A Product Market Fit Show | Startup Podcast for Founders
00:28:28 · Alex Back
[00:28:28] S0: The furniture industry, as I alluded to a number of times, is still catching up to the online wave and that's a huge part of what I'm addressing right now with my new company couch.com. We are in a position where these old school generational players were just becoming more comfortable with the online space and also saw it as an opportunity finally rather than a threat. That's on the manufacturer and retailer side. Unsurprisingly, our suitor, the one that was interested in us was a old school legacy furniture, retail, brick and mortar chain in the Midwest. They had about 30 stores, big stores. I'll name a few names of retailers that are similar just to give you. In different places in the southeast, Rooms To Go is a good one; on the west coast, Living Spaces; the northeast, Raymour & Flanigan, Bob's Discount Furniture. Big huge furniture stores like built in warehouse and huge showrooms, they're interested in moving into the online space. They were looking for opportunities. We were always, after a few years, fairly well known in the furniture space. It's a very big industry but very incestuous and everybody knows each other. We were one of the names that were getting thrown around. A few online businesses like ours had been acquired over the past few years. This was a model that other legacy furniture retail brands were looking to repeat. We got approached. I think for them they were interested in bringing in our e-commerce expertise and experience to their world and seeing if we could help catapult them into that space and also just investing in a growing business that had a lot of opportunity that they could probably use their operational infrastructure to help support. Both things ended up being very true. That's the reason we were able to grow the business so much post acquisition.
00:30:29 · Pablo Srugo, Alex Back
[00:30:29] S1: You started around 2010. When did you get acquired? What year was that? [00:30:31] S0: We started building the business in 2010. It went live in 2011, got acquired in 2018, so that conversation started in 2017. We were in business for about five or six years I guess. I mean, it felt like an eternity, but theoretically, I mean we grew pretty fast. My partner and I, we were making nice livings. Everything was going really well. Our business was growing. We had a bunch of employees and then this company came to us and asked us if we would be interested. [00:31:04] S1: Walk me through the emotions, especially the last few weeks before you actually get this deal closed because the reality starting a business and especially I think a bootstrap business where at some point you're paying yourself a decent salary, but you're always mining cash flow. Every now and then there's an entrepreneur who wants to build a business that they can run forever. I would say 99% it's about building a business and at some point selling it and then doing another. When you get here, I mean it's a huge event. What was that like? What did that feel like, those first weeks right before it and then when the thing actually happened and closed?
00:31:04 · Pablo Srugo, Alex Back
[00:31:04] S1: Walk me through the emotions, especially the last few weeks before you actually get this deal closed because the reality starting a business and especially I think a bootstrap business where at some point you're paying yourself a decent salary, but you're always mining cash flow. Every now and then there's an entrepreneur who wants to build a business that they can run forever. I would say 99% it's about building a business and at some point selling it and then doing another. When you get here, I mean it's a huge event. What was that like? What did that feel like, those first weeks right before it and then when the thing actually happened and closed? [00:31:39] S0: I've never worked so hard in my whole life during the diligence process to provide all of the things that they were looking for in the format that they were looking for them. We used a third party. I was doing big business things in my living room at night after my kids went to bed. I was educating myself at the same time about how to do them and how to put together financial statements in the way that they needed to see them and things like that. I'm super proud of the body of work that I did personally to just get us ready for that. At the same time, it was very rewarding because a lot of it was just asking and answering questions about what made our business successful.
00:31:39 · Alex Back, Pablo Srugo
[00:31:39] S0: I've never worked so hard in my whole life during the diligence process to provide all of the things that they were looking for in the format that they were looking for them. We used a third party. I was doing big business things in my living room at night after my kids went to bed. I was educating myself at the same time about how to do them and how to put together financial statements in the way that they needed to see them and things like that. I'm super proud of the body of work that I did personally to just get us ready for that. At the same time, it was very rewarding because a lot of it was just asking and answering questions about what made our business successful. [00:32:18] S1: What about the anticipation of it? Were you able to just cost and be like, well, if it happens, it happens, if not, whatever, we have our business or were you like, oh my God, let's freaking close this thing, I can't wait to close this thing?
00:32:18 · Pablo Srugo, Alex Back
[00:32:18] S1: What about the anticipation of it? Were you able to just cost and be like, well, if it happens, it happens, if not, whatever, we have our business or were you like, oh my God, let's freaking close this thing, I can't wait to close this thing? [00:32:31] S0: No, Option B, because we were – at a certain point, I think with anything you get excited. You start committing to it hardcore. We started really not counting our money or anything like that, but we were really focused on getting this done. Then we had a snag right at the end in the last few weeks that delayed us about a month which was interesting. It had to do with the difference in cash basis accounting and accrual basis accounting that we were on cash basis and they were on accrual. It materially affected how our payout and payment situation was going to work. We had to take a big one on the chin right before closing this deal. My partner who had a larger stake than I did, he was really thinking about shutting it down. I'm hopeful but also trying to manage my emotions and also trying to keep him calm and sane. I'm working all the angles at the same time. When it finally closed, like, yeah, man, what a wonderful feeling to have a climactic moment in one's life! It's like winning a game. You watch these sports games. Someone wins a Super Bowl, like, man, what must that feel like? I'm not saying this is akin to winning a Super Bowl, but it is like – [00:33:53] S1: The feeling is probably similar. Yeah.
00:33:53 · Pablo Srugo, Alex Back
[00:33:53] S1: The feeling is probably similar. Yeah. [00:33:55] S0: You close something, it's done and you can celebrate an actual achievement not just growth or something more nebulous. It's like, you didn't sell the business yesterday, today you did, and this is the day you can celebrate. Does that make sense? [00:34:10] S1: Boom, I love that. Yeah, makes perfect sense. Maybe that's a pretty good endpoint actually. Let me ask the two questions that we always close on. The first one is, I'm actually really curious how it fits in here. When did you feel like you had true product market fit?