A Product Market Fit Show | Startup Podcast for Founders
00:36:18 · Pablo Srugo
[00:36:18] S0: What did that feel like? First of all, just negotiating the price, getting to something super interesting, $30 million all cash for a company that wasn't fully bootstrapped but you still owned a serious amount – it's not like you own 5%. Then getting that across the line and getting the wire coming in, walk me through all that. I mean, that just must be such a – stressful but then, ultimately, magical moment.
00:36:41 · Nazim Ahmed
[00:36:41] S1: Oh man, Pablo, we're talking at that time 17 years, and then, during the entire time, we sold over $100 million worth of art over the course of all those years, right? We built something great, but it was a long haul. It was a long haul. You can never sell something on the way down. The only time you're going to get an offer for anything is it – it's when things are flying up into the right. When I was on my deathbed after PopKey, I actually tried to – I started looking for acquirers when growth was flat, and I was getting one to $2 million offers for the whole effing business. I'm sitting there like, wow, after all those years. Then I just cover the debt, and then I got another million to distribute. This is brutal. When you take that off the table and you start cleaning up the thing that you have and then we started turning the business around, by 2021, it was flying, high margin, super profitable, all this innovation coming out, new products, growth is going up direction. Then that's the time where you either got to raise money and keep going the next level, or you have options, optionality. I remember speaking to the CEO of our manufacturing company, Circle Graphics, and we just used to jam every few months. I told him, “Hey, we have this innovation team internally. We came up with some really interesting technology, and I think I can have some really interesting products using this tech. I'm thinking of maybe doubling down on that part of the business and creating some new purely digital products.” Then he said, “Well, you could just focus on that and sell CanvasPop.” I didn't even know that was – it wasn't even part of the conversation. As soon as he said that, I was like, huh, interesting. It's like, well, let's explore that. It was very natural and organic, and by that time, we were friendly, right? Then we did a mutual NDA. Then we started sharing some financials. One part is they knew what the volume was or growth volume on their end, but they didn't know what our financials were because we could be blowing all the money on marketing and being very unprofitable. When they looked at the financials at first glance, they were like, okay, these are looking very, very good because we focused on innovation. It wasn't a race to the bottom. We are highly profitable.
00:39:11 · Nazim Ahmed, Pablo Srugo
They had all the metrics of all these other companies out there, so they knew that they found a diamond the way we were building products. Then it went from there, and they put in some initial numbers together. Then they went through that first term sheet, but then you got to go through due diligence. That due diligence was we tried to get it done in six weeks, but it ended up taking two months. It was actually a really positive experience. At that point, everything was so clean and so perfect that we blew through the process. Now, that last call, when all the lawyers are on the call and then they all approve the acquisition, it's just really interesting process, and it was during COVID. I never shook hands with Andrew. I never went down, and he said, “This is a – one of the unique times.” I'm doing this all through Zoom, and then he had a few words to say. Then I had a few words to say, and at that moment, you hang up. Then the money all gets wired to everyone. [00:40:14] S0: Incredible.
00:40:14 · Pablo Srugo, Nazim Ahmed
[00:40:14] S0: Incredible. [00:40:14] S1: When I hung up – and I owned 35% of the company at that point, right? Seventeen years, everything, I hung up, and I felt like I was on the battlefield. Was it a billion-dollar exit? No. Was it a 100 X for my investors? No, but it was a four X for all my investors within three and a half years. It created a ton of trust with us. I finally got some cash off the table. When the money came out, funny thing is everybody got their money in their account within hours, and my check was the only one – my wire was the only one that got stuck. It ended up going into some ether, and I knew what it was. Not to get into the details, but it was my name is Nazim. I mean, I won't say anything, but it was across border, very large eight-figure check into a personal account that never had that much money before. It disappeared, and no one could find it for 10 days. Obviously, there was some heavy due diligence happening like who is he? What’s this all about? Anyway, to make a long story short, it finally showed up, and then I just thanked my wife for dealing with me for all those year and the line – and signing on the line of credit and getting me through all those moments and at the same time, I raised $3 million for a new startup from all just the investors because I built that trust, and then I was off. I took three days off and I was off [unclear] because I looked at it as okay, the job's not done. I went on to build a really big company, but I looked at it as the next milestone. Man, it was a great feeling.
00:41:30 · Pablo Srugo, Nazim Ahmed
[00:41:30] S0: How much time from that first conversation where you opened this idea of selling until Wire lands in your account? [00:41:30] S1: I think the whole process took about two and a half months because once a conversation happened, very quickly, within a couple of weeks, we got to an initial term sheet. Then it went through two months of due diligence. Of course, like I mentioned, it was three years of relationship-building, then really getting comfortable with us as a brand and so on. So it always starts much, much earlier. [00:41:30] S0: Did you manage to keep yourself grounded during those, let's say, three months, or were you counting dollars? It's hard not to. You got this big, life-changing amount of dollars coming to your bank account. I remember when I -- I've told the story many times -- almost got acquired. I was much younger than you were at the time, so probably much dumber. But combine stuff in my head but wow, blah, blah, blah. What was that like?
00:41:30 · Nazim Ahmed, Pablo Srugo
[00:41:30] S1: I think during at that moment, I think it happened to me at the right age at that point. I'm 45 years old. I've got two kids at that point where were 9 and 11. I was still sobered up by that point that it was a very different focus. It was get this over the line, do good by my investors, do good by my employees. Okay, what's next? What am I building next? So it was a little bit of a different thing than if i had done it in my 20s, which I probably wouldn't have had the maturity to get it there. Then as soon as the money came in, it was really paying off mortgages and then talking to wealth advisors and doing all the nerdy stuff but had a little bit of fun. I won't get into it, but I had a little fun for the first few months with family. I got some major, fun purchases. My brain was like okay, what can I build now that I don't have a noose around my neck of mortgages and always on the edge? I could take some more risk and swing bigger. That's what the freedom was. That's the best feeling on earth. Now I'm a year and a half into the new startup and crazy first year. That will be the next show, but we're starting to see product market fit now, so it's exciting times again. Just went right back into the fire. Okay, what can I build now? [00:41:30] S0: Okay, let's stop it there. I'll ask the last two questions that we always end on. Looking back now at DNA11 or CanvasPop, when was the first time you felt like you had true product market fit?