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The Story Behind Jason Flick’s $100 Million Sale to WarnerMedia

March 5, 2021 |  

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These days, you’re just as likely to watch a football game on a mobile phone as you are on an old-school TV. The technology that enables you to watch your favorite show on whatever device you have handy was made possible by Jason Flick. Flick co-founded a company called You.i TV with a vision to “own the glass.” He struck deals to provide the user interface, which enabled content to be viewed across devices with the likes of the NFL, NBA, and just about anyone else who produces original content.

The business was thirsty for cash which Flick raised through four rounds of investment totaling around $35 million. One of his investors was WarnerMedia (formerly Turner Broadcasting), who decided to switch from an investor in You.i TV to the owner when they offered Flick more than $100 million for his company. There is lots to chew on in this episode, including:

  • A solid overview of the pros and cons of raising money from a private equity group, venture capital firm, and a strategic partner.
  • The definition of an A, B, C, and D round of funding and the dilution associated with each.
  • Valuation benchmarks for both recurring and one-time revenue.
  • A sneaky trick some SaaS companies use to boost their valuation.
  • How to avoid the downward pressure on your valuation that comes with giving an investor the option to acquire your business.
  • The danger of raising an investment round too early.
  • An overview of the liquidation preferences most venture capitalists demand (and why they might upset your other investors).
  • How Flick forced the hand of his investors into making a pre-emptive acquisition.

WarnerMedia was not only an investor in You.i TV, but also a customer. When the proportion of You.i TV’s revenue attributable to WarnerMedia crested 30%, Flick knew he risked undermining his negotiating leverage if they ever want to flip their investment into an acquisition. Suppose you feel overly reliant on a single customer. In that case, we’ll help you think through your options in step eight of The Value Builder System™ — complete step one for free by getting your Value Builder Score.

Our guest

Jason Flick’s mission is to challenge the status quo, understand what’s next, turn it into business value and disrupt an industry. By cultivating a habit of seeking new ideas, inspiring people, and creating excellent work culture, he has built a career path of founding/co-founding many successful start-ups. N-able Technologies, which Jason co-founded in 2001 was acquired by SolarWinds (NYSE: SWI), a leading provider of powerful IT management software. He co-founded You.i.TV, attracting big-name U.S. investors since its founding in 2009 as an offshoot of his mobile software firm, Flick Software. The company’s customers have included Sky, Fox, AT&T, NBA, Disney, and Twitch. You.i was sold to U.S. media giant WarnerMedia, one of its biggest customers, in late 2020. Jason is a big believer in giving back to the community and sits on non-profit entrepreneur-focused entities and private sector company boards. In addition, Jason continues to mentor the next generation of tech leaders and help them summon courage, resilience, and creativity in their entrepreneurial journeys. Twitter: https://twitter.com/jasonflick
Linkedin: https://www.linkedin.com/in/jasonflick/

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Transcript

John Warrillow:

When’s the last time you read a book on selling your company? My guess is you’ve never read a book on selling your company. Why bother when the only books out there read like textbooks filled with acronyms and terms you’ve never heard of, written by people who make it their job to make themselves look and sound smarter than you. Why bother? Well, The Art of Selling Your Business tries to do exactly the opposite. It features the stories of the founders I’ve listened to for the podcast. I’ve taken their best practices, their secret hacks and bundled them into a storytelling format so that you can take away the key lessons, the action plan, the field guide, without sifting through the boring textbook that is most books on the topic of selling your company. You can get it at builttosell.com/selling.

John Warrillow:

Okay, cool little story I think you’re going to like coming up from a guy named Jason Flick, who built a company over four rounds of investments up to more than $20 million of annual revenue, at which time, he sold it for more than $100 million. He talks a lot about the pros and cons of different types of investors, private equity groups, venture capitalists, even friends and family as he built his company. You.i TV. It’s a cool technology that if you’ve ever watched a football game or a baseball game on a device other than a television, you can thank my next guest, Jason Flick for that. He built the connective tissue that made content run across devices, and he talks a lot about how it feels to have an investor, in his case, WarnerMedia customer. Here to tell you his entire story is Jason Flick.

John Warrillow:

Jason Flick, welcome to Built To Sell Radio.

Jason Flick:

Thank you, John. Looking forward to it.

John Warrillow:

Tell me a little bit about You.i TV, and you got to dumb it down for me because I am not a technology guy. I read the press stuff, and I’m like, “I’m still confused.” So disabuse me of that. Explain to me what You.i TV does.

Jason Flick:

Yeah, I’ll give you the one-minute origin story, which probably maybe helps a bit. We, 10-year-old business. The iPhone launched 10-ish years ago. My co-founder and I, Stewart saw the iPhone, we immediately knew this was a game-changer for how people are going to relate to technology, My wife loved it. My two-year-old daughter loved it. None of them wanted anything to do with BlackBerries and Nokia’s of the day. And Apple is never going to license this, which everybody knew, and they wouldn’t. We decided let’s create some software that can create this level of experience on what we now call every piece of glass. We wanted to help all these pieces of glass devices, if you wish, to have that kind of experience, and even got in a bit of trouble by literally copying iPhone in the early days, and Apple said, “You can’t do it,” but to make the point, we really just technically copied it so we can do it. That’s what we do right up to the end, we’re helping these incredible experiences to everyone.

John Warrillow:

When you say, “Helping people on any piece of glass,” when I think of pieces of glass, I think of all of the Apple products, so the iPhone, the iPad, and blah, blah, the Apple Watch, etc. I’m assuming you’re not referring to those devices, because Apple creates its own software, I’d imagine. You’re talking about everything else, Android devices.

Jason Flick:

Yeah, so we started off helping everybody else, but about midway through the business, we said, “Okay, where is the biggest problem to solve?” So we had this piece of technology that solved it for Sony and Canon and Kobo in Canada, which was going after… On the e-book space, we’re doing a bunch of stuff there, but we said, “Really, the bigger problem seems to be apps everywhere.” Of course, we’re inundated with apps. Anything electronic, it usually ships with an app. And so we wanted to solve that problem, and apps are now on iOS, Android, but your apps are on your TV, your apps in your car, your apps are on your thermostat, and so-

John Warrillow:

If I go down to my TV and flip it on, I get like, “Hey, you can watch cable TV, or you can watch Netflix or Prime or the weather.” That interface that I’m looking at, someone has created that interface. I’m assuming it’s some technology guy at Samsung who has created that. Are you saying that that would be an example of the kind of interface you would create?

Jason Flick:

Yeah, and we focused mostly on the biggest companies in the world, so if you wanted to build an app and you wanted it to be on TVs, and on set-top boxes, and an iOS and Android, you would have to go and download all these tools to build it for each one of these platforms, and we took a very different approach, so you build one beautiful experience, and it could run on smart TVs, cars, iOS, Android, so these big brands that have really beautiful apps and not have to maintain all the separate code bases.

John Warrillow:

So, they licensed your software and then develop it based on that platform?

Jason Flick:

Yeah.

John Warrillow:

I see! Okay. Gosh, it sounds like a really expensive business to start. Did you and Stuart kick in a ton of cash to get this thing started, or how did it…

Jason Flick:

Yeah, we were lucky. Stuart had some IP, but the comparable, how do we get on all these platforms and not care about the platform because we had to build it. So, the level of effort in the end, where we were, which is almost a million lines of code, it was equivalent to a tier one video game engine or a tier one operating system. Both of course, you could list on your hand how many companies have built those? Yeah, it was stupidity and foolishness that we could do it, but in the end, we did. We were on dozens of platforms, and we just didn’t care about the platform.

John Warrillow:

How did you finance creating a million lines of code? What was this capital structure?

Jason Flick:

Yeah, it was through stages. We started off bootstrapping like a lot of companies here in Canada do, doing services around some for IP, and then we got a bunch of government support to kind of build it because they could see what we’re doing, and then we did finally raise the first round of capital, which is private equity, which we’ll talk more about that as we get into the final stages, that’s a big impact, then we raised our next round from a strategic, from one of our investors, which ultimately acquired us, then our next round was actually our first VC, venture capital round, and another strategic came in on that one. So, we did do all these levels of funding to continue to grow that because we were not at all profitable. There was no short-term goal to be a profitable business.

John Warrillow:

What was the business model, how did you make money?

Jason Flick:

Yeah, so we based it off of the return on investment of not having to have what I would say 10 people for 10 months for 10 platforms, because generally, a lot of these people wanted to get on 10 of these platforms with these devices, and it takes you 10 months and 10 people. So, you have 100 people to try and build these apps and maintain it. We, one team of 10 now to build for all those platform to get a better result. We did a yearly fee on a per platform. Typical deals for us were in the million or millions of dollars because they were picking a bunch of platforms with a bunch of brands, and then using our tech to get ahold of them.

John Warrillow:

You would go to a company like Samsung and say, “Give us a million or two a year, and you’ll have access to the platform.”

Jason Flick:

That’s where we started, helping those hardware manufacturers, but where we moved midway was saying, “We’re going to get capped,” and there’s a whole piece on that, looking at kind of our competitors and how they got cap. We actually ended up going right to the final customers, to the Twitch of the world, the NFL, the NBA, the Cartoon Networks and getting them to license our tech, and then we had no cap, right? You want to get on 25 platforms with 25 brands, that’s 25 times 25 times our 75k, 100k a year license fee.

John Warrillow:

You lost me. So, when you say a cap, you’re referring to a cap that they would pay you, like a brand like Samsung would pay you? They’re not going to pay per-

Jason Flick:

They would pay us once. So, they would license our engine then Samsung’s covered, so you’re capped by the fact that there are only so many device makers, right?

John Warrillow:

Got it. Instead, you went to the end producer, if you will, the NFL, the NBA, and then charged them per platform, like so Android and iPhone, and they would pay you per platform.

Jason Flick:

Yeah. Exactly. That way, on the Samsung platform, we could get 10 to 100 licenses, if there’s 10 to 100 apps on that platform. Whereas, if you’ve kept working with the device manufacturers, they’d say, “Hey, we’ll pay a license fee once,” and they might have paid a bit more, but it would put a pretty quick cap on your business model.

John Warrillow:

Someone like the NFL or the NBA, what would they pay per platform? You mentioned 75 grand. That would be per year, I’m assuming?

Jason Flick:

Yeah.

John Warrillow:

Got it. It’s a like a SaaS model on the fact that it’s recurring?

Jason Flick:

It is. It is like a SaaS model. That was always an interesting challenge. It is like a SaaS model, but it isn’t quite because there’s really no… Early days anyways, there was no cloud component to it, but it was sold as a SaaS model, which really did pay out well for us, right? You get the 10 X on those kind of revenues versus the 1.5 is you know well on the service-type metrics, they’re just traditional.

John Warrillow:

Got it. And was that part of your intent in characterizing the revenue as SaaS-like because you knew it would impact your valuation?

Jason Flick:

Absolutely, yeah. That was a big push. All the investors wanted to see that. The type of investing we were looking for anyways, which is this higher rate of return, they all want to see recurring revenue locked in, so that was a big push. In fact, from year five to year eight, we went from probably 90% services to close to 50% recurring. Really aggressive at trying to flip that from A, having to do the services work at all on it, and B, making those recurring.

John Warrillow:

Just to be clear, by the end of that effort, you had gotten your recurring up to 50, 5-0 percent of your revenue?

Jason Flick:

50% of the revenue, yeah.

John Warrillow:

And the other 50 was just one-off services, or not just…

Jason Flick:

Having looked back, I think a lot of people package those services a lot better than we did, right? They call them onboarding and packaged them into recurring components. But yeah, we had a world class design team, which was a bit unique considering it was rocket science technology we were doing, and we would use those to make sure that our clients were successful, right? It was really critical because we were doing something so unique. You’re able to understand what we did. It’s complicated. Our customers thought it was impossible. So, it was very new. Early days, we had to eat our own dog food, which whatever metaphor you want to use, to really make sure they were successful to validate this very, very different technical approach that we took.

John Warrillow:

I want to just double-click on something you said earlier, which was that you’ve seen others, I don’t know if it’s fair to say mischaracterize, but certainly fudge they’re one-off services revenue, and kind of roll it into ARR, annual recurring revenue. They do a one-time implementation, and instead of calling it the one-time services, they would somehow package that as part of their annual recurring revenue, is that what I heard you say?

Jason Flick:

Yeah, I mean, if you can raise enough funding, and you lose money, you just say, “Hey, it’s not 50k of licensing and 50k of services, it’s 75k of licensing,” and you just spread that service piece out over a while, and you can certainly do it. I see a lot of companies do it. I don’t think that’s there’s anything necessarily wrong with it, but we were very black and white about what was the actual software recurring services, and a lot of other companies, they were just from day one all about recurring. There was no such thing as services revenue, and I think that’s something, looking back, we probably could have been better at because we did have people that were just available on call. We did do support through that, but we could have doubled-down even more, and I think we got really… You don’t get a lot of value out of the service fees relevant to that recurring.

John Warrillow:

Right. So, in your experience, it sounds like services was sort of in the one times revenue, and the SaaS stuff, the recurring stuff was…

Jason Flick:

One in 10. I mean, whatever. Maybe eight, and eight and 1.5. Whatever. But yeah, an order of magnitude difference, and so we definitely should have and probably could have pushed more there, and now if you look at most of the banks in the last four or five years, they’ll now do your lines of credit based on recurring. They’ll do loans. A lot of investors, that’s the only number they want to hear. And yeah, you definitely want to maximize that number as much as you can.

John Warrillow:

How was your churn? I’d be curious to know your revenue churn and your logo churn. I’m assuming logo churn was low. What about revenue churn? Maybe talk a little bit about that, if you could?

Jason Flick:

Yeah, it was a big commit, but when you went on our tech, it was very, very little churn unless they shut down a brand, but there would be churn in revenue if they chose different platforms, or again, if that big client shut down one of their brands, we would see churn there, but very few of our clients that went on our tech, came off, because once you get on that having one team of 10, instead of 10 teams of 10, it’s hard to go back.

John Warrillow:

Yeah it was a game-changer. What would revenue churn had been in a given… I don’t know. Did you measure monthly or annually?

Jason Flick:

We did everything annually, yeah.

John Warrillow:

What would a typical year of revenue churn look like on a percentage basis?

Jason Flick:

Yeah, I mean, probably five or 10%. Pretty small.

John Warrillow:

Yeah. Yeah. Got it. I’d love to go back to the raising of capital here because I’ve got so many questions about that, but it does seem like a very unique staging. Really, there are kind of four unique stages here, the first being bootstrapping and a combination of some government support and bootstrapping to kind of get the code written, and then it sounds like there was a private equity round, and then a strategic investment, and then finally, a VC investment. I’m getting the four stages right?

Jason Flick:

Yeah, correct.

John Warrillow:

Okay. Got it. First question relates to the private equity round. When I think of private equity, I generally think of sort of more established later stage, less sort of high tech startup and more sort of quiet little niche corner. Tell me a little bit more about the private equity round. What was going on here with this PE round?

Jason Flick:

Yeah, because of your bootstrap, and this is one of the risks, is you become a profitable business. That’s kind of the definition of it. I think we were doing maybe two million a year in business, and your profit, you’re 30% profitable, and we hit closed $10 million in business. We closed a big deal with Rogers, we closed a big deal with Corus, another big Canadian brand that owns a whole bunch of kids brands. We closed a deal with Crackle, Sony, and we were just swamped. We were like, “We now need to hire 100 people,” but our story was just too unbelievable. And maybe it’s on me, they didn’t believe we could build an app not using iOS tools and it would be better than iOS, also identically works on Android not with the Android tools, and so we couldn’t.

Jason Flick:

A private equity firm said, “Well, we just believe in the numbers.” They knew what they’re getting into, and we know what we’re getting into, and it did have an impact five, six years later, but it was the money that was available at the time, and we did go and hire other people, we did do execute on all that business. They was a private equity firm with a tiger by the tail, right? Watch what you ask for.

John Warrillow:

Why do you say that?

Jason Flick:

Well, we did our A round with them, and it was in three tranches actually. We didn’t even take the third tranche, which I’m not a big fan of tranching, but I get what they want to do it, and it kind of burnt them in a sense because we didn’t take it, and then our B round was six months later, and they got a 2X right away. Technically, they would have loved to be in and out for six months and got their 2X return, but that’s not how it works in this world. So, they had to go along with all… And they were really supportive. They were great. They followed on in every round, but yeah, they got the 2X return in six months when our strategic came in. On paper, right? On paper, they got the 2X, right?

John Warrillow:

Yeah. Yeah, I’m now fully confused. You’re going to have to debunk this for me or decode some of this stuff. So first of all, what is a tranche? You mentioned the private equity group invest in three tranches. What do you mean by that?

Jason Flick:

Yeah, so they said it was a $10 million round, plus the bank gave us an extra line of credit for two million, so we called it a $12 million Canadian round, maybe 13 Canadian when we converted it. And so the first was 2.5 million to say, “Hey, if you get these things you said you’d do then…” Actually, I think they just gave us the first 2.5. The next one was, “If you can get these things done, we’ll give you the next 2.5.” And then I don’t know there was too many metrics around the next round, but it was assumed that they would give us that third tranche, that last five million.

John Warrillow:

And each tranche comes with them obviously owning more and more of your company?

Jason Flick:

Yeah, and that evaluation’s set in the past, right?

John Warrillow:

At this two million, 30%… What valuation did they put on the company when it was a $2 million business?

Jason Flick:

I don’t remember, but it was almost every round was 20, 30% dilution, right? Because that’s kind of what they all want to own. I mean, this is going back six years ago, so I don’t remember the details. I’m not trying to be evasive. I don’t remember, but it was about a 20, 30%. And evaluation was okay, but it was based on kind of what was being done, not what had been done, and we did go execute on those deals, so I didn’t really want to close the third tranche, which is the biggest piece, which would have given them, six months later, a company doing twice the revenue they would have gotten that valuation from six months prior.

John Warrillow:

Right, because if you had taken the third chunk, you would have given up more of the company at a lower valuation.

Jason Flick:

Yeah, more dilution for everyone, and then so a strategic came in, it was Turner at the time, which then got bought by WarnerMedia, which got bought by AT&T. They did a B round for us, which interestingly enough, really wasn’t the B round because we gave up a chunk of the A, but they really wanted to call it a B. Everybody wants to lead a round, right? But it kind of did set us off a little bit.

John Warrillow:

I’ve always wanted to know, this A, B round. I don’t get it at all. Is there some sort of official governing body that says, “This is an A round, and this is a B round?” Is there any definition, or is it just the entrepreneur who makes up this shit, and they say, “Yeah, this isn’t my A round.” Is it adjudicated by anyone, or is it actually just you making it up?

Jason Flick:

No, but it does have a huge impact. It is not. It’s a very loose set of terms, but it has a huge impact. On your seed round, it’s assuming you probably don’t have any revenue. On your A round, you probably have some. On your B round, you’re in growth and you’ve probably figured your business model out. On C round, there’s some scale, maybe some side vectors, and then D round is your last round before IPO, and that’s your real scale. That’s kind of the rule of thumb. And because we gave up half of our A round and did a B round so quickly, we were being perceived in that, “Yes, very nascent B round bucket.” We weren’t really there, and that was a ghost behind us all the time kind of-

John Warrillow:

In what way?

Jason Flick:

Because we were always B minus point five, C minus point five, D minus point five because of the A round didn’t really get finished.

John Warrillow:

And in what way did that impact you?

Jason Flick:

Valuations, expectations. Each round is a little bit harder to raise because they said, “Oh, you won’t be in your Cs. These are kind of the things we’re looking for,” but we’re not quite there at that because you’re always kind of halfway around behind in terms of the metrics that they’re looking for.

John Warrillow:

When you say metrics, are you referring to revenue?

Jason Flick:

Revenues and metrics, consistency. Again, each one looks at a different… Even different countries have different definitions for them, but yeah, predominately growth, percentage of growth factors in matters. In the early rounds, you can have higher growth, as you get bigger, you can have a little bit lower, but still, you look for top-line revenue numbers.

John Warrillow:

Got it. Six months after the private equity group, you took the second tranche, you did a further financing with what you said was Turner, which became Warner, which in turn became AT&T. What was the valuation Turner was putting on a company? Were they using a multiple of revenue? Do you remember what the valuation was there?

Jason Flick:

I remember it doubled because it was pretty low as a private equity firm because, again, we ere profitable services company that said we had product and we did, but very little of our revenue was licensing, so they actually came in and priced us with our product’s company. They also made a bet on our tech. They double down our tech. They gave us millions of dollars worth of business. They gave us all their big brands, their sporting brands, their Cartoon Network, GNT, TBS, all their-

John Warrillow:

Oh, so these guys were not only an investor, they were also a customer.

Jason Flick:

Yeah, which then plays out in the whole journey too. Yes.

John Warrillow:

That must be weird because on one hand, they’re a customer and you want to… But then the next breath, they’re-

Jason Flick:

And they’re sitting on the board, yeah.

John Warrillow:

On the board? That’s got to be weird. How do you manage that dynamic?

Jason Flick:

In the end, I believe, and I believed it then too, it’s equally good and bad. Bad for all the obvious creepy rules, right? If things are going bad, if they want to push agendas, all those, and they didn’t. That didn’t happen too much, but it can and did happen a few times. All the positives though, like really hard to get off your tech when you almost expect intros to all their business units, if they don’t choose you, it’s like, “Hey, why aren’t you?” They never just turn your service off. They got to talk to you.

Jason Flick:

Taking an investor is not dissimilar to getting married, right? This is a long-term commitment. So, that that helped us, and they also helped us break new ground. They would be our customers for a lot of the new technology and trying things out. So, I would say it’s pro and con, and I can go through the list of all of them, but yes, it is tricky, and you have to ask them to leave the boardroom sometimes, but also a lot of synergy. They would say, “Hey, I know those guys over at Disney. Let me give you an intro.” Thank you. As a competitor, they wouldn’t do it, but as an investor, they would.

John Warrillow:

I think it would be helpful for our listeners to hear an example of when you had to ask the Turner board members to leave the boardroom? Can you share a story about what was being discussed that required you to ask them to leave, and I’d be curious to know how does that work? Do you just turn to them and say, “Hey, Steve and Mark, or Mary and Jane, can you guys leave? We’re going to talk behind your back.” How does that work exactly?

Jason Flick:

Yeah. I mean, to me, a well-run board meeting, which is where a lot of stuff happens, there’s a lot of prep work in advance for it. The board meetings a little bit of the end result of all that work. So, we would already know. We’d have scheduled that, we’d let them know this agenda item needs a walkout. Obviously, we haven’t gotten into it yet, but the next round with the VC, we actually had Comcast and Sky, which AT&T and Comcast are competitors. In any of those conversations, we’d ask them to step out. It did change eventually how I can present.

Jason Flick:

I couldn’t present all of our revenue and pipeline because I’ve got Comcast and AT&T sitting at the board now. One was an observer, one was a board member, so that helped a little bit too, but also added some complexity. But yes, there was a few times. There’s probably more times I wish I could ask them to leave, so they know it’s like, “Hey, look at this deal we’re doing over here, and we’re going to cut a deal because of this and this and that. Can you please plug your ears?” There’s times I wish I could have asked him to leave but I had no right to ask them to leave.

John Warrillow:

So, in other words, you were going to reveal that you were going to lower your price or provide some sort of special concession, and they’re like, “Nope. Note to self: Ask that next time.”

Jason Flick:

Yeah, they’re going to see that and actually… We had, at one point, 18 active projects WarnerMedia, Warner Brothers, AT&T, DirecTV, all owned by them, and it’s different deals and different… We had business with the Latin American Division. You might imagine that $1 in Latin America is different than $1 in the US or Canada, so a lot of different pricing stuff. It worked out, but yeah, it is an interesting challenge. I would say both good and bad. So, I wouldn’t discourage people or encourage it. Just be aware it is…

John Warrillow:

And with the strategic investments from Turner, did they negotiate for an option to buy all of the company at a predetermined price?

Jason Flick:

Almost every customer was big enough. They all wanted to invest. They all wanted a first right of refusal, they all wanted that, even notice, and we said no to all of that. We always said, “100% separate business transaction from investment,” and that pissed off a few and there was a few big investors, strategic that didn’t invest because of it, but always kept that clean. I call that a poison pill, right? If they have a first right of refusal, no one’s going to do all the hard work to get to a price to have them go, “And we’ll pay $1 more.” So, we never allowed that. Yeah, some customers almost said, “Oh, every deal we do with a small company.” Even when we were 200 people, we were small to some of these early deals, and they said, “No.” And you just had to say no and put your foot down.

John Warrillow:

Turner would say, “Look, we’ll give you X million dollars for Y percent of your business, but we want the rights to buy 100% of the business at this cap.” That would be a common negotiating request from someone like a big strategic, to which you just said, “No.”

Jason Flick:

No, and what we did in the end, that was how we compromised, and that was they got a board seat. You’re going to see everything, you’re going to see us all squirming in our seats, metaphorically, when we have an offer, so you’re going to kind of smell something’s up, but you don’t get a first right of refusal.

John Warrillow:

Got it. That’s helpful. And how long did you go with the funds from Turner, the strategic, before raising a VC? And I’d be curious to know why raise the VC round, and how the private equity company reacted when you did that?

Jason Flick:

Yeah, it was an interesting one. I mean, we always wanted to raise VC because we loved what we were doing, right? We really were a highly disruptive technology that had tremendous growth potential, and we knew that’s more of a VC play, but I think-

John Warrillow:

Let me just push you a little bit there. Why not just go back to… You have these companies that have more money than God. I mean, they’re 100 billion dollar gap market capitalization. Why not just go back to the Turners and the Comcasts instead of going to the VC, why not just go back to those guys who invested in the second round and say, “Let’s re-up.”

Jason Flick:

Everybody did follow up on every follow round, but it’s not the business they’re in. You look at the Turner investment, they really bought a board seat for five, six million bucks. They’re not really into, “Hey, let me give you 20, 30 million, so I can make a 10X on that.” That’s not the business they’re in, and they were okay with it because they saw the value in us. The more platforms we got on, the more reach we got on, the better for them. But yeah, they would not sell the business right, we needed someone who was in the business of putting in a million or 10 million and getting 100 million or a billion.

John Warrillow:

Got it, and so you went out to the VC community. What was the reaction?

Jason Flick:

Again, the .5 round, always kind of being a bit behind was a bit of a challenge, but we closed, again, an enormous amount of business in one year, and that really helped bolster our story, and we did close around out of Boston, Causeway Ventures. They were great. They’re actually specialists in the media vertical, which was great. So, they did our C round, and gave us the capital to really go international. That capital allowed us to A, go from almost 100% of our business in North America to 60% of it, 40% of it-

John Warrillow:

How much did you raise in that C round?

Jason Flick:

It was only $23 million C round, and with a 25% dilution for that round to be traditional.

John Warrillow:

Yeah, yeah. Did you and Stuart ever sort of sit back and say, “Hold on a minute. We’re giving up all this equity, do we just want to maybe put the brakes on and just kind of ride this out?” Clearly, you’d been successful, you’d created some incredible technology. Was there ever a moment where you said, “Let’s just stop at this strategic investor, and become really profitable and ride this out, and keep the remaining tranche of equity?” Did that conversation come up at all?

Jason Flick:

Yeah, we certainly talked about it a lot, and each round, it usually comes with a liquidation preference, right? It’s a layer on top of that layer. The problem is we have-

John Warrillow:

Sorry, what’s a liquidation preference?

Jason Flick:

Most VCs, when you invest money, they get their money out first and then they participate, right? Participating shares. Each one of those, it’s a 20% dilution, but then on top of that, they get their money out first, which if it’s a big exit, that’s irrelevant, if it’s not a big exit that can be relevant. For sure, we thought about it a lot. The challenge was it was a bit of a race, right? It wasn’t a race, we had a competitor, because only in the end in the last year, do we have a real meaningful competitor, but it was about this core piece of IP that you had to get on all these platforms. It was probably half of the money just went to moving that ahead and keeping it rolling, and so if you decided not to raise capital, you’d have to get profit, but you’d have to let go half the engineering team, and then I don’t know that we kept our head above the water in terms of the platform.

Jason Flick:

We had to be at least as good as Apple, as good as Android, as good as Samsung. If you’re way less, then you start selling a sub-premium solution that just saves money, and we did not want to do that. We didn’t go into it, but we were a premium solution. We were the Ferrari of apps. They were all gorgeous. They were like video games. Most of the apps were so fun to use, you felt like you were playing a bit of a game and that was our goal. If we didn’t have funding, we would have had to pull back and say, “Hey, we’re just going to be a crappy good enough,” and then guess what? They didn’t want to pay much for that, so then you really get into the spiral of, “Oh, now you only pay 10 grand instead of 100 grand. Wow.” I think we made the right decision to keep doing it, but all these things conspire eventually, which is what we’ll get to, and you have to make choice about do you keep going or not.

John Warrillow:

I’m reminded, do you remember the Indiana Jones movie, I think it was the first one, when the massive boulder comes tearing at him, and he’s running away from it, kind of feels like that, you clicked up this boulder of raising money, and it’s like, “Hold on, kids, because this is going.”

Jason Flick:

If you go and raise your seed round, or any round, for sure, you now have this boulder and it’s every 18 to 24 months, you have to go. Some companies can pull back and do it, but we have this massive chunk of IP that the core stuff is great, but it constantly needed to be maintained. As Apple made tweaks, we had to make those tweaks too.

John Warrillow:

You mentioned there was an interesting reaction the private equity group had to the VC. So, if I’m getting this right, the private equity group would not have had the liquidation preference. Here they are, betting on you guys as a small upstart, and they see these VCs swooping in and getting these preferred shares and this liquidation preferences, and they’re probably sitting there saying, “Hold on a second. We backed you guys from the beginning. How come we didn’t get the fancy shares?” Was that the dynamic, am I putting words in your mouth?

Jason Flick:

I’ll tell you, the number of times we had their lawyers, both the VCs and a private equity, and this [inaudible 00:34:00] go, “I have never seen this term ever in a deal in my life!” If I had a buck for every time I heard that.

John Warrillow:

What? What would a deal term be that they’d be like, “Are you kidding me?”

Jason Flick:

One of them was the interest rates. On top of their preference, they wanted the interest rate, but not paid… Well, they wanted to be paid in real time, which we said no to. Then they wanted that paid, and VCs, you never charge interest on your money. That’s never done. So, that would be a private equity term that they’d want. A VC term. Gosh, I don’t know off the top my head I can think of one, but yeah, in terms of what they’re expecting, and how much control they want of the money, of the reporting, those sorts of things, very different. Private equity, much more hands on, lots more detail, very little risk.

Jason Flick:

And then on the VC and strategic side, they just want to swing for the fence. It’s just a lot of, “We just trust you. We’re [inaudible 00:35:01] this. Let’s go and change the world.” They know it comes down to the team executing, whereas private equity, I think is always like they want to be able to just pull back and say, “You know what, that’s too far. Let’s pull back on that.” And so just the terms, all the terms that linked to that, it was interesting. And I was able to find balances because we were really a middle-risk deal. We obviously have enough revenue and huge clients that they couldn’t churn, but we also had enough potential that if we turn the right levers, this could be the next billion-dollar company for everyone to own the glass. So, I was able to leverage the two against each other and get some nice middle ground, but that was a constant effort for me.

John Warrillow:

Yeah, sounds like it. How big did you get this company before you chose to sell it outright? What was the revenue, number employees, that kind of stuff?

Jason Flick:

Yeah, so I think we probably peaked around 300 people, probably 24, $25 million revenue was our peak earnings through all of Canada and the US. Those were all US numbers. It was a good size. We went through a lot of the major inflection points, the risk was all gone, but that doesn’t mean you just keep going and do it. Each inflection point, I think, brings a new risk, and the more capital you raise, the more expectations. I feel sad when I see some of the companies out there. They raised 100 million and they sold for 100 million. Well, that means that you had to have made a side deal for a little bit of money for all the staff, and that can happen if you… There’s not a lot of patience in there, right? If you have a bad year, that’s it. That’s the year you probably have to bail and not get anything, so it’s a very tricky game.

John Warrillow:

Wow. Again, 24, $25 million top-line, roughly half was this recurring SaaS-like revenue, and then the other half was more kind of implementation services revenue.

Jason Flick:

Yeah.

John Warrillow:

Got it. Well, let’s get in the final sale price now. Before we go further, let me ask you about the triggers. What was the trigger? You mentioned there was a competitor. What actually was the straw that broke the camel’s back to say, “We’re going to pull the trigger here.”

Jason Flick:

Yeah, luckily, I’ve always built-in knowing that this is something that’s going to happen. You always have a plan A, B, and C, and C’s usually salaried, but plan A is grow the businesses as aggressively as you can. That’s always your best value lever, but I would say a few things came together, private equity tends to want… Five year’s kind of their window. They were on six. There was this small thing, which again, this is public, called HBO Streaming Service, which needed to go from zero to billions in revenue, and they needed technology, they needed a piece that we had, and so that timing was there.

John Warrillow:

Meaning, you thought you could get them to bid on the company?

Jason Flick:

Yeah. Well, they were clear that… If you look at the battle that’s going on in the streaming wars, it’s a technology battle now, right? It used to be a content battle. Content was king is the old expression we’ve all heard of. That’s not the case anymore, right? Content isn’t king. There’s tons of great content out there. Everybody has great content, so it’s really a technology battle, and Netflix is by far the most equipped, right? It’s already in every piece of glass. My car has Netflix on it. I don’t know if I have a piece of glass that doesn’t have Netflix on it. So, they need to get there and so we were that missing piece, and they really didn’t want others to have that.

John Warrillow:

It’s funny because the pandemic has caused my wife and I to watch more television, I admit it. And we’ve just subscribed to HBO Crave. I don’t know what the difference is between HBO and Crave, but their interface-

Jason Flick:

That’s an old deal. Crave licenses. Bell owns Crave, Crave licensed to HBO, but eventually, it will be to HBO direct.

John Warrillow:

Okay. I don’t know what it’s like in the US, but in Canada, it is terrible. The interface is from 1986. It looks like the Dewey Decimal System for trying to find a movie. It’s terrible.

Jason Flick:

And as a person who is in that business, [crosstalk 00:39:01].

John Warrillow:

Oh, my God. It must be excruciating.

Jason Flick:

Yes, we tried to win that business, but they just couldn’t. It’s a slow organization that takes a long time.

John Warrillow:

I wish you had because it would make my life a little easier. Anyways, that’s beside the point. But HBO is out there, so you’re figuring they’re going to want to maybe make a play for your company. What next, did you hire bankers? Tell me about the actual process.

Jason Flick:

Yeah, we actually used an i-banker because we always knew maybe that was going to happen, and we saw this coming. They were telling us. We said, “Well, we’ll get an i-banker to help do our D round, and then it does from this, we have an i-banker there.” I regret using i-banker for the D round. I don’t think that was wise. They’re invested in who we are, what we are, and again, we’re always .5 off a round. You couldn’t look at just the numbers, you need to look at the brands. Twitch was using us and look at the number of developers and platforms we’re installed on. You did need to look at the business a little bit. Just looking at the revenue numbers, even though we doubled for five, six years in a row, we hit an inflection point where it’s about getting your tools to others, and it was about getting that community going, which is not about revenue. They had to dig in a little bit, and i-banker aren’t good for that. If they need to invest in your vision, your passion, i-banker, that was not good.

John Warrillow:

Okay. So, when you say i-banker, you’re referring to an investment banker, and you’re referring to a certain sort of status of investment banker, namely one of the large sort of bank-owned groups, or who did you go with?

Jason Flick:

Yeah, it was one of the mainstream, one of the large ones, and they’re just… I think when you’re raising capital, it’s still a relationship. Again, it’s like marriage. You’re getting married with these funds, and to put a middle person between you and them was not good. There was a bunch of things, but that didn’t help the D round, which it got to the point where it had been… The pandemic hit of course, and all these things, and they made it clear, “Hey, there’s this massive deal that you could have, but they probably, which they were pretty clear about, wanted to own it to be part of that stack. They don’t want any of their competitors to have it because we’re such a huge advantage.” So we said, “Okay. D round’s not doing great. Again, I think a bunch of reasons, but i-banker one. And they’re very interested. The timing’s right for them.”

John Warrillow:

They being a AT&T or Warner?

Jason Flick:

Yeah, WarnerMedia. HBO is owned by WarnerMedia, which is owned by AT&T.

John Warrillow:

Oh, okay. I didn’t realize HBO. I’m sorry.

Jason Flick:

Yeah, it is so confusing, and if you compare these media brands, it is. Yeah, they’re all in the same family, so we were so deep across that organization, and then for them to let us keep powering their competitors, the industry wars, they didn’t want that.

John Warrillow:

Okay. What you refer to as the D round, so you’ve raised venture capital though, right? And so, that’s in the bank, you’re growing. So, the D round would have been another route after that. You have pre-IPO, for example, and so that’s in the market, and It’s under-subscribed, meaning you’re not getting a ton of interest. Yeah, I don’t mean to put words in your mouth. Okay, and at the same time you’re having meetings where… How did AT&T Warner sort of raise the specter of potentially buying you outright? Was that a conversation over a beer? Was it a board meeting? How did that actually?

Jason Flick:

It had always been an assumption, and it’s both positive and negative. Everyone who looked at us, even for investors [inaudible 00:42:45] in the D round was looking at like, “Wow, you’re so fundamental to these guys. You’re running almost every brand I’m aware of.” And to your point, a bunch I didn’t even know they owned, “And you’re running all of them?” So, I think that was a bit of a detriment, but it-

John Warrillow:

Why would anybody care? I mean, it sounds great that you were doing all this work with this company.

Jason Flick:

Yeah, it can be great, but it’s also single-point fault, right? They can say, “Hey,” and of course, they were so many different brands, they wouldn’t be able to, but in theory, they could say, “Hey, we’re just going to turn the tap off. We don’t like the new investor you picked, and so we’re going to turn the tap off on your revenue,” which is not realistic. It’s not a real scenario, but they can imagine it to be one and therefore they’re like, “Wow. Okay, then the company just lost a huge chunk of its revenue.” That’s the risk they perceive is that it’s a single point fault from one customer. I perceive it as, “Look, we just did this for AT&T. Now imagine Comcast. Now imagine Verizon, Liberty Global. There was hundreds of multibillion-dollar operators that we could do exactly what we did with AT&T.”

John Warrillow:

How much of your overall 25 million revenue was coming from one of AT&T Warner’s brands?

Jason Flick:

Yeah, services was a big higher, but the recurring there was about a third, maybe a little bit more than third. So, it’s a bit more than a third of our revenue is them, so it’s significant.

John Warrillow:

Got it. Got it. Got it, that’s helpful. And again, back to my question: So the assumption has always been there. It’s sort of like the elephant in the room. How does it go from the elephant in the room to the actual proactive conversation with AT&T Warner?

Jason Flick:

Yeah, it was weird. Two years ago, when they got acquired, I don’t remember when. When AT&T bought Turner, they had said, “Hey, we’ve got a powder keg of money. We’re going to buy all these companies,” and they did go buy a bunch of companies, and they had all told us that we were on that list. Two years ago, almost every employee knew, which they thought they knew, that they were going to buy us, which was not good. It’s on your list of [inaudible 00:44:54]. We couldn’t really stop it though. They were telling my salespeople and managers, all were just going to, “We’re going to buy you guys. This is amazing. We’re going to go change the world of AT&T.”

John Warrillow:

Did those employees have shares in your company?

Jason Flick:

Yeah, every employee gets ownership.

John Warrillow:

More options? Okay.

Jason Flick:

Yeah, everybody gets them.

John Warrillow:

So, they’re like, “All right! When do we start?”

Jason Flick:

I think it’s critical, especially in an IT world where this is all about how passionate you are about what you’re doing.

John Warrillow:

Yeah, but they’re, I’m assuming, now learning that you’re potentially for sale, and that’s probably pretty distracting for them, no?

Jason Flick:

It was, and for the leadership team even more so because the day-to-day team is like, “Well, the bulk of the revenue’s…” Back then is even more than that percentage. “The bulk of the revenue is going to who’s going to buy it, so just keep doing your day job. It’s all good, and you’re not even going to notice that much difference. You’re going to get some cash and keep working on the same projects, right?” So, it wasn’t as scary, but it was very distracting for the executive and management team, and I do think that really took us off-track, and then in the end, there was some executive shuffles that happened and the executives that would have probably pushed for us to be bought didn’t get their moves till a year later, so it didn’t happen.

Jason Flick:

So, that was definitely a tough spot, and we missed the revenue targets, we had to let I think it was like 12 people go, which is a tiny number, but it hits hard and it’s like, “Wow. We were this company doubling every year for four or five years straight. We were the fastest-growing company in Deloitte’s list and in Canada for two or three years,” and then to have to also let people go. So, that was a really tough, dark time, but then we got out of that. We raised our funding and we made a bunch of new milestones, and then when this round, we were much savvier. I kept that tiny group involved. Try to keep it as under wraps as we could. And to your point, it’s just not healthy for anybody to know.

John Warrillow:

Okay, so I just want to make sure I’m clear. The employees found out. The Turner/Warner AT&T folks, when were they talking to your employees saying, “Oh, we’re just going to buy you?” Is that in advance of the VC round, or at the stage of the D round?

Jason Flick:

Yeah, this was probably midway to the C round, they were saying that they were going to do that, and because it was so many different brands and they all communicated with each other, it was hard to stop that. Yeah, so I couldn’t really control it. I’d have to say, “Hey, guys. We don’t know. You got to just keep focusing on stuff.”

John Warrillow:

And what triggered you to have to lay people off? I wasn’t clear on that piece.

Jason Flick:

Because we were so distracted with them buying us, we focused on them way too much, and their revenue didn’t grow, right? The extra focus on them didn’t increase our revenue. In fact, it decreased revenue elsewhere, and we wanted to make sure we had the runway. So, when you go and seek funding, you want at least six to 12 months to raise the capital, and this had thrown our funding cycle off a bit, which sucks, right? You still got millions in the bank, but these 11 or 12 people make it to that you’ve only got three or four months of runway instead of six or eight. So, that wasn’t great, and then there’s the service piece too, yeah?

Jason Flick:

You have to always choose the service piece, so [inaudible 00:48:06] services had gone down. And I’ve heard some of your other speakers talking about it, right? When you start getting that investment, it really messes your business up, and softens, I think, with one of our customers, and so we had a softening of our business and you have to make things make sense financially. You still have to run a certain monthly burn.

John Warrillow:

Got it. Again, maybe my memory is failing me, but did we cover how the conversation went from the elephant in the room to actually a term sheet?

Jason Flick:

No, it was pretty slow. I mean, they had told us way before, “Hey, this project is so massively important to us, we’ll never give you the deal unless we buy you,” so that was awkward, and then we slowly started seeing we were going to win that deal. Again, that was still fairly obvious, and then-

John Warrillow:

And this is the HBO deal?

Jason Flick:

This is the massive HBO deal, right? And then six months in, it was pretty clear that they want it, and they still hadn’t closed the deal, and people are going, “What? We’re pretty sure we won this. It’s pretty obvious. We’re deep into their business. We’re pretty sure we won this. Why haven’t they done the deal?” And there was definitely a couple of months of awkwardness there, where it was… Certainly a month of awkward works for us, and then they started talking to me about it and the team, and we actually brought in an ex… We had a board seat open, so we brought in one of our ex-customers from them, which helped to kind of communicate and get that rolling. Probably it even made it too easy by bringing one of their ex-employees as a board member, but yeah, it slowly started happening, and then they said, “Yeah, we’re going to send you a term sheet,” but of course, when you talk to AT&T sized companies, everything you say is always plus a week or plus a couple of weeks, so it took much longer than we thought.

John Warrillow:

Okay. So, you’re working on this HBO proposal, it’s clear you’ve won it based on how integrated the conversations you’re having at the… It seemed clear, yet they haven’t… Did they have a price in front of them? Are they saying, “It’s going to be 75 grand a year times all your platforms.”

Jason Flick:

Yeah, there was an interesting little game I played as well. The market really for us because we’re going after the giants, and in the last two years, the giants went from being a whole bunch of brands that were kind of upstarts, like Crunchyroll and these company brands, all of a sudden became about Peacock, Disney, HBO Max, Netflix obviously, and Amazon, so these five giants. So, I’d actually re-tuned the business and pulled away from going down market, which wasn’t working as well as we wanted for a lot of reasons. I said, “All right. Let’s go wide,” and so instead of getting on 12 devices, which is kind of the Samsung TVs and the iOS and Android, I said, “Let’s get on hundreds. Let’s get on cars, Let’s get on set-top boxes.”

Jason Flick:

And so what we put before them, which was based on current pricing, millions and millions and millions of dollars of deal in front of them and all their competitors saying, “Hey, if you want to get on every set-top box, in every car, you can’t all go do it yourself. There’s not enough memory in the set-top boxes, not enough memory in all these devices. Pick us, be part of this founders group, pre-license this stuff, and I’ll skip my D round, and everybody wins,” and that really scared them. That really scared them and-

John Warrillow:

Because effectively, that veiled threat would have given their direct competitors this magic sauce.

Jason Flick:

We were going to say, “Let’s make getting on every piece of glass a commodity,” which a whole bunch of them wanted, but whoever could get us instead of that would be at a huge advantage, right? There’s no technical competitor to Netflix, even the Disney guys. They’re just doing it with thousands of developers.

John Warrillow:

So, that threat got them off the hop, if you will?

Jason Flick:

It did, yeah. So, I had to help a little bit too, so that got them like, “Wow. Okay, so now your licensing didn’t go from 10 million or whatever to 100 million a year. Okay. Well, man, that doesn’t make sense. We should probably buy you.” So, I think that also encouraged them. And that was us playing to kind of get them off because either we do the D round or you buy us, one or the other has to happen. You got to pick one at some point and put two or three months into due diligence and get it done, and it was pretty obvious that was the better way to go, and investors saw that we saw it, and so that was one of the things we did that I said, “Holy crap. Okay, now I can do a QA or ROI for buying.”

John Warrillow:

Yeah, instead of $500 million of licensing fees, I can pay X and own the company. So, what was their term sheet? What was your reaction to the term sheet?

Jason Flick:

Yeah, so we went back and forth, and I was always advised, “Don’t share the number first.” Whoever speaks first, loses on the pricing side, this old sales analogy. I don’t think that was the best advice. I think we believed we had a huge opportunity. We knew of the obscene amount of money we would save them, and our board didn’t want to speak first. Then they spoke first. Well, everyone knows they pay a lot, and they always do cash deals. So, that wasn’t it. So, there’s a whole bunch of these things.

Jason Flick:

So of course, they do what they always did, which is they lowball, and then you got to fight your way up. I wouldn’t go back in time and say, “Yeah, let’s just give them the frigging number. Go against common sense, say this number, and then go down,” but of course, what if the number we came in was twice what we were going to give them, but we knew it wasn’t going to be. Yeah, so they gave us a number, and then we had to go say, “Come on, really?” And you go back and forth, and you do a bunch of dancing.

John Warrillow:

And what was the number they came up with, the original offer?

Jason Flick:

Yeah, it was about 20% less than we got. It was a deal they knew we wouldn’t take, and to you, some of the other people have said, “Do you tell them what you want, what your lowest number is?” And again, having a private equity that was happy to have probably exited four years ago, and going, “Wow. Exciting!” Having our VC go, “Okay, this is cool. We’ve only been in for a little while, so I guess it’s still a good exit,” and then me who knows, we knew how much money, the savings were crazy that they were going to make with our tech, and so yeah, just going through all that, and we had a whole bunch of extra meetings.

Jason Flick:

It’s as much political as it is reality too, and as you’ve said before too, “Can you gather bidders to the table?” Well, really hard to do when you have someone there who knows there isn’t really a reasonable price limit to your point. I don’t know. I think about a month or two before the deal, they had done a $4 billion cash buyback just for fun like, “We got some,” and they just spent four billion, and we knew that this CFO of AT&T and the CEO were involved. They had approved. These guys who really don’t get into meetings that are in the billions of dollars numbers, why are we getting? Yeah, so it was a lot of back and forth, and in the end, I think, “Good,” but as always, there’s more to be had, and I think everybody is probably a little bit unhappy.

Jason Flick:

And again, they weren’t picking us up, which is now public knowledge. They weren’t buying us to take us to be the billion-dollar company we knew we could be, they were buying us to just lock us down and make us their own differentiator, which is a very different metric to measure, but they had to also look at revenue metrics and recurring revenue metrics. I think we had really good support. I had good lawyers. They all did good stuff. But again, I don’t know that the i-banker has a lot of value in there. My takeaway, I always thought i-bankers were there to maximize your value, and I always thought that for housing too, but I mean, in the end, it really felt like it was, “Just get the deal done.” Generally speaking, they’d rather sell 10 houses at 20% less than sell one house at 20% more. We’re not stupid. I really felt like it’s like, “Yeah, let’s just do this deal. Who cares?” Yeah, I was kind of on my own to fight to get back to a reasonable number.

John Warrillow:

Right, because the private equity group, I’m assuming, were thrilled with the outcome and they wanted out, so they were like, “Okay, Jason. Let’s go!”

Jason Flick:

It is, yeah. “What did they offer us? Take even less than that. We don’t…”

John Warrillow:

Yeah, interesting dynamic, and of course, the other investor, Turner/Warner/AT&T…

Jason Flick:

Yeah, they’re owners. That was a big part for them.

John Warrillow:

And then you’ve got the VCs who are in early and weren’t going to get the big unicorn kind of style of exits.

Jason Flick:

Yeah, so you got to look at all those dynamics, marketing timing and COVID adds a lot of risk to every business, right? And to your point, you’re watching a lot more streaming, so it’s definitely increased it, but also, with Peacock and HBO Max, all those burgeoning services, Red Bull has a service, A&E has a service, all these burgeoning services that were trying to get ahead, for the next couple years are going to be in trouble because Disney, Peacock, HBO, Amazon are putting billions into this. They’re going to have to let that all settle down become kind of just a regular flow, and then get above it. So, I think the risk profile was increasing.

John Warrillow:

You said Peacock. Are you referring to NBC?

Jason Flick:

Yeah, the NBC Peacock streaming solution. Yeah, NBC Comcast, and they own Sky too, which not a lot of people know-

John Warrillow:

Interesting. What was the final sale price? What was reported?

Jason Flick:

I think it was said to be over 100 million, but it’s definitely within that range. A lot of stuff leaked because of the way the deal was structured. AT&T went a very, very formal process, which requires courts and disclosure. There were some really awkward times where the staff were fully aware of what’s going on, and as you said before, waited for the cash in the bank. The cash was still weeks and weeks away from being in the bank, but we had to involve staff because they wanted to lock key people in, they wanted to get shareholder approval. Well, I’ve given shares and equity to every single employee. So pretty quickly, when you say, “I want to make shareholders aware of this.” That’s every one of my employees. There are some real awkward moments in there, but the team was awesome. They stopped by and they got it done, and we all knew they were going to get taken care of well.

Jason Flick:

I don’t want to speak badly of private equity deals, but when you get bought by private equity, step one, efficiency, efficiency, efficiency, and they wanted us to be exactly who we are, just doing it for them, and so I think A was online division. We want to get every piece of glass. I think HBO’s been pretty clear they want to get it on every piece of glass they have, even if they’re not saying it, and so now our engine, you won’t be able to turn on a device probably in the next two years and our stuff won’t be on it, that was one of our less tangible, but kind of not financial, but more visionary goals, and we can achieve that now for sure.

John Warrillow:

Mm-hmm (affirmative). What a neat legacy to know that there’s millions and tens of millions of devices out there that are running this stuff that you created back so many years ago.

Jason Flick:

When we started this, it’s been, “How do we be on everything? How do we get pretty embedded in?” We were definitely getting it, so it’s exciting. Hundreds of millions of our engines. I imagine most devices in your house, if they can play video, they’ve got our engine now, so it’s pretty cool.

John Warrillow:

Yeah, interesting. I mean, it is an amazing story with so many lessons inherent within it. If you could do one thing differently, knowing everything that you know now, what might you have done differently at a tactical level that might have been… Hindsight’s 20/20, right?

Jason Flick:

Yeah. I mean, luckily, I had a lot of peer mentorship and spending a lot of time with CEOs, so a lot of the basic stuff I didn’t get wrong. I think we did the planning, the process, and culture, and all those really critical things, I think we did a really good job on those. If I look at just the end result, I would have loved… Our vision was always that it was more of a Microsoft, Google, Adobe, Amazon-type exit if we went to the full because those are the ones that really need to get on every piece of glass and commoditize that, right? Because they weren’t our customers, we would never sell our engine, our license to them. We could never get engaged with them, so we never got on their radar, and I did try in the last year or two to get that.

Jason Flick:

I don’t know if it’s plausible, but I wished that they were more aware of us and somehow going in the journey, maybe they need to be one of our strategic investors. I don’t know, but to me, the home run that I know we could have been would have required a Microsoft, Amazon, Adobe to be there and go, “Holy crap.” I mean, we all know Flash, right? Flash failed. We are what Flash wishes it could have been headed and been thought of 10 years later. All those guys just weren’t at the table, and I didn’t know how to get them there, and they didn’t come on their own because they’re just so huge. That’s one I could have fixed, that they would be there. We tried to do some strategic projects with them, but, man, they’re just so huge.

John Warrillow:

Hard to find. There was that old Harvey Mackay book. This goes back 30 years where he’s like, “Who buys the balloons?” Was that the expression, meaning in these giant companies, there’s somebody who actually has a job of doing, but it’s just finding that person within the company.

Jason Flick:

Yes, but then that person is in… So, if you look at Amazon or Microsoft or Google, they have so many business issues, that person is so busy. You have to be in the tens of billions to even be relevant to them, and we weren’t there. We could be the Shopify of glass, but that person is so inundated, and they’re not broken down by groups. They’re almost all centralized. Yeah, it’s a tricky one. Yeah, that might be the one I think. I’m pretty proud of the culture we built and the accomplishments we did and how we did it technically, but yeah, I wish we could have gotten one of those there.

Jason Flick:

In four or five years, look back, you’re going to see what we’re doing, that’s going to be commonplace. There’s only one competitor and that was Google, it’s only been out for a year, but what we were doing 10 years ago will be commonplace in the next few years, then you go, “Shit.” There was no realistic path in that, unless it was some sort of brimstone approach.

John Warrillow:

How did you and Stuart commemorate the sale?

Jason Flick:

This is the thing, it was such a gradual thing, right? And there’s so many milestones, like you said, cash in the bank. Even that, we ended up picking some firm that is a middleman between the middlemen because there’s a whole back and… I mean, cash in the bank was weeks after done, done, done, done. There was so many phases. We celebrated a bunch of times kind of informally, but there was never that, “Now it’s done.” And I was kind of thinking money in the bank, but that just dragged on forever right into the new year and stuff. I think we haven’t yet done it, and COVID I think is our excuse. We will be doing a lot of celebrating later. It’s unfortunate. I would have loved to have been just a, “Ta-da! We’ve sold,” but because of the way the deal went, and because they’re such a large client, it was six months of, “Ta-da!” I could bring ta-da on for six months, but that’s kind of how it was from my perspective anyways.

John Warrillow:

How has it been for you personally, just psychologically? I’ve heard from a lot of entrepreneurs, they go through the just amazing high of the sale, and then there’s a drop-off just emotionally where the money’s in the bank, that’s great, but there’s also sort of a lack of purpose. Did you go through any of those emotional sort of downtimes at all?

Jason Flick:

Yeah, I think I am. I mean luckily again, I had a lot of CEOs I’ve seen sell, so I knew what I was getting into. This is my only 10th startup in some capacity of leadership, so I’ve seen a bunch of people go through it. Just, generally speaking, living in Canada, money for most of us isn’t… You can probably do what you want. I knew a lot of that, but yeah, I’ve got to find my new purpose, my new passion. I’m trying to just say no to everything, except for just reaching out and sharing, talking to people, but I’ve had CEO offers, I’ve had investments. I’m just saying, “No. I want to just let it settle in.” I mean, I never let myself believe the deal was done even when it was so obvious because if you don’t have the, “I’m going to keep running this,” then, “Oh, we want to offer you half.” You got to keep saying yes.

Jason Flick:

Right up to the end. I said, “No. If I have to run this, I will. I want to. I’m okay with it,” and then when it finally happened, I’m like, “Okay, I guess I can stop saying I’ll keep running it because now I can’t anymore,” and so I think it’s all still settling in. It’s a new journey for me. I’ll catch up on some more of your other guests who maybe were not just as freshly exited as me and learn a bit from there, but certainly, I’m going to keep doing it. I mean, this is in your blood. I love building businesses, I love all the stuff that’s involved in it. The chase is a big deal. I just love it. So I’ll get back into it, but-

John Warrillow:

Well, I can’t wait to be a fly on the wall to see what comes next. Jason, where can people reach out? I don’t know if you’re accepting LinkedIn requests, or if you’re a Twitter guy. What’s the best way?

Jason Flick:

Yeah, LinkedIn’s easiest way. Drop me a note. Let me know what particular you want to talk to me or know, or whatever, and I’m happy to chat. I almost never say no. I’m always happy to chat and help folks out. I was certainly for years… It was actually 18 years because of my other company that I founded that let me found this one, so whenever I got an hour of somebody’s time who has been there, done that it was so helpful for me, so I certainly am doing a lot of give back now. Yeah, if somebody wants to talk, I’d be happy to happily share them with them.

John Warrillow:

Well, that’s very generous, and you’ve certainly given back to our audience, so I really appreciate doing that. Jason, thank you for joining us.

Jason Flick:

My pleasure, John. Great chatting.

John Warrillow:

Hey, if you like today’s episode, you’re going to love my new book, The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years, who have been able to negotiate an exit far better than the benchmark in their industry, sometimes two or three times more than I would have expected. I was curious to understand the tactics and strategies of these entrepreneurs, and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business. To learn more, go to builttosell.com/selling, where we put together a collection of gifts for listeners who ordered the book, just go to builttosell.com/selling.

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