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Once Bitten, Twice Shy: The (Real) Reason Jay Gould Sold Yashi for $33M

October 1, 2021 |  

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Jay Gould co-founded Bolt, a video sharing website that grew to more than 40 million monthly users. Based on Google’s valuation of video sharing sites at the time they acquired YouTube, Gould estimated his share of Bolt to be worth more than $100 million. The business was booming but when Bolt was served with a lawsuit, Gould’s share in Bolt eventually went to zero. Gould went from being worth millions on paper only to have his wealth erased almost overnight.

Gould picked himself back up and went on to build Yashi, a platform that helped advertisers buy ads on video content. Yashi grew to more than $25 million in revenue and more than $5 million in EBITDA when Gould received an offer of $33 million from Nexstar Broadcasting. The offer represented around 6 x EBITDA and Gould was conflicted. He knew he could probably get more, but he had also seen how quickly a successful company can go to zero. In the end, Gould accepted Nexstar’s offer and has never looked back.

Strap on your seat built because this episode is a machine gun firing wisdom bullets by-the-second including how to:

  • Protect your control using super voting rights.
  • Keep most of your equity when raising money.
  • Answer the one question Reid Hoffman of LinkedIn fame asks founders before he invests.
  • Pick a great name for your company.
  • Boost the value of your company by selling less.
  • Find acquirers motivated to make an offer.

About Our Guest

Jay Gould is an entrepreneur and technology investor.  Jay invests through his fund, Gould Ventures, where he’s made nearly 100 investments in high-growth, privately held technology startups over the past decade. Previously, Jay was the founder of Yashi, which he grew to become an award-winning video advertising technology company, and was later acquired for $33 million in cash by Nexstar Broadcasting Group. Prior to Yashi, Jay built and sold a few early-stage technology startups, including the first viral video sharing website, before YouTube, an early dating website, and one of the first social networking websites. Today, Jay spends most of his time with his wife and four children in New Jersey.

 

Connect with Jay:
YouTube

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Transcript

Disclaimer: Transcripts may contain a few typos. With most episodes lasting 60+ minutes, it can be difficult to catch some minor errors.

John Warrillow:

What’s your biggest question when it comes to selling your company? When I ask that question of other entrepreneurs, I hear things like, “How do I avoid an earn-out? When’s the best time to sell? How do I create a bidding war?” These questions, along with many others, inspired me to write the book, The Art of Selling Your Business. It’s a field guide for punching above your weight when it comes to selling your business. I’ve taken all the best practices from the 300 plus interviews I’ve done for this show, and distill them down into an action plan for you.

You can get it, along with some gifts from my listeners, when you go BuiltToSell.com/Selling. Welcome to another edition of Built To Sell Radio, the podcast where we help you punch above your weight when it comes to selling your company. My name is John Warrillow. Today on the show, you’re going to hear from Jay Gould and how he sold his business, Yashi, to Nexstar for $33 million. I got to come clean on something. I was over my head in this episode. When you hear Jay talk, it is a mile a minute. I had trouble keeping up with the story, but I want you to stay with it.

Pay close attention because Jay will leave you with so many value bombs and nuggets of wisdom, that I think it is worth your time to stay with the conversation. I found myself overwhelmed at times, just with how much information I was trying to consume. Again, maybe put your media player to 0.8 times speed, and just take it all in because Jay shares insight, after insight, after insight. Here to tell you his entire story is Jay Gould. Jay Gould, welcome to Built to Sell Radio.

Jay Gould:

Thanks, John. Thanks for having me.

John Warrillow:

Where are you, man? You look like you’re in a bar. It’s like noon.

Jay Gould:

This is my basement. I don’t even drink alcohol. I used to, but I stopped. This is my basement downstairs.

John Warrillow:

Well, for those of you who are not watching on YouTube, it looks like the classic bar room saloon with the booze up on all the shelves. Looks great, awesome. Great to be with you, Jay, talk to me about Yashi. I understand you went through a transformation, so I’d love to go back to the beginning. What was the business in the early days?

Jay Gould:

Let me just give you a little background. I started a social network years ago, dating site years ago, sold those. Started the first video sharing site before YouTube was around in 2004, sold that. I only say this because it brings my wife into the picture. I met my wife at the company that acquired that company. I became an equity partner in that business when I sold it. She was the leading salesperson there. We started dating, I was an owner of the business. I didn’t want anybody to know because you’re dating one of your employees, but I fell in love with her. We’re dating and that company ended up unfortunately, being sued by Universal Music. It was a bad outcome for us.

That company went bankrupt a few years later. I came up with this idea for, at the time, it was called Gamers Media. We were the largest video sharing site before YouTube surpassed us. They had executed us. They beat us, is what it is. Then we got sued one week to the day after they got announced that they sold for $1.65 billion to Google. Then Universal Music filed a lawsuit against us, MySpace, and now what you know as Crackle. We all got sued the same day. I was like, “Oh, no.” We weren’t venture backed. Essentially, it was a bootstrapped company so it didn’t work out so well. We have millions of dollars in legal fees, mounting and mounting, we were laying people off. It was a disaster.

I went to her and I said, “Look, you have a strong skillset in sales.” She was really good at it and a lot of relationships. I said, “I have a strong suit of skills in product development. Let’s build what is going to start off as an ad agency.” And I knew over time, we would be what’s known as an ad network, more technologically driven. In the beginning, when we first started off, it took the first year almost we had no revenue. I almost wanted to give up at a certain point. I was like, Jesus. We were chugging along, trying to get people. The year before that, Bolt maybe did $10 million of revenue, that was the previous company.

I estimated 20%, 30%, $2, $3 million, and we didn’t do anything. It’s just knocking on doors, trying to figure out what our sweet spot is, what’s our product market fit, all these things. Couldn’t really figure it out so we started off in gaming. That’s why it was called Gamers Media and the reason for that- [crosstalk 00:05:07]

John Warrillow:

Were you doing advertising for games?

Jay Gould:

Game websites. Yes.

John Warrillow:

Game websites, so World of Warcraft is a game.

Jay Gould:

Well, there’s Miniclip. It was casual games. We were the exclusive sales team at Bolt for Miniclip and RoomScape. If you were in the US and you and you were on there between 2005 and 2007, the ads came from us, even though you were on the website. We signed a contract exclusively. Then we went to all the ad agencies throughout the United States, and we closed and secured those deals, and we ran those ads on their websites.

John Warrillow:

Almost like a media buying shop- [crosstalk 00:05:40].

Jay Gould:

As opposed to agency. Yes. In many ways, if you want to think of it from the advertising perspective. We were like media buying and placement. There were companies within the industry, which were called advertising networks. This is advertising.com, Value Click, et cetera, Fast Comp, Fast Click. I aspired to be like them, but we didn’t have any tech initially. I knew what we were doing at Bolt. When we started Gamers Media, we just contacted all the old players that we worked with, RoomScape and Miniclip, and they all said no. This is how we started all. I’m like, “What do you mean no?”

But because we had those relationships previously, like Rob Smalls, they were like, “You got nothing. You got no sales team. It’s just you and your wife. What, are you crazy? No, we got to go to somebody else,” so they went in other areas. But I went to everybody else and I lived on my history and my background so I went to their competitors, the smaller sites. I locked up over 20 million unique visitors on a monthly basis in contracts with us, to do business with us. These were freeonlinegames.com, flashgames24/7.com. There was just hundreds of these guys over time.

John Warrillow:

Hold on. Let me make sure I understand. These free game sites make their money by running advertising because they’re free, they monetize their game by running ads. You went to them and said, “Look, I can get you advertisers. If you just give me a cut, I guess of whatever,” they place on your site. You got these deals, in total, in aggregate, there were 20 million unique visitors based on all of these different websites you signed up to sell advertising for.

Jay Gould:

At the launch.

John Warrillow:

Got it. What was your cut of the media that you got first on this thing?

Jay Gould:

We took over 50% initially. Ad networks don’t do that anymore, but we did. When I had the conversation with John is I said, What is your average ECPM now?”

John Warrillow:

What does ECPM stand for?

Jay Gould:

It’s basically the cost per 1,000 that they were getting paid. What is your average cost per 1,000, or RPM, revenue per 1,000, per page. They didn’t think about RPM. They thought about it on a per 1,000, per ad unit. If you add up the number of units on the page, it tells you what the revenue is per page. I was very analytical about it. I broke it down. They would share some of their stuff, screenshots, some of the early ones. Over time, it becomes social proof. Once you get the first 20 million, everybody else wants to join and it perpetually starts to grow.

But it’s hard to get the first one to sign so I couldn’t get RoomScape and Miniclip. What I said to them is it doesn’t matter what I’m selling it for, what matters is what you’re willing to take, and it should be more than what you’re making now with whoever your providers are. We were able to give them a higher CPM, a cost per 1,000, than they were receiving from the ad networks. These were the advertising.com of the world. They were getting more, what they call, run of network ads, remnant ads, the flashy ones you saw in the mid 2000s.

Where it’s like, click here, get your free cell phone, text messages, and ring tones and all that crap. We went to Pepsi, Kraft, Fruit of the Loom, these were the advertised boost to work with all the time, GameStop, all these companies and we would close a deal. This brings me to your book in a way. We closed deals and we did, by the way, the impetus of this, the origin of it was I created the first video sharing site. We had a very large video sharing website. I was known in the industry for online video and also, with the ad networks.

Sorry, ad agencies, I should say. I always wanted it to be an advertising network for video. That was the intent from the start. But to get there, you don’t start where you end, you start where you start. I had to start off crawling and we did weird, agency-like things. We would do banners, we would do text things, we would do advergames.

John Warrillow:

When you say you would do them, does that mean you would create them, actually do the creative for them or just run them?

Jay Gould:

Not the banners because they would have the banners from the agency who gave them to us. The agency has the media buying planning part and then they also have a creative agency. Sometimes it’s within the same like Omni-Commerce or something, but a lot of times it’s not. Digitas may have doing the media buying planning, and then they may have a creative agency that they also hire. The client, in this case, could be Nike for say, Digitas. We weren’t on that side of it. We were there because we managed the relationships of the websites because the agencies didn’t do that.

I never understood this, by the way. Why didn’t the agencies naturally just become advertising networks? It never made any sense to me. The point of that was, I guess the reason why that was, is an agency, as you say in your book actually, because it was funny how your book actually talks about an ad agency as an example. What they did is they would have a small number of clients, maybe 10 or 20. In some cases, two. There was a deep relationship with those folks. They couldn’t have 10,000 websites if they only had campaigns from two, or three, or five or 10 clients. We would aggregate all the agency relationships, and we aggregated all the publishers, the website owners.

And because we had those relationships, in some cases exclusive contracts, nobody else could even get them. We got their inventory exclusively, but most cases, non-exclusive. We take that inventory, bucket it up, go back to the agencies and say, “Who are you looking for? Tell us the demographics you’re looking for.” Female moms between the ages of 18 and 34, et cetera, et cetera. Then we would sell based on that, we would create packages based on that. They would give us the assets, which could be the banners. But we did have a creative division within. We created in called advergames.

We didn’t invent it, but we were doing a lot of these. We were early on this. One of them we did was Underoos from Fruit of the Loom. We also did another one from Deli Creations, which was Oscar Mayer. That one, you could still find online if you look. You had the hands, you probably seen these before, where they’re making sandwiches. As the levels, level one, level two go by, it gets faster and faster for the customers placing orders, and you have to put them together. It was fun you’re engaged with the brand, with making the sandwiches, the Deli Creation sandwiches for Oscar Mayer. We were in that business and we did really well.

Year one, first year revenue, $750,000 in revenue. Year two, $1.5 million, then $3 million, then $6 million. We just kept growing 100% a year, every year so it wasn’t a growth issue that I was having. I was having an issue trying to get investors to invest because I wanted to scale faster and I needed investors. I was friends with people like Naval Ravikant, who now runs AngelList. This is prior to that. He came to my office once in New York City, sat down me and it’s year two. I was like, “I’m trying to raise money.” We’re making a lot of money. I was running the business very profitably and personally, making a lot of money.

And by the way, I started this company because I always say to people, I was out there, it’s like the Gold Rush. I was hacking away trying to get the gold when I was the website owner. Then after multiple companies that didn’t work out so well, I’ve had some exits and stuff early, but they weren’t huge wins. Then one that was worth hundreds of millions of dollars on paper, John, and it goes to zero. Then I started another company that didn’t work out in between this one. And I said, “You know what? I’m just going to sell picks and shovels.” That’s the ad business, right? It was the low hanging fruit. I knew I could make millions of dollars doing this. It wasn’t inspiring to me.

I wasn’t changing the world, so to speak. Although when you are running an ad network, you are proliferating free content for the web. In some ways, if you want to think about how you’re helping the world, but if I stepped out, somebody else would step in. I don’t feel like it was that revolutionary, but I knew that I could execute it and I knew I could do well. I couldn’t get it to that level where I can get the Sand Hill Road venture capitalist to want to invest. Naval told me, he’s like, “You’re running a very profitable business.” He goes, “Let me ask you a question. Why do you have the business? Why did you start it?”

I told him, honestly, “Well, I’ve had some exits and they weren’t so great. I had some that failed and I’m just looking for some more money.” He goes, “Exactly and you’re profitable.” He goes, “People forget why they start companies. You start a company to create wealth for yourself and for your shareholders, if you have shareholders. You already passed all that. Why do you need the shareholder? You’re making money. Just keep making money.” Excuse my language but he says, “Just get your fucking money and then worry about raising money.” That’s so funny. I said, “Okay, in a couple years?” He goes, In a couple years, let’s re-talk, let’s talk again. Let’s have another conversation.”

A couple of years goes by then I’m making so much damn money, I didn’t want any investors in the business. Then I had some- [crosstalk 00:13:33]

John Warrillow:

Did you have any investors at all?

Jay Gould:

I did. I did.

John Warrillow:

Okay. So tell me about when they came in and how you got them.

Jay Gould:

When I sold my company to that company in New York, one of the guys, who was a co-founder, is a guy named Lou Kerner. Lou was the founder of dotTV, the domain extension. He sold it to Barry Sion for $100 million. He was a part of Idealab, Bill Gross. I don’t know what percentages anybody had, but he made a lot of money, nonetheless. He ended up investing in the company a few years later. He was one of my first investors.

John Warrillow:

When you say the company, you’re referring now to Gamers Media?

Jay Gould:

Yashi, yes. He invested $1.5 million, but before he pulled the trigger, a person that I met through him years before is a hedge fund manager. I don’t want to name his name because he wants to be anonymous on this, but he’s a noted hedge fund manager, managed $13 billion under management at his fund. Great guy, taught me a lot in business, in life as well. That’s another thing about investors. They could also just be great mentors in life, too for people that are looking for investors. Be careful about who you bring in because you have 10 years or so usually, it was eight years in this case, with these people. They become like family. I talk to my investor every, single day. I used to talk to this guy every day and he would just counsel me on different things.

I didn’t always listen to everything he said, but I always took the information in because of his experience in life and business. He was my first investor. $250,000 he invested in the company, got a couple percentage points for it. Then Lou came in about a year later with $1.5 million and the valuation kept going up. The difference is when I got these guys in, I was aware of something that was called super voting rights, they call it. One of my old angel investors in previous companies is a guy named Reed Hoffman and Reed gave that privilege to Mark Zuckerberg, him and Peter, so he had that. He was also an investor in Mark Pink’s company, Zynga, and he had super voting rights control stock.

I was aware of this and when I said, “You want to come in, I don’t need you. I had leverage.” By the way, wealth is created through leverage and equity, just as a key thing that people don’t understand. What he always told me, the guy that I can’t name his name. He always said to me, “Listen, I want you to retain the control,” because I asked him for super voting rights. He’s like, “I’m down with it. We’re going to give you that because if I can’t trust you, I can’t trust anybody. I definitely don’t know if I can trust DCs in the future, in this business.” They get crammed down as the angels.

I don’t want to get too detailed about this depending on what the audience knows, but you should look into this. Investors will get a lot of different types of investor rights, preferred rights. These could be liquidation preferences. They could be accruing dividends, which come in the form of equity, which is more dilution. It could be what they call the option pool shuffle. They’ll say when they’re made to the investment, “Oh, you should set aside 20% for future employees.” They tell you to do that first and then they invest, versus doing it afterwards and diluting themself as well as you. There’s all these tricks and he was on the same page.

We’re just going to do this the fair and equitable way. I want to make sure that everybody else in the future is going to be fair and equitable because we’re giving you the control and now you have the control. They can’t change it otherwise. And so from that first angel investment, I had control. Then Lou remained the precedent by putting in $1.5 million. Then we raised another $1.5 million from other angel investors at that point, which were friends, Wall Street guys too, a lot of them. The key was maintaining control. I never needed their money, but their money was leverage. Go back to the leverage, so that when I wanted to raise money in the future, they could see that we were profitable, number one.

We had capital on the balance sheet. We never really needed to use it. we raised $3 million in total. At one point, John, we had a Silicon Valley bank loan for $3 million, which then got replaced by PNC with a $4 million loan. It was a straight line of equity. It’s really unheard of. They usually have- [crosstalk 00:17:18]

John Warrillow:

When you say line of equity, do you mean a line of credit?

Jay Gould:

Credit, sorry. Line of credit. Yeah. Okay. What it was is most of the times they do these things, they have an AQR. Well, they look at adjusted quick ratios, and they look at your revenues, and they look at the growth of it, and the deceleration, et cetera, and they can call on it. I got a friend that ran a very large average network, sequoia Capital was his investor. Don’t want to name the company. He had a line of credit from a bank and the AQR broke. They said, “You need to pay us and if you don’t, we’re going to foreclose,” and they did. Sequoia didn’t ante up and give them more equity to pay it. Gone, they liquidated the business. Shit happens. I’ve learned a lot over the years from this.

John Warrillow:

Let me just pause you here. Super voting rights, can you define what you mean by super voting rights?

Jay Gould:

In my case, what it was is we created two classes of stock. We had a C corporation, we had class A, class B. I was in class A and everybody else was in class B. My wife and I were in class A, I should say. What we had was a 10 to one vote over everybody else. Everybody else got one vote per share. We got 10 votes per share. I forget what the math is, but if we were only down to 20 something percent, I still had the majority, over 51% of the votes or a few more than 50% of the votes, which is important for making key, strategic decisions about the business.

Do I want to raise more? Do I want to take this off? This will come up later, I’ll tell you about when we sold the company, these things are important. Now, you still want to get everybody’s signature on everything. But when they know their signature doesn’t really matter, they just vote yes anyway, because they don’t want to be a problem child?.

John Warrillow:

If I’m reading between the lines, and just tell me if I’m getting it right or not. This was important because through these various rounds of investment, you, on paper, owned less than half of the company- [crosstalk 00:19:07]

Jay Gould:

No. I sold the company owning over 80 some percent of the company when I sold it because- [crosstalk 00:19:13]

John Warrillow:

Why was the super voting rights necessary?

Jay Gould:

Because at some point, that may have been the case. I was always worried about what happens if we keep raising capital? $3 million’s nothing in today’s world. We could have easily gotten over our competitors that had $100, $200, $300 million in capital raised. I never over capitalized the business. I was always afraid that the outcome may not be so great and over capitalizing just means less to go around in the future. Plus, all the things we talked about, liquidation preferences and everything else that they may have put in there. I never allowed that. We had offers from VCs.

We had an offer from private equity, and they always had these weird things and I was told that’s market, that’s conventional. I said, “Not for me. Maybe for everybody else, but I’m not doing it.” And in the end, I saw companies that we competed with that went public. You looked at the S-1 filing, and you looked at what the stakeholders own, I said, “Wow, this company’s going public. While their market cap is significantly higher than what I sold my company for, this guy as a founder owns 2% of the company.” What? So he ended up making less money than I did and you can’t sell all your stock. If the founder just liquidates everything, that’s a negative signal to the market. He’s stuck. He’s stuck in a company and he has less equity dollar wise, I should say nominally.

John Warrillow:

In your case, you were able to hang onto how much equity?

Jay Gould:

Over 80% by the time I sold.

John Warrillow:

Good for you. And so you were raising from Lou and the other angel investors at a really high valuation, presumably.

Jay Gould:

Yep. I waited, we waited several years to Naval’s advice. I would love to have him come on my show but he’s too busy. I want to thank him, as I want to thank you as well, thank you, because the people that… I call you guys docents. I have a show, it’s called Docents, which you’re going to come on the show. I say docents are people that inspire influence and guide others. They could be people in your life and they could also be public figures, or authors, or athletes or whatever. Those people have an impact on you. I felt that you had an impact, Naval had an impact, a lot of people in my life had an impact on me.

I realized later that my success is built on the backs of everybody else. That I was smart enough, I would give myself credit for this, to put them in my lives, and make the right choices of having the right people around me, whether they’re directly or indirectly in my life. It’s changed who I am, and it’s changed my outcome dramatically. Naval’s advice, when he came to my office, was great, which is wait, get leverage, leverage is everything. He’s friends with Mark Pinkus, Mark Pinkus at Zynga. People know Farmville. He would take advertising, and popups, all kinds of wacky things, and put it on there. Everyone’s like, “I can’t believe he’s putting.” Yeah, because he wanted to be profitable.

When he sat down with the VCs, he dictates the terms. That’s the key. He waited to raise that capital. When he did, he had leverage because I don’t need your money. You can see I’m profitable. If you want to invest, it’s on my terms. It’s not perfectly on your terms, but a lot of the control provisions get removed.

John Warrillow:

Got it. One of the terms that you felt was important to you were these super voting rights, in particular. Was it Lou who helped you understand that or the hedge fund guy? I can’t remember.

Jay Gould:

Super voting rights, Reed Hoffman is the one that really brought it to my attention when he was an angel investor in a company I had called Wiki U. He brought it up to me several times. I was like, “Why don’t I have that with you?” It was the back of a napkin we came up with that idea, and they invested, and he was small investor within it. Again, another one of my docents. Great, influential guy in my life. And just listening to the stories, learning through osmosis, but sitting in a room with guys like him. You could see now, if you look up Reed, he’s a VC nowadays. When I met him, he was transitioning out as a CEO of LinkedIn.

John Warrillow:

LinkedIn, yeah.

Jay Gould:

He brought Jeff Wiener in and he stepped down. This is true because one of the things he did when he invested in me, he’s like, “I got a question for you. It’s the only question I have,” which is crazy. He made a decision in two seconds. He’s like, “The only question I have is how important is it for you to remain the CEO of this company in the future?” I’m thinking this guy doesn’t think I could be the CEO. What the hell? I was also thinking this is a test. I really thought about it and I was like, “I don’t know. Let me think about that.” He’s like, “Okay.” I said, “What’s more important to me, Reed, is really the control.”

“I don’t really care about the title, the ego, the pride of all that. I don’t really care. I really care about the direction of the company. I think I’m the best person suited for that. I don’t know if I’m the best person to manage 200 people in the future. I’ve never done that.” He goes, “It’s a good answer. That’s exactly why I’m stepping down to CEO of LinkedIn.” I go, “You are?” This is before he did it. And he’s like, “Yes. I’m bringing a guy in.” He tells him this whole thing. He goes, “When we got to 50 plus employees, I didn’t want to manage the people anymore. The personalities, it’s not interesting.”

“A lot of politics, people positioning themselves for their careers. I like a small team, 10, 20, 30 people. We build something and we get it off the ground. It’s this kernel, and it starts to pop. Then when it starts getting crazy like a bag of popcorn, it’s time to leave. I don’t want to deal with this.” He goes, “But not everybody’s like that. Mark Zuckerberg’s transitioning really well.” Bill Gates, Steve Jobs, Jeff Bezos, they all transitioned really well. They had a desire to do it, they learned it, and they figured it out, and it fit well within their personality.

He’s like, “It doesn’t for me. I’m not sure what it would be for you, but as long as you’re open.” I said, “That’s interesting. I don’t know.” As Yashi started to grow, we sold the company, I think we had like 65 or so employees when we sold, it was definitely getting to that point, what he was saying. I could see myself at a 100 plus employees, probably not really thoroughly enjoying the day-to-day. I like the beginning of the business. I love coming up with the idea, shifting the strategy slightly, the narrative, we’ll get into like we did with Yashi. Those things are really fun.

When it comes to that repeatable model, just keep doing the same thing over and over, I lose a lot of interest in that. It’s not my personality type.

John Warrillow:

Good stuff. Let’s get back into the story. You’re growing, raising money on your terms. You’ve alluded to a couple of times a shift in strategy. Tell me a little bit about that.

Jay Gould:

Let’s go back. Started this company in 2007. By 2011, we had our first child. We’re running the business for several years now and we go on a vacation that year. It might have been the year after, 2012. We go on vacation to Hawaii. We’re in Ko Olina. Somebody said to me, “You got to buy the book, Built to Sell.” I said, “Sure. Why? And they go, “I think it would be great for you. I read this book and it just seems like you’re a little distracted. You might want to read this book.” I said okay. This a friend of mine. He knew my business and what I was doing.

I go to Hawaii, land, whatever. I’m sitting on the beach and in Hawaii, they have these little coves with the jetty’s out there so no sharks get in. You’re just chilling, my wife and kid are just sitting in the water and I’m reading this book. No joke, John, I read the book from start to finish in one sitting. It took me several hours but that day, night, I couldn’t put the book down. I read this book. Part of the reason why I think it appealed to me is that the character that you created in the book, I can’t remember the guy’s name. What was his name?

John Warrillow:

Alex Stapleton.

Jay Gould:

Alex, he’s running an ad agency. I’m running an advertising network. The more I thought about it, I was running an ad agency. As I’m reading this, I’m like, “Jesus, gosh, I’m not really running an ad network. I’m really running an agency.” We’re doing advergames. A lot of revenue in advergames. When I looked at it though, the core fundamental thing that I always wanted to do was the video advertising. In the book, you talk about Alex, when he sits down with his mentor and he says, “Hey, what you really need to do is focus on the logos.” He created a process of how they did it. Then he went to the client and he started to… It was interesting.

I go, “The one thing that I’m passionate about, that I understand will have massive growth potential in the future, it’s not the advergames. It’s not the banners, the text links, it’s none of this other crap, homepage, takeovers, all these customized things that we did.” By the way, agencies loved that stuff. They loved it. It’s probably what closed a lot of RFPs for us. They loved it. What was the most scalable thing was the advertisement for the video because they already have the asset created from another creative agency. They’re placing it on television and internet, 30 second spots. And we had the capability through data targeting to be able to target all over the world or locally. And nobody, as I was reading this book, these ideas are just popping through my head.

Nobody was a local, focused geospecific to focus on video advertising yet. Who would the customer base be for that, as I was reading this book? I’m thinking to myself, it’s a different customer base than we have now. We have large agencies in New York, Chicago, LA, Texas, Austin. There are all these agencies we worked with, and Seattle, et cetera. It’s different. I think we’d have to go and find different types of agencies, if there are agencies for this, but we have to go to the car dealerships of the world. Everybody knows this part when you look back, and you think about the television, you’re watching ESPN on cable TV. You see the guy with his dog. He’s at the local car, our dealership and his last name, and they’ve had it for three generations and all this stuff. I’m like, “Why are they buying television? Nobody watches this shit.”

They get up when there’s a commercial at halftime or whatever it is, and they go to the bathroom, and then they come back. Nobody’s watching this. But online, I can guarantee viewership. I can understand view through rates. It’s all data driven, it’s all technology. What if we can convince them to do this? This could be huge. We could rebrand ourselves, as a whole new business and only focus on that and just forget about everything else, but it was scary. I was reading this book and I was like this is a scary thought. What if I ever removed the revenue and I can’t capture it back? The other thing you never want to do in a business is you don’t want, I’m going the opposite way. You don’t want your revenues to do this.

You want your revenues as smooth as you can from bottom left to top right. I thought about it and I said, “I think what I’m going to do is I’m going to focus on online video advertising. I’m going to not focus on the other stuff. I’m going to dedicate a couple people to it, to maintain what we have. I’m not going to shut it off, but we’re not going to buy more. We’re not going to add more. We’re not pitching it to websites. The existing ones, we’ll do it. We have existing relationships with tags that they’ve given us and we’ll continue to run it.” We didn’t sell any more advergames, that was over. Whatever we ran, we ran. We didn’t do any more homepage takeovers, but the banner business remained as a remnant thing that we did, but we didn’t sell any more of it.

It was like whatever it is, if they keep giving it to us for renewals, we’ll take it. It’s fine. We have two people focused on this, but we’re not adding resources to it. We are focused on online video advertising pre-roll before the games load. We’re going to go outside of that. I will say this. We got a little distracted, John. We had Gamers Media and I knew I wanted to go to video, but I didn’t want to distract the narrative gaming. I created a subsidiary business called Create Reach. We’ll help you create reach and that was the idea. I had these two businesses. There’s Gamers Media, there’s Create Reach. Not only do we have two businesses, we have multiple, different strategies.

I was like, “What am I doing? Now I know why my buddy wants me to read this book.” I’m like, “This is crazy.” I decided we’re going to unify the brand. We’re going to close down Gamers Media as a website, as a name, an entity. I had this domain for years, Yashi, Y-A-S-H-I. Sort of phonetical, two syllables. There’s a lot of stuff around names. If you think about eBay, Google, Facebook it goes on and on, Snapchat, it’s always this two syllable thing, Pepsi, of course, there’s Coca-Cola, but that’s rare. You look at branding and then the colors were light blue, it’s the color of the internet. I’d looked through all this stuff and this is all in Hawaii, by the way.

I decided we’re going to rebrand this as Yashi. The reason for that is that for the non-gaming segment of our customer base on the advertising side and our vendors, which is the supply side, which is the website owners that we’re non gaming, it’s a generic name like a Yahoo. If you look at the history and the who is, they actually owned the domain at one point, which I thought was really interesting. In 1996, they owned it. I’m like okay, this is interesting. Short, five characters, two syllables, phonetical, it’s good name. It doesn’t mean anything to the non-gaming audience, but for the gaming audience, it’s got an Asian ring to it. Feels like its origins come from gaming. I think they’ll be cool with it. The others, it’s an internet company, and that was a big risk. When you’re running the business, you’re afraid to change anything. If it’s working a little bit, why fix what’s not broken?

In some ways it was broke. It was really, really difficult to raise real venture capital from anyone. I didn’t think anybody would ever be interested in the business, because to your books point, it was very services oriented. It was like is it Jay and Kate? Is it all the people? We needed to remove ourselves from the business. In some ways, you want to build the business that could be sold. Doesn’t mean you have to sell it, but if it’s worth buying it’s sustainable. That was the key. I realized, and this is what your book was saying, is we were very generalized. We needed to be much more specialized. That’s where we decided to just focus on the video. Come back from the Hawaii. Another thing I’ll tell you, is I would always have my developers come up with, I would have a new idea.

I bought this domain, shareable.com. We’re going to do this thing shareable. And then I would distract them. Don’t worry about this product development we have over here, we’re going to go do this. Three weeks later I’m like, “Forget about that shareable thing, and don’t worry about Yashi. We’ll get back to that. I got this other thing over here.” I would do this all the time. I grew up with my CTO since we were five. This guy, Larry. One time, I’ll never forget. He knocks on my door, random day, wasn’t after I did anything like that. He’s like, “Can I talk to you at lunch today? Do you want to go take lunch me?” I’m like, “Sure.” On the ride over, he’s like, “Bro, you got to stop with this stop, go, stop.”

I go, “What are you talking about? I’m a founder, crazy, erratic person.” He’s like, “There’s people that are talking about wanting to leave. I was like, “What, why? We’re chasing opportunities, bro.” He’s like, “I get it.” He knows how I think. He’s like, “You’re crazy. I get it. You’re A.” He said, “These people, they want consistency. They’re looking for comfort.” What? I couldn’t compute. I said but you got to keep iterating and trying different things, or you won’t find the next big thing. He goes, “But what you’re doing is you’re implying that this is not the next big thing and this is where they work.” I’m like, “I never thought of it that way. To be honest with you, it’s not. We’re not quite there.”

I thought about that conversation when I was reading this book, I come back and I can’t imagine what people are going to think now. I go in, and I could see the faces, and it reminds me of the book when the one person knocks on the door and is like, “I’m leaving.” Same thing. I’m like, “Guys, you’re never going to hear me to say this ever again. I know I’ve said that before, but I mean it. We’re changing the name of the company.” Everyone’s like, wait, what? I go, “No longer going to have two names. We’re going to have one name. We’re changing the focus away from all this crazy different product offerings to the one product that is the most scalable product for us. It’s going to be online video.”

The difference between us and anybody else that’s focused on online video, there was a couple companies like BrightRoll, Tremor, ScanScout. The difference is that we will focus on targeted local video advertisers. They’re not focused on that. You don’t ever see in a tag on cnn.com a pre-roll for a car dealership. Nowadays you might, but back then you didn’t. I go we’re going to get doctors, dentists, attorneys, accountants, engineers. We’re going to go after all of them. I said, “I know I can see on your faces you’re confused.” There’s a couple smiles. Some people are like I get it but most of them didn’t, particularly my developers. I said, “You got to trust me on this. I read this book. I encourage you to read it.”

I don’t think anybody did. But I said, “I encourage you to read this book.” I said, “It’s changed fundamentally what I’m thinking about this business and we got to give it a shot. I know what you’re all thinking, but we’re growing.” I think we might have had maybe $7 million in revenue or something that year. I can’t remember what it was, six or seven. Everybody thinks we’re doing well. I go, “We’re really not.” When you look at the other companies that have raised a lot of money, I don’t think it’s just the money. I think it’s the focus. The BrightRolls, and the ScanScouts, and the Tremors, these guys, some of them went public.

They raised $100 million, $70 million, large numbers but they’re focused on one thing. We have to differentiate ourself in that focus. As an investor, John, I have this acronym. I call it TTTDSD. The first T is team. The next one is traction. It’s got traction trumps everything. It’s a lot of traction. Then there’s the TAM, what’s the market size opportunity you’re going after? Then on the product side, I think, is it differentiated? Is it scalable or is it scaling? Ultimately, if you do, everybody’s going to say, “I’m going to copy that,” so what’s your moat, how is it defensible? So differentiation, scalability defensibility.

When I thought about our business, along my own framework of how I make investments as an angel investor, I wouldn’t even invest in my own company. I was like what am I doing? What we did was not that highly differentiated. We weren’t scaling very rapidly. It was very manually linear scale and it wasn’t defensible. I was like we have to create a better product offering. Your book woke me up to that quite a bit. I got buy in. There was a couple people actually left, believe it or not. Some people were like, “I don’t like the new direction.” I was like, “Then go, I get it. I totally get it. I’m happy to be a great reference for you wherever you go.” I’m always like that with everybody.

I was never trying to trap people into working for me. You want to work for me because you want to work with the company, understand the vision, and what we’re trying to do. If they wanted to leave, by all means, happy to have you leave, because you don’t want bad culture. There’s concentration risk that we had. Reading your book, you talk about concentration risk. We had customers that were 20%, 25%. No, my wife would come to me and say, after I read this book, she’s like, “We got this deal, blah blah. It’s $700,000.” And I’m like, “Look at the revenues that they owed us from previous months, no.” “What do you mean now?” I was like, “Tell them we can do $50.”

“What are you talking about?” And I was like it is what it is. I’m telling you, concentration is a big thing. When we go to sell the company someday, they’re going to look at the books and they’re going to say, “Uh oh, this is an agency. You got 40% of your revenue from one customer.” I’d rather not have the revenue. She goes but we’ll make a lot of money. I go, yes, we’ll make a lot of money because we own the majority of this business, but you’ll never get of out this business. You’ll be a prisoner to this business. I don’t want to be. I want to be able to exit the business when I want, not that I’m going to. But when I want to, I want to have that option.

The concentration risk of customers and suppliers on the supply side for the websites was always a real focus of mine. If you had a website that had a lot of traffic, I couldn’t take it on in the earlier days. We had to grow overtime very strategically. That transition was a very difficult transition that we did and it took us about a year to complete. That was in 2011, 2012. I can’t remember exactly when we did that. I think it was ’11 or ’12. It might have been ’12. Then by 2015, we sold the business to Nexstar Broadcasting. Another thing I want to just point out is I thought about, because your book told me to, think about who your potential buyer is.

I’m going to write a book, by the way and not related to this, but I’m writing a book. Another author I’m friends with said to me you write the title of your book and your subtitle, that’s your focus, your premise. It’s an interesting thing. I never heard anybody else say this. He goes write your best Amazon review that you would love to see. In that review, what are they saying is so great about this book? What do they love about it? Then you start to write in the subject matter of the different ideas, and stories, and piece them all together in a table of contents. I was like that’s interesting.

He goes you start with your beginning and your end, you fill in the middle. If you think about my business, it’s the same thing. We had a premise, we had a target audience, all this stuff. The substance of the business is the middle, running it, scaling it, less concentration, all this stuff. Then the end is who is your buyer? The buyer isn’t a particular company. It was a subset of a type of company. For me, it was old media. I was like I don’t think we’re going to sell to Google or Facebook. It’s possible, but they have these capabilities. There’s way sexier businesses that they’re connected to through VCs that probably invested in their companies. It’s like an inside baseball thing and I’m in New Jersey.

I’m not in the valley. I said so how and who would be the buyer? I thought the local would be great. I said we’ll go after local because there’s a huge, old media sector. This is television broadcasting, cable, there’s print, there’s outdoor, at a home, et cetera. There’s so many of them that know they need to have a digital strategy, they don’t understand what that needs to be or how it needs to happen. They have relationships with the local advertisers already so Nexstar Broadcasting ended up being the buyer, as we know. They had 650 sales people selling in 150 markets throughout the United States. They had all the advertisers so we bring them a technology platform. All you got to do is fill into the platform. Use the technology, take that, you can target locally for your local car dealership that already buys $2 million in advertising a year from you or something.

John Warrillow:

What is Nexstar? I don’t actually know what they do. You said they had lots of sales people. What are they selling?

Jay Gould:

They’re a television broadcasting company. In a way, they’re like a franchisee, even though it’s not what it is. The FCC has these licenses for TV broadcasting, which is crazy when you talk to the founder of Nexstar because he’s like it’s all for monopolistic reasons. You can’t have more than 50% in the market for television. He laughed and he’s like, “Facebook’s got more, than Google’s got more.” It’s why he loved the internet. He’s like, “I could become a monopoly in digital.” For television airways, how much of the audience do you have? What they are, is they get a license from Fox, CBS, NBC, et cetera. In certain markets, that’s not actually Fox. It’s run by Nexstar Broadcasting, Sinclair Broadcasting, et cetera. They call them broadcasting companies.

John Warrillow:

They’ve got these 650 sales reps selling dentists 30 second, 60 second spots on TV. By buying you, they had the ability to add another offering to their kit effectively, a 60 second ad in- [crosstalk 00:39:43]

Jay Gould:

We can get into that too, but they didn’t ever do it, which is interesting. They buy me and it was this great idea. I think I sold them on the idea. I guess I was a good sales guy. I sold them on this idea that this would be really well. It just fits right in. Then the problem was once we sold, I can say this, I guess. Once we sold, I was on these calls with the station managers and they used to call us the Yashi station. So funny. I’m like station, what are they talking about? You just fit right inside their cog on the wheel. I’d get on the call, and they would do a roll call, every, single person. They were so funny, John. These guys would go on and be like, “This is John from Cincinnati.”

They sound like they’re on a radio and I’m like what is going on? Then they would be like, “Yashi, you there?” The guy from Nexstar. I’m like, “Yeah, it’s, Yashi.” I have to wait for the roll call and it would take five minutes or so, maybe 10 minutes for everybody to say that they’re there or not there. They would name Jeffrey, Jeffrey, you there. No, Jeffrey’s not here yet. Okay. We’ll get back to Jeffrey. I’m like, “Oh, my God. What are we doing?” And then Perry would come on, the CFO would come on, and they would do this whole thing. Then top sale managers would say is there anything we need to know about in certain markets and all this stuff? I thought it’d be a top down approach.

We now have this, we want you to sell it. He wanted it to be a bottom up approach. Those calls he’s like I need you at the end of these calls, to talk about the Yashi offering so they can adopt it. I was like wait, you’re the CEO and the founder of Nexstar Broadcasting. It’s a $5 billion company. Just freaking tell them to do it. He goes it doesn’t work that way. I’m like what do you mean it doesn’t work that way? Roll heads if they don’t do it, I don’t understand. He goes no, no. We need them to buy in. I was like, dude, you want me to sell 150 plus TV station managers on the Yashi offering? You bought it for $33 million in cash. What are you nuts? Just tell them to do it. He’s like it doesn’t work like that.

They’re a political organization in many ways. I think I found from other friends that sold to large corporations, a very similar scenario so I don’t think it’s unique that I dealt with. After about a year of this, I had enough of it. I was like I’m out of here. I can’t do this anymore. I was like I’m done. I have my arm behind my back. I called mercy. I’m not trying to convince anybody.

John Warrillow:

Did you have an earn-out or what was keeping you there for a year?

Jay Gould:

And I said to them in the negotiation, another thing I’ll tell you is that we had a valuation on a prior round, $1.5 million on a $75 plus million valuation, pre-money valuation the year before we sold. The year before we sold. We sold it and that’s why I said earlier in the interview, control’s everything. We had an offer from Nexstar for $20 million the first time. I was like no freaking way, not doing it. They wanted to do an asset purchase, not a stock purchase. The asset purchase, as a C corporation, which means they would’ve given us $20 million to the corporation. The corporation now has to pay tax, corporate tax, which I think was 34% at the time.

And then whatever’s left, is distributed as a dividend to the shareholders. Obviously, I’m the largest shareholder. I was like the math and economics on this. Your book talks about this, actually. I think it says what do you think he could sell the company for? What do you want to sell the company for? When he did the math on the earnings and the multiple, it came out to $500,000 in your book. He says well, what do you think you need? He goes I wouldn’t do it for less than $5 million. Then you got to get yourself to a position where that $5 million is divided by a number that makes sense for the multiple. That’s the earnings you need to get to. I fundamentally understood that, even reading the book.

I remember thinking about at the time, it’s a few years before we sold the company, I definitely don’t want to sell the company right now. It wasn’t going to change my life because it’s all about how many years of your current income in the company that you’re providing yourself would that sell for? We ended up selling for six times the earnings. The year before we sold the company, we did $5.5 million in revenue. Six times that was $33 plus change.

John Warrillow:

Sorry. Just to be clear, $5.5 million of revenue or $5.5 million in product?

Jay Gould:

EBITDA.

John Warrillow:

$5.5 Million in EBITDA.

Jay Gould:

The way it was structured, I treated the company like a dry cleaner. I took my quarters every month. I bonus myself on a quarterly basis, as well as the shareholders, and was making a lot of money running the business. When I was sitting down and getting these offers, I called up Perry Silk. I said, “It doesn’t make sense for me to do the numbers you are, because this is what I made last year, so you have to just think about this. Why would I sell what I could just make in the next, and I’m growing 100% of the year.” I could just make that in another year or two. He goes, “Well, what if you don’t?” I’m like, “Well, why are you buying it if you think we’re not going to grow?” I know I’m going to grow. If you’re telling me you don’t think so, then that’s not even real because you wouldn’t want to buy it. It was a real conversation.

He’s like, “Let me sharpen my pencil.” Comes back, talks to his executives, comes back. They’re like, “We could change it from an asset sale to a stock sale,” which in that case, he’s buying the stock of the company also eliminating liability that you would have owning it. There’s some carve outs for liability. There’s some fundamental reps you have to have in a transaction when you sell for that kind of money for fraud. We didn’t commit any fraud so I had nothing to worry about. But in terms of receivables or anything that doesn’t get paid, they can’t come back to you on this stuff. If there’s something that you just didn’t even know you were in violation of but it wasn’t fraud, they took on that risk.

And there were some tail, and tail insurance, and all these other good things. I don’t want to get too much in the weed on this. At the end of the day, he sharpened a pencil, came back, says same purchase price, but a stock, I said, “That’s better. That’s not right.” I said, “We had a $75 million valuation last year.” He goes, “Well, they just bought one point something percent of your company for $75 million. I’m buying the whole damn thing so I tell you the price.” He was really Type A. Nobody tells Perry what to do. I was like, “All right, well, I can’t do it. I don’t know what to tell you. I have other offers,” which we did. Didn’t love the offers. We had an opportunity to sell a large percentage to a private equity firm with some money off the table, infusing some capital in the business.

But the thing is, I would’ve had to keep running it for God knows how long.

John Warrillow:

What were they valuing at, the private equity group?

Jay Gould:

75 to 100, somewhere in that range so it would take $30, $40 million off the investment, and take $20 million off the table. I go, “Perry, I could get money off the table and still run the company with a second bite at the apple.” Now, to your point, he eventually got to the point where it was over $30 million as a stock purchase, which is net more money in my pocket. It’s a good deal. Others were still pushing real hard on the asset crap. I was like that’s not going to work. They do that because of liability reasons and stuff. They could have offered me the same as an asset and I netted less. The point that I’m making here is that the control stock was everything. Because at the end of the day, when I finally just decided, I think we’re going to do this.

I went to my wife, didn’t tell my parents, or her parents, or anybody else. I said, “I think we’re going to do this. I’m going to pull the trigger on this. We’re going to go down.” Once you do that, due diligence really starts. It takes about a month or two, once you’ve really decided I’m going to accept the offer, no shop, et cetera. Got to that point and I said, “I think I’m going to do it.” I said, “We’re definitely going to do this.” We go down this path, we decide we’re going to go down and accept their offer, and then we did. We went down this path and it was like this diligence. I got to tell you, it’s very stressful when you decide we’re no longer shopping and talking to anybody else.

This has to work now because now, it’s a big failure to everybody else that you were talking to. You can’t go back, crawling on your knees.

John Warrillow:

You signed a no shop, so you couldn’t keep negotiating with anybody else.

Jay Gould:

And you don’t want to signal to your employees, you don’t want to signal to anybody that this is happening. Obviously, my executives knew, but nobody else understood it. My investors were aware of it. When the deal comes down, and I finally go to the investors, and Lou was a very good friend of mine. I just talked to him this morning. He’s still a good friend of mine. I went back to everybody and everybody says… One of the guys was the chairman of Bank of America was my investors. And he’s like, “You got to do it. It makes sense. Just do it.” I was like, “You’re not in the money.”

He was in the $75 million round. I go, “But you have non-participating preferred,” which means he gets his money back. I said, “I feel bad so I’m going to give you a 20% premium, all of you in the round.” My cousin was in that round. He’s a surgeon. “I’m going to give that 20%.” He goes, “You don’t need to do,” but I’m going to do it. It’s just the right thing to do. You guys invested a year ago and I’m selling for half the price. What are we doing? I got to give you some return on your money. In that round, I gave out of my own pocket, I wrote a 20% check. 20% on top of whatever they invested when the deal finally got completed.

When I called them all, everybody’s like of course you got to do it. Of course, you got to do it. Then I called Lou and Lou says, “I’m a little conflicted.” I said, “Well, what are you conflicted about?” He was the only guy that said this to me because he’s the closest one. I was like what’s going on? He’s just being honest. “I’m conflicted because I have two hats, so which hat do you want to put on? My investor hat or my friend hat?” I said, “Tell me whatever perspective you want to tell me.” He goes, “All right, as an investor, this is a terrible deal.” I go absolutely. He goes, “As a friend, I think you have to do it.” I go, “So which hat are you telling me with?” He goes both. You’re not giving me any advice here.

John Warrillow:

Okay. Let me get a word in edgewise here. When you’re talking about as an investor it was a terrible deal, you’ve gotten including your cousin and all these people to buy into around valuing the company at $75 million. Then you’ve got this Nexstar offer for $33 million, less than half the price. Lou’s like as an investor, this is terrible. You could do better than this. As a friend- [crosstalk 00:48:44]

Jay Gould:

He’s like, “Jay, we’ve been through this together. We got sued and went out of business. I previously sold the company for $100 million. I think you got to do this for your kids.” At that time, I had two kids. I have four now. He’s like, “You got to do this for your family, for your kids, for you. But as an investor, I’m just going to tell you it’s a prudent thing. I can’t support it as your investor, but I support it as your friend.” I go so which hat are we going with? I’m so confused because he had limited partners in his fund. He’s like this was a big deal for his fund. It was a small fund, a $15 million fund. He’s like I had the bylaws and my funders, I can’t put more than 10% in any given investment.

You were by far the largest investment. I gave you the 10%. He’s like I would’ve given you 20% if I could because he loves me as a friend, and all this, and believes in me. I was pushing this as he’s leaning in on me. He’s like this is my big investment for the fund. I was hoping you’d go for hundreds of millions or more. I can’t say no. He’s like no, I get it. I think you should do it. I go you’re telling me I should do it. He goes as a friend. I said you’re screwing me up. Could you cut it out, dude? He goes overall, I think you should do it.

It was interesting though, because they were all going to support it and sign the docs. If they didn’t, I had the right to do it anyway because of that. I think even the ones that otherwise maybe have exercised their right to say no, realize that’s not going to go anywhere anyway so why even do it? So it’s really important to have that control for that reason.

John Warrillow:

Super voting shares that we talked about earlier.

Jay Gould:

And by the way, just want to tell you something. I looked really smart about three months later. We sold the company for $33 million. We had companies that were public companies that were in our space. Tremor was one of them ScanScout, I believe, and a couple others. A couple months later, John, they all crashed. The ad tech market crashed, not the whole market. This is early 2015. We sold January 30th, 2015. A few months later, if you look at the charts of these guys, they all crashed. Everyone’s like wow, you timed that perfectly. I was talking to these guys in 2014, so I didn’t time anything but I hear you.

It looks like I’m smart. Then Trump comes into office, decides I’m going to do tax cuts. Everything starts booming in the stock market. It’s like now you look like an idiot. Then 2020 hits, and everything crashes. Everyone’s like whoa, man, thank God you don’t own that business no more. I’m like I know. Then they print more money than we could ever imagine. I think I could have taken that thing public as a spec today for probably a billion dollars plus. With the growth trajectory of our revenues, I think we would’ve been a billion dollar company today. So you’re smart, you’re dumb, you’re smart. Timing is everything in terms of value.

John Warrillow:

Yeah. It sure is. I got so many questions. I got to start though, way back with the decision to go all in video advertising. I just want to understand this prior to Nexstar acquiring, I understand how Nexstar had salespeople selling the doctor’s offices and the car dealerships. I understand that. But before the Nexstar acquisition and you decided to focus on video, help me understand what that would look like. I would look at an ad on CNN, let’s just say.

Jay Gould:

Or YouTube.

John Warrillow:

Or YouTube. Prior to watching the content I want to watch, I’m served up an ad.

Jay Gould:

Correct.

John Warrillow:

And you are the one who would’ve made that possible. Is that right?

Jay Gould:

Yep.

John Warrillow:

Okay. So you would’ve gone to a brand and said, “I’ve got relationships with all of these website operators, these eyeballs.”

Jay Gould:

That’s right.

John Warrillow:

“And I can get you placed and insert your brand in front of women 25 to 54.” That was basically the business model.

Jay Gould:

Yes. Initially, it was very manual in that sense. But as we started to grow and we started to build technology, that automated that process a little bit. So we built something that was called a demand side platform, DSP. And we were the first, I think maybe the only, DSP for local video, so we were a DSP for local. So over the years, had built a lot of relationships in advertising, ad networks, friends that were running competitive businesses. They’re frenemies in some cases. In other cases, they weren’t competitors at all. They just ran an advertising business. Particularly when we focused on online video, they may not have even had that inventory. But over time, everybody starts to get into online video.

It’s just a massively fast growing secular growth trend within the sector. What we built was this technology that through APIs and otherwise, we connected to all the different exchanges and we could see all of their inventory instantaneously when an ad is loading. So we would, on our side, we also bought data. Let me just take a step back. Friend of mine, Andy Monfried, ran a company called Low to Me, which is one of the first data targeting companies. Blue Kai was another one, Live Ramp, Hoffman. These guys had these data companies. So they would go to websites and say, “Can we drop a tag on your website, collect audience data?” And that would be based off of browser settings, behaviors, et cetera, psychographic and demographic behaviors and stuff like that.

They would capture all this data, and then they would go to us and they say we can pair up this ad view right now, so you loaded a page right now. They can pair up that ad view as it’s loading and see that particular cookie of that view user matches up with all these data sets. And then we can bid based on the user, the data sets, geography, et cetera. Geography was very critical to us, but it’s not just the location obviously, it’s everything else. It’s who is the person? What are the behaviors? Are they in the market to buy a car, et cetera? How do I know? Because they were on toyota.com, or Edmunds, or whatever it is in the last 24 hours.

You have 72 hours maybe to see in that purchasing decision. And every product has a different time horizon for that type of stuff. These are just statistical things you have to know, and you can set it up in your system for that reasoning. The point was, we built this technology now that there’s an evolving ecosystem of these ad networks. One more point, let we just rewind the tape. 2007, there was 50 advertising networks. When I sold the company, John, there was 2,500 plus advertising networks. It was getting massively saturated. Margins were compressing a little bit. I can see the writing on the wall that this is going to be very difficult to compete in the future.

Again, back to the DSD, you have to keep reinventing yourself, pivot, adapt, evolve. And if you don’t, whether that’s the narrative, the story, or the technology, you will be left behind in technology if you don’t. Everything continually evolves. I started to see that we have to be really competitive on the tech over time to keep differentiating ourselves. We have to keep being five, 10 X, better than everybody else at what we’re doing. And we were already massively scaled by the time we sold it and not revenue, but in inventory capabilities. We were seeing 20,000 ad views per millisecond on our platform. We had hundreds and hundreds of servers.

John Warrillow:

Okay. So this is my ignorance coming through. But if I’m YouTube, doesn’t Proctor and Gamble call up YouTube and say, “I’d like to run an ad for Huggies, Pampers or whatever and can you put it in front of 100 million eyeballs and I’ll write you a check for whatever?” Doesn’t Proctor and Gamble call you up YouTube directly and just buy that advertising?

Jay Gould:

So they have a self-served platform and the agency of record for P and G can go into their platform and they can just place their ads through Google AdWords. We had an advisor to our company. His name was Gokul Rajaram, they call him the godfather of AdSense. He developed that entire system. So he worked with me and helped me just advising and stuff over the years. Great guy. He’s ow I think at Square. He was at Facebook after Google. So I understood the way he talked about it was Google sells advertising in buckets. He said think of it as buckets, keywords, as we would think of it as.

It’s intent based advertising, at least on google.com. You type in something, and then they show you ads based on what you’ve said. In this case, it’s not the same way. It’s based off of your behavior and so is YouTube. So some of the users, they’re cross pollinating the user that was on Google. They understand, they’ve marked that user. And then when I go on YouTube, if they’re logged into Gmail, they can see them here or there. When they log into the different platforms, they can see them cross platforming in a different sense, so they have a great targeting capabilities. But they don’t have 100% percent sell through rate, believe it or not.

They have massive amounts of inventory on YouTube and they can’t sell it all out. They’re working with folks like us and other companies like ours to try to fill in what they call the unsold inventory. Otherwise, they show remnant ads, which are ads that it convert to not a brand ad, but they’ll convert, if it converts, I should say. They’ll keep showing these cost per acquisition advertisements that if they convert, they make money. Those are lower CPMs because they have low conversions. They’re the best in the industry, obviously to figure out how to do the conversions.

John Warrillow:

Okay. Yashi was working with some of this unsold inventory. You would be working with brands. They would use your self-serve interface that would allow them to pick the markets they wanted to reach. And then you would serve up their ad to those audiences.

Jay Gould:

Well, we didn’t quite get there on the self-serve. I was talking about Google on the self-serve. We had that capability, but it was a lot of hand holding, even when we sold the company and the buyers were well aware of it. Look, we got to get the there, but we’re not quite there.

John Warrillow:

You’re still talking to human beings and saying, “What audience do you want to reach?”

Jay Gould:

Signing conversion orders.

John Warrillow:

Got it, got it. So there’s a manual component to it with the potential to be fully scalable.

Jay Gould:

Correct. The difference was between this and other product lines that we had, is that if I closed you, let’s say you were an agency. You give us a tag, you can then continually pump stuff through your tag, and we’ll find placement for you within our system. So we have to land you, we have to schmooze you, whatever it is to get that deal.

Once we get that deal and we got the tags coming from you, it’s as simple as them just like sending an email or logging into our system and doing it. But to come to us organically and just sign up and start placing ads, we never really got there for that. That was the holy grail, but there’s very, very few companies, Facebook, Google, a couple of them actually have that going on.

John Warrillow:

So what’s confusing to me is how you became so profitable. I can’t remember, maybe I was deducing it from something you said.

Jay Gould:

50% margins gross profit.

John Warrillow:

Gross profit margins. And so what was your revenue when you went to sell?

Jay Gould:

The year before we sold, it was over $25 million. The year after it was over $36 million.

John Warrillow:

Okay. You’re $25 million in revenue and you’re putting more than $5 million to the bottom line.

Jay Gould:

Yep.

John Warrillow:

That sounds crazy to me. That sounds incredibly profitable.

Jay Gould:

To Naval’s point, why do you even want to sell it? Just keep running it because we were growing it. I think the year before we sold, it was like at 75%. We were decelerating a little bit and that was because we had some transitional things. The year we transitioned, I remember Nexstar looking like your revenues went from 2.9 to 3.5.

What happened? I said, “This was the pivotal moment.” I read your book. I was like it was tough, but look at the growth after that. It accelerated and it’s hard to decelerate a little bit, just purely because of competition in the market, but it was decelerating a little bit.

John Warrillow:

Got it, got it, got it. Congratulations. I think that’s awesome. That’s incredible. It does beg the question though, so I guess you had there were really three roads to go down. You had this $75 million valuation. You could have continued to raise money, presumably it wasn’t hard to raise money. You were very profitable. All these investors, including fancy brand name people, throwing checks at you all over the place. That could have been a road you could have just continued to remain independent, raising more money and blah, blah, blah. Presumably, the other road you could have stayed on was to just keep cashing the checks you mentioned.

Jay Gould:

I have a friend that did that in ad tech.

John Warrillow:

Yeah. The quarters of the dry cleaner, you could have just keep… $5 million bucks is a lot of money every year.

Jay Gould:

By now, it would’ve been a lot more, a lot more.

John Warrillow:

But you could have just remained- [crosstalk 01:00:34]

Jay Gould:

Probably for $10, $20 million roughly these days it would’ve been.

John Warrillow:

80% shareholder of this company and just basically declaring dividends every day, or every quarter, whatever. And then you have this option in the middle, which for a lot of people listening would be like, “Man, this dude left a lot of money on the table.”

Jay Gould:

Correct.

John Warrillow:

Although $33 million is a massive amount of money on any possible measure.

Jay Gould:

Hundreds of millions.

John Warrillow:

There are people going like, “Why on earth did this guy leave so much money?”

Jay Gould:

I can tell you the reason for that. I got tired. I called mercy. I ran a business from 2004 to 2007. This is a tough thing to swallow, but I never cried about it. I never was woe is me. There was no self-pity here and I’m not looking for it now either. But I built the business, was first to market in the business. There’s an old saying, pioneers have arrows in their back. I got a lot of arrows behind my back here. YouTube basically copied what we did. They started off as a dating thing. Then I think they pivoted, seeing what I was doing, what Vimeo was doing.

But I was the first one to do viral video in bed. You take the code, you copy and paste it. Now, the video is embedded onto a third party website. First website to do that. Shortly thereafter, within months, other people started to do it. I couldn’t understand why nobody was doing it before I did that. And I thought, “Well, there’s got to be a reason. Maybe it’s not profitable.” So I modeled this out in spreadsheets and figured it out. And I was like, “That is profitable. I don’t understand why isn’t MTV or Viacom?” I got the opportunity to sit down with Wendy McGrath, the CEO of MTV, and all these people, Sumner Redstone.

We’ve had these discussions because they were looking to buy Bolt before Universal sued us. We were sitting there. Go ahead.

John Warrillow:

Keep going.

Jay Gould:

I was going to say, so I sat in a room with the top executives at these large media companies, when the company’s worth hundreds of millions of dollars, and I owned a third of that business with Aaron and Lou. We all had a third each. So I’m sitting there, knowing on paper, I’m worth over $100 million dollars. Then you get a lawsuit in the mail, poof, it’s gone. And I said, “I don’t want that to happen again. I have the offer on the table right now.”

This is what Lou was saying. “You have to do it. I wish you didn’t have to do it, but you have to do it because if I say, don’t do it. And then next week you get a lawsuit in the mail, you’re not fundable and no one’s buying it until you can clear that out. If you can’t, you’re dead.” He’s like, “I don’t want that to happen to you so you got to do this. It’s a shame because I wish you would’ve had a higher offer right now, if we had more bidders, but you got to take it, and you can’t go back to the people.” It’s a tough situation.

It’s like we went down on a rabbit hole with these guys and I decided to sign the LOI when I got the position of where we got to. Could I have just continued to negotiate? They could have pulled their offer and who knows what. It could just unravel. And I was like I got to, I got to go with this, and I felt good. It was something I felt. I’ve always gone with my instincts too. When I sold to Bolt, I had offers to sell that video sharing site for millions of dollars in cash.

I said, no, I’m going to take the opportunity to go and partner up with Lou and Aaron. Aaron created Bolt.com, which was the first social network in 1996 so basically invented social networking. Lou started dotTV with bill Gross. I come from like no pedigree, John. I went to Rowan University, it’s a college no one’s ever heard of. In fact, I transferred to two other different colleges prior to that. Wasn’t a great student in elementary school, in high school, B, C student. I always felt like I wasn’t that smart.

What I realized is I have a different type of intelligence. As I got older, I started to understand. I’m a pattern recognition person. I’m a high EQ, lower IQ, like a lot of founder friends that I have that are very similar. When you meet founders, you’re lik we totally connect. When you meet other people, you’re like I don’t connect so much. Dinner parties with my wife and stuff, I’m like these guys don’t talk my language, doctors and whatever. They were the smart kids in school. I just felt like I had to take this offer because if it poof, disappears, I was totally fine with the first couple companies not working out.

I never looked at it like I lost something because I never had it, even though it was on paper, but this was there. The offer’s there, take the offer. Don’t take the offer, you got to live with the ramifications. At that point, I was getting a little older. I think when we sold it, I was 35, 36 years old, something like that. The first time this happened, was years before. I was in my late twenties. I was like, “I got a whole life ahead of me.” Now, I’m 42 and I got no energy to go through this stuff again. It’s like I don’t know, I don’t think I could have recreated it.

Timing is everything in the world in life and everything was just happening. I was like I got to take this offer right now. I know it’s not the best offer. I could look in the rear view mirror and say, “Oh, woulda, coulda shoulda. I could have been a public company today with $100 million in top line plus. Probably a billion dollar company in today’s valuations with interest rates where they’re at,” but I didn’t know any of that in 2015. I was a young guy didn’t understand economics, and finance, and the money printer’s going to keep going for the rest of time.

They’re just going to keep spending and keeping interest rates low, which just pumps valuations up. If you’re listening to this podcast right now and you’re running a company, I could just tell you that your valuations are only going to go up over time because the dollar’s going down in value over time. That’s what’s really happening. The prices aren’t going up, the dollar’s going down. I didn’t understand any of this stuff back then. I don’t have regret. I do have the understanding and knowledge that I probably would had a higher value today, but you can’t regret it. You got to live with what you did. It is what it is.

John Warrillow:

So many questions. When you had, you said on paper, $100 million dollar personal net worth because of your share in the video sharing website, what was the name of the video sharing website?

Jay Gould:

Bolt.com. B-O-L-T.com.

John Warrillow:

Got it. So you’re a shareholder, along with Lou and others in Bolt.com, and on paper, it’s $100 million. And then in this case, Nexstar comes along years later, lots of water under the bridge, writes an offer of $33 million to buy your company. And you mentioned that this time it’s different. I’d be just curious to know what was different, because it sounds like both of them were on paper. So what was it about the Nexstar offer that made it so much more real to you?

Jay Gould:

We didn’t have an offer to sell Bolt.com, like a definitive offer, as they call it. We had a lot of discussions. We were meeting with we went to CNET out in California and actually it might’ve been Seattle. But we met real networks, CBS, Viacom, MTV within. Sumner and them said, “Go meet with Wendy McGrath.” That’s the music video thing. Then we started off with music video codes previously. It was called Music Video Codes before Bolt.

John Warrillow:

It wasn’t a definitive offer on paper with the number there?

Jay Gould:

What it is, it’s extrapolation, John. We looked at what is our number of unique visitors? What are the number of unique visitors for YouTube? They sold for this divided by that. That’s the exit per user. Multiply that times the user, holy cow. We’re worth a lot of money on paper. We had a bank, Savion was our banker.

This guy, John Lambros, and a very noted banker in the industry. People know who he is. He’s done a lot of great deals. And when you looked at talking to the to our advisors, we were worth a lot of money on paper. But you aren’t worth anything, as my dad says, until someone pays you. It’s only worth what someone’s willing to pay.

John Warrillow:

I’ve heard it actually from an acquirer saying you should write, even if you don’t think the owner is going to bite on the offer, write it down. There’s something quite powerful about seeing your life’s work. Somehow, someone else validating it to the point where they’re willing to actually write a check with six, seven, eight, nine zeros on it. It can be quite intoxicating.

Jay Gould:

For me, when it was legitimate and it was sitting in front of me, and there was multiple offers who come back and forth with these guys. They were hot but let me tell you the story how we sold it. We hire a bank and he had an event that he was hosting in New York City. And he’s like, “I want you to come to this event. I want you to meet with some investors.” And there was like a stage, and the fireside chats, and all this stuff. So I go the morning and he’s like, “All right, Jay, come here. I got you on multiple meetings today with all these investors.”

I’m like, “That’s awesome. They want to meet with me?” He goes, “Absolutely.” I was like cool. So me and my Chief Operating Officer, this guy, Scott Hoffman, we go to the first meeting. We sit down, it’s like nine o’clock in the morning. We sit in this little, tiny room in this hotel place. There’s a little area, and there’s three investors, and they’re on their cell phone. They’re like this [inaudible 01:08:55] go ahead. They’re not even paying attention and we’re doing this presentation. I leave the room and I said to Scott, “I’m done. I’m not doing that again.”

He goes, “No, those guys were just assholes. Just go to the next one, just go to the next one.” It was 45 minutes later, same thing. No one’s really paying attention. After two of those, I said, “I’m out, I’m leaving right now.” I’m aggressive. I was like, “I’m leaving.” He’s like, “No, think about it. Let’s not leave. Let’s not leave.” So he goes, “Let’s go into the conference area where they had the stage and everybody there.” There’re hundreds of people in there. He goes, “In the back there’s coffee. I’m just going to get a coffee.” I don’t drink coffee. I don’t need it, I’m too high strung. So I go back with him.

John Warrillow:

You don’t need coffee, by the way.

Jay Gould:

I go back to him. He’s sitting there drinking his coffee. Then the banker comes running over. He goes, “What are you doing? You have a meeting in two minutes.” I go, “I’m not doing the meeting.” What do you mean you’re not doing the meeting? These are my investors. I go, “They’re your investors? I’m understanding what’s going on here.” I go, “What I’m seeing is that we come and go as the client, but we’re really not the client. They’re the client and I don’t like that.” And he’s like, “What are you talking about? I set these up.” I go, “I get it. These are your relationships.

You keep pitching them stuff all the time, but I’m not here to undress myself for everybody. If you really pitched them, they should set up a meeting and have a Zoom call with me.” Back then it wasn’t Zoom, it was Skype. “Just have a call with me and we could have an in-person meeting. If it makes sense, if we’re clicking.” I go, “I’m not feeling this. This doesn’t feel authentic. They’re looking at their phone the whole time, John.” No, don’t worry about it. I go, “No, not doing it, buddy. I’m out.” His name was John, too. I said, “I’m done. We’re leaving. We’re going back down to Jersey.” We’re in New York City. “I’m out of here.”

And he is like oh my God. And Scott and him is like “Jay, calm down.” They’re talking and I’m watching this guy on the stage. I’m staring at this guy on the stage. They’re doing their banter and I’m listening to this. And then he tells me, “Hold on.” And they’re talking. AOL’s up there, Yahoo was up there, Nexstar Broadcasting was up there. There was a moderator, who was moderating the discussion. It was a fireside chat. I go, “Who’s this guy on the stage?” He goes, “Who? Oh, that’s AOL. You said you didn’t want to talk to them,” because I told you old media. I said, “No. John, the guy from Nexstar, I’m looking it up my phone. This is like a TV broadcasting company. This is what I told you about.”

He goes, “No, they don’t do these types of acquisitions.” I go, “He’s literally talking about acquisitions right now. That is the name of this discussion, mergers and acquisitions for media companies.” I get it, but he’s only been there for six months. He has no clout, blah, blah, blah. I was like, “What do you mean he has no clout?” Politically, within any organization. I’m going to buy this company. I go, “John, I’m leaving but before I leave, I’d like to talk to him or I’m going to find a new banker.” Okay. I’ll set it up. He runs over there. The guys come off the stage, everybody comes there and he’s like, “Come here, come here.” Then he waves me over.

Come here, we go downstairs. I said, “Let’s go downstairs, if you don’t mind to the bar on the first floor.” And he is like, It’s a little early for a drink.” I said, “I just want to talk to you for a few minutes. Go downstairs. I heard you on the stage. You guys are trying to get into digital.” Now, he’s the Chief Revenue Officer. His name is Tom O’Brien of Nexstar Broadcasting. He was also the president of Digital. So he’s president of Digital, Chief Revenue Officer. So it’s his pet project for this TV media company. He did like 20 something years at NBC. If you’ve heard of Chuck Scarborough, the guy on TV every night, he’s the one that did his contracts every so many years. He told me all these stories.

So I’m sitting down with him, I’m having a glass of water. He’s having an iced tea. I said, “What’s your revenue in digital?” And he’s like, “What’s that?” I go, “I’m just curious how much revenue you guys have.” I can’t imagine it’s much. I didn’t say that part. But he says, “I can’t tell you that.” I said, “You’re a public company. It’s got to be in one of the 10Ks. I can go find it. I’m sure you talk about on earnings call, just tell me.” And he’s like, “That’s a good point,” and he gives me a number. I think it was like $50 million or something like that. $25, $30, I don’t remember but where we did $25 million the year before.

And so then I looked over at Scott and I said, “Okay, so what’s your number?” And he’s like, “What’s my number? Does this guy want to know how much I’m worth?” I go, “No. I’m saying, what’s your target number?” He’s like what are you talking about? I go, “Your revenue?” I can’t imagine I’m the CEO of a small company, I don’t care if it was big, I’m bringing you in, I’m tasking you with a number. What’s your goal that the CEO of Nexstar says this is the goal? I’m sure you have bonuses and everything tied to this shit so what’s your goal and what’s the time horizon? He looks at Scott. He goes, “I don’t need to answer that.”

I go, “No, you don’t. Would you like to know what my number is?” And he’s like what’s your target? I go, “Not my target. I think I can get you closer to your goal. You got to have a number.” he goes, “It’s $100 million,” just like that. Just quickly says it’s $100 million. I said, :”Interesting. We did $25 million last year. We’ll do probably close to 40 this year. I’d get you to your number real quick, don’t you think?” This guy was hook, line and sinker, John. He was like, “Okay, let me get to my car. We’ll talk.” From that point on, this guy just got in. He’s the Chief Revenue Officer. His goal is to drive revenue, and he’s in charge of their digital initiative.

What are they doing in digital? It was like at that point I knew I had them hooked, but it was all about value at that point. They’re not like an internet company. They’re not paying high multiples. It had to be accretive for them as well. They had to be able to buy for less than what their multiple that they traded on the market was. And I think they traded, at that time, for 12 times, maybe 11, 12 times their earnings. So the negotiation was always well, we’re an internet company. They’re selling for 30, 40 times profit. They’re like, “Well, we don’t pay that because our shareholders won’t value it that way. Your revenue’s like 1% of our overall revenue. It doesn’t get baked in that way.”

Lots and lots of discussions that we had. Ultimately, it was just very serendipitous. I was literally about to fire my banker and try to find a new banker. Then I see this guy, and then it just evolves. And we were having discussions with private equity firms and some VCs, as well as some potential buyers. But that was the one that made the most sense. That was, when I read your book, that was my target buyer. He was literally right there. It was served up on a freaking, silver platter. I was like there he is. I solve his problems and he solves my problems. Let’s try to make this work.

John Warrillow:

And your problem at the time was what exactly?

Jay Gould:

Liquidity. It was just I want that exit that I missed. I just wanted out. I was doing this from 2002 to 2014, at that point. That’s a long time. I had smaller exits, nothing to write home about. Made money running the business, became a millionaire running it, but I wasn’t able to retire for the rest of my life. It wasn’t like I had money I would die with, if that makes sense.

John Warrillow:

The business was thirsty for cash presumably. You weren’t dividing $5 million out personally a year?

Jay Gould:

We did.

John Warrillow:

You did divide $5 million?

Jay Gould:

Yep.

John Warrillow:

Again, why not just keep?

Jay Gould:

Because I saw things stop. When you see that you have this, I was very cognizant of the ability that the party could end tomorrow. It may not end tomorrow, but you get a notice in the mail and it’s effectively over.

John Warrillow:

Because you’ve seen it once before.

Jay Gould:

I didn’t want to go through that. I didn’t want to go through that again. I also knew that the growth… When you’re running a company, it’s important to keep having a steady percentage of growth moving forward. You got to keep every year, because if you have erratic revenue that goes up and down, it doesn’t look sustainable to the buyer. It’s got to look like, not that your window dressing it, but you have to make the business have a steady growth, a predictable revenue.

Not just the product in the services that you provide to be predictable revenue, but also the actual numbers, the gross numbers on a quarterly and annual basis. And we were growing quarter over quarter, year, over year, every quarter, every year. Any disruption to that shows a fracture in the business to a potential buyer. So it’s like as you’re running that business, you’re like we don’t want to have that happen because anything could disrupt that. Anytime you try to say, “Well, it’s because of the economy, this and that,” it’s just words, man. It scares the buyer. It spooks them. You don’t want to spook the buyers.

John Warrillow:

You mentioned that you started this business with your wife, who was the number one sales rep and the former company. So obviously, really knowledgeable about this space, great salesperson. How did she influence your decision making, as it relates to this decision? You went to Lou and he said two hats investor versus a friend of yours. Tell me the conversation you were having with your wife at the time?

Jay Gould:

So when we were ready to sign the definitive agreement, I had the paperwork in front of me. She’s on the documents, Scott’s on the document, my investors got the documents, emailed then scanned them back and I didn’t sign the document. Everybody signed. I got all the investors, everybody to sign first. I was the last signature. And it was me, Larry, Maurice, Kate, we’re in my office. And it’s like I get emotional thinking about this. I’m staring at this document and I’m just I’m looking at it like here it is, this is it. I sign this document, we’re getting a wire transfer tomorrow. This is it. Scott walks over to me, puts his hand on my shoulder and he says, “If you don’t want to do it, don’t do it.”

And I looked over at him. I was like, “I want to do it.” He goes, “You seem like you have hesitation. Don’t do it if you don’t want to do it,” because it wasn’t meaningful to their lives. I owned the majority of the business. My wife leans in and whispers to me and she goes, “You know you have to do this, but it’s your call.” Not because she wants me to, she knows I want to do it. I sat there and I looked at that document probably a minute or two. I was like, “Holy shit, do I really want to do this?” To your point, I knew we were going to keep growing. I knew it. It’s just this exogenous event that you don’t know could happen that’s happened to me.

So when you’ve had that reality come true, I don’t want to be the cause of the reason why my kids will not have this type of an outcome. I was fundamentally able to change the life of my descendants for some period of time, possibly forever, and I didn’t want to be the cause of that not happening. Most people come from poverty. 99% of humanity has been poor. This is something that always came through my head. My family has always been poor. As far back as there’re any stories that I can know of, we’ve never had any money. We were just poor people like the rest of the world. Not only Americans, but the rest of the world. I have an ability to get escape velocity. I always use that term.

It’s funny you said that. This is escape velocity from a personal net worth perspective, but also for my kids, and my grandkids, and so on, depending on how we manage it. There’s an old saying usually your wealth disappears in two generations. I put a lot of precautions in that so it doesn’t happen, but it still can. I didn’t want to be the cause of it never happening for them and so it was here. I was going to fundamentally change their lives, my kids. Better education, healthcare, everything was there for us. If I say no to this, John, and something happens, I got to live with that.

I wasn’t the cause of the reason why it didn’t happen the first time. I could have been the cause of it this time. It wasn’t like I decided not to sell the company for $300 million with Lou and Aaron. We got sued before we had the definitive to sign so I don’t ever feel like we ever had it. In this case, I don’t know how you live with that. You’re going to have to, but it’s a tough thing to swallow. That’s a tough pill to swallow. I didn’t want to be responsible for that. I signed the document. A tear was in my eye as I did it because I knew next year, I’m just going to make seven or $8 million in the year.

This is crazy. What am I doing, to your point? Ultimately, I just can’t take that risk. It was a risk I wasn’t willing to take. It was an offer I really just knew I couldn’t refuse. It’s also why they offered it, I think. They just knew, based on my history and everything, this guy’s going to take the offer. My investors even said it. They’re like, “You got to do it, but I wish you wouldn’t, but you got to do it.”

John Warrillow:

How has it impacted your relationship with your wife since?

Jay Gould:

You mean because we sold the company or what do you mean?

John Warrillow:

Yeah.

Jay Gould:

I don’t know what you mean by that. It’s been great. We have a great life. I wouldn’t trade my life for anything. I love our lives. Our kids are healthy. We have four children now. She focuses on the kids all the time. I now do my podcast. I’m writing a book, I’m an angel investor. I don’t think I ever want to be operational in running a business again.

I don’t think I need to do that anymore. It’s not something I’m really interested in doing these days. I can’t say forever. Who knows? But where I’m at right now, my kids, in life going to soccer, and all these different things, they do karate. I love life right now. I’m otherwise healthy. This is a good spot to be in life. I think we’re both very, very happy with where we’re at.

John Warrillow:

Very well said. Did you shop the company in a traditional sense? It sounds like you hired an M&A banker. He took you to this conference where you met the Nexstar guy that was out on stage. I get that. But did you, did your M&A banker shop it in a traditional sense to other potential acquirers?

Jay Gould:

Yeah, he did. The problem is it’s the speed of which everybody gets to where they are. One moved really quick, Nexstar, and others were dragging along. This is a good question because you have to sit there and think to yourself, “Well, if I could just slow play Nexstar, maybe we can get these others to catch up.” But then you’re taking a risk. They could always just walk away. They were pushing because they knew they were moving faster than others and they wanted to get it done. And again, I think it has a lot to do with that guy, Tom O’Brien, knowing I got to get this done.

I have an opportunity to get this and he gets it at an accretive transaction for them because he knows my backstory. He knows that if I give him this real offer, this guy can’t say no. I think he knew that. He played it well. He got a great transaction for Nexstar, in terms of the price and the value at the time. It’s phenomenal for them. It was great for us too. It should have been better. We probably should have sold for over $100 million, had we had more offers on the table simultaneously, but I just couldn’t take that chance.

John Warrillow:

And just sharing your story from the beginning, I get it totally. I would do the same in your shoes 100 times over, especially given your history.

Jay Gould:

I bet you this, John. If I didn’t have the previous company get sued, I would’ve just kept going. There’s no question, I wouldn’t have had that experience, and understanding, and belief that it could go away. I think founders are irrationally, eternally optimistic by nature. We believe that we can accomplish amazing things that statistically you shouldn’t be able to do. But statistically, you shouldn’t be able to do them.

You have to keep that in mind. So when it’s there, it’s like being at the poker table or roulette. Do you really want to let it ride? How long do you want to let it ride? I didn’t want to keep letting it ride because I just was there and seen it before. It just seemed like it was dangerous at that point. I just kept thinking about my kids.

John Warrillow:

Yeah. And you’ve got four of them to feed.

Jay Gould:

Two at the time.

John Warrillow:

But now you got four.

Jay Gould:

We’re done. No more kids.

John Warrillow:

This was a fantastic conversation. I learned a ton personally. I’m really grateful for you sharing it. Where do people learn more about your podcast, the upcoming book? Are you a LinkedIn guy, or a Twitter guy? What’s the best way for people to reach out and connect with you?

Jay Gould:

Most platforms. It’s my name, J-A-Y G-O-U-L-D. That’d be like Twitter, I’m on Twitter. If you want to connect with me on LinkedIn, I’m over there too. I do have a podcast that I have on various, different podcast platforms for audio, but YouTube is a channel that I put most of my focus on. Just type in my name in quotes, Jay Gould. But then you’ll have to type in docents or something like that because I share a name with the famous railroad man, Jay Gould. Not the same family. If you type in just Jay Gould, you’ll find the name of the podcast.

John Warrillow:

So Docents is the name of the podcast?

Jay Gould:

Yeah. Docents, D-O-C-E-N-T-S. Docents are guides, volunteer guides at museums, and art galleries, and universities and stuff. I just view highly successful overachievers as a docent because they are a guide. They inspire and influence people through their actions. So I’ve redefined it in my own head. I call the guests on my show docents, which you’re coming on my show so you are one of my docents as well.

John Warrillow:

Well, I’m grateful for that.

Jay Gould:

I had one of the guys on my show that was as a kid, I went to the same high school as him. Al Liter, he was a professional baseball player.

John Warrillow:

Sure.

Jay Gould:

Three time World Series champion. That was one of the coolest interviews for me because as a little kid, I remember him coming back to the elementary school and getting an autograph from him. It was like this is so cool. He is only 10, 12 years older than me but as a kid, he’s like a giant.

John Warrillow:

Sure.

Jay Gould:

Actually, he is a giant. He’s a pretty big tall guy, but his son actually just after he did the interview, like two weeks later, he just got picked up as a number one draft pick in the MLB draft.

John Warrillow:

Yeah. He was a Vanderbilt Commodore, as I understand and one of the best pitchers, the best pitcher, maybe with Kumar Rocker in the graduating class. Amazing story. Cool.

Jay Gould:

Yeah, you can find me there. You can find me there. I do podcasts and then I’m an angel investor too.

John Warrillow:

Awesome. So Jay Gould on all the social platforms. Docents is the name of the podcast. Check it out on YouTube. Thanks for doing this. It was awesome.

Jay Gould:

Thanks, John, and I appreciate you. I think everybody, if you haven’t read his book, read the book. It definitely changed the direction of my company, because it refocused us on what mattered so that we can productize the business. We ultimately sold the business, I think, because of that. And also thinking about who the end solution buyer was. And frankly, if I never sold it to your point, John, I would’ve had a great sustainable business either way. I just didn’t want to take the risk.

John Warrillow:

It’s a great endorsement.

Jay Gould:

Thanks a lot.

John Warrillow:

I really appreciate it. Thanks, man.

Jay Gould:

Thank you.

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’ve 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 order the book. Just go to BuiltToSell.com/Selling. Built To Sell Radio is produced by Haley Parkhill. Our audio and video engineer is Denis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week. Just go to BuiltToSell.com.

Outro:

Thanks for listening to Built To Sell Radio with John Warrillow. For complete show notes with links to additional resources, visit BuiltToSell.com/Blog. John is the founder of The Value Builder System™. To find out how to improve the value of your business by 71%, visit ValueBuilderSystem.com. John is also the author of Built to Sell: Creating a Business That can Thrive Without You, and The Automatic Customer: Creating a Subscription Business in Any Industry. Connect with John at Facebook.com/BuiltToSell or on Twitter @JohnWarrillow, W-A-R-R-I-L-L-O-W. Thanks for listening.

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