A Broke Philadelphia Sports Blogger and His $12 Million Payday

In this week’s edition of Built to Sell News, we’re covering:

* The lessons founders need to take away from the collapse of Silicon Valley Bank
* How supplier risk led one founder to take a $4 million haircut
* How platform risk can be a double-edged sword
* How Kyle Scott went from a broke Philadelphia sports blogger to a $12 million payday

☠️ Silent Deal Killers: Platform vs. Supplier Risk

Last week’s collapse of Silicon Valley Bank has led to Jason Calacanis, a start-up investor and author of Angel, recommending that small businesses spread their cash across multiple banks to guard against future bank runs. This extreme example highlights the extent to which some founders will go to reduce their reliance on a single supplier.

Supplier risk extends beyond just your banking relationship. If your business is highly dependent on a key supplier, it will be less valuable in the eyes of an acquirer. Balancing the need for good terms from suppliers with not becoming overly reliant on any one supplier is crucial for founders. Read how supplier risk led one founder to take a $4 million haircut on the value of his business.

Supplier risk has a close cousin called “platform risk”. When you tie your wagon to a major platform like Apple’s App store, or the Shopify Marketplace, it means your fortunes will rise and fall with your platform.  Thanks to the growth of Amazon, it took Sophie Howard just 18 months to hit $2 million in sales for her handmade products from Nepal. But being too dependent on Amazon’s sales brought down the value of former Built to Sell Radio guest Ben Leonard’s company Beast Gear.  And when 90% of Adii Pienaar’s customers for Conversio came from the Shopify Marketplace he got so spooked that he decided to sell.

🎧 Built to Sell Radio: How Kyle Scott Went From a Broke Philadelphia Sports Blogger to a $12 Million Payday

On this week’s episode of Built to Sell Radio, we spoke with Kyle Scott about the sale of his sports blog, Crossing Broad. In 2009, Scott created the website, which quickly became popular among Philadelphia sports fans. Despite his success building an audience, Scott found himself scrounging for cash on several occasions. In 2018, the US Supreme Court lifted its ban on sports betting, enabling Scott to monetize his audience by receiving affiliate fees from sports betting websites. This decision proved to be a turning point for Scott and his website. In 2020, Scott and his partners agreed to sell Crossing Broad to XL Media for $12 million in cash, $8 million worth of XLMedia shares, and the potential for another $9.5 million tied to a three year earn-out.

📽️ Clip-of-the-Week

This week, Built to Sell Radio guest Kyle Scott described how a change in YouTube’s affiliate platform almost killed his business. Watch the clip.

🏆 The Trophy: How to Commemorate Your Win 

With the earnings from his business, Kyle Scott and his wife bought a vacation home on the Jersey Shore. Here’s what $17.5 million buys you on the Jersey Shores these days.

📣 Quote of the Week

“In the future, keep your cash in three different banks”.
Jason Calacanis, author of Angel.

📈 Recent Deals

* Subscription-based tele-health platform Sequence was acquired by WeightWatchers for $132 million in cash and WeightWatchers stock which is a little more than 5 times Sequence’s $25 million run rate.

* The U.S.-based Department of Justice is threatening to block JetBlue’s acquisition of Spirit Airlines. JetBlue’s deal with Spirit includes an agreement by JetBlue to pay Spirit’s shareholders a $400 million breakup fee if antitrust authorities block the combination, as well as another $70 million to the company.

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Thanks for spending a part of your day with us. For more information on how to build the value of your company, be sure to visit our website at BuiltToSell.com.

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Colin Morgan, Executive Producer of Built to Sell Radio
John Warrillow, Host of Built to Sell Radio
Daphne Parsekian, Copy Editor
Denis Labataglia, Audio Engineer

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