The Wise Exit

Lloyed Lobo - Episode 54 | CASHING OUT M&A PODCAST

00:00:00:03 - 00:00:12:19
Lloyed Lobo
Entrepreneurship is not about just making money. The entrepreneurial spirit is about how do I take an obscure idea through execution and impact while dealing with extreme risk and uncertainty?

00:00:12:22 - 00:00:34:18
Todd Sullivan
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, my guest is a Kuwaiti refugee and former engineer turned serial entrepreneur Lloyed Lobo.

00:00:35:03 - 00:01:07:20
Todd Sullivan
Lloyed co-founded and built Boast.AI a company helping businesses access R&D, tax credits and innovation incentives to 10 million of RR. He also co-founded Traction, a nonprofit that brings together more than 120,000 entrepreneurs and innovators to share lessons on scaling startups. Lloyed sold a majority stake in Boast.AI to a growth capital firm, which not only allowed him and his co-founder to create the personal liquidity they both needed for the next stages of their lives, but they were also able to maintain a substantial portion of equity in the business.

00:01:08:01 - 00:01:36:01
Todd Sullivan
It's to potentially benefit even more from a future exit. Lloyed is full of poignant, entrepreneurial and personal anecdotes to succeed in business and in M&A. In this episode, Lloyed shares his views on how outsourcing the financial role to professionals helps when it's time to sell the business, how bootstrapping allowed him to sell on his timetable, and why building community is a key differentiator and value driver in any business and even more when it's time to sell.

00:01:36:12 - 00:01:39:03
Todd Sullivan
I hope you enjoyed my conversation with Lloyed Lobo.

00:01:43:14 - 00:02:07:12
Todd Sullivan
Lloyed, thank you so much for joining me today. I've been really excited to talk to you. I know you have a couple of really exciting companies that you are running right now. One, you took in some growth equity to create an exit for yourself and your partner. I want to learn a lot about that, but I just I love your background as an engineer, a kind of growth hacker marketing guy into entrepreneurship.

00:02:07:17 - 00:02:23:09
Todd Sullivan
I know you have a lot to share on the types of capital raising that occur and the ways to actually create liquidity. I thought there was so much here in your background to share that we had Mark Cuban booked for this spot, but when I got you, I immediately bumped him. So thank you for being here.

00:02:23:19 - 00:02:47:21
Lloyed Lobo
You're too kind, man. I hope hopefully someday I'll live up to Mark Cuban's stature. And, you know, my my really good friend Melissa Kwan had a great time on the show and she spoke very highly of you. And rather than asking for for an intro. You know, I saved the favors for when I really need it. I just set you up and it works like it always works when you hit people up.

00:02:48:12 - 00:03:07:00
Todd Sullivan
I'll thank you. Melissa was awesome. We had her on a couple weeks ago. We are huge fans. The guts it took to to keep her startups going to the point of finally finding real success. She is really inspirational. I think our listeners definitely learned a ton from her episode, so if you haven't listened to that, really look up.

00:03:07:01 - 00:03:19:12
Todd Sullivan
Melissa Kwan - she's fantastic. Well, thank you for being here. Let's start at the beginning, right? You came out basically of school and you were an engineer to start and career started from there. Why don't you take us take us from the beginning?

00:03:19:21 - 00:03:45:17
Lloyed Lobo
Definitely. So I graduated engineering first. I finagled myself into engineering as a refugee of the Gulf War. I never into school, didn't finish high school, but like, bunked all my high school exams so I don't have a high school diploma. I started applying to university when we got to Canada and one school said, Hey, why don't you come in and test for, you know, give us the tests, There's no SAT’s in Canada.

00:03:45:17 - 00:04:02:21
Lloyed Lobo
So I wrote the test and like, where are you transcripts? I'm like, There's political unrest in Kuwait, so I'm waiting for them. They said, Why don't you start the semester and send it over? Because your tests were really good and they forgot to follow up man, and I graduated engineering. So that's like luck. You know, luck is always on the other side of rolling the dice.

00:04:03:06 - 00:04:26:00
Lloyed Lobo
The thing is, more people don't roll the dice more often enough. And if you keep rolling and rolling, maybe you'll get a six once in a while. But so I graduate engineering and you know, I always had this love to take risk to try something that, you know, is not the typical not the status quo. And so I didn't want to do a desk job like I didn't want to code.

00:04:26:00 - 00:04:44:00
Lloyed Lobo
It was not my jam all through college. And I think that love came from being a refugee of the Gulf War. So I think I was like eight or nine years old when the war hit. I went down the building with my dad and I see all these concerned faces. And unlike 2023 where everyone belabor is on the problem and it perpetuates and bad news just carries on and festers.

00:04:44:12 - 00:05:09:07
Lloyed Lobo
Back then there was no phone, there was no internet, and this country had been struck by a war and security had lapsed. But as soon as we looked around the building, everyone started coming together with solutions like Hey, I’ll guarded the building from 12 to 6 and somebody like 6 to 9, 6 to 12 all guarded. Somebody like, I'll organize food supplies and somebody else is like, if you have displaced family members, I got space at home or I'll organize in different shelters.

00:05:09:15 - 00:05:30:05
Lloyed Lobo
And every building became a sub community and the word of mouth carried and carried and carried, and it became one of the largest grassroots movements that evacuated the people to safety, communicated building, to building, to building the word of mouth that got to embassies, that got to countries and took us from Kuwait to Jordan to Baghdad, to Baghdad, to Jordan, refugee camps and whatnot.

00:05:30:16 - 00:05:57:20
Lloyed Lobo
That experience actually taught me two things the power of bringing people together to create big impact and the entrepreneurial spirit. Because entrepreneurship is not about just making money. The entrepreneurial spirit is about how do I take an obscure idea through execution and impact while dealing with extreme risk and uncertainty? There's no bigger risk and uncertainty than evacuating people in a war struck country.

00:05:57:23 - 00:06:21:11
Lloyed Lobo
And the funny thing is, a mission so, so big. The purpose felt so big. And every little person like I was a little kid, man. But the little work that I did, the people around me, made me feel like I was driving that big mission. And that's what great leaders do, right? They cascade purpose where even the smallest, the lowest common denominator feels like they're driving the mission.

00:06:21:11 - 00:06:42:02
Lloyed Lobo
It's like it's like President Kennedy was walking the halls of NASA at 12 or at midnight or something, and he sees a janitor sweeping the floors and he asks, What are you doing at this hour? And he says, The janitor says, Sir, I'm putting a man on the moon. And that's how I felt as a little kid, like I am, like alongside everyone guarding the building or moving things, moving supplies.

00:06:42:02 - 00:07:01:19
Lloyed Lobo
I'm like, I am evacuating the people to safety. That's that's what I felt like a little Rambo, right? And so that entrepreneurial spirit drove me. So I graduated university with engineering, and now I don't want to get a job in engineering. I ask somebody, Hey, if I wanted to be an entrepreneur someday, what's the best skill I could learn?

00:07:02:14 - 00:07:33:05
Lloyed Lobo
Family person at? Back then, people wouldn't use the term entrepreneur or startup, right? It was just like businessman, businesswoman, businessperson. And so I asked like, Hey, if I want to be a businessperson, what would I do? And they said, Sales. I get a job in sales. Sales is everything. Sales fixes everything from convincing your spouse that you're not going to bring money, to convincing employees to work harder, to convincing customers to investors.

00:07:34:06 - 00:07:59:05
Lloyed Lobo
It's all communication and selling. And so I said to myself, Well, if communication is such a big part of being a businessperson, then what would force me, right? More than selling to do this in and out? Like, you know, these days we talk to people who say, Hey, man, I'm really bad at writing, but they never write. If you're really bad at something and never do it, you'll always be bad at that, right?

00:07:59:11 - 00:08:15:07
Lloyed Lobo
So I'm like, if I want to be a good communicator and and sales is a big part of an entrepreneur’s journey, then I better get a sales job, right? I know it's going to suck and it's going to be hard. And I'm an awkward engineer. I'm not the best public speaker. It's going to be very hard, but I'm going to do it.

00:08:15:16 - 00:08:40:03
Lloyed Lobo
So I start applying for account executive jobs, sales jobs. I'm like Xerox, too. I like I think I interviewed at Xerox. I interviewed at some of the biggest companies and small companies. I wouldn't get a job because people just couldn't figure out why a person who graduated software engineering is applying for this job back then. And so then I thought my way and beg my way to convince a start up as a small company.

00:08:40:03 - 00:09:15:05
Lloyed Lobo
Back then, nobody would use the word startup. It was like this telecom company to give me a job in cold calling. And I never forget, man, I, I practiced four hours for my first cold called session. I finally get to the connect with the decision maker and I hang up and everyone and I hang up. But you know, what happened was, if you want to become a better communicator or better at anything, put yourself in an environment that forces you to do that something over and over again because systems eat motivation for breakfast, right?

00:09:15:11 - 00:09:36:18
Lloyed Lobo
Many people are not self-motivated. But if you're in that environment that requires you to do it to survive, then you're going to be forced to do it. So I'm like, I hung up once, but if I need to get paid, I'm mean, I have to keep doing this. I kept doing it and doing it and doing it. And it got better and it got better and I got really good at it.

00:09:37:09 - 00:10:05:00
Lloyed Lobo
And honestly, there is no other job that forces you to polish your messaging, pivot on the fly negotiate, model the tone of the person you're talking to so that experience was formative for me as an entrepreneur. What's funny, though, is my parents are from India. They were born India, raised in India before they went to Kuwait. And, you know, there is a thing in Indian cultures is you got to be a doctor or an engineer or a lawyer, one of those things.

00:10:05:00 - 00:10:37:04
Lloyed Lobo
Right? And so when I graduated software engineering and now I'm making $30K dailing for dollars, they've lost it. They're like, Dude, our friend’s kids are at Microsoft and you're making 30 K a year cold calling. Like we can't even tell them what to do. Fast forward today. Everything I have, I think that skill was a key, key driver because as you think about it, communications is the rails of everything we do.

00:10:37:06 - 00:10:43:02
Lloyed Lobo
Without communication, you can't connect. And if you can't connect with people, you'll always have an empty room.

00:10:44:17 - 00:11:07:22
Todd Sullivan
Well, thank you for sharing that. I do think that sometimes people look down on that first sales job and it's an incredible asset to an entrepreneur. And I would think you having that engineering background and then that ability to communicate and convince through a lot of reps at sales was really training you for entrepreneurship, right? You got to be able to sell whether it's that first customer or sell your company in the end, right?

00:11:07:22 - 00:11:19:13
Todd Sullivan
You got to be able to present something that really connects with somebody else. So I can understand how that was, you know, incredibly valuable to you. All right. So, so you got the skill set under you. What's the next step?

00:11:20:04 - 00:11:38:14
Lloyed Lobo
So I think the next step from there, what happened was so I was dating this girl is now my wife. Since we were teenagers and she was actually going to med school in the States, I had to move to the States. So I started applying like this for this first job in my engineering school was in Canada. So I start applying the jobs.

00:11:38:14 - 00:12:01:16
Lloyed Lobo
I'm like, I graduated, you know, luck would have it. I got, you know, the only school that would take me was the one I went to in Canada. So now I graduated, got this first job simultaneously applying to jobs in the U.S. She was in New Jersey in medical school. I got a job as a sales rep at a tech startup in New Jersey, now a small tech company.

00:12:01:17 - 00:12:35:01
Lloyed Lobo
Right. And I was excited. I'm like, Oh, this is moving up. And it looked like an enterprise tech company basically sold a supply chain software to large enterprise companies. And so I end up getting that job, bump $50K plus commissions go there, I land there, and then I realize like it didn't have a repeatable, scalable process. And so my job involved talking to customers, figuring out what to build, then wireframe and, and writing specs for the developers of what to build.

00:12:35:09 - 00:13:17:01
Lloyed Lobo
And then I guess what I also needed to figure out the marketing side and the product marketing materials. And I'm like, Oh my God, this is crazy. But you know what? Working alongside the C-suite and the founders is also an indispensable experience. If you want to be a founder someday. And I tell people, like, if you don't have the risk appetite to start a company, there's no substitute for doing like, you can read 100 books, but the only way you'll learn is do, but say you don't have the risk appetite to do and you want to get that risk appetite. Going to sales, pick up the phone, dial for dollars, then go work for a founder.

00:13:18:07 - 00:13:35:15
Lloyed Lobo
And so this was fortunate because I didn't have the liberty of quitting for years. I tried to get a job in the States, try to get into school in the States. But I you know, I couldn't be with the love of my life. And that was the best decision ever. Were married. Right now I'm everything I am because of her, because she paid the bills for so long and she encouraged me and she drove me.

00:13:36:04 - 00:14:11:03
Lloyed Lobo
But I take that job. So I'm like, I can't quit two months. And the chief operating officer was reporting to quit. They didn't replace him. So now I am like in this position where I have more autonomy and more, I guess, responsibility. So I'm talking to customers, big customers, Tiffany Armani, Simon & Schuster, big brands, Tory Burch walking their floors, figuring out their pain points, the consultative sale and driving long locations from New Jersey to to where not like you name it, upstate New York, all over the place and in the car because I don't like reading.

00:14:11:10 - 00:14:29:18
Lloyed Lobo
It was very hard for me to read growing up. I would listen like this and do Spin Selling by Neil Rackham or Dale Carnegie's How to Win Friends and Influence People are influenced by Robert Cialdini over and over and I would then implement that as I'd go right four hour drive, three hour drive, two hour drive, then go and implement it in the conversation.

00:14:30:01 - 00:14:57:13
Lloyed Lobo
It was it was an epic experience. Then come back and then write down the specs. Like these are their pain points and this is how you would spec it, wireframe it. And so the wire framing and the and the software design I learned from engineering school, but this consultative sale, I had to just listen to all these audio books and then a lot of what I searched on sales content online and marketing content online was always HubSpot.

00:14:57:13 - 00:15:36:23
Lloyed Lobo
So HubSpot had this inbound marketing community and that was cool. And so I started listening to their inbound marketing content, inbound marketing certification, joined their community, started going to meet ups. And so in a way, like, you know, after the Gulf War community, this inbound marketing community became my, my community. I learned everything through there. And, you know, that's a program that even taught me the value of consistency, because one of the courses in there was some Gary Vaynerchuk, and he was chubby little young guy, did a two hour course on video marketing and he was so bullish on the power of video.

00:15:37:13 - 00:15:59:17
Lloyed Lobo
And this was what, 2005? Imagine how it's played out for him if I only bet on video back then and kept doing it and doing it, he never stop, right? Or you look at Mr. Beast, he never stop is he's an iconic brand or you look at who the single richest person in SaaS is is Larry Ellison kept going like just didn't stop or in investing is Warren Buffett just consistency, right?

00:15:59:17 - 00:16:28:22
Lloyed Lobo
So that's where I learned probably the second lesson in life is consistency. Compound interest on consistency is what we call overnight success. Like keep doing it. And the first one was communication. But that experience was very profound for me because now I'm combining communication with creation and consistency. And so kept talking to customers, figuring out what to build a wireframe provide and just kept doing it on repeat.

00:16:29:14 - 00:17:00:04
Lloyed Lobo
And then my wife got into Residency in Philly, so I joined another startup there and now I moved up from sales to running Sales and Marketing and carried on with that HubSpot community. And then one day when life was stressful, I had this one moment in life when life was really stressful at work, and my best friend, who was my partner in every project in university, Alex, he calls me and he says, Hey, I want to do a startup in the R&D tax credit space.

00:17:00:18 - 00:17:22:14
Lloyed Lobo
And I'm like, I jumped at the opportunity to work with him. So Alex's story was after engineering, he got into Johnson and Johnson's engineering leadership program, which is a very rare thing. And then he did a startup which didn't work out and felt he needed to study accounting and finance. He studied that and his unique combo of accounting and finance took him in the world of innovation funding.

00:17:22:19 - 00:17:46:09
Lloyed Lobo
So globally, hundreds of billions of dollars are given by governments to fund companies that build new products or improve existing products, not necessarily white lab code R&D, but product development. The problem is with anything government, it's a cumbersome application process, is prone to frustrating audits, and receiving the money takes a long time. And so he was doing this for a big four accounting firm and he said we should work in this together.

00:17:47:06 - 00:18:15:12
Lloyed Lobo
And and I was at this startup in Philly now, and I used to work till nine, 10:00, which is fine. My wife was in residency working 100 hour weeks anyway. And one day I started going home at six in the evening and I got a call from the CEO of the company or an email from the CEO of the company saying, Hey man, I used to like it when you're in the office till 9 or 10, I'm worried that last two, three days you've been going home at six.

00:18:15:12 - 00:18:30:22
Lloyed Lobo
What's causing you to go home? Your wife works 100 hour weeks anyway. And I was like, man, like, you know, my parents were visiting and I hadn't seen them in a while. That's why I was going home at six. So when I when I got home that night, Alex called me. He's like, I want to do the startup.

00:18:30:22 - 00:18:47:03
Lloyed Lobo
I'm like, I don't care what we do, man. As long as we build a company we want to work for, I get the opportunity to build a company that I want to work for. I'm in. And so that's how that journey started with with Alex. But, you know, going back to the CEO, you know, we're good friends now.

00:18:47:03 - 00:19:10:01
Lloyed Lobo
I'm also an angel investor in his company, but he was driven by a lot of stress. You know, a lot of times what happens is as founders, we take any kind of capital that's available to us and we don't realize the strings it comes with and strings doesn't necessarily mean what's written in the document, because sometimes influences is more dangerous than power than written power.

00:19:10:06 - 00:19:29:16
Lloyed Lobo
You may be the CEO of a company and have a controlling share, but if your investors are on your board, they can stress the F out of you. Yeah, right. And make it difficult till you burn out. And like they say, right, shit flows down the leg, man. It then goes to the employees and it goes to everyone, right?

00:19:29:16 - 00:19:55:23
Lloyed Lobo
Like if the CEO is stressed and burnt out, especially young CEOs, it takes a lot of fortitude and can to shield your team from it. Then it becomes like, Man, I want all you guys working. Why aren't you working? Get more clients, get more sales because that's what the investors are telling you. And so after that experience I was in, I moved to San Francisco, my wife got into Stanford and she got a fellowship.

00:19:55:23 - 00:20:19:03
Lloyed Lobo
There's a move to move to San Francisco. And then Alex was in Canada, actually. So shuttled a bit between San Francisco and Canada and started BOAST. And in parallel to boast, we worked on a couple other companies, did a chat, bought in ‘13, 2013, ‘14, and that failed. I mean, nobody knew the term chat board back then. Then worked on we worked with Bessemer.

00:20:19:06 - 00:20:41:18
Lloyed Lobo
They incubated a company called Speakeasy, which was an AI driven sales assistant. They invested $6 million that didn't work out. We did an events company because I was good at planning events from, you know, between so many events to get customers over time. And the third co-founder ran away with a quarter million in profits, locked us out of our accounts.

00:20:41:18 - 00:21:04:20
Lloyed Lobo
We had to sue him because he announced another conference to the same list. But then he didn't have the money because he used all that money to pay for the conference. So then in installments, over six, seven months after lawyer fees, he paid us $50,000 and he fought it like never catch a break. And then we had BOAST going on in parallel as a consulting firm that we said, You know what, all these things failed, but we learned a ton.

00:21:05:07 - 00:21:29:11
Lloyed Lobo
Let's turn this into a software company, because the benefit was we already had customers paying us for the service to do it manually. So we knew like what we could automate, we knew the exact flow and that was the journey we went. So 2017, we incorporated the consulting firm into boast.ai, and the journey from 2017 to 20 was a great one.

00:21:30:02 - 00:21:39:02
Lloyed Lobo
And during the pandemic we got approached by a growth equity firm that offered us a great deal that we couldn't refuse. And life was life was good.

00:21:39:16 - 00:22:00:01
Todd Sullivan
That's just awesome. The whole background. Thank you for for sharing it all. It just feels like step after step. You're upskilling yourself to have that moment when Alex calls you and says, Right, we got to start a company and you've got the skill set now, you got the confidence you're in a situation that you want to get out of.

00:22:00:01 - 00:22:22:03
Todd Sullivan
I've been in that situation before and so this sounds like this was the right time to take that risk adjusted jump that you talk about. What's interesting is I similarly, my wife got her residency out in San Francisco, too, and it was one of the reasons I ended up going out there. Right. So now you've put yourself into the kind of, you know, entrepreneurial mecca, right?

00:22:22:03 - 00:22:45:05
Todd Sullivan
And you're seeing all of those companies starting venture just venture dollars pouring in, you know, in every coffee shop around the city and down to Palo Alto. So that must have been a kind of amazing experience. And you're starting a bunch of companies, you're working with Bessemer. It just awesome. All of such such a great experience. I love I can visualize what you're going through.

00:22:46:04 - 00:23:01:09
Todd Sullivan
I love to hear the eventual you creating success, boast.ai, I maybe you could take us through when you started to realize, Wow, this is going to be successful up to the moment where you say, maybe it's time to take some chips off the table. Can you talk a little bit about that?

00:23:01:20 - 00:23:24:22
Lloyed Lobo
It felt like you're barreling into a dark tunnel and there is no light and then one day it shows up. You know, there's luck and risk are two sides of the same coin. And luck is the 10% that flips the 90 in your favor. The thing is, a lot of people don't keep flipping, right? Flipping is the consistency.

00:23:24:22 - 00:23:43:18
Lloyed Lobo
You got to keep flipping, flipping, flipping. And I'm not saying doing a business is about luck, but if you keep taking chances and taking chances, you're going to hit luck. You're going to hit heads. If you keep rolling the dice and keep rolling the dice and rolling the dice, you're going to hit us six, right? And so the thing is, you got to never stop, right?

00:23:43:18 - 00:24:03:05
Lloyed Lobo
We didn't stop. We kept going and we kept going and we kept going. So one thing was really interesting when we started most first as a services company, we kept dialing for dollars. That's what we need to do. You kept asking people to buy our service. There's a few frameworks I would talk about as a result of this.

00:24:03:18 - 00:24:20:07
Lloyed Lobo
We called manufacturing companies. We called oil and gas companies. We called construction companies saying, Hey, man, we can get you a bunch of money from the government. You got to give us your technical data. They're like, Who are you? Like two guys I've never heard of? And even if the service exists, why didn't my accountant tell me I'm going to go do it with my accountant?

00:24:21:05 - 00:24:42:04
Lloyed Lobo
And we started going to manufacturing events and oil and gas events and construction events, and we just couldn't vibe with them like a hammer and we just feel lost. It looks like they don't even want to talk to us of conversations feel so forced. So then we started going to every startup event in the neighborhood, like every tech startup event participating in hackathons and whatnot.

00:24:42:17 - 00:25:13:05
Lloyed Lobo
And we found very quickly that, you know, we're all in the same like age bracket, life bracket, you know, and the conversations resonate because we have something similar to talk about. We're starting a company, they're starting a company, we're going through similar struggles. But the one thing we realized very quickly in 2012, that every event we went through while it was great at connecting us with other founders, they were all high level CEO platitudes.

00:25:13:06 - 00:25:36:10
Lloyed Lobo
This was a time where podcasting didn't wasn't huge, where LinkedIn wasn’t huge as a distribution platform for business content, Instagram, none of that. It was events and blogs, right? Events and blogs, events and blogs and all the events we were going to was high level CEO platitude. Do they bring legacy off like a multi hundred million dollar company or $50M company to talk about how they did it?

00:25:37:00 - 00:26:07:23
Lloyed Lobo
Now that is not helpful for somebody who's at 0 to 1. I it's not helpful for us. Anyone else. It's good aspirational. So we said, Hey, you know what? There's something here. What if, you know, as a function of working and being around startups, we know a lot of people who are maybe not at 100, but we can bring the people at 5/10 to talk to the ones that zero or one exactly on the steps, how I got my first customer, how I develop my product, how I got my first angel investor, how I landed my first enterprise sale.

00:26:08:04 - 00:26:39:16
Lloyed Lobo
Like these frameworks that somebody at $50M can’t teach you because they're far surpassed it. So we said, Well, we'll do these meetups because now we understand this. ICP really well. So then our messaging changed from Hey by my stuff, our ICP changed from going up for manufacturing and ICP is ideal customer profile for manufacturing, construction, oil and gas to startup founders at zero one with some spend right there spending some money on building their company but don't know how to get to the next step and start hosting these events.

00:26:40:07 - 00:27:00:19
Lloyed Lobo
Founder events like how do you get your first customers? How do you get your first investment? And the first event we did like ten people showed up next and we had 20 people showed up 25, 30, one day we had 200 people show up at the coworking space, hijacked the whole co-working space, and then the guys around the co-working space are like, You can't do this here anymore.

00:27:00:19 - 00:27:22:01
Lloyed Lobo
It's no longer a small meetup. When you hijack the whole co-working space with the aisles of desks. This is like turn into a conference. Yeah. And what's interesting is that right? Combined with another gap we found in the market, that was a time where, you know, this was we started the business boast.ai in Canada, so it was a small market in Canada, in Calgary.

00:27:22:19 - 00:27:49:19
Lloyed Lobo
This was a time where the local press wasn't giving a lot of attention to startups. So we're like, there is another opportunity here. If we try to build social proof on our blog and write content, our blog, the CEO is going to take years to develop. How do we get the brand rep of the big people, right? So the brand rep of the big speakers, like 5/10 million and revenue speakers, we got by hosting our own events.

00:27:50:02 - 00:28:13:08
Lloyed Lobo
So we got there social proof. As a result of getting there, social proof we looked credible and so we would start getting conversations towards doing business. So that community was building and we're like, now we get to blog contact, contacted the local newspaper and asked to give us a call them. The local newspaper said No, no. Eventually, after much following up, like I followed up like hit you up a couple of times, right?

00:28:13:08 - 00:28:33:09
Lloyed Lobo
I followed up with the newspaper a couple of times. The largest newspaper group in Canada, and they said, Fine, eventually I'll give you a blog. Right. And the way I even got that blog was first I blog for some second tier blogs in Canada, drove a lot of traffic to them and send it to the newspaper in the newspaper like, Oh, this looks like it's got a lot of likes and shares.

00:28:33:09 - 00:28:51:09
Lloyed Lobo
Fine, we'll give you a blog then. I wrote a column called Startup of the Week and the first column, Startup of the Week that I wrote in their blog. I shared with an entrepreneur who virtually made it go viral at that time. It got shared so much on Twitter and everything because that's what entrepreneurs do. They're not getting a voice, so they share with their family and friends.

00:28:51:09 - 00:29:11:06
Lloyed Lobo
And it was like oh, Calgary Herald is launching a Startup of the Week column. The editor senior editor calls me. I have my missed calls from him, an email saying, If you commit to writing this every week in the newspaper, on the blog, we will run it in print. I won't pay you, but we will run it in print.

00:29:11:06 - 00:29:28:18
Lloyed Lobo
I'm like, Don't pay me. And so what happened? The effect of that was now a startup of the week became a weekly column in print, and every Monday at 6 a.m., an entrepreneur is going to the convenience store to pick that newspaper, take a photograph, share it with other entrepreneurs, share it with their family, share with the community.

00:29:28:18 - 00:30:03:17
Lloyed Lobo
And those things started while I wrote that column for two and a half, three years straight, while doing these meetups and events and that social proof of now a high domain ranking website from the news with the news is the highest authority website, right? Always coupled with the social proof of the speakers would bring to the events that one / two combo brought us not only customers, but partners who would refer as business and, you know, helped us get those early social proof, early customers, first hundred customers.

00:30:03:17 - 00:30:32:03
Lloyed Lobo
In a way, it came through the word of mouth and direct customers and then eventually turned into a large community that we run called Traction, which is today 120,000 subscribers. We have a podcast, we have a YouTube, but a lot of meetups and a big conference where every major CEO from Twilio to Zoho to Atlassian's President Uber's old previous CEO, Travis has come to one of our events and that's what it evolved.

00:30:32:13 - 00:30:55:01
Lloyed Lobo
And what's funny is as we got to $10 million ARR, we didn't have a marketing team. It was these events in front of us that drove it. And in fact, during the pandemic when everything was closed, they had an open window and we hosted an event and this growth equity firm through a partner that we knew said, Hey, you know what, You always invite VCs on panels.

00:30:55:09 - 00:31:12:12
Lloyed Lobo
I want to suggest you invite these growth equity guys. I'm like, I mean, they seem like PE. Like, why don't why should we invite? He's like, Trust me, man. They're good guys. So we invite them. They participate on the panel. It goes, Well, I got an email saying, Hey, would you be interested in joining our venture partner network?

00:31:12:12 - 00:31:32:19
Lloyed Lobo
We had a great time at this. I'm like, final hop on a call. I'd take a meeting with everyone. I hop on a call. Really nice people at the fund is really in capital out of New York. The founder, one of the founders, came out of Bain Capital. So, you know, solid background as well. Great conversation. He's like, Hey, would you like to join our venture partner network?

00:31:33:05 - 00:31:50:23
Lloyed Lobo
We'll give you carry in exchange for deal flow. You have such a great community and we met a lot of like good founders and I'll get into in a second what growth equity is and the difference from venture and PE. But I'm like, Listen man, I don't have the time. I have a business to run this community thing we just do to pay it forward.

00:31:50:23 - 00:32:12:01
Lloyed Lobo
And it's been a big driver for our business as a result of paying it forward. So it's like, what does your business do? So I explained and he's like, what? You're selling $100 bills for $20 and you got such great gross margins and you have no marketing spend. Can we and can we invest? Would you be interested in saying like, how are you capitalised?

00:32:12:01 - 00:32:33:15
Lloyed Lobo
Like customer revenue and can we invest? And I'm like, Listen, we're not interested in taking capital. My co-founder is dead against it. Like, you know, Alex always said, as soon as, you know, you can turn one into three, you take it. But still, bringing on an investment partner is a marriage like, why would you invite somebody else into your marriage?

00:32:34:10 - 00:32:53:09
Lloyed Lobo
Would you want to complicate your life? And on the other end, my wife's like, you know, if you do another zero sum game like you've only worked at small companies that took investor money that went bankrupt from that company in New Jersey to the company in Philly to like the Bessemer company. All venture-backed. Right. And they all did work out.

00:32:54:02 - 00:33:22:04
Lloyed Lobo
And the one before in in Canada where I was cold calling, they all went down the drain. So she's like, how do you know you'll do this? And it's going to succeed. She's like, If you do this, she's like, Alex is very strong willed. So, one, you can't convince him to, even if you manage to convince and remember, if it becomes a zero sum game, you're going to have to get a job at like Oracle or Salesforce or some stable company because I can't keep paying the bills at home.

00:33:22:04 - 00:33:41:21
Lloyed Lobo
It's really hard. And so I'm like, okay. And then I ask these guys like, Yeah, man, we're out of tech investor money. So that was in my head when we were having this conversation. He's like, Sure, look, we're not VC. So I'm like, What are you PE, like, you know, the second company I worked out in New Jersey was a PE company, PE back company, PE hustle.

00:33:41:21 - 00:33:48:07
Lloyed Lobo
Yeah, we know the drill, right? Like long due diligence, they come in, they want to run your company. They. They drain you out, right? Yep.

00:33:48:12 - 00:33:48:20
Todd Sullivan
Mm hmm.

00:33:49:13 - 00:34:18:01
Lloyed Lobo
And so they're like, we're growth equity. I'm like, What is that? He's like, We want to invest in companies that are moderately growing with a clean cap table that are profitable. And we want to return, say, 4 to 7 x, our investment in 4 to 7 years. And so I'm like, why would I take your money? He's like, Because we invest in profitable companies.

00:34:18:18 - 00:34:40:09
Lloyed Lobo
The founders can take the bulk of the funding to liquidate themselves and de-risk themselves. So we'll let you take money off the table. So you de-risk yourself In the short term, create comfort because as bootstrapped founders, we know how stressed out your families are and then you'll have enough skin in the game so you can play the long game.

00:34:40:09 - 00:34:59:12
Lloyed Lobo
And when he threw all the numbers, I was like blown away. So immediately my first call was call Alex. And he's like, Yeah, this is legit. I researched them and then, you know, they had a partner in San Francisco, met him, had a few conversations, and within weeks there was a term sheet, took a couple of months and I can dive into why instead of a 30 day.

00:34:59:15 - 00:35:23:06
Lloyed Lobo
Yeah, took like a 60 or 75 day close, but the deal went through. It was a great experience. We got two board seats. We sold, I think 52% or so. It made us I mean, for me, I hadn't seen that kind of money on both sides of family and ties are us. Alex So it was life changing and you know, they've been they've been great partners.

00:35:23:06 - 00:35:54:15
Lloyed Lobo
And so I tell everyone now that, listen, you got to understand what your values are and what you want before you go into any partnership, great relationships are built on great alignment. Most founders don't ask themselves these basic questions. What is your personal definition of success? Don't say money. Write down what do you imagine yourself doing? What is your personal money is?

00:35:54:18 - 00:36:16:09
Lloyed Lobo
Success is not money. If it doesn't buy you what you draw joy from, money doesn't matter because you'll burn out. And then, you know, with our western diets and high stress life, you'll be you'll have all the money in the world at 65 and not be functional. So don't ever write down money. What is your personal definition of success?

00:36:16:13 - 00:36:37:01
Lloyed Lobo
What do you see yourself doing day in, day out that brings you joy? How much money do you want in your bank account to make that happen? How long do you want to run the company for? Is there a version of the company you don't see yourself working for or you don't want to work for? And is there an argument for taking money or not?

00:36:37:01 - 00:37:05:03
Lloyed Lobo
Based on that? I think that's very important because on the other side you got to understand the motivation of investors. Venture investor wants to like a VC investor wants to significantly outsize deliver an outside return to LPs. LPs invest because they want to return. Now put yourself in the LP shoes, man. Are you going to buy lottery tickets if it doesn't return to you like a venture is almost like a lottery?

00:37:05:09 - 00:37:22:22
Lloyed Lobo
Or would you put your money in the S&P 500? It was Are we entrepreneurs curse VCs a lot that they put pressure on everything, but partially we are as founders to blame also, right? We polish decks showing these multibillion dollar outcomes. Why did you show that? You showed that because you wanted their investment. Do you understand their perspective?

00:37:23:05 - 00:37:44:21
Lloyed Lobo
They raised money from LPs who, like our institutions, who run endowment funds that drive research and other social good, or maybe not, or maybe buy big boats regardless that somebody is harder and money that goes into this fund. And rather than putting it in the S&P 500 or some index, that's like growing 10% year over year, that's a safe bet.

00:37:45:09 - 00:38:04:23
Lloyed Lobo
They put it in this fund to drive outsized returns. So the VCs job is only one thing. I got to find deals that drive outsized return. Now, if you if you polish the turd so hard that it looks like it's going to be outside which outsized returns, but then like two or three board meetings in the reality since and it's your fault too, right.

00:38:05:00 - 00:38:20:13
Lloyed Lobo
Yeah great companies great relationships are built on great alignment. You will not find that alignment for you until you write these questions down. What is my personal definition of success? How long do I want to run the company for? How much money do I need in my bank account to drive that personal definition of success? Is there a version of the company I don't to work for?

00:38:20:16 - 00:38:44:16
Lloyed Lobo
And I'm telling you, the more founders I talk to now as like the three boards, I'm an angel investor in 18 companies. The more founders I talk to misalignment with investors comes from this. They're like, Oh, they're pressuring me. But I didn't know all this. Why didn't you know? Why did you polish the deck? Right? And so the venture investors, it's clear at a minimum they want out three x the fund, right?

00:38:44:16 - 00:39:06:00
Lloyed Lobo
At a minimum, yeah. So then when you raise a seed round at a $20 million valuation, maybe that's palatable when you raise your age at like $50, $60 million is also palatable when you raise your be at a few hundred million valuation, it becomes hard. How many acquisitions are happening at $300, $400, $500 million?

00:39:06:12 - 00:39:07:02
Todd Sullivan
Very few.

00:39:07:11 - 00:39:27:23
Lloyed Lobo
And then at that point you sign up for an IPO or bust. So what do you think is going to happen? You know, the media has perpetuated this addiction to unicorn porn. In reality, the world is run by horses, camels and donkeys. In the last two years is a perfect example of this, describing how this works. COVID hit.

00:39:28:17 - 00:39:49:08
Lloyed Lobo
Everybody needed to digitally transform everybody. So if you were a startup digitizing offline, you know, everyone needs to get Snowflake, they need to get Twilio, they need to get Shopify, they need to get Zoom, they need to get SendGrid, boom, your growth is through the roof. They need to get R&D funding. Boom, Your growth is through the roof.

00:39:51:06 - 00:40:18:20
Lloyed Lobo
2020, 2021. If you didn't do it, you're not going to. In 2022, the market didn't explode. How people wanted to believe. Our founders wanted to believe they just rolled forward to the market a couple of years ago. So hedge funds started coming in and investing in these startups going crazy. You think the hedge funds didn't know that one company out of these would be maybe a multi hundred billion dollar company?

00:40:18:23 - 00:40:48:19
Lloyed Lobo
There would be one Airbnb or one Uber that comes out of this as it did out of 2008. That was the bet. But behind they leave a graveyard of startups, the founders didn’t know this now the voices driving into the FOMO started also investing Then 2022 rolls around interest rates rise right so this digital transformation, coupled with low interest rates, flooded the capital in the market, 2002 growth rates projections fell, interest rates went up.

00:40:48:19 - 00:41:14:08
Lloyed Lobo
And every time interest rates go up, stock market falls. It's the correlation boom came crashing, everything, valuations fell. There are so many unicorns that I know that are personal friends of mine or like print acorns that have raised a multi hundred million valuations, raise hundreds of millions that can grow and that can raise, if they're raised, they would wipe out the cap table and the growth rate doesn't warrant.

00:41:14:12 - 00:41:33:05
Lloyed Lobo
So as a founder, when you raise at a certain valuation, it's a promise that you're going to meet that valuation in 18 months. Yeah. So think about what you're signing up for and if it meets your personal definition of success. And so growth equity aligns very well. If you write down those questions.

00:41:33:11 - 00:41:54:00
Todd Sullivan
That was great, right? I appreciate the questions. I think, you know, for our audience, I want to jump in a little bit more on growth capital. So you didn't really understand what that was when you started talking with Radian Capital. Right. And the difference really between private equity and venture capital, I think, in a lot of people's minds is venture is minority investing.

00:41:54:00 - 00:42:14:13
Todd Sullivan
They are taking a minority stake in a company. Now, it doesn't mean that they won't have control over time, right? Even if it's not, I think you put it as like legal control, but it could be undue influence over the growth of the company and the decision the companies make. Private equity are usually control investments. So that's over 50%, right?

00:42:14:13 - 00:42:34:04
Todd Sullivan
So they have the majority of the board seats. They are making the decisions they make all the decisions. Now in growth capital, most of the time what we see is that word growth. They want the dollars they invest to go towards growth of a company. And then there is a little sliver in there that founders can kind of take off the table.

00:42:34:04 - 00:43:02:21
Todd Sullivan
They can de-risk their position. And a lot of times you continue to run the company and maybe the the management team is supplemented. In your case, you were able to negotiate really a significant portion of this value coming right to you. And Alex. Right. So that's fantastic. I'd love to maybe understand how you negotiated that. And then two, you guys both made the decisions to take the company from where it is, which is $10 million of ARR approximately, maybe were eight at the time.

00:43:02:21 - 00:43:20:11
Todd Sullivan
8 million of our. Is that about right? So I think this is a critical point because we talked to a lot of entrepreneurs, those who have great businesses, they're thinking about selling their businesses and we want them to understand what is the number that you need to achieve everything in your life that you want to achieve, Like what would bring you happiness?

00:43:20:19 - 00:43:40:07
Todd Sullivan
And when you understand what that number is, then you can be very intentional about the type of transaction that you should be going for, right? And in your case, you knew your number and that growth equity provided this avenue to achieve your number and own almost half your business. You have, what, like 38% of this business? You sit on the board, right?

00:43:40:07 - 00:43:54:09
Todd Sullivan
You're going to see another exit or another liquidity event for yourself at some point in the future. But you basically sped up what distributions would have had done for you year over year by going into this transaction. Does that sound right? Am I understanding.

00:43:54:23 - 00:44:15:06
Lloyed Lobo
That is exactly it. And the other thing you've got to think about is market conditions, right? Like, yes, yes. You know, the you know, what Warren Buffett said is when the world gets optimistic, you should worry. And when the world is worried, you got to get optimistic. So, you know, the world was behaving like drunk sailors. And so, you know, Alex has is always is like that.

00:44:15:06 - 00:44:36:04
Lloyed Lobo
It comes with that Warren Buffett mindset. And so he's like man like anything can happen. And think about it if we hadn't done that event during COVID, the window that opened, you know, that's the one thing we kept doing and kept doing and kept doing. Even when the COVID shut down and we couldn't do a conference, we we asked all the speakers rather than doing a virtual summit, Hey, can we do a Live AMA?

00:44:36:04 - 00:45:03:13
Lloyed Lobo
And we're with you twice a week and over COVID, we did for two years that those live aims, which grew our community from 30,000 subscribers to 100 plus thousand subscribers, but we kept doing it. And so the social proof for our growth was driven by doing a lot of events. Our salespeople were more like brokers of resources or BD people going in the community, either going to our events, when it partnered events, or going to other people's events and shaking hands and kissing babies and those guys who help people.

00:45:03:16 - 00:45:23:18
Lloyed Lobo
So it's easy to get deals so warm, the deal flow, you know, with content with community, basically. And then it's easier to get get your foot in the door. So when the events stopped, we started doing those events virtually online conversations online. So when the first window for an event opened, we did it. We were the first people to do in-person event.

00:45:23:21 - 00:45:47:16
Lloyed Lobo
And that's that's how they came to us. The the lucky. So the timing was good. And, you know, the worry always was, will this last? Right. The burden hand is always worth two in the bush because the market go to shit. And like Alex always said, the market go to shit which did end up happening. Right. And so it's like, yes, fortunately we're in a business where we're giving people money, so our market's always good.

00:45:48:00 - 00:46:06:02
Lloyed Lobo
But you could be in a situation where a lot more companies are going out of business. And sure, now, like less companies want to take that money. But regardless, we're typically against the market. But still there's always this worry, right? And so if you can de-risk now, why not de-risk? And then what happened exactly a year and a half later?

00:46:06:18 - 00:46:25:13
Lloyed Lobo
It's all for us all to see what happened, right? Like, yeah, yeah. Founders that didn't they suffered even companies that raised multibillion dollar valuations like are in the shitter. A couple of companies got lucky because their founders two massive secondaries from hedge funds and whatnot. But yeah you know you you win the lottery once in a while, right in a situation Yeah.

00:46:26:03 - 00:46:43:18
Todd Sullivan
Lloyed, I think it's just it's awesome. And there are tunnel lessons here. I think people are going to learn about growth equity in that option. I'd love to understand what life is like now after you know you hit your number so you know that's the right transaction for you. You timed it well. What do you do as a board member?

00:46:43:18 - 00:46:46:20
Todd Sullivan
How do you see your company continuing to grow and what's your role in it?

00:46:47:15 - 00:47:16:10
Lloyed Lobo
Before I dive into that, I want to share one piece of advice there as they're doing something like this. Right? Number one is as bootstrap founders were very, very frugal in a lot of things. Yes. And what's your zone of genius and what's not? Barrel down your zone of genius, but what's not outsource? I think one one thing I regret not doing is outsourcing the finance work because it was due diligence till like 70.

00:47:16:14 - 00:47:35:07
Lloyed Lobo
Somewhat. Yes. And a lot of founders, what happens is like, you know, what are you a bootstrap founder, especially like us, we use the cheapest tools like we don't have a marketing automation system, so all the leads are coming through the database and then we're like picking and shoving. Sure. Files. And we didn't have a CRM like Salesforce.

00:47:35:07 - 00:47:59:05
Lloyed Lobo
We were using Zoho. In fact, we started as a services company, by the way, especially in 2023. If you have an idea and you want to bootstrap, no better way than learn to sell and offer to the services consulting. Do that three or four times because you can't hide behind buttons or toggles customers want outcome. They don't want software, you don't want, you don't want marketing automation, you want more leads, you don't want a gym membership, you want to get a six pack.

00:47:59:11 - 00:48:25:19
Lloyed Lobo
So offered as a service. Through that, you understand what it's like to sell consultatively, what it's like to deliver first rate customer success and what it's like to deliver an outcome, not software. Then write down the process it took you automated and your initial product can be generative. AI combined with like a no go tool. Our first version there was no yeah back then or rudimentary.

00:48:25:19 - 00:48:53:13
Lloyed Lobo
We used Zoho Creator and Zapier, but today you got like Bubble and you have Chat GPT and all these tools effectively. Then it turns into, Hey, I'm collecting data manually, I'm going to normalize that data and I'm going to apply it, analyze it. I'm like workflow, so you can bootstrap a lot longer. So don't think you got to raise money to build products as a boost that founder your day one should be selling and understand the customer and delivering the outcome.

00:48:53:13 - 00:49:24:20
Lloyed Lobo
So that is learning one. Learning two is understanding your zone of genius and outsource other things. When time is right and no better thing you can outsource when you're doing a deal like this is your financials. Like you asked four or five people who did deals and who the best finance person is and outsource this work to them because they have teams and they know how to present your numbers, your data to investors and do and do yourself that service.

00:49:24:20 - 00:49:46:21
Lloyed Lobo
And I can't stress this enough, like biggest regret because we were like spending hours going through customer files and this is just stressful, right? Like you don't need it, right? Do you have 100 things and your finance person will be enabled to show your vision and how you're meeting that vision with the numbers. And they've done it before, like they've seen this movie before.

00:49:47:03 - 00:50:00:07
Lloyed Lobo
Don't, don't try to do things. That's not your expertise. And usually when you're a bootstrap company, you can't afford a multi hundred thousand dollar CFO anyway. So you're making do with like people who haven't done that before. So that is two pieces of advice.

00:50:01:02 - 00:50:26:01
Todd Sullivan
That's that's awesome. I got to lean into that, particularly the second one, right, the finance piece. And so we work with companies that are thinking about exiting or founders who receive inbound interest, right? There's a strategic partner out there. They call and they say, we're interested in buying you. And inevitably the financial arm of that company is far behind the rest of the product in the management team's ability to sell and market everything else.

00:50:26:01 - 00:50:48:00
Todd Sullivan
Right? So we've really kind of take it upon ourselves to, say, hey, we can help clean that up and we outsource that financial arm of that company very early on. Before we bring you to the investor bankers, the M&A attorneys. And we've found that extraordinarily helpful because when you go to market, you really have one shot to excite that buyer.

00:50:48:05 - 00:51:08:00
Todd Sullivan
And when all your financials are really showing incredibly well, it's well-described, it's understood there are no red flags. And if there are, they're they're understood and explained. You sit so far above, everybody else in the market. And so now you're the one that sits on top of the the stack of opportunities that buyers have. You create the most competition.

00:51:08:00 - 00:51:23:06
Todd Sullivan
You drive the outcome and the highest purchase price. So it's such a great point to say you should be outsourcing that. And we've seen it time and time again that we are starting to offer that service right out of the gates for founders. And it is not difficult. It is just a call and a decision to outsource that.

00:51:23:15 - 00:51:45:06
Todd Sullivan
So I appreciate you bringing that up. Tell us a little bit if I appreciate all all the advice, but because you went through this relatively unique transaction, at least unique for our audience, what is it like on the other side? Because I feel like you're getting to do the things that you are the genius at even more, rather than having to do everything in a company to build it.

00:51:45:19 - 00:51:46:13
Todd Sullivan
Can you tell us about that?

00:51:46:22 - 00:52:09:21
Lloyed Lobo
You know, initially was hard for me, I'll admit. It is hard for my co-founder. It was hard because I prioritize the business over everything else. Like I put family. Because think about it, our business was community led. You know, we built this community of founders called Traction. The reason even we call it traction and not most was because it was tied to the greater aspiration of founders.

00:52:10:02 - 00:52:31:14
Lloyed Lobo
We helped founders get money from the government. Why do they need the money to build great products, to innovate faster? Why did they do that? To create impact, to get traction? And so we call that community traction. And so I spent a lot of time doing that. A lot of my energy was either on the front facing side marketing partnerships, product and being out there in the community.

00:52:32:02 - 00:52:55:17
Lloyed Lobo
And I had neglected the family for a very, very long time. So after this transaction happened, you know, I didn't take leaving the day to day as well. Okay. I felt lost for a little bit. I got depressed. I started traveling to different places, seeking the lull that I, I had in my life because I was always surrounded by community all my life.

00:52:55:17 - 00:53:21:12
Lloyed Lobo
And I said, Yeah, the community was leaving me. But then when things got better, you know, we moved out of San Francisco. We still the place there, we rented it out, spend the summers there. But me and my wife and three kids. We moved to Dubai last August after our annual conference and just wanted to explore a different place where people look at work and life very differently.

00:53:21:23 - 00:53:44:13
Lloyed Lobo
Okay, we traveled a bunch. We could have lived in Europe in any number of places, but I think one of the criterias or how similar it is to the United States in terms of sort of Vibe Rain and Dubai feels like Miami meets Singapore. Is there a community feel? Is it safe? The other thing is like help. This is a country of land of convenience.

00:53:44:13 - 00:54:04:23
Lloyed Lobo
Everything from your groceries to your gasoline to your doctor, your chiro, everything comes off. Everything is done for you. So created a lot of convenience. It basically put me in a flow state. And so I love being here. It's a great community vibe, country. A lot of people and friends I know since childhood or even from the States, Canada have moved here.

00:54:05:06 - 00:54:24:11
Lloyed Lobo
So this is a place we came, we spent a month here and we said we want to move here. And so life has been that transition to the board. Now sit on two other boards, one public company, one. Jason Lumpkin recently was gracious enough to invite me on one of his company's boards, and that was life. And in my spare time I decided to write a book.

00:54:24:15 - 00:54:44:20
Lloyed Lobo
It's called From Grass Roots to Greatness Rules To Build Iconic Brands With Community Led Growth. This book will be out in September 12th, but on pre-sale, it topped a number of newly released charts. And here, you know, as I looked back and I said, hey, I got to do something. All my life I've been like, running, running.

00:54:45:09 - 00:55:04:11
Lloyed Lobo
It feels weird. Like, how much will you hang out on the beach? And Dubai has great beaches, but how long will you hang out on the beach and work out and do nothing? I mean, as someone who's gone, like doing 8000 hour weeks, doing nothing is hard to sell. It needed some purpose and as I look back at my journey, my childhood summers were spent in the slums of India.

00:55:04:11 - 00:55:31:03
Lloyed Lobo
My mum lived there, my mother, my grandparents and she grew up there. Refugee had the Gulf War, then came to Canada, moved to the US, joined the HubSpot sales community, then build this traction community to startups, right to building. And then when I left the day to day, at most I felt depressed. I felt like a void in my life and how I got back to sanity was also a fitness community.

00:55:31:03 - 00:56:01:04
Lloyed Lobo
The Peloton community combined with a bunch of fitness friends that I made so like, Hey man, the only time I felt lull in my life was when I didn't have the community. And so I started rewatching all the content from our conferences, talked to so many community members, started researching every single iconic brand. Right. As like, you're curious when you have time, you're like, okay, sure, this experience, but I'm not didn't have $1,000,000,000 exit, so nobody wants to listen to me.

00:56:01:04 - 00:56:32:10
Lloyed Lobo
Let's see if there's commonality. And as I researched and looked and looked, I found something very interesting. From Christ to CrossFit, every seemingly obscure idea that eventually became a global phenomenon or steps in common, every obscure idea from Christ to CrossFit that went from this obscure idea to becoming an enduring long term global phenomenon, right? Yep. If people listen to you or buy your product or service, you have an audience.

00:56:33:10 - 00:57:04:22
Lloyed Lobo
That audience comes together to interact with one another. It becomes a community. When the community comes together to create impact, that's much larger than the purpose of your product or profit, to create impact towards a much greater purpose that's beyond your product or profit. It becomes a movement. And when the movement starts to have unwavering faith in its beliefs and its purpose through sustained rituals, it becomes a cult.

00:57:05:09 - 00:57:27:12
Lloyed Lobo
And I saw this for Harley-Davidson and HubSpot and Nike and Apple and you name it. So I'm like, I found it right? Community has been my DNA. Community is how we bootstrap the company community is how our investors came, community is what drives all these iconic brands. You can't build a cult. What stops you from taking an audience to a cult is community.

00:57:28:09 - 00:57:44:05
Lloyed Lobo
And so I said, I'll write a book about community led growth and it'll it'll, it'll get what's in my system out there. And so I spent the time all my spare time writing this book. And I think if I hadn't had this opportunity to create time in my life, I wouldn't be able to do this.

00:57:45:10 - 00:58:04:02
Todd Sullivan
Lloyed It's It's great advice and I appreciate you kind of sharing the painful side of it. You know, you sell the business at least through, you know, Growth Equity Channel and now you got this void, right? You've been your whole life building community and it's clearly comes from, you know, a real place of passion. And so now that's missing.

00:58:04:06 - 00:58:27:00
Todd Sullivan
You know, we've had other founders I remember Ryan Vaughn saying when I sold or I left that CEO role, it was like a gut punch. So, you know, what we really recommend to founders is to really try to understand what your life will be like afterwards. Plan that out, have a be a few steps ahead. So it's not only what you're going to do with the money, but what you're going to do with yourself and your family and what really makes you tick.

00:58:27:05 - 00:58:39:10
Todd Sullivan
So it sounds like you've found it again and you put it in the book after doing a bunch of research and you're probably off to building more communities and hopefully cults will see that. That's a great place at boasting.

00:58:39:10 - 00:59:00:23
Lloyed Lobo
I think Cult doesn't necessarily have to be a bad thing. There is a lot of good cult like brands like, like, like Mr. Beast. But the one thing I felt was my journey had both stopped at building a community. And I think the next thing I do, I'm a big fan of community led businesses. You know, the next thing I do would love to take it to a movement.

00:59:00:23 - 00:59:15:16
Lloyed Lobo
Let's see if it gets to a cult. And so I would put a lot of love and research into this. The books available on From Grassroots to Greatness dot com, I put it for $0.99 because my goal is not to make money. If you want to buy a collectible, we have the hard copy. It looks it looks pretty cool.

00:59:15:16 - 00:59:52:04
Lloyed Lobo
You'll see like it's it's full color, bright and nice and Lemkin here and whatnot. It's a nice design book, but I put it for $0.99, will have a very detailed notion workbook and how to go from from like figuring out which ICP you should even target building rituals. Right? And I want everyone to know that we're in an age where CPMs are up ticktalk Facebook messaging is getting the same and same and same with chat, DVDs, captivity, and generally the AI has sped up something, but it sped up a lot of things.

00:59:52:04 - 01:00:16:07
Lloyed Lobo
It's made it's going to democratize and I guess make life easier for a lot of people. But what it's also doing is creating a sea of sameness. Now, I know when people copy paste just blindly from chat to beat. Yeah, marketing is taking a bloodbath in 2023. People are tired of spam, the sea of sameness, clickbait, seeing like, you know, giving personal data to access crappy white papers.

01:00:16:22 - 01:00:43:09
Lloyed Lobo
But if you look at it, the best brands know this and they've been building sustainable communities for a long time, right? We always latch on to the next innovative trend. But if you see what happened first came the Internet, then the cloud. You used to say Internet company, then cloud companies, then social company, then mobile company. Now we're saying a company will stop eventually because every company will have a AI in it.

01:00:44:01 - 01:01:06:00
Lloyed Lobo
What the what I'm trying to get with this book is yesterday's innovation always becomes tomorrow's commodity, but if you build a community, you won't become a commodity. And the perfect example to close this out with is in the eighties, Harley Davidson almost went bankrupt when the Japanese manufacturers commoditize electronics and started building their cycles on that. And what did Harley-Davidson's leadership do?

01:01:06:10 - 01:01:29:19
Lloyed Lobo
They went and started communities. Community became a company strategy, not a marketing strategy. Leadership out there started writing clubs, employees became writers, writers became employees that proliferated through weekend rider rituals. They created the same Harley movement, but then they created several campaigns like Donate to Breast Cancer and autism. And today, the company is a global, iconic brand worth over 7 billion.

01:01:30:06 - 01:01:56:10
Lloyed Lobo
Not only that, you can recognize a Harley fan merely by what they're wearing. And so, you know, don't latch onto the innovation because what drives the world eventually is people. People build companies, people build cultures, people drive innovation. Innovation will come and go. But I wanted to reignite the conversation as someone who built a successful and someone who helped build a successful company.

01:01:56:16 - 01:02:15:20
Lloyed Lobo
Mm hmm. The company wouldn't exist if we didn't a community. And so I wanted to reignite this conversation around the unique power of authentic human connections in molding enduring brands. Like I said, yesterday's innovation becomes tomorrow's commodity. But if you build a community, you won't become a commodity.

01:02:16:16 - 01:02:35:02
Todd Sullivan
Lloyed, I man, I really appreciate this. This conversation certainly went in a direction I wasn't expecting because, you know, we tend to focus on the exit. You had a very innovative exit that achieved all your goals, but everything you shared today, I think our audience is just going to take a ton from. I'm certainly going to think a lot about it.

01:02:35:02 - 01:02:54:05
Todd Sullivan
Definitely getting your book and certainly will really try to push that because you think just your message from your experience inside. I think I really understand who you are. People are just going to get a ton out of us. So thank you so much. Let me just ask, is is there any other kind of last words of wisdom that you might have when it came to the exit?

01:02:54:17 - 01:03:01:12
Todd Sullivan
Right. Was there some mistake that you made or another place where you got lucky that you want to kind of let people know about.

01:03:01:21 - 01:03:27:02
Lloyed Lobo
You know what, man? When the due diligence goes from a 30 day close to a 70 day close. Yeah. Like you're getting lucky every day. But I think a lot of those mistakes could be solved. I think, you know, 80% of the things success is comes from 20% of the things. And I feel like 80% of your frustrations come from 20% of the things you're thinking about.

01:03:27:11 - 01:03:56:00
Lloyed Lobo
And I think I think having a great financial partner clean up everything, because what happens is, you know, when your financials get a little dodgy here and there are mistakes that cast doubt on other things, right? Absolutely right. If one thing is like looks awful or not up to par, then then they start digging in other places. But I think like because think about it, it's like dating, okay?

01:03:56:04 - 01:04:12:07
Lloyed Lobo
You don't go to a bar and ask somebody to marry you on first go. What do you optimize for for the phone number? Why do you take the phone number so you can optimize for the text? A lot of people, they make the mistake of coming too hard and then like it falls apart. Like if you want to get married to somebody, optimize for the number that the text, then the next day and the next day.

01:04:12:14 - 01:04:34:17
Lloyed Lobo
And so if you look at that, the leading indicator of a term sheet, it's a good conversation and some high level financials, the leading indicator of a great due diligence process is is the first thing you send them. What is the first thing they ask for? Send me your financials right. Yeah. If the financial is are not prim and proper, then they won't poke in other places.

01:04:34:17 - 01:04:58:12
Lloyed Lobo
Now they really love the business and they understood that we're bootstrapped and then we'll have some of this information. But they really worked with us to help us through this. And you know, it's the great, I guess, high regard for it for Radian, that they really love the business that it run research on the market, the Radian Capital folks that they had done a lot of, they did their homework on the market and they loved the market and they they got to love us.

01:04:58:21 - 01:05:13:20
Lloyed Lobo
And so they helped us through the process. But what I'm saying is, if your financials like, you know, you ask yourself, well, you guys are the experts. I'm not. You see this movie every day when when an M&A or any transaction happens, what is the key thing they ask for is the financials, right?

01:05:14:17 - 01:05:25:19
Todd Sullivan
Yeah. I mean, typically they would be asking for a data room and your all your advisors have organized all that financial information in a really digestible package with no mistakes. Yes.

01:05:26:06 - 01:05:54:10
Lloyed Lobo
And if it is not super digestible. Yeah, then what does that do? It either derails the deal or if they're still excited because they know, right? Sometimes you just talk to customers, you know, the market pool, you look at the bank account in the bounds like it can't be they can't have so much money in the bank and and growth and like so then then you know, so then they walk you through it but like what I'm saying is fix the leading indicators, the lagging indicators will solve itself.

01:05:54:10 - 01:06:11:13
Lloyed Lobo
So, you know, to give you another example, startups are built in phases. So first phase is validation. You have an idea, you've got to get ten people to pay you to try it out. What is a leading indicator that ten people will pilot with you? Is you going to have 100 conversations? You don't have 100 conversations. Those things are going to happen when you get to product market fit.

01:06:11:13 - 01:06:34:05
Lloyed Lobo
Everyone just figure out product market fit. But what really is product market fit? To me personally, product market fit is when customers who said they'll use your product to try it out. They keep using it, they love it. So what is a lagging indicator or success metric of product Market fit is retention. Now everyone says fix retention. How are you going to fix retention If you haven't looked at the leading indicator of retention?

01:06:34:05 - 01:06:58:01
Lloyed Lobo
What is that engagement? If I'm not using the product for the intended use case day in day out, even if I signed an annual contract, I'm not going to. So it's the same way with this, right? If first thing you're setting in there is financials, make sure that is clean. It calms the rest of the conversation down. Make sure the execs and the other things we did well, execs are aligned with the conversation.

01:06:58:01 - 01:07:18:15
Lloyed Lobo
So you don't want to have North and South messaging like this is great companies, great relationships are built on great alignment. What is the purpose like? What is it forever? What is a vision? What do the world look like? Because we exist? How do we do it? The mission and how do we behave that the vision mission values should be crisp.

01:07:19:04 - 01:07:40:04
Lloyed Lobo
This is the other piece of advice that will solve it, right? One is having crystal clear financials. But but the key thing here is also communication. The job of a leader is to clearly articulate the vision to excite, inspire and motivate people. And you've got to do the standout.

01:07:40:11 - 01:08:03:15
Todd Sullivan
Just to tie that back to M&A, right? That story right Certainly the financial is has to be it has to be perfect. The story is really that second piece and having somebody who knows the buyer and what the buyer wants to hear as that story can tweak your story a little bit for each buyer. And that creates competition and that creates great outcomes.

01:08:04:04 - 01:08:14:21
Todd Sullivan
So I really appreciate all this time. I am going to ask you one last question, which is, you know, who would you like to thank in your life for all your and of professional and personal success so far?

01:08:15:16 - 01:08:37:06
Lloyed Lobo
Definitely. My mom. My mom never worked a day in her life to stay at home to look after us. And, you know, I thank her for that, for giving up her career when she could have had one. And my wife, she sacrificed a lot. I mean, being the wife of an entrepreneur who never brought money home for ten years is very hard.

01:08:37:06 - 01:09:03:21
Lloyed Lobo
When you have a family and you're living in the Bay Area. And she persevered and persevered. So those two people, of course, you know, I like to say that there is no self-made human being on this planet. Maybe, maybe there was one, but but there's none. Right. And everyone says it takes a village. I'd like to say it takes a community and lots of people to thank my my parents, my grandparents, my my wife, my co-founder.

01:09:03:21 - 01:09:22:22
Lloyed Lobo
Alex, if you'd never ask me to join him on this mission to build boast.ai, it would never happen. My co-founder in the Traction Community and co-founder of Traction Community Ray, who launch Academy, if he didn't say, I'll work with you because we're a bootstrap company, you can only do so many things. So building a community alone is hard.

01:09:22:22 - 01:09:43:15
Lloyed Lobo
So we built it with another community builder. That wouldn't have happened if. Jason Lemkin if, if I, if he didn't help us so much, meaning he gave us free boots at boast.ai. He made intros to some customers, some partners that ended up being multimillion dollar deals for us annually. If he wasn't there. He wrote the foreword on my book.

01:09:44:06 - 01:10:03:07
Lloyed Lobo
So there are a lot of people to thank, man. But, you know, if I had to take it to grassroots level, it would be my mom, because without her perfect perseverance and my wife's perseverance, I wouldn't even have the opportunities to meet any of these people. Right? I would be getting me I'd be having a job somewhere. You are.

01:10:03:10 - 01:10:22:10
Lloyed Lobo
I'll tell you a funny story. My name has an E in it, Lloyed with an E. And I kept asking my white mom throughout life, Why did you throw an E in Lloyed? Everyone mispronounces that. It's so funny. People make fun of it. And she said, Someday you'll have a business and you'll want to trademark your name and you'll be able to trademark that name.

01:10:22:10 - 01:10:25:19
Lloyed Lobo
So she and I feel like if she didn't will that into existence, it probably wouldn't happen.

01:10:26:08 - 01:10:52:12
Todd Sullivan
That's awesome. Lloyed, thank you. Thanks so much for the time and sharing the stories and awesome advice. I really, really appreciate it. Thanks again for listening to the Cashing Out podcast. For more founder exit stories, please subscribe to the Cashing Out podcast on Apple iTunes, Spotify, or wherever you listen to your favorite podcasts. And please remember exit dot com and the Cashing Out podcast are for entertainment purposes only.

01:10:52:19 - 01:10:56:04
Todd Sullivan
This should not be relied upon as the basis for investment decisions.