really chomping at the bit and I was I realized that when I wasn't creating things that I would slowly kind of whither and I became unhappy. I started you know very mild not depression but I felt myself just unmotivated and really lethargic and I was kind of like I need to snap out of this and I need it to take another challenge to get that purpose back.
Ryan Tansom: 10:46 So how do you what was the process because that obviously probably led into the Drip phase. So what was the way that you will process or were there resources or something to help you find where your purpose was? Because I think that's a big challenge and a lot of people have. OK. So this is great, but how do you actually go- What are the process that you go to actually find that purpose?
Rob Walling: 11:08 So there's a couple of things I did. One is a skill I learned from my wife Sherry who you've interviewed on the show. She would go on these annual retreats where she would go off the grid away from me and the kids for 48 to 72 hours and go to the beach or the mountains or to somewhere far away and disconnect and leave her computer at home and she would read and think and sketch and she brought butcher paper and it was this question of what brings me life, what brought me life over the last year? What did I not enjoy? What I want to do more of? What do I want to do less of? What does the next year look like? And it's this this time when you just let your mind open up and it typically takes 12 hours before I can even like get some good thought done because my mind still races with thoughts of work and schedule and kids and et cetera et cetera. But once you get in that mindset, you can really there's a... you can gain some self-knowledge. You know and really start understanding where you are and where you want to head. So that's what I did. I was doing those twice a year and at certain pivot points it really helped kind of shift my focus and at the end of this 10 month stint with with my child I went on a retreat and I had the I wrote things down like I need I need to do something bigger. I need to be more ambitious. I need to make a difference. I need to create things you know all these notes have like this is what's going to change how I feel and sure enough I was I was right for the time being these things for me tend to go in about 18 to 24 month cycles where I go go go. And then by the end of it. I'm like phewf! and now I'm done with that, onto the next thing.
Ryan Tansom: 12:42 So it is. So if you're done with that retreat is when you decided to start the Drip company?
Rob Walling: 12:51 That actually was when I bought HitTail. So I acquired... I was going to either build or buy something, I could do either. And I started breaking ground on code and it's just such an arduous process to build something from scratch and I knew it was going to be probably 12 to 18 months before I had launched it and found product market fit which is where you have something that people actually want to pay for. This is a lot of iteration to do that. And so I was doing that while in the back back of my mind I was thinking you know if something came along that I could acquire - because I'd acquired several things before that - I was thinking I would do that because it's basically you know for whatever it is 20, 30 grand or 50 whatever, you might it'll leap you ahead 18 months. And I was interested in getting there so I was doing some cold e-mail outreach to some old SaaS apps that I had known about. I was looking on forums I was looking on Flippa you know I just kind of looking around and I- one of the cold e-mails I sent was to the owner of HitTail.com and it was just a decaying business you know and it hadn't... No one was paying attention to it. At one point, it had been in like Ink Magazine and Forbes and the New York Times. I mean all these people had written about it and it was like one of the top ten apps of 2007 coming out of New York and then it had just kind of you know gone off the radar. No one was maintaining it. So I was able to purchase it for I think it was you know was 30... 30,000 bucks which again and the parlay. Like I said earlier I had about 50 grand in my business bank account at that time. And so I wrote most of it to buy that and I spent the other 20 to rehab it. I had to hire a designer, I had to move servers and some other stuff so this was this was a pretty big gamble for me as it was 2011.
Ryan Tansom: 14:27 So you know when you're. Because I'm interested in as you as your mindset going in to HitTail.com and Drip because that's even further down the road is how was your mindset different when you've got these three things that you're trying to hit, the freedom purpose and relationships. How do you look at a business like that? So when you go in there and you're buying it you know what is the ultimate goal where you start with the end in mind and you have certain milestones or certain things that you were trying to do with the business.
Rob Walling: 14:54 Yeah there was I wanted to a) gather more- So I already had freedom and relationships, right? I was kind of chilling, I had a full-time income and I was doing fine with relationships. The purpose is what I was missing and the business was such a challenge. So what. Another thing I learned about myself. You asked me earlier how do you know how do you think about what to do next? I take I've taken several like these kind of personality tests which Sherry - my wife is a psychologist, she kind of rolls her eyes at this stuff - But I do I love finding out stuff about myself that I kind of knew subconsciously what I maybe didn't know on the surface. And I took strengths finder I've taken the Enneagram I have it on my list to take the Coleby A. But all three of these can kind of help help you do stuff and strengths finder told me I'm a learner and I'm a maximizer OK and a learner is where you are unhappy unless you're learning new things and being challenged by new things which I was not at that time and I'm a maximizer. It says you love taking things that are that are good and making them great and you don't necessarily like taking things that are really crappy and making them good. And so that's what HitTail was. HitTail was this good app at one point and it was just flailing you know at one point it had peaked at five thousand dollars a month in MRR and it was now doing I forget it was like 1,500 when I acquired it. So it is really just a kink and I saw the potential in it though it had tons of inbound links it had a really good like a loyal customer base, thought it wasn't large. And I thought I can maximize this thing. So that kind of lined up with who I understood myself to be and what potentially what would make me happy by you know redesigning this app rehabbing it and then the goal was to like 10x or 20x the revenue to a point where it would have a meaningful impact on our lives. That was my personal challenge was can I you know right now make a you know at that time I think a full time living low six figures whatever. But can I double or triple my income over the next couple of years and not for the money but for the freedom and the challenge is why I wanted it.
Ryan Tansom: 16:47 So over the course of the handful of years that you own that, what were some of the major milestones and you know in your feedback loop were you hitting the milestones that you wanted to?
Rob Walling: 16:56 Yeah I was being pretty ambitious and I was my two milestones were a) I wanted to learn as much as I could about new marketing approaches because things are changing so quickly and I just gobbled up all these resources on Facebook ads which were just coming to fruition then on the new side of SEO because I've been doing a bunch of search engine optimization like there were a bunch of technical marketing skills I wanted to learn. And all of those I like. It was amazing. It grew fast and I got to learn which is like the two my two favorite things in the world. In addition I have loose revenue milestones and I think I 10x'd it within 15 months, maybe? So I got up to about 15,000 MRR from fifteen hundred to 15,000 and that was a great milestone because I was able to hire help which I really had only hired virtual assistants before because I never had the budget. But that allowed me to kind of hire someone local. And then I eventually yeah grew it up to between 25 and 30,000 MRR. And that was I was very proud of that. You know it was less about oh look at this money it was more like I accomplished what I set out to do. And I had purpose and I was really happy.
Ryan Tansom: 18:01 So at what point what triggering event within HitTail then did you start finding that you purpose was no longer there or was there a triggering event that said OK I do want to sell this and I'm bored or you know how did that transition period happen?
Rob Walling: 18:13 Yeah it was but it was both. Well two things. One was I did start getting a little bored and my my expiration date tends to be about 18 to 24 months working on the same project and then I kind of just lose interest. And so since HitTail is monthly subscription it had recurring revenue. And I you know kind of brought in help to help try to run it didn't work that well over time it did it gradually decayed back to. I can't remember what it was when I sold it but it was in the teens probably in revenue. And that was I think I sold it in 20 15. So I kept there for several years. The other reason I wanted to sell it is Google kept screwing around with its algorithm and with the way it sourced keywords and it kept breaking HitTail and it made me realize I started to ask myself Is this a business I want to own for 10 years? Like in a decade is HitTail still going to be solvent like a viable business? And when the answer was I'm not sure because Google keeps accidentally breaking it made me think I want to build a probably a business that's more of a long-term business. And that's when the idea for Drip came out of a problem we had with HitTail.
Ryan Tansom: 19:22 Well that's that's beautiful because it's a good segue in because you know you and I were talking before we got on the show about the value builder system which is John Warrillow's book Built to Sell and some of the philosophies behind there. So I'm just super curious because I love how you've got this sequence of the evolving philosophy on business so how did Drip and what did you learn from HitTaill and the sustainability of that and how did the whole Drip idea come out and kind of walk us through the origination of that.
Ryan Tansom: 22:04 And the genesis of Drip started. [Rob interjects: That's right. That was it.] So obviously had some overlap from when you sold HitTail and then when you developed and when you actually formed Drip and started working on that full time.
Rob Walling: 22:17 That's right. So I was using I was basically taking all the net profit from HitTail and feeding it into Drip because as Derek and myself I mean I was paying us and Derek that became a W2 employee. Derek later became my co-founder in essence kind of retroactively because he had put so much into it. He was so valuable that that I felt like you know we both felt like he deserved some equity and then there were server costs there was all types of stuff so yeah. Again I was parlaying one thing to the next to the next.
Ryan Tansom: 22:43 So obviously you're... I can feel the fact that you found your purpose and how you find your flow which we've talked about the zone and making sure that you're happy because you get your freedom financially as you've been building all of these you got the relationships you've been forming and you've got the you've kind of found your niche or your [Rob interjects: purpose] the purpose, right. So how you know when you're looking at Drip and what you were developing then I mean did you look at the business going OK because you wrote your notes seven figure you all these different things you wanted the business to be. So how did you plan ahead of what you are trying to do with Drip? I mean it's because it's a different kind of model based and the other businesses that you had owned because of the fact of those criteria that you had done. How did you go forward with the different thoughts?
Rob Walling: 23:27 Yeah I in all honesty I had planned for Drip to be another lifestyle business and I thought, boy wouldn't it be great- Yeah I really did. I was not trying to take over the world with it that just didn't because you know it's interesting again personality test stuff like the Enneagram I'm I'm a creative or a maker; I'm like an artist. When I when I come to it, which is interesting because I'm left brain I'm a coder but I've always been more enthralled with the idea of making things than the achievement. Right. It's different. It's a different skill set or a different desire. I don't want to achieve just for achievement's sake. I want to achieve while am making things so I've been in bands I write songs. You know I'm always like making. And so I really looked at it as like let's build this interesting tool and it'll be great. I do have these goals of revenue but I don't particularly want to work 70 hour weeks or grow this to a 50 person team where I'm managing people or where we are forced to raise funding or where you know all these things. I'm not anti-funding, by the way. I realize I've been negative on it. I have, I'm an angel investor now I have a dozen angel investments I have friends who take funding but it wasn't something I personally wanted to do. And so that's how I was thinking about it was to make a lifestyle business. But once we launched it there was ah we got a decent amount of uptick and I think it was doing about eight to ten grand a month which was great from the launch right from the start - two dudes in a closet basically - working on my porch you know but the problem was we were churning out we really didn't have product-market fit. And as we had like advanced users using us who I respected they kept giving us feedback of like just build in a way to do automation just build in a way to do these more advanced features. And once we did that it was almost like grabbing onto a rocket ship. Where it's like I have to hire people and we have to get an office because we're now growing three to five grand a month. You know to have entire businesses that did that and it was just it was just like we just to have stuff support and to keep the servers going and keep the features going. It was like you know this was exhilarating but it definitely wasn't where I had originally planned to take it.
Ryan Tansom: 25:30 Well obviously you found a niche there and a need and a problem that you were solving if people were gravitating that fast. And at that point so as far as like the timelines for the listeners because you know Drip competes with you know Infusionsoft, or Helpspot, or Marchetto or Active Campaign all those all of these tools came around. And were you a little bit before those because a lot of those other people had tons of VC backing. So I guess I find it interesting about how you snuck in and then what you did so were where is everybody else in the same line for the kind of the marketplace?
Rob Walling: 26:03 Yeah no that's that's a really interesting point because we launched in 2013 and at the time Active Campaign was still a white label downloadable software they weren't SaaS yet. Infusionsoft was the 900 pound gorilla or 800 pound gorilla in the room like everybody knew about it because it's often kind of a small business space. HubSpot is five times more expensive ten times more expensive so more in the mid-market or enterprise space. But Infusionsoft and Entreport where the two that were really duking it out. And we came in and we were like an easier to use infusion software. Less expensive and way simpler and really built from the ground up without a lot of legacy right because Infusionsoft had been around since 2006 or seven. So their code base is a little crusty. And again I have respect for all these companies, I'm not talking smack because they're competitors. But it's you know it's the facts of the situation. And so we were able to swoop in and really with a new code base we're able to move really fast and kind of start taking their market share. And so we actually were taking people kind of pulling down from Infusionsoft and Entreport and then pulling up from MailChimp and A-Weber right they were very simple tools and then all the automation. And so that was like 2014 and 2015 were these years of just hyper growth for us. Like I had never experienced you know especially with no funding and that was one of the challenges was when you're growing that quickly and the three to five grand a month was the early growth; it got faster. The more you know. So when you're growing that quickly it's hard to have enough cash in the bank just to keep things solvent.
Ryan Tansom: 27:28 So how did you end up going through that process as you're looking. Okay. As that rocket ship starts going up and you realize that this is no longer just a lifestyle business where you're going to be walking her kid down the road. And you've got like a full time enterprise running. How did you financially back that? I mean were you just self funding or how did the work as you had mentioned previously that you were you know obviously forced into a little bit of other things because of how substantial you were growing?
Rob Walling: 27:55 Right yeah. I was still funding it out of HitTail revenue. I was pulling off of a Drip's revenue. It's nice to have a subscription business where people pay you in advance. Right. And then Derek and I at this time you were essentially cofounders making the decisions and we were seriously evaluating a round of angel funding because at the time with the growth and the level we were at raising a half-million dollar around at a pretty nice valuation would not have been hard. And so we constantly struggling with that. We were making ends meet. You know we never missed payroll the servers were always up, but I was stressed the whole time right it was like you're on the edge where we'd grow by 10k of monthly recurring revenue and I'd be like All right that's enough to hire another developer let's go. So it's always right at the edge you know. And yeah that was what led us to really start seriously considering angel funding. And during that time we started being approached by potential acquirers.
Ryan Tansom: 28:53 I was going to say because you when you get to the point that you're at you're probably your mindset starts to shift about what is the longevity of this business and so when you had mentioned that you had criteria of this next business that you wanted one was longevity and you're starting to think about angel investors and these different things you know where is your head at? Where did you start to- where was the vision of the future of Drip in your head and how did that change is you were having some of these conversations?
Rob Walling: 29:17 That's a really good question. You know I mean we had gone from just being nothing to being one of the top 12 marketing automation providers in the world according to data Nyes which is market share you know analysis platform and it was it was at that time it was five people and basically a big closet in Fresno. And people were emailing us like how are you guys doing this. You know it was it was such such a surprise. And so the thought there was look Derek and I would talk and I'd say look we could raise a round of angel investment and then that puts us in here for another three to five years of of doing the grind. And I want to call it affectionately. I mean it. Running a business day to day and scrambling like that is as much exhilaration and purpose as you get from it. It is. It can also be tough you know mentally or you know we do have these acquirers starting to poke at us a little bit and say hey have you- you know just starting to feel us out and it's like should should I even return their e-mails because prior I had not had it just no, not interested. And that's when we decided look we could at least see where- pull those strings pull the threads and see where they go you know and if they don't wind up then there's not much time wasted. But if they do end up being something this could be potentially a life changing outcome for us in a shorter time frame. You know we could still be involved in the business which we are today both Derek and I still work full time on Drip. And maybe we could you know take some money off the table for us without having to you know again raise a around and then wait three to five years for something else to happen you know.
Ryan Tansom: 30:45 So how when you're getting these inquiries and I'm curious about the process that you that you went through as you start answering. You know going back to when you're on that retreat and you are very purposeful with the three different things. How were you calibrating what was important to you versus you know getting caught up in the hype of what you had been building and making sure that you didn't make the wrong decision how- What was the process that you were going through?
Rob Walling: 31:11 Yeah it was a lot of it was a lot of thinking over a long-term. So it was not. There was nothing impulsive about it. It was never I woke up and said I'm going to sell this because it was more like Derek and I having one conversation a week hey do we need to raise funding are we doing- or do we do nothing? You know do we just keep growing it the way we are do we slow down growth to just tap the cash flow meet. Do we sell? And it was this six month mulling over you know of he and I and I would do it with Sherry. She's a really good sounding board. And a mastermind group I would do with those guys and I would also just go on these retreats as I said. And every time it was coming back to you know what is it that I want long-term. Will this give me freedom, purpose and relationships. And are we at the point where where we would even evaluate you know an exit. Because when you're growing like that it's a struggle of like well if I sell now am I leaving money on the table? Should we just not pull the threats yet? You know can we get back to the six months again we are growing so fast it's like we could almost double the value of the business in a certain amount of time as long as it doesn't top out right because if the growth stops and suddenly you're negotiating based on net profit rather than revenue multiple. So it was it was tough it was not clear cut. I mean to answer your question it was not like it came out it was just mulling it over and thinking.
Ryan Tansom: 32:25 What was some of the best advice that you got during that process?
Rob Walling: 32:31 During that decision to sell or even you know to raise or to stay. I think the advice I got was from probably from Sherry who talked about she kept saying you know where where do you want to be in two years where do you want to be in five years. Right. And where do you still want to be working on Drip? Think out further than just the short term. I've got a lot of good advice. Once we got into acquisition talks that's when I talked to other founders who had been acquired because it was more of a tactical thing right. What should I do here? How should I think about this? But I struggled with the decision to consider even consider selling you know with no price in mind or no like having never talked to anyone or gone through a big acquisition like this. I found that an extremely personal decision. And so I didn't actually talked to many other founders which maybe I should have.
Ryan Tansom: 33:20 And what were the questions or the thoughts going through your head as a personal decision was being made?
Rob Walling: 33:27 It was things like Do I still want to be working on this in two years, five years, ten years? You know is this something that really excites me that I think I have longevity on? It was a question of I'm stressed now, is it going to get better or worse or is it going to stay the same? It was do I want to grow by the time we got acquired we were about it was eight full time and two contractors about ten people and I kept asking myself do I want to run a 30 or 40 person company? Is that something that I will enjoy? So those are the types of things I was mulling over.
Ryan Tansom: 33:59 So then as you kind of have a little bit more clarity on those different decisions you sort of pull these threads and answering the emails to the acquirers what was the process and who is reaching out to you and kind of explain how you started set up those meetings and the conversations you were having.
Rob Walling: 34:15 Yeah it was. So there were five different inbound companies within I think was about over 18 months. And frankly most of them went nowhere. You know as I think is apt to happen but each time I did it each time I responded and said hey yeah I might be interested in talking and then we would do a phone call and I'd find out oh they really they're kind of looking just to acquire the team right there looking for acquhire you know more. And that's not that's not something we're going to do or they are what is kind of a private equity firm that I could tell was just really doing good to be all about dollars and cents. And that also was not something I was super interested in. And then you know a couple of them didn't go anywhere. But then there was this there were there were actually two that were pretty interesting and the one that the acquirer that eventually bought us was a company called Leadpages here in Minneapolis and that one the reason that that really caught my eye and that I followed up pretty heavily with it is I knew Leadpages, I knew they had the funding they had raised and I also the CEO of pages and I had crossed paths in the past I'd interviewed him on my podcast and we kind of lived in that in the entrepreneurial space.
Ryan Tansom: 35:28 So which is super interesting I want to dive into the process that you guys went through in that. But you know as you're you know what I find interesting Rob is that you know said that you've got 18 to 24 month window before you get bored or you're kind of onto the next project. And I don't know exactly how far you're in the Drip at this point but you know some of those other possibilities were good ways to get your chips off the table completely and move onto the next page. So did you find like a different sort of investment emotionally with Drip at this point to go past 18 to 24 months?
Rob Walling: 35:55 I did. That's a good that's a good observation. Well I was I think we're at about 3 years by this time. And for me, my personal interest in the topic and the technology and the just business was waning for sure but I had employees I had a company that was used by you know I don't remember the number but a thousand maybe customers paying at the time and a lot of them were people I knew personally. Because again you know I have this personal brand. And the entrepreneurial founder's space startup space. A lot of them were relying on Drip and I kept thinking to myself I can't just bail on them. It's not just a little app that I'm going to sell the technology like there are people relying on me and so there was there was a there were complex mix of emotions there.
Ryan Tansom: 36:41 Well I think it's interesting too because you know what you're feeling at that point where you got these people that are relying on your services to run their lives. I think you know some of the people that we've interviewed or that have gone through acquisitions really thinking about how your product and your service is going to continue because it impacts the ripple effect of how your customers rely on you. And then it also reflects on you so if you were to just sold that to someone that acuhire. And then they shut down Drip and you're literally letting a thousand people down. How would that affect your happiness. Because I think even though you pull a bunch of money off the table it could completely backfire.
Rob Walling: 37:16 Exactly. And that that was so I had a couple of deal breakers going in. Number one I did not want the product to get shut down for exactly the reason you said. Number two I did not what the any of my employees to get let go because I built a really good team and there was no reason to do that. So those were the deal breakers going into to any acquisition. And I should I want to be clear. I was also I was not burned out. Right. I mean I was stressed and I was you know tired and not super like jazzed every day but I was we were still kicking ass. And so it wasn't like we had to sell right. We were profitable we were growing quickly and it wasn't like I was pulling my hair out but I knew that at some point I would be and I didn't know how long. You know I didn't know if that be a year or five years until I would be. And so the concept or the idea of selling was a bit intriguing but I'm also pretty measured and a pretty calculating person I don't do impulsive things. And so it wasn't like Oh, I'm just burned out. I got a fire sale this thing you know it was. I looked out and thought Boy if I even start talking to someone about funding that's going to take three months to raise it if I start talking to some of them about an acquisition it might take six to 12 months to complete. So let's play long ball here you know and not get to the point where I am burned out and I just want to walk away from this thing. And that was my kind of measured thought process the whole time. It's like at least be smart about this and think over the long term.
Ryan Tansom: 38:32 Well you're not you know forced into a corner you're actually able to you know as you have from what I'm seeing is you know you're able to have conversations with these potential acquirers having questions you're asking questions that are important to you and you're able to get the answers because you know what you're asking and why. There was a you know before we jump done you were saying that you would you know obviously with your coding background and the type of individual you are you do a lot of self research. What was the where were the places that you were going to educate yourself along what questions to ask. So you did have eyes wide open as you were going on this route?
Rob Walling: 39:04 Yeah I listened to- so I'm a big audio book guy. You can read these books but I say I listen to them. I listen to Built to Sell by John Warrillow. I had read that years ago, but I refreshed myself listen to it two or three times and then Finish Big by Bo Burlingham was one I listened to several times a lot of that was funny how much of it some of it applied to me a lot of it didn't cause for me so my legacy and my like identity was not tied up in my business and that's a big part of Finish Big for me. I still have you know I have a blog, I have two podcasts, I've written three books. I have a conference like that. That's more of me. And if those things went away I would struggle. But the thought of like oh no I won't be working on Drip you know next month. That didn't that wasn't super disappointing to me like I think Finish Big you know focuses on.
Ryan Tansom: 39:51 Did that help the cause, you know I was more in that camp. I was like You know I was just kind of like what the hell happened. And did that help almost like therapeutically like hey I can go into this knowing that I can approach this from a rational perspective and practical perspective instead of you know... having the emotions to the side must have been a heck of a lot easier?
Rob Walling: 40:13 Absolutely. Absolutely. The stories that I've read and heard and the interviews because I listened to a lot of built to sell radio during this time as well. And the emotions that I kept hearing I thought Man I'm really not in that particular boat. And so I can be a little more rational although there were there were certainly some irrational moments I will I will give myself. But it wasn't about oh what am I going to do next. It was always you know it was always about me getting angry at something some negotiate or something. I was able to detach myself while still but still keeping my... I had principles right. It was like we can't fire my people. We can't shut down my app. You know those kind of things but it helped for sure.
Ryan Tansom: 40:50 Well that's actually a huge right you had. I want to actually highlight that because you had principles that were important because I think what happens is a lot of the negotiations gone south. You know the people that are unhappy afterwards they don't have the set of principles going in. So they don't know how to judge whether they've succeeded or not because they have no map of of how to guide themselves through the decisions.
Rob Walling: 41:13 That's right. Yeah I had one other deal breaker I should mention and it was that if I was going to if we were going to sell that I needed to walk away with enough money that I never had to work again. That was a deal breaker for me. So it was a non-starter. We weren't going to be talking about range.
Ryan Tansom: 41:29 Got it. So maybe pull that back a little bit. So was it a lump sum or was it a cash flow? I think is. You know you get to that dollar amount is a complicated situation which we don't you know dive too much into but you have all these taxes and all these different things that you have like a lump sum net proceeds dollar amount that you're going after or?
Rob Walling: 41:49 That's how I framed it. Yeah I looked I did- again I'm into investing I'm a left brain kind of guy and so I went back and looked. I did a bunch of research of like what. How much does it take to retire? You know even though I'm not going to retire but I want to know how to think about it. And there's a lot of research bent down there's a trinity study that looked at the 4 percent rule that if you take 4 percent of your portfolio it can last 30 years and then they did a big study from you know they started every year from like 1935 to 2000 or something like that since 1990. And almost all the years I think they were two years where it wouldn't have lasted 30 years based on a 4 percent rule. But what they found was most of the endings you wound up with more money at the end of the 30 years than you did when you started. So there was a second study done. That's like does 4 percent rule actually apply perpetually? You know unless you have a run of bad luck early on could you could do literally you know retire on 4 percent and with a decent amount of luck just kind of have money to leave to your heirs? And they supported that in most cases that's actually true. So I started thinking through that and I actually backed my personal... I started saying you know I'm a little more conservative than that. So three and a half percent was the number I started looking at and then I started thinking well how much money do I want you know each year and that was kind of a bare minimum of how I started thinking about it and I said if after taxes after you know a co-founder gets paid after broker commission you know kind of after everything, if I can walk away with some someone have that much cash in the bank in the market in the assets that I manage because I'm actually pretty decent at managing money and diversifying and stuff. So I have confidence that I wasn't going to piss it away. That was that. That's why I kept it. So then I had to work backwards from there right and say obviously there's probably going to be progress payments and so it all had to kind of add up to that again.
Ryan Tansom: 43:37 It's a principle and it's a way to it's a rock that you're guiding the negotiations at which again you know I'm I'm I'm part of our deal and a lot of other people that I worked with were they get so hung up on those gross dollar amount that you're going to be getting. You know, it's like "Oh, we were bought for this!" But I'm like, yeah what did they walk away with? Yeah. And yeah and then what kind of terms and conditions are they stuck with after the fact. So let's progressing going OK. So as you're going down the road with the Leadpages and Clay and what were what were some hang ups that you had or what were the things that you really liked about the relationship building throughout the negotiations?
Rob Walling: 44:21 I struggled with that I want to be honest. I had known Clay he emailed me in mid 2015 and it took just almost a year... no, it was 13 months until the acquisition closed but about six months of that was pretty hard negotiation. I struggled. A friend of mine had given me advice and he said you know every conversation from here on is is part of the negotiation. And that was helpful, but it was also for my personality being very cautious it was also probably wasn't great because I was suspicious of everything and probably to the way that I shouldn't have been. It made in the end everything worked out. And Clay and I are actually friends we hang out and have breakfast stuff so like there was no there was no blood you know that was lost and we did build a relationship. But I was probably a little too on guard a little too much and it stressed me out. I think I think I added stress to my to myself during that time because I just was so concerned. I told my wife at one point I could say something and you know lose a million dollars off the off the purchase price you know and she was like Is that true. Is that actually true or do you just are you just so wound up about it? And the fact was I was so wound up about it.
Ryan Tansom: 45:32 You know I think it cautiously optimistic or however you want to word it. I think that feeling that you had is very real and I totally have experience and I watch other people. But you know on the flip side Rob I've seen it happen. You know I mean because you don't know the people across the table from you until you're actually married with them. I've watched it and so it's you know from what I know. Just my two cents is like it because if you're an open honest book which I can tell you are then it's internal conflict that you're dealing with because you're protecting yourself but you're also trying to be yourself and so it's just it's constant turmoil going on inside.
Rob Walling: 46:10 That's a really good way to describe it it was turmoil because I'm by nature like you said I wanna just tell the truth. I want say I want to put my cards on the table. And I also just like saying yes to people like that was one of the greatest things when I was a developer as people would say hey can we build this and I'm like Yes We Can. I could totally kill that. So me saying no the whole time and resisting and like that doesn't work. Well why doesn't it work and then defending that. I would just get riled up like I would raise hair on the back of my neck because it's like well now we're just arguing is what it felt even though isn't it when negotiating is? You know.
Ryan Tansom: 46:40 It's an interesting process. You know I'm curious so you go to the closing and you sign those documents and the money gets wired and everything's kind of complete. What were your what was the emotions that you were feeling?
Rob Walling: 46:54 Well I mean there was a huge sense of relief when it finally came through when the when the wire hit the bank account. I was actually at my son my oldest son's cello camp and I was supposed to be in like helping them out. And they they were like docs that hadn't been signed and so I'm on my phone getting the e-mail for Leadpages and it's like you have to sign these docs because we have to send the wire in the next 30 minutes. So I was getting the evil eye stare from like other parents and I was like Guys serious like you just have no idea what is going on like my life is changing as we speak. So it's completely surreal and I'm like oh my iPhone outside and I sign it and then I went back in and then I get a text from Derek and he it's a screenshot of a bank account so I was like wow yeah it was. I almost got super choked up right. Because it's such a journey. And then. But I also remember I remember the stress not boiling away for it and not feeling real for probably a good month or two after that.
Ryan Tansom: 47:51 What was how did the operations and how everything changed after that? What was kind of the arrangement for autonomy or the integration with the companies and such?
Rob Walling: 48:02 Yeah you know the cool part about Clay and the way everything was set up was he was super upfront about it. He said we're not going to let people any of your people go we want to build on top you know on top of Drip and continue to have it be this great product. You guys are going to be what you guys do today works. And so keep doing that. Like let's let's be more of an Instagram-Facebook acquisition where you're held at arm's length and you're just cranking away and let us basically feed more customers into you. And it was... Clay lived up to everything that he said would happen in the deal. You know and that was super cool. I mean we had you know you get 80-90 percent of it written down, but you can't you can't write everything in a contract it just doesn't work that way. And so there were some verbal things that he and I had. And you know he lived up to every one of them was you know hopefully I did as well.
Ryan Tansom: 48:47 That's awesome because you know one of the you know a lot of times people on the show or you know a lot of the Built to Sell radio interviews that you probably heard were people will say that they don't get into writing and everything changes afterwards. So at the end you know that's where the trust in the person that's buying you but then also getting it down in writing and having that balance is super important. How did you like rolls or freedom or autonomy to change afterwards. I mean are you still able to do whatever you want to say yes to everything? Or is it a little bit different?
Rob Walling: 49:19 For the most part, I am I mean my role became more focused which was good. Like I gave up H.R. and payroll and you know health insurance administration and even like I gave marketing to Leadpages because I was running that and I gave support to the Leadpages team and you know slowly but now I just focus on product. And so I was able to grow. We were three engineers when we got hired and now we have 16 and I was able to really focus on just building the product faster. Building a better with more resources so it it's been a net net positive not only the ability to take money off the table but I have been less stressed over the past 18 months. You know since acquisition than the 18 months before that.
Ryan Tansom: 49:58 So do you have freedom purpose and relationships?
Rob Walling: 50:02 I do. Yeah I do have the freedom I have most of the freedom because I'm pretty you know I'm a V.P. of product here so it's not like I have to be here at nine o'clock out at 5:00 and that kind of stuff. I take the one thing I'd probably changes that might take more vacation, I might travel more. But no one's ever - we do have unlimited vacation - No one's ever heard me crap about it. It's just my own internal thing of like my teams here working. I struggle to do that as much as I used to. But overall yeah freedom's there. The purpose is still there because I'm working on Drip right? And then my relationships are strong because I'm not stressed and so I can spend time thinking about other people.
Ryan Tansom: 50:38 So you know now you're going on probably what? Four, five years since you started. You're way past that 18 month gate that you were accustomed to. I mean do you see the flame giving at all or is it. I mean is there something else on the horizon or are you still see enough runway in the industry and the product that you have?
Rob Walling: 50:59 Yeah. I don't have any ideas. I don't have a plan of what I would do next because I don't actually think I want to do any more software products as much as I've enjoyed them. I turned 43 about a month ago and I feel like I've accomplished what I wanted to with the kind of B2B SaaS software and that's my wheelhouse now. And I just don't feel like I want to do the grind of starting another one now. So obviously someday I'll move on to something but I still have two podcasts. I have a conference I throw three times a year. Sherry and I are publishing a book, I'm thinking about writing another you know it's like I have other stuff I don't need to start another business and I don't necessarily- Like an actual you know kind of what'd I say? A grind it out Software Company. So I don't think I will ever do that again. But yeah you're right. There will come a time where it'll be obvious I think when it's kind of time for me to move on to my next steps.
Ryan Tansom: 51:54 And it's interesting because of who your wife is. Because I think you're what I see with a lot of entrepreneurs where they go through the grind that you're referring to I think a lot of entrepreneurs it's the start it's the immediate feedback of creating something that's tangible and there's tangible whether it's the code or the financial reports and you're able to see like how well you're doing and a lot of these people move in after they've kind of hit the you know hit the ball out of the park like you have. Yet all of a sudden, Now that challenge is a little bit more intrinsic. So you know it's exactly what Sherry talks about all the time right where you have no how do you challenge yourself and stuff that's not as measurable as all the stuff that you've done in the past. [Rob interjects: Yep that's exactly right.] So you kind of doing that with the conferences because I know you're you know you're on the Zen founder podcast you know you're integrated in a lot of what Sherry does I mean is it- Do you see yourself kind of migrating into the more of that that is or is it more just kind of still in the journey search mode?
Rob Walling: 52:53 I would say I'm more on that journey search mode. I love helping Sherry out kind of being a backstop and a sounding board for her. But you know my my wheelhouse is still kind of going in and mentally grinding stuff out on my own I think. And that's where like you know building a book or writing a book or building even I mean I was built like just simple tools hacking away last weekend and that was super fun and I don't know if it will ever be a business but I would love to spend six months you know just not doing much and just only doing the podcast and everything and then see what comes of that. Because in the past something always does.
Ryan Tansom: 53:30 The universe calls and says Hey that was a good idea. Such as Drip. [Rob interjects: Yeah that's right.] Rob as we're going to wrap it up here. You know with a couple of the journeys that you discussed with us and a lot of the things that we talked about is there one thing that you would either highlight for someone going through the journey or something that you would you know leave us with?
Rob Walling: 53:49 And I think something that one thing I did right. And one thing I did poorly during acquisition specifically is something I did right as I hired really a really good team. I had a really good lawyer that I trusted. I had a really good CPA that I've had for years so he was able to advise me on tax implications way early on we were able to structure things in a way that made sense and then I actually had a broker who was advising me and helping with negotiation. Without that I would have been a complete basket case. So that was something I did right. Something I did wrong and I wish I could do again is as I said I stressed myself out more than I should have during an acquisition. I really struggled for about six months and I can never get that time back and I have regrets of how I potentially damaged relationships and just how I live my life for that half a year.
Ryan Tansom: 54:36 I think it's fantastic advice because I mean it's tough hindsight bias is always 20 20 and that's what you know the whole purpose of getting people on that can share the wisdom like this. I appreciate it so much you coming on the show. If there's one way for our listeners to get in touch with you what would it be?
Rob Walling: 54:54 To head to Rob Walling dot com.
Ryan Tansom: 54:55 That's super easy. Thanks for coming on the show. Appreciate it.
Rob Walling: 54:59 Absolutely. My pleasure.
Ryan Tansom: 55:04 Thanks for sticking in there I hope you enjoyed the interview with Rob. If I had three big takeaways that I had after interviewing Rob was you know the first one was how true he was to the principles of freedom, purpose and relationships. And I really respect Rob on how much reflecting he did to get to understanding himself and what was important to him. And what was crucial to his happiness because I think a lot of us realize after the fact or after selling a company what was actually making us happy instead of looking at it in some future planning and some foresight.
The second thing that I really took away from talking with Rob was how well he thought about the scenario and plan for what might happen. It was not a knee jerk situation. He thought about the ramifications of the different outcomes and then he backed into what he wanted. And he went to the table with the number that he needed and what was actually going to make him after happy afterwards because that was how he was able to have a successful outcome in the happiness factor and the dollar amount because he went to the table with the principles that were important to him.
And the last takeaway that I had which was an interesting one was the internal conflict that Rob had throughout the negotiation standpoint. And I can relate and I've seen so many other people go through this where emotions are so high as you're going through this negotiation because you need to protect what's right for yourself. But then also usually that comes at the sacrifice of being who you are because as an entrepreneur a lot of us are giving. We're open we're transparent we're passionate. And so either having to subdue that and having to you know really focus on the practical stuff is very difficult for us whether it's not telling your employees or not being exactly who you are to that buyer. It's a delicate balance and really having the strong people around you to support you and guide you along that way is nothing short of important. So I hope you enjoyed the episode. Go on iTunes give us rating. I very much appreciate it. And until next week.