This week in Built to Sell News, we’re covering:
- How Dan Reich built TULA Skincare to a $100 million giant before selling to P&G (listen now)
- What the Forbes list of the 25 wealthiest people tells us about the secret to getting rich
- A disturbing trend among our biggest priorities (patriotism down, money up)
- $175 million fraud and what happens when you fudge your numbers for an acquirer
💰 How to Get Rich
Last week, Forbes published its list of the world’s richest people and Elon Musk was replaced by LVMH’s Bernard Arnault, the purveyor of $2,000 handbags.
In the same week, The Wall Street Journal published a report showing “patriotism”, “religious faith” and “having children” have all dropped in importance for the average American. The survey, conducted with NORC at the University of Chicago, a nonpartisan research organization, shows the only priority that has increased during the same period is Americans who see “money” as a very important priority (43% up from 31% in 1998).
Starting and selling a business is still the most reliable way to get rich in America, as evidenced by the Forbes list where 100% of the 25 richest people in the world are entrepreneurs or their heirs, but the desire for money is so strong that it’s apparently pushing some entrepreneurs across the line. Last week Charlie Javice, the founder of Frank, a student financial aid application assistance company, was accused of dramatically inflating the size of her customer list for JP Morgan Chase before the bank purchased Javice’s company for $175 million in 2021. Now the bank is claiming that of the 4.25 million users Javice claimed she had, just 300,000 are real people. Not surprisingly, Javice has been accused of fraud and may soon find herself in an orange jumpsuit along with fellow entrepreneurs Sam Bankman-Fried and Elizabeth Holmes.
😀 The Happiest Founders Don’t Focus on Getting Rich
Given all the hype about money last week, you may be surprised to learn that the happiest Built to Sell Radio guests we’ve interviewed do not appear to be blindly pursuing money and fame at all costs. We’ve interviewed lots of founders who have had seven, eight, and even nine-figure exits — they could afford just about anything — but the happiest entrepreneurs have taken their proceeds and done something meaningful with the money. Dave Darmanin bought his sister a home, Tammer Kamel took his kids out for an unforgettable dinner, and Dan Reich built a school.
Reich is the founder of TULA Skincare, which he started in 2013. From the beginning, Reich approached his business with a spirit of generosity. After hatching the idea for TULA, Reich recruited a friend with experience in the beauty products category and then convinced Dr. Rojini Raj to lend her medical credentials to what they were creating. As he told John Warrillow this week, rather than keep most of the equity for himself, Reich split it evenly among his co-founders.
Reich then raised money from friends and family using convertible debt with a $3 million cap meaning his early investors were rewarded with a big stake in his company when TULA attracted its first round of institutional investment. When the business reached $10 million in sales, Reich realized he was the wrong guy to lead it and had the humility to replace himself with a professional manager. When the company needed a spokesperson, he listed Dr. Raj as the sole founder on their website, even though he was the originator of the idea.
Much to the chagrin of Bernard Arnault’s team at LVMH, when Reich sold TULA, he didn’t buy an expensive piece of jewelry; instead, he took some of his proceeds and built a school in the name of his grandparents, who were Holocaust survivors.
Unlike the average person who is increasingly preying at the altar of money, the happiest founders seem to be driven by who they can help and what they can build with the money they make.
🏆 The Trophy: How to Commemorate Your Win
As mentioned above, Reich chose to donate his earnings instead of buying something luxurious for himself. At the 1:06:15 mark of the episode, Reich shared a story of his grandfather’s experiences during the Holocaust, emphasizing the importance of education. He made a commitment to honor his grandparents’ legacy by rededicating his childhood school, The Hebrew Academy, which will now be known as The Reich Hebrew Academy, to ensure future generations have the same opportunities he was afforded.
In this clip, Dan Reich explains how he utilized convertible debt with a $3 million cap to finance TULA during the angel round of funding.
📣 Quote of the Week
” I’d rather have 1% of something than 100% of nothing”.
Dan Reich explains why he chose to evenly split shares among his co-founders.
📈 Recent Deals
- US-listed software company Trimble has completed its purchase of Hg-backed Transporeon, a transportation management software company.
- InfoDesk, which is backed by Cuadrilla Capital, has acquired Wide Narrow, a move that will unite two SaaS platforms that specialize in providing enterprise-level business insights.
We’re always on the lookout for inspiring entrepreneurs to feature on Built to Sell Radio, and we need your help to find them. To nominate a founder, head here.
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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