The Wise Exit

Cashing Out Podcast | Episode 2 | Itai Ben-Gal | Sold to Strategic Partner

Todd: [00:00:00] Welcome to the cashing out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve today. We have a special guest and great friend Itai Ben-Gal.

Itai took his passion for home, audio and video and made it into a business. He raised angel funding, venture capital, and even took money from a strategic investor. Itai ultimately sold the business to that strategic investor. And he has some of the best advice that I've heard for our fellow founders.
We're gonna go through that M&Aprocess. I hope you enjoy my conversation with Itai. All right. So Itai thank you for being here. I am psyched that you are here. You are one of my best friends and you have built and sold a company. And I feel like I got to see some of that journey for you and was [00:01:00] so excited when this happened.

So for you to join the Cashing Out podcast is, awesome. Awesome. Thank you for, for doing this.
Itai: Thanks for having me.
Todd: So, do you remember the first time that we met? I don't know that I do. Okay. So, I remember it. And if you, if you remember, it is a little different, correct me. So I remember we're both at DVP Detroit venture partners, and we were going to some DVP event for founders that they were investing in and we were walking along and.

One, the venture capitalists, uh, Jake came up and said, Todd, I really want you to introduce you to Itai. And he said he started like listing off these accomplishments and some, a big award that you won. I don't know if it was like a CES award, like Best In show.

Itai: Yeah. We won, uh, control product of the year.

Todd: Yeah. At so. And, and I remember you kind of like had your head down as he's like, bragging about. I said, that's amazing. Congratulations. And you said something to the effect of, oh, like they, they gave away lots of awards and it wasn't really that big of a deal. And I was like, no, man, what we're doing is so hard, like own this thing that you just won.
That is amazing. I've always kind of gravitated to people that are not looking for the limelight, not, you know, always want their, you know, name in the paper and winning the accolades. And so I kind of knew that we were gonna be friends at that point. And then like moving on, I have to throw this one thing out.

Right. So, you know, you invite us out on your boat and we learn what the lake life is like in Michigan. And then you're showing us about like your cooking skills and your woodworking skills. And I think we're friends for like two months before my wife repeatedly says to me over the next couple of years, why can't you be more like, EATI like, that's the running joke in my house.
So as good as friends, we are, you know, you've set the bar far too high for me at home.
Itai: You're welcome. And I'm sorry

Todd: So. I think what we're really trying to do is educate our fellow founders right around the M&A process, which is traditionally very private. Right. You're signing non-disclosures you can't tell your employees, you can't tell family in some cases.
Right. And it's a super stressful event that lasts a long period of time in a lot of cases. Right. So you gotta be able to handle it. So I'd love to kind of get your perspective on, you know, your business, what you built, who was involved, and then at some point you decided to sell and get into that. So can you tell us about your company first?

Itai: Yeah, so the company we founded was iRule, it was founded in 2009, right around the beginning of when apps started to come out for the iPhone. And the idea was pretty straightforward. I enjoyed using my phone and I wanted to use it to control my audio video in the home. And it was right after the iTunes app came out, that you could control music that I realized it wasn't controlling the receiver.

So I couldn't change volume. So I actually snuck into CES and stayed on a, in Vegas, in

Todd: Vegas. So biggest, biggest, biggest

Itai: convention show on earth. And I was just a nerdy person who. Audio video. Yeah. Uh, managed to get tickets through somebody. I knew slept on a floor with, you know, in a hotel room with a couple buddies and, uh, just hung out for the week at the show and tried to learn more about it.
And actually there was a product that did exactly what I wanted and I tried it out and I wasn't smart enough to figure it out. And I went home with this itch of like, this seems really like a thing we should be able to do. So that following week I started, I approached, uh, what, who became my partner, Victor, and with the idea, and we met on a Thursday for lunch and we talked about it.
And then on Sunday we started the company. And from there we spent about year and a quarter building our MVP. At that point, it was just a hobby. So, you know, it's around 2009 and in 2010 and we launched our product and it was great people bought it. And we were pretty surprised. And you know, it was this kind of early days of selling apps and our app was complicated cuz you needed a whole bunch of electronics and other things and people were buying it and it was growing.
And after a couple of years, We decided that this was way more interesting and fun than our day jobs and in the bottom of the recession in 2011, end of 2011, we quit our jobs and started the business as a full-time gig.

Todd: All right. So IRule it was really a hobby for you, right? You had this audio video. Interest you're really for a long period of time. And then you find a way [00:06:00] to enter the market. You build a product, Victor joins you and things are going pretty well.
So what's the next move. Are, have you taken on investors? Do you have board members? Like what does that, yeah,

Itai: so at that point, you know, our goal was, I mean, our modest goal, because it was a hobby was I wanted to buy a piece of equipment to upgrade my theater and that piece of equipment around $2,500. So our goal was cover our bills.

And so the wives don't kill us. And we were 50/50 partners and I wanted to finish the year with $2,500 left over. So I could buy this equipment. I thought, you know, if you can have a hobby pay for itself. Yeah. I mean, how great is that? And we finished that year, um, with each of us being able to buy a car.

And that's actually, wasn't a great car, but it was a, it could be, it could be a nice car. And, and that's when my dad, who's a CFO by trade kind of pulled us aside and said, Hey, it's moving beyond a hobby. Hobbies don't generate this kind of money. But also you're now getting [00:07:00] customers who are relying on your product and selling it to others.

And those people are relying on you. And there's a responsibility. So you kind of have to decide if, if you're gonna keep this going or not. Yeah. And we decided that we were gonna make a go at it and, uh, I quit my job in January and then we raised an angel round and started just friends and family at that point, you know, they call it friends and family.
None of my friends at the time, uh, we're writing any checks and family, they were saying no way. Family wrote a track. That was very helpful. Good. And yeah, we had some local angels, um, who stepped up and were, were really, you know, believed in us or believed in the space and were willing to make bets. And we raised, uh, I think it was a half million dollar raise and we moved downtown to the Compuware building and started working.

And I mean, we were in an office, the size of a shoe closet. [00:08:00] and it was the greatest thing on earth. And we did that for a while. Grew the company, grew the business and started to, you know, just do the normal business thing. Um, how many people were you at that point? You know, we were probably half a dozen people.

Okay. And then, um, a year later we, we raised money with, um, Detroit venture partners. They were our lead as a VC. We did a couple of rounds. and where there a fantastic partner, we moved into one of the, uh, Dan Gilbert buildings and that worked really well. And then the big shift for us came when we moved from the residential space, which is the space that I, you know, that was my hobby home theaters.

Yeah. Home residential market, right? Yep. Yeah. And into the commercial business and that was really brought on by some of our customers who were in that space. Were asking us to help solve problems that we just hadn't considered and it happened that our [00:09:00] solution could be very scalable to solve much bigger problems than you would normally encounter in a home.
And we were way too in, we were way too cheap, um, for that market. So we actually had to redo our sales and how we were charging and, uh, the whole business model for that space. But that's really when the company accelerated and took off, because that was really where we could differentiate from, from the rest.

And we took an investment from strategic investors and then finally, In the end of 2016, we ended up selling a company to our strategic investor.
Todd: So, at this point on your cap table, right, you've got you, Victor, your co-founder friends,family angels, some family you've got Detroit venture partners in as a venture capital firm and a couple of rounds.

And now a strategic investor. So I wanna hear a little more about the strategic investor and what made you make the decision totake their money, right? Because that's [00:10:00] a decision that has significant implications.

Itai: So, we actually met that company at a trade show. It was, uh, 4:00 PM at a trade show. So it was kind of the last walking through last day.

Okay. Last day of the show and met this company and we started chatting and then we, they became a, actually a customer of ours. So they were buying our product, relabeling it, white, labeling it and using it. And then from there, uh, we saw an opportunity when we were looking to. um, you know, when you're trying to raise money with VCs, the challenges and we're in a, we were in a fairly unique space where it was kind of a B2B to B or B2B to C space.
And I would spend out of an hour meeting, I'd spend probably 40 minutes. Educating them on the space and the go to market and the dealers and distributors and, and all of the moving pieces in our industry. And, and every industry has that. And I realized the part that I was most excited about, which is our differentiators and the value we bring to our customers was like this last 10 [00:11:00] minutes.

And usually most of the VCs were like, Hey, that's great. We're not in that market. We don't care about this. We like direct to consumer. We like this. And when I spoke to. A company that was in our space and had been for 30 years, it was just effortless. Right? I mean, you're talking to people who knew the space.

I remember the first presentation I made, I got interrupted within about a minute and a half. And one of the founders just said, are you about to tell us why this is a good space? And I'm thinking, yeah, that's the next, uh, four slide and he said, we agree. Tell us why your product and your team is special.

And so that was a really fantastic opportunity. Um, and we saw eye to eye on the needs in the market, and that really fit with, um, with what they were trying to do. Um, but it did pose some challenges because, you know, a 30 year old company that was privately owned, uh, doesn't necessarily have the same exit outlook as say a VC or angels.

There were discussions about, [00:12:00] you know, what that would look like if that was the fit, how we would grow, how we would do things. And there was some, you know, some normal sort of. Different groups pulling in different directions. Should we take, you know, strategic versus staying the course.

Todd: So you were actually talking amongst kind of the current board, current investors.
Yep. If we do this with a strategic, what are their expectations? How does it. Limit us, right. Potentially to creating liquidity events for all shareholders. Right? Exactly. So you kind of went in eyes wide open, but you had something that, where it was just perfect fit. It wasn't dumb money at that point. Right.

Itai: Right. And, you know, and we never felt like, you know, we always had good feedback and, and good help from our VCs. Not knowing the space and not knowing the relationships. Yeah. It was always, you know, harder and longer to get through those discussions. Right. And with somebody who actually knows more than us and could open more doors.

And the other thing is the strategic also became [00:13:00] our number one selling partner. So it, you know, our real focus was, well, if we wanna accelerate growth, You know, dozens and dozens of offices and hundreds of employees who do nothing but this. And they're already talking to the people we would build and take money for to reach those same people in

Todd: the agreements that you had with that eventual buyer of the company, right.
At this point, did you create a way, a window for you to sell to somebody else? Or were they gonna have a blocking right? Or a write of first refusal?

Itai: They didn't necessarily have any blocking rights. They were very sensitive about some very specific companies, you know, they're direct competitors and we knew what that would look like.
Yeah. And we knew that that could potentially limit, you know, our horizon. On the other hand, we felt like that was a risk worth taking because. You know, it's a big industry and if three or four players are off the field, that doesn't mean it closes all your doors.

Todd: We see that [00:14:00] quite a bit. When offers are being made, there is a real understanding of who is involved in that cap table.

And we've had acquires not even take a look at businesses when they see a competitor on the cap table. So it sounds like you went into this eyes wide open, right. Which is. What I'm trying to convey to founders is, you know, it's not, nothing's a bad decision, as long as you really understand the consequences of the decision you're making and yeah.

Going forward. So, okay. So you built this business and now this eventual acquire becomes interested. How did that happen? Who reaches out to who.
Itai: Oh, you know, so when, when they invested in the company, we were looking to build kind of what was gonna be our next generation platform. We had, we felt like we had taken our existing product that was designed for [00:15:00] homes into the commercial space, as far as we could go.
And now it was time to. Solve the problems in a more dedicated way and that really aligned with them. And it was funny. I remember we closed the round and now we've got, I think two and a half million in the bank and everybody's feeling good. And I remember asking my new board member, right.
Let's set up, uh, some meetings and discuss, you know, development roadmap. What do you guys want? He goes, we don't know. We trust you just whatever you think we need. Go build that and it was the most surreal moment, right. Where you realize you have this money and you have these people's trust you don't necessarily have a great definition from them.

You just go figure it out. Yeah. Um, and that was both exciting and scary. We ended up, uh, building a product and eventually I think they realized, um, we had a, because they were not just a financial investor, but because they were also a res. We had, um, sales agreements on, you know, when they sell hardware or when they sell [00:16:00] their products hours and how the money gets shifted.
And eventually the math made sense for them to acquire the company. Yeah. Based on some of those, um, previous deals. It's interesting.

Todd: I think that's probably more common than a lot of people think when I sold my first business, it was a strategic partnership. They're paying royalties on a technology. They realize they are paying too much and they should just own, the company have more control.
And that drove actually our first acquisition was that's what pushed it. So that's really was the impetus to them saying, Hey, let's sit down at the table and figure this out.

Itai: And that's one of the ways when we were thinking about it and talking to our, um, financial investors of how we thought an exit could come about is, you know, we're kind of modeling the sales and saying.

If they do X, Y, and Z, like we think, and like, we hope. The natural fit is why share this money with other people they'll want to own the whole pie because this is how much money they would make otherwise. [00:17:00]

Todd: And so you create a real differentiation in the market for them, right?

Itai: Exactly. Yeah. Yeah. They were a hardware company. We were software. Um, they were veteran company. We were kind of young using, um, technologies that they hadn't been exposed. so that was a good,

Todd: all right. So you decide you're gonna go down this path. Like, what was the decision? Was it, was it money? Was it time? Was it external factors that were influencing the decision to sell?

Itai: I think in our case, it was almost the next logical step because they were already an investor. They were already a reseller. They were already our biggest reseller partner. So I think in that regard, it was. It felt like a very natural next step. Sure. And those pieces aligned well, uh, obviously the financial investors were eager to, you know, have an exit because they did not just wanna hang around and see,

You know, when they [00:18:00] own 1% of the cap table, they don't necessarily care that, you know, sales are going up or things are improving in the roadmap. Um, so there was some of that to provide. And I think any entrepreneur, when they take money from an investor, there is that feeling and that knowledge that you have that yeah.

I have to return their money. Yeah. You're on a clock, right? Yeah. And even if they're not beating you up, That's what you want to do. Yep. And so we, you know, we obviously were eager to be able to put money back in the hands of the investors.

Todd: okay. Yeah. I think that makes sense. I've been in that position as well, where it's like, You've taken money from investors.

They all have expectations. They have limited partners, right. That have invested in a fund and that fund has a lifetime. And as you go, and maybe you're not like your growth rate is not screaming through the roof, they're saying, Hey, well, let's, let's look at liquidity events.
Itai: I think we were rather [00:19:00] fortunate.

VCs or our angels, nobody was really screaming for, Hey, we, you. We need to do something. It was, how do we help the business? How do we grow the business? Um, so we didn't necessarily have the external pressures.. Okay. But it felt like when an opportunity started to present itself,

Todd: it was really a perfect fit, right?
Yeah. Okay. So, okay. So who, who makes the first offer, who makes the call and says

Itai: So our offer evolved and sort of meandered, it started with, um, with the strategic buying. Everybody on the cap table.

Todd: So it's, it's not your offer, it's their offer to you, right? Correct. So they're making an offer to you. Okay.

Yeah. And that's, and they were straight to you straight to Itai Ben-gal.

Itai: Yeah. I managed almost a hundred percent of the, um, investor relations, um, in the company. And so the original idea was for them to buy out the, the other financial investors.. [00:20:00] Early on in their initial investment, they actually bought out some of the angels.
And so that worked really well for some, so some had already seen some liquidity Ah-huh okay. And, um, and they wanted to get to a certain level in a cap table.

Todd: So when you got liquidity for those angels, right. They may have different expectations that everybody else and they raised their hand. Yeah, sure.

I'll take a cash out. You got that approved by the other shareholders that say no, no, no. We wanna stay in we'll we're gonna we're in the long game here. Right?

Itai: Okay. And, and actually. We had, certain rights for preferred owners versus common, um, shareholders mm-hmm and some of those were, you know, you needed to be the majority of the preferred to have certain things.

Yep. And it was interesting where our financial investors, uh, were not really overly concerned with those minutia, but as a strategic, they really wanted to. The majority of the preferred pool. Sure. [00:21:00] So the challenge was we didn't have enough other preferred investors. Mm-hmm for them to buy. And I came up with this ingenious idea.

We called it the, the Midas touch, where if they buy a common share from. Somebody else who's willing to share. They can have kind of a preferred light. Okay. So you have the voting rights of a preferred without the, uh, pref of a preferred yeah. Liquidation, preference, liquidation, and that, and everybody signed off on that because our.

You know, our VCs didn't care, they couldn't be bothered with that. They didn't, they weren't worried about.
Todd: And ultimately that sounds like they're looking for control as opposed to ROI return on investment.

Itai: Correct. So, so those, those investors, you know, got some good money out. Um, some of 'em did well within a very short period of time.

Uh, so they were very happy and, and it was interesting because we had another interesting offer that was actually. Um, from industry veterans that were looking to invest in us, invest in a competitor of ours and [00:22:00] do a roll up and it didn't work out. And we went with the, with the strategic. and that's where we ended up.

All right. So you made the decision, you get to an offer. You're negotiating. Do you have any like dissenting parties on the cap table or is it everybody saying, Hey, this is the right decision. This is where we wanna land. Everybody's calculating their post-tax outcome, right? Yeah. And they're happy. So how does it go?

Itai: It was, it was a little bit challenging. So the original offer was based on the angels and VCs exit. and, you know, some had comments, some had preferred, so they were doing their math and, and it was okay, except that you still have, you know, people who think their shares should be worth more than the other people's shares

And so there was a little bit of the, and, and you're sort of in the middle trying to make sure everybody's happy and content and just feeling like it's a good opportunity for them.

Todd: So it's such an important point. [00:24:00] Because you are playing psychologists, trying to run a business politics, right. Of all the people that have some stake.
And you're trying to drive to a goal, a goal line. Right. And you've got all these people that you kind of have to bring with you and keep relatively happy and what people can say. Oh, okay. Yeah, I could do that. Yeah. Can you run a business at the same time? Growing that business. Right? Cause they're gonna take advantage.

The buyer's gonna say, oh no, you didn't hit your numbers. What's happening. There's more risk in the business. So, you know, like you were obviously managing this all on your own,

Itai: Holding it together. I wouldn't say managing it. It was probably a very one of the most stressful times in my life. I think what you're in process, whether that process goes to the end or not, it's basically a full-time job between lawyers, investors, partners.
Acquirers. Uh, I don't think people recognize how much time a CEO and anybody in [00:25:00] that exec team just burn up. And unfortunately it's on top of everything else that you already do. Right. So customers don't know, employees don't know. Right. And that's one of the hardest things we're in our company was in a very small space.

Yeah. We had no offices desks were right next to each other. So even taking a phone. And talking about these things yeah. Was challenging. Aand you know, and you're trying to juggle all of that. So it was a very stressful time. but trying to keep everybody sort of content, seeing things through the right lens.

Todd: It's an interesting decision, right? Sometimes you're kind of forced to not let employees know, particularly if you have more than say 10 people, right? Yep. Cause you can't have a mass Exodus of key people or really anybody, you know, I've sold businesses that where my business only had five people and I felt like I could bring people under the veil and you knew who was gonna be acquired, [00:26:00] uh, or have a job on the other side.

And those who were not, I remember telling one guy, look, look, they, they have your role. I want you to spend the next three months while we're doing this, starting another business, go in that room and figure something out. Right. And so that was, that was actually very rewarding to be able to do, but that privacy component to it, once you get to a size of 10 people, boy, you gotta keep tight lips.
Right. Or you can be in trouble, customers, employees, like you said. All right. So how did the negotiation yeah, really go.

Itai: So I don't remember exactly what the shift was, but at some. I think the founders, we realize that, well, if everybody else is exiting and if everybody else is sort of moving on, at least financially.
That, you know, what does that look like for us? Yeah. And kind of, okay. Are we really gonna sit here for the next 30 years? Yeah. Or do we have, you know, do we want also to participate? So the deal ended up getting restructured and, and it was a challenging thing [00:27:00] to sell to the acquirer. Hey, if you guys exit, why would you stay on?

And it was as much. Talented people cuz we're a small company. Yep. As it was about retaining, you know, intellectual property and customer lists. So it took a while to now convince them and change the mechanics of the deal to include the founders and there were mechanisms in there, you know, earn outs and things like that, to make sure that.

Everybody was incentivized and aligned to those things. Yeah. And so that took a while to restructure. And at that point, in a way, it sort of created even more complications because now you've got common shareholders, founders preferred and, and the acquirer and employees all vying for some level of attention and trying to figure out, you know, who gets what and finding a balance.

Todd: One of the things that you brought up that is really interesting to me is that, you know, you can have a venture investor, an angel investor who’s on a timeline, right? They [00:28:00] want to see a return in call it five to seven years, maybe in certain industries that pushes out a little longer. But when you go to sell to essentially a family owned business, that’s been in business for 30 years, that has no pressure or plan.

To create liquidity for shareholders. what is truly the value of that stock, right? So you gotta know what you're getting into you can't cross your fingers and hope. Yeah. They're gonna sell in the next three years and I'm gonna get my payday. Obviously you're aware of that. And as you saw all the other shareholders kind of taking their piece, you and Victor said, all right, look, the founder's gotta figure out their piece too.

Exactly. That's pretty, that's pretty interesting that it was kind of done in those stages. You didn't really ink in stages. Right. But the whole M&A process evolved right. Significantly. Yep. Yeah. Okay. So you get the deal that you're all excited about, right? You sign the deal and then your team goes and becomes employees of another company.

Itai: And we were really, and we were [00:29:00] really proud of the fact that we managed to keep everyone with a job. Some people got transferred to the parent company, because they were gonna lead with sales. So, you know, the sales people could now just have a, you know, a new boss. But they were doing the same things for the same customers.
So we were very proud of the fact that we were able to maintain the same team and grow it and make those investments. Team was a big part of it. You know, people, when they, when you work for a small startup and you're sitting desk by desk, you really want to, you know, those people are family and you want to take as good a care as of them as possible. So that was a big part of it.

Todd: You know, I think your deal had a lot of structure to it. And that earn out piece and you had to hit certain numbers. Did you feel like you had control of all the levers to hit your own numbers? Cause that's what we see. A lot of times that we have to structure deals for founders where those levers are in their hands and [00:30:00] not the parent company, or you have to create the incentive.

Everybody wins when something happens. So how did that?
Itai: We actually had a very interesting problem to solve during the deal flow, the deal process, where we were working on a new software platform and it had yet to be launched and it had no revenue because of that. Yeah. And we had an idea and you can imagine a company that is really good at making hardware and selling that for 30 years.

The buyer isn't really good at understanding what software will be, it's not even what they have. It's what they will have. And so there was a significant component that their side asked for, which was upon the successful release of the product on time, on budget and the way it was written.
It was actually our lawyers who said, there's no way we can sign up for this, but it. I think we had a list of like 200 features that [00:31:00] we were building and they all had to be tested and approved and those features had to work. And, and if, and it was an all or nothing, right. If you had 199. Yeah. And it was a significant amount of money that was tied to that because they felt like, Hey, without all of this, our product is incomplete.

And I remember lawyers said, it's impossible. Anybody can have a bug. You can't hold this much money for. That type of a thing. And it was actually, uh, Victor who said, yeah, no problem. We can do it. And everybody just sort of looked at him and he said, you know, if you want six to nine months ahead of time to lock in the features, it's not the best way to build software.
Yeah. But I can make those 200 features yeah. Work well, and I can make sure that they will all be perfect. Yeah. And it was a risk. Yeah. Yeah. He felt like he could control those variables. all I could feel is, well, if he says, I mean, [00:32:00] I, all my eggs are in that basket. If he feels like he can do it.

Yeah. Then I have to support my partner.

Todd: I heard you say approval though. And that's what kind of makes me uncomfortable. Right. That the company doesn't change their mind of where that goal post is and says, no, this isn't quite approved. We need it to do these other things.

Itai: Yeah. We put a lot of thought into that list.
It was a very long Excel file of features. Yeah. And how you test them and how you can prove, prove that, Hey, when I press this button, it's supposed to light up that it did what it's supposed to do. Got it. Got it. Um, but it was a little bit scary and I think without having the right sort of partner and the right sort of.

I don't think I've ever been more proud of his entrepreneurial spirit than at that moment when he said, yeah, we can, I can make, I remember him saying something to the effect of, I can make 200 of any features work. Yeah. If there's enough of a goal. And so, yeah. That's he took that on and we delivered at the trade show.

We had our last review. We had two [00:33:00] features left over. Yeah. And we did a reboot of the server. And I remember I could see. The team showing up to the trade show. And this is a couple days before the show starts. Yeah. And we reboot the server with the new update and I see it working and they walk in and I'm just acting like it's been there all along and it isn't just, you know, final version.

And it was fantastic. I mean, we did a demo, they saw it, we all hugged and high fived. Then they sent an email to. Leadership ownership that yep. And they wired a check.

Todd: It’s all there and they wire that check.

Itai: Exactly. Yeah. so it was, uh, it was a great feeling. That's awesome.

Todd: That's awesome. Yeah. Earnouts man though, they are, are scary.
And I think it's rare that people can get to that, you know, final number unless it's structured in a really, really smart way. So, um, congrats that you guys were be able to do that, and yet you could trust Victor and Victor could pull it off. So I trust Victor. That could be our slogan moving forward.

Itai: We trust Victor.

Todd: Exactly. All [00:34:00] right. So I guess this is an amazing story, right? You're off now doing your next thing. Yep. Right. Tell us about Nerdy Bunny.

Itai: Um, we accidentally started another company. After, after we sold a company, we stayed on Victor stayed on longer. Um, and I joined as the CTO of a much larger company and in the audio video space, and it was a fantastic experience.
And in there we incubated a new idea and for digital signage for retail, uh, actually our largest customer at iRoll was a retailer. and we knew that space. We liked that space and we found an opportunity to serve that space. We're doing kind of a smarter, better way to do interactive retail experiences.

We woke up one day and realized, all right, we need to do this. And we pack your bags again, respect our banks again, and with the blessing of our [00:35:00] owners and colleagues and ventured off and started this new business.

Todd: Good for you. And how’s it gone so far?

Itai: So far. So good. Yeah, nothing has gone according to plan. So we started this at the end of 2019. Yeah. And everything as you know is exactly as we predicted it would be since then. Yeah. Um, so we endured, COVID and shutdown and you can only imagine, you know, I remember in March being, you know, sitting at home, everybody was sent home and.
Shop is closed globally. Yeah. And you're sitting here thinking, so we made a retail tech company and retail is closed and nobody, and you know, these are the early days, there was not even a discussion about what the future looks like. Yeah. And it was fascinating cuz we were able to, we were very fortunate where our customer.

Was continuing and talking to us. So even though the store was closed, they were still working with us and [00:36:00] we were building our product and we were pretty heads down and continued to build and came out of it and started winning new work and growing the business.
Todd: So that’s great. That’s awesome. I’m very excited to have that grow and then you call us and let me figure out how to get you the exit you deserve.

I'd like to finish with, you know, if you have one piece of advice, right. For our fellow founders who have not been through that M&A process before, and it really is a black box and everyone's a little bit different, but if there's a piece of advice that you could give anything around M&A yeah.
On what, what would you share?

Itai: So I think a couple thoughts, one, it's a very lonely process. And what I mean by that is, you know, you have your spouse and I did not do a good job of. Managing my spouse. She suffered a lot and I was under a tremendous amount of stress and I should have shared more. And I think I was trying to do the, the thing where I was not giving her all [00:37:00] of the gory details to spear her from it.

But as a result, She was too much into dark. Yeah. So part of that is better managing of your family life mm-hmm and making sure that you have good partners, they've stuck with you to this point, making sure that you do that. Um, the second part is it's a trust game and it's probably multiple trust games simultaneously, right?

Investors, acquirers employees, family, yourself, and what you want and partners and. If you think about playing one chess game, which is time consuming and difficult and challenging. Imagine setting up five different boards for, to five different constituents. And I think being prepared for that and understanding that everybody's a little bit different and your cap table, or how they're involved with your company and taking the time and understanding what they need.
I struggled and I spent a lot of time. To try to structure a deal that was fair to everyone. And I was very [00:38:00] proud of the fact that we were able to bring, you know, positive outcome to everybody, even though we didn't necessarily have a, a very simple cap table.
Todd: That’s great. I think your first point gets home really for me because when you start a company, I tell entrepreneurs, make sure, you know, who's on your side, who is on your bench and it better be family because it is gonna be really hard.

And you're gonna need somebody to not say, why are you doing this? But keep going. And so you have brought that advice essentially to the exit. And I absolutely know exactly what you're talking. Because you have six months of hell. It is really hard to sell a business and all the things that you're trying to balance while you are keeping your business afloat, trying to keep it growing, making so many people happy.

I absolutely understand what you're saying of like, why would you wanna bring that? Pain home right to your partner. Let's spare the gory details, as you say. So your [00:39:00] advice would be bring them into that process a little bit sooner, even though, you know, they're not gonna fully understand all the intricacies of the deal of your business.
Right. But make them. Support you, or is it for their benefit? Like

Itai: Like it's both it's for their benefit. It's for your benefit. It's, you know, anybody, that's an entrepreneur to your point, right? It's a big leap. Um, and, and you have a supporting team around you, family, friends, you better, you better. You're better.
Yeah. It's hard. It's hard as it is. but getting them involved early and understanding the stresses. To, you know, they're asking because they care because they want to know they can see how you're reacting and how it's affecting you. Mm-hmm and shutting 'em out. Does nothing to help anybody at any point.

Todd: All right. I think that's an amazing, amazing point. I feel like we'll have more and more stories where there'll be a lot of consistency and that might be one of like really one gold nugget [00:40:00] to take away for everybody. So Itai thank you. This is, uh, my pleasure, pleasure, pleasure. We will be seeing each other very, very shortly.

So, awesome. Thanks for supporting me too. And uh, when Nerdy Bunny goes to market, I'm gonna be there for you.

Itai: You'll be my first call.

Todd: All right, buddy. Thank you.

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