Part I - Exitwise CEO, Todd Sullivan's Entrepreneurial Journey - Hockey, the University of Michigan, and the Creation of his First Companies

Today, based on multiple requests from our listeners, my friend, fellow entrepreneur, and co-founder of Exitwise, Brian Dukes is going to interview me, Todd Sullivan, to help our listeners learn a little bit more about my background and how we came to start Exitwise. We'll take you through the four companies I've started and sold while sharing a few memorable stories about my co-founders, investors, customers, and acquirers that have made my professional journey worth the risk, the sacrifices, and the emotional rollercoaster that is entrepreneurship. This is the first part of a two-part series. We hope you enjoy our conversation.

Cashing Out Podcast | Episode 12 | Exitwise CEO, Todd Sullivan's Entrepreneurial Journey - Hockey, the University of Michigan, and Building His First Companies (Part I)

Todd: [00:00:00] Today based on multiple requests from our listeners, my friend, fellow entrepreneur, and co-founder of Exitwise, Brian Dukes is going to interview me to help our listeners learn a little bit more about my background and how we came to start Exitwise. We'll take you through the four companies I've started and sold while sharing a few memorable stories about my co-founders, investors, customers, and acquirers that have made my professional journey worth the risk, the sacrifices, and the emotional rollercoaster that is entrepreneurship.

This is a two part series. I hope you enjoy our conversation. Brian, thank you for doing this. Um, I was a little reluctant, but, but, uh, I guess this is requested, so happy to, happy to share my stories and thank you for being the Wanda to ask the questions today.

Brian: Yeah, it's, it's my pleasure. Thank you for inviting me to do this.
We have gotten, uh, a good amount of requests to hear more about your story. We're 10 episodes in or so. And have seen good growth organically in the Cashing Out podcast. And I'd say if there's a consistent piece of [00:01:00] feedback we get is we'd like to know more about Todd and his story and who he is as the CEO of Exitwise, beyond just the guests that we've featured.

So for those that don't know me, my name is Brian Dukes. I call myself the accidental entrepreneur. We'll, we'll get into that in a bit, but I'm the co-founder of Exitwise. Obviously a huge fan of the show and really excited to be here to help you kind of talk through that story.

Todd: Let me just say that the success that we've had on this podcast is more than I ever expected.
So we appreciate everybody listening in and really the credit goes to you. I'm asking the questions, and we have some amazing guests that are providing fantastic advice that really every business owner needs to hear. But the credit goes to you. You are the one orchestrating everything behind the scenes and creating the audience that we have today.

So thank you for everybody that's listening, and thank you. Brian for making this actually work.

Brian: Well, I appreciate that. Uh, it's easier to be behind the scenes than it is on, uh, on camera . Uh, so I think we often [00:02:00] like to start with kind of how we met each other. Yeah, right. I think that's a great place to start for our story.

We've talked about this a bit. I'm a bit embarrassed that we don't have that kind of one moment that we both recall that we ran each other a bit odd. You know, I'm the tallest guy in the class. You're the shortest guy in the class. . We would've , we would've run into each other in that regard at some point.
But you know, I think over the course of a two year program at University of Michigan, that first year, we're both in the same section. Section four, we have a common set of classes and curriculum that first year. And I would say to this day, we have so many common friends and that alumni base is so strong.
We do for the last almost 20 years now, a lot of kind of additional activities and football games and golf trips and all those. But that first year we were all kind of together and then we get into that second year and everyone kind of goes down their own path. For me, I was at Michigan to refine my finance marketing kind of operations skill set where I was more of an engineer undergrad.
And so I was taking a lot of those classes, trying to quite honestly get a [00:03:00] job. And you know, you came in with a different plan, a different path, right? That second year you were all about creating a business, creating jobs through that really, really strong entrepreneurial program that Michigan has. Right.

And so, although, uh, I may not have that memory where we first met, we certainly knew each other throughout that full run. And although our experiences were different, you know, I think part of this story is really fun because we've come back together over, you know, after almost 20 years to take on what we're doing.

Todd: Yeah, I think you didn't notice me because I was walking behind you and in the shadow of the Brian Dukes, but I think seriously touching on that MBA program, the University of Michigan, what a gift to be able to have gone there together. Gone there at all. Frankly, I know that the MBA is attracting a different type of student, and what I notice there is that everybody's very intentional about why they're there, what they wanna accomplish, and they, what they want their professional life to look like afterwards.

And Michigan really [00:04:00] enables that. So yes, I came in saying, okay, I've had an entrepreneurial success, but I need to really understand business better. And so I was very focused at the same time, very aware that my classmates are gonna be running the world someday. And all of these different facets, right, whether it's economics or art or philanthropy, like these are very, very special people.
So I, I made an effort to get to know a lot of people while I was there. So you went down a different path and I really stuck on the entrepreneurship. And you know, it served us both really, really well. Kind of a testament to that school is you could kind of pick and choose your path and know that it was just a first class experience.

Brian: Well, one of the things we talk about a lot that I think is interesting, so I grew up in a very kind of big business childhood, right? My dad worked at Ford for almost 30 years. My mom was a school teacher, then became an RN. And it was one of those things that I went to undergrad to be a mechanical engineer and I was gonna design windshield wiper blades, you know, [00:05:00] for most of my life.
Like that was gonna be my path. Whereas you, from a very early age, right, it was just, you were born into that entrepreneurial spirit, right? You have a childhood as you describe it, that I think we should dive into that it drove you to what you, you ultimately became, right. But very early on, you know, you were having different experiences than I was and yeah, I'd love to dive into that.

Todd: Yeah. So obviously you are influenced by your. You know, you, you tip your hat to your dad. My dad was a professional athlete, professional tennis player. He won the US Open three times. Billy Jean King was his double's partner. He won it once in the open era and twice before that. And he had a line of tennis clothes that he produced in Massachusetts and it's sold very well throughout country clubs.
And a lot of the professional, uh, tennis players at the time wore Paul Sullivan Sportswear. And so I spent a lot of my childhood growing up in that factory that just made tennis clothes. And when my dad finally quit tennis, what he found was he had to adapt [00:06:00] that business to selling other types of products.

And so making the t-shirts and sweatshirts and fairly unbranded apparel items and selling it to Big Box, I think JC Penney was the big name at the time, but grew up with that was, that's how you created your own kind of professional path. So in high school it was my first business and I had a car waxing business.

I did it before I could drive, right? I'd get either rides to places to wash people's cars that were either friends of my parents. I had one law firm where I could get all the partners. And I did that for three summers and it grew and I did it the first year by myself. And then I brought on a partner the second year and then the third year I had employees.
And boy you learned that. That was my first entree into, your employees are never gonna care as much about the finished product, your the service that you provide as you do. But yeah, entrepreneurship was in my blood. My grandmother was an entrepreneur. I knew I was gonna be an entrepreneur from a very, very early age.

Brian: So you're a hockey player, [00:07:00] you go to Yale to play hockey and have a prolific career there. You then go on to try out for the Olympics, the San Jose Sharks. And along that path, I think stumble into maybe your first real big opportunity with shocks.
Todd: Yeah, I mean, let me touch on something before that, right.
So going to Yale was an amazing gift and hockey kind of opened that door for me. And, um, I was very fortunate when I was there that I was a goalie and, and somebody, a goalie that was the senior, broke his leg. And, and I got to step in and essentially got to play for four years and really, really enjoyed that experience.

But when I was there as a freshman, my freshman year college roommate was the first and last Soviet citizen to ever go to Yale. So they've been accepted before, students have been accepted, but no one could get out of the ussr. And he managed to get out and the Soviet Union fell in our freshman year. So he had no money.

And we [00:08:00] said, Hey, in your new country, which is now Ukraine, he was from Odessa, Ukraine. There are gonna be all of these people that are gonna have to look for a new way to earn a living, and they're gonna start businesses. We should raise some money and go over to Ukraine and help this burgeoning entrepreneurial class.

And it was really my way of getting my friend home to see his family. But we raised this money from Yale alumni and we went over, and that was an incredible entrepreneurial experience to see people trying to traverse, building their own businesses with kind of government and regulation, really unclear and running really against them.

And we got really a first row seat to that in ourselves. We started businesses, so we were importing and exporting coffee and sales for ships and model ships and wine from Moldova. And we were just trying to find markets outside of Ukraine for it. And we went back and did it again the second year, and I would've gone back a third.

And I had that opportunity [00:09:00] to try out for the Olympics in 1994, so I couldn't pass that. But for me, seeing that new kind of group of people trying to start businesses in an environment that is so counter to the way we would think about a culture enabling and embracing entrepreneurship like we do in the us that was eyeopening.

So yeah, after college I try to with the San Jose Sharks and you know, had a great time. I wasn't good enough to make the NHL and ended up in the minors and realize there, that's probably not where I'm gonna last very long or have a real career. And so I started writing my first business plan on those bus trips.

And that was the company that you referenced shocks. And the reason it came up was I was asked to be a pro roller hockey player. I'd never been on those inline skates before and I threw 'em on and boy, I'd lost all my mobility as a goalie. And I was, I'm really small, so that's all I had was my ability to jump from one side to the other faster than the puck.

And those skates really took it away. I just, I just remember going, I can [00:10:00] fix this. Right? And, uh, so I developed out of cardboard what I thought the bottom of the skate should look like. That held the wheels, they call it the chassis. And it articulated in a way that allowed me to really move. And so I called a friend at MIT and called my brother and said, Hey, you guys, we need to make one of these.
And so we did, we made this prototype of what I had envisioned, and I, I actually have one here. So this is the original shocks prototype, and it is super heavy and it's really high, and you'd really probably get hurt trying to use this. But the chassis moved underneath your foot and your foot. You didn't lose balance when the chassis moved to accommodate quick turns or push offs, or even uneven surfaces.
So my brother and I, we said like, we gotta do this. And my dad gave us the money to file patent. While that patent process was going, we said, look, we gotta kind of hack our way into a real business and pretend we're bigger than we are. And so we were shooting videos [00:11:00] with, with our family members, and I remember my sister, we made her take her helmet off and she really couldn't skate.
And she flew around a corner, just slammed right into a building. And we were like, okay. We looked at each other like, we can cut that while my sister's lying, bleeding on the floor. And eventually we went to this trade show and we had prototypes that looked a little better than that, not much, and had music going.

And these videos of my family members, you know, dismembering themselves on inline skates. And we had K2 and Roller Blade and Oxygen and Mission all coming up to the booth saying, what is this? And we're like, yep, we're going to market. And you guys are in trouble. Right? Like a total. But all three of them were interested in new technologies.

We kind of played 'em off against each other. And eventually Oxygen, which was owned by the Amer Group at the time, which was the Oxygen snowboards, atomic Ski, Wilson Tennis, big sports conglomerate, they decided like, Hey, we gotta have this on our next line of skates. And so they licensed that product [00:12:00] from us.

My brother and I said, look, we're not gonna go into production. We have no idea what we're doing. Let's take this licensing deal. So we got to go to Austria and Italy and Germany to see like assembly and manufacturing and sales, and it was really incredible. And we were asked to present a lot of times and I had to skate on these things and do a lot of demos.

And that business just grew and we did it all out of the attic of my brother's fraternity house. We were making no money at the time. We really were only given money by my dad to file these patents. And I'm sure he was like, Paying for all our food, but we're living, I was sleeping on a floor in an attic and my brother was sleeping in the closet of that attic, and I didn't even have a key to get in.
I had to jump a fence to get in and out. So we had no money and this was, we're banking everything on, we're not getting jobs, we're doing this. And I'm spending a little bit of the money I made playing hockey. So yeah, they, they go into production and they start selling and we get a couple dollars for [00:13:00] every time they sell.

And we're like, this is fantastic. And we're learning along the way, felt like on somebody else's dime. And then oxygen came to us one day and said, Hey, we don't wanna pay royalties anymore. We just wanna buy your company, which is essentially a bunch of patents, right? It was intellectual property. Before I go too much further, I'll show you what that last final version of the skate ended up looking like.
Right. So way cooler looking and, you know, you could fly over any surface and it became less of, not, not a hockey skate, but it became a recreational skate. That's where the market really was for something like this. And, uh, very customizable in the ride that you wanted. In the end, production drove it to be a very expensive product, so the volume wasn't quite there.

And that's pretty interesting, like, cuz we didn't have any understanding of how it would really sell. There were projections on it and we were being paid on those projections. And the projections didn't quite meet up, but there were minimums built in, so they kept having to go over these minimums [00:14:00] and for them it wasn't economically viable to continue to pay royalties.

So they made an offer to buy the business and my brother and I were like, we have no idea what this is like to sell a business. We better hire a professional, somebody that does this every day. And so we do, we hire somebody and they do a great. They kind of package the business, they frame it, they project out what it could be, what is this intellectual property, how it could be used on a full line of skates.
And we end up coming to a number that we all agree on and we sell the business. And you know, that took just a couple of years. So it was this amazing experience of building a product, finding product market fit, creating like real economic value for ourselves and then having this exit. And it wasn't by any means, you know, a walk off home run experience, but you know, we had hit a single as first time entrepreneurs and, and so I like to say we lived to launch another company another day.

Brian: So does that tech still exist in the idea of inline gates?

Todd: Yeah, so that brings up actually a really good point. When the [00:15:00] company bought us, it turns out because the unit of oxygen was being sold by the Amer group and we were the last piece of kind of like out there dangling out there intellectual property that they didn't have full control over.
They needed our deal to close in order to sell this enormous division sports division. And one of the lessons here is if we had just known that piece of information, and I almost look back, right? We would never let something like that at exit wise happen. Our experts are gonna know what's going on at the other companies, right?

They're intimately involved in selling their businesses, understanding their mission. Our broker at the time had no idea that Amerigroup was selling off this division of the business. If we had known, you know, it could have been a 10 x different outcome for us. So it just goes to show that, you know, information in these m and a engagements is incredibly valuable.

So to your question, the technology got shelved and it was [00:16:00] purchased, the whole division was purchased by a company that was only gonna make skates. That went up to like $99 at retail. So everything went down to plastic and really, really inexpensive. So frankly I never saw another one on the shelves, which is really fun, by the way, to see your product up on a shelf at a City Sports or a name, the sports outlet.

Brian: That’s great. I don't wanna overlook something you said a few minutes ago that you wrote the business plan on the bus trips. Yeah. When you're a minor league hockey player, I, I mean, I assume that most hockey players are writing business plans for their kind of future business while they're traveling between what, Des Moines and...

Todd: Yeah. Something else. Yeah. That, that brings up a lot. Um, so I was not very good, so I kept getting traded from team to team, but the team I spent the most time with was the South Carolina Stingrays. And when I got there, there was another player from Yale there and, and I drove up in my little beater car and met them on the road to do a pregame practice.

And he quickly pulled me aside and said, don't [00:17:00] tell anyone here. You went to Yale, we will get killed. Right? So, uh, I think these guys figured out and their greatest guys, right? Just gotta get to know everybody and party a little bit with 'em and then, you know, friends for life. And they knew that I was gonna be different and so they kind of left me alone.

They just let me go in, in a bunk on those bus trips and right away and then they'd ask questions and it was really cool. I think one guy ended up opening a subway after here. His career was over and he had that plan in his, in his mind. And we used to talk through that. Not that I was a, you know, franchise expert, but I think they saw me that way anyway, so I was relatively safe.

Brian: That's great. Okay, so, because I know the story, I guess we get to the next product that I think you came up with about the same time is SHOCKZ.

Right? And I've heard the story a couple times and I'm, I'm excited to hear you tell it each time because it is really quite amazing. So I'd love you to dive into…

Todd: Yes, I know where you're going to Capball. So, so, you know, my brother and I, as much as we like to think that we were helping [00:20:00] sell this product, right, we were just learning that was the, that was shocks the skate.

And we could think about iterations. We had a hockey skate that we thought might roll out next, but really we're like, we have to come up with something new, right? If we're gonna do this long term. And so my brother came up, he just heard a story that some kid had been shot by a police officer because the kid had a cap gun and was firing it at the police officer.

And after that, the news really took hold of this story. And Kmart and Walmart and toys are us all dropped cap guns from the shelves. They said no more. And the problem with that economically for those stores is that the business of caps was really good cuz you're selling paper for like 800 times markup.

And so my brother came up with this idea, what if we use caps in sports equipment? So when you swing a bat and hit a ball, bang, you know, off go of the caps or you know, you shoot a hockey puck and you hit a target, bang, all the caps. Same with [00:21:00] archery, bowling, all of these different sports. And so we'd like, okay, let's prototype this.

And we're taping caps to every sports thing we have and uh, I mean we had footballs that had 'em and they'd like spark off when you caught a football and just like in the end, right, there's some safety concerns. Sure. But what we came up with was cap ball. And I'll show you this product, so I don't know if you can see this.

So you would load the caps on the. And we made these plastic balls that were injection molded and they have little dots on them, so when the dots spin, they create a lot of friction. So you really just had to touch the cap and bang, you'd get this explosion. And you can see, I guess on this side, my brother that is my little, little brother is the model.

And you know, we have the history. He looks like he's having a great time. Oh, it, yeah. I think it's spent, we spent like two weeks in photo tr trying to get his teeth white. But what a sport he, I think he shot that for four hours to get one shot [00:22:00] right in the packaging. And then you'd have caps right on the side and you'd reload.

So you'd get to hit the ball like 10 times and then you'd reload these caps. And it was really fun to play because you get this like bang and it was just like playing wiffle ball, except you had cap. And so my brother said, all right, how do we sell this? And we didn't know anything about kind of online shopping at the time.

It was 1997, ‘98, right around there. And so somehow he figures out how to get in contact with the founder of Toys R Us, Sy Ziv, and I don't know how he does it, frankly, but he gets this guy on the phone and tells him that he's got these new products and that he's gotta see 'em. And so Sy Ziv is gonna be in New York at the JT Center for the toy show.

This is in New York, and that he will give us 30 minutes or something like that. He's gonna take the meeting, not the purchasing team. Right. So Sy Ziv, that's amazing. Who I guess doesn't work at Toys Re anymore, but he founded it and I think he's on the board or [00:23:00] certainly has some influence and has, you know, a presence at this to.

So my brother's like, we gotta go meet this guy and present all our stuff. So of course, right. So we're feverishly working to build stuff and prototypes and that, you know, that's a prototype. We printed it all out and it's held together with staples. And anyway, we get all of our prototypes and we put in a big cardboard box.

And this is, it's like, it's just all we had, right? It was a, a big car box that you think you get from Amazon today, right? And we've got duct tape all over it. And even the strap from one side to the other is just rolled up duct tape. And it's where we can get everything in into one thing. And we're like, okay, now we have to make it to New York for this meeting.

And we know, like we have one car, which doesn't run very well, so it's only good for maybe five, 10 miles at bass, right? So maybe you could get to a grocery. So we call a friend who has a car. He's like, okay, I'll lend it to you. And we map it out like, okay, it's probably what, two hours, two [00:24:00] and a half hours in New York?

And we're like, no, no, let's bake in four hours because something could go wrong. So sure enough, we load up this car, we're driving, we're about an hour and a half in car breaks down, breaks down on the highway, and we're like, oh no, but we got, we got a lot of time, so we gotta figure this out. So we, we push the car over to the side of the road, just off of the breakdown lane, and we start thumbing, and it's two kids essentially in jacket and tie with this big cardboard box, right?

That nobody knows what's in it. And we're thumbing and somebody pulls over and says, Hey, I'll take you to the train station. When they hear where we need to go, they take us, I don't know, 10, 15 minutes, get to a train station. Sure enough, there's a train coming, but we gotta wait an hour for it. So we're just losing time.

Eventually train comes and we jump on the train. We're excited, but we're nervous. Like things are not going that well. It's getting tight now. It's getting tighter and for whatever reason we start talking to the people in our car, our train car. And there's a couple of guys there that think it's [00:25:00] hilarious that these like two guys are in, in suits, two little hobbits holding a bunch of sports equipment in a big cardboard box and we're telling 'em about the meeting and getting people excited for us.
And then the train stops and over the loud speaker is, the train is broken down, we're missing apart. Some the we're gonna have to wait for a part. We could be here a while. And I just remember my brother snaps. He's like, no, right, we gotta get to New York. This is our only. And it kind of speaks to that energy and fire that an entrepreneur has.

It was like a broken down car and a broken down train is not gonna stop my brother. Right? And what exacerbates the situation? Are everyone in the car kind of knows our story at this point because they think it's funny. And these two guys start egging my brother on like, you gotta jump the train, you gotta jump from this train.

You guys gotta get to New York. And so my brother turns to me, he is like, I'm going. And he, I'm like, well, what? He goes, just [00:26:00] be ready when I come back. You get ready to jump too. And I'm like, what? Wait, what are you doing? And he, he runs the exit. He kicks the emergency thing and pulls a handle and jumps from the trend.

And what he didn't expect is that when you're on I 95, right? Or just off of an I 95 on the tracks on the East coast, the pitch of where he's gonna land, he lands in gravel and then dirt and it's raining. So he just slides down this pitch into the woods and he's gone. And the whole, and our, and when, when our car saw what he was gonna do, everybody got up on both sides of the train.

They came up, they're looking at the glass, and they're watching this kid in suit and tie, jump out and just slide through the mud in his coat and tie and disappear into the. And so everybody's looking at me like, oh my gosh, what can you believe? He just did that. And then security comes over and they grab me and they're like, it's a federal offense to jump from a train.

You can't do that. I'm like, Hey, I don't know what just happened, right? I'm just trying to play a little low key. [00:27:00] Everybody's like, you gotta go with him. People are like cheering. People are cheering and I'm just doing what my brother said. Like, I'm gonna wait. I'm gonna wait until he comes back. So do you have the box or does he have the box?

I, I got all the equipment with me. Right. Okay. All right. So anyway, we wait and we're like, he's gone. Nobody knows anything. And I would say 10 minutes go by and you see, and people are watching and I hear, there he is. And they see this kid in coat and tie climbing up like hand, foot, hand, foot up this mountain of gravel and.

And the thing is, he comes up to the wrong train car. Sure. Because he can't see in and it's all blacked out. And he just starts waving his arms and he realizes that he doesn't know what car I'm in. And so he gets close to the train and just starts running up and down. Three or four cars just waving. And everybody's like, you gotta go.

And security's right there. And unfortunately, and I feel bad to this day, that security was a 70 year old guy Right. With his hand on my shoulder saying, you're [00:28:00] not going anywhere. And you know, obviously I'm gonna go wherever I want to go. Sure. And I thought I pushed him out of the way. I really just dropped him and ran right over him.

And I feel terrible, and I hope he's okay. But I got to that security door, kicked the emergency, and I jumped and knowing the pitch, I, you know, I, I landed right. I slid down, but I've got huge box in my hand. You're soaking wet. We run through the woods and on the other end is the highway. And my brother has managed to flag somebody down.

We're about 45 minutes outside of New York at this point, and this guy in a moving van looks at the two of us, lets us in and drives us right to the front of the Javit Center. And we get to a size of his office and we're 12 minutes late. He looks at these two guys covered in mud all wet, and we're just like, we're here.
And he says, I don't even want to hear what you guys are doing. Just pitch me all your products set up. And so we did. We set, set everything up. He loved it. He said, uh, you know, I want to give you a [00:29:00] test, and toys are us. And uh, he asked about the patents that we had on these caps and toys are us. Uh, and, and whoever, his team, they looked into the patents and found that there was a patent out there that somebody had done basically what we had done on a golf club.
And there was an old patent. It wasn't that they, we wouldn't be able to make what we had presented, but we wouldn't be able to control kind of the pricing and everybody could do what we would do. So Toys R Us dropped the test. We never got into Toys R Us, but it was a long period of time while that was all happening that we were so excited that we had done everything we possibly could to get to Civ and we were gonna be in toys or us.

Brian: This is a story that I first heard and said, there's no way that this is, this happened, right? Yeah. Until I heard your brother independently tell this story. Yeah. without you. And it's literally to the detail, it is an amazing story. Yeah. And I think beyond just being fun, you said it right.

It speaks to when you're an entrepreneur, right? [00:30:00] That's in your. And you put the amount of time and effort all, you know, all jokes aside into what you've created here, you're gonna do anything to get to that meeting to be successful each and every time.

Todd: Absolutely. And I think, you know, it also, it speaks to like enjoying the journey, right?
And the people that you're on that journey with. I don't know who else I could have gone through that with and my brother. The willingness to do what he did, right. And me, the willingness to join and, you know, we'll do anything to try to make it work. And ultimately that didn't work. And we kind of bundled those two products, the skate and shocks together and sold off the IP of what it was.
And, and we said, all right, that was, uh, one for the ages and, and we'll both go on to do our next thing.

Todd: Yeah, so that was cap ball and you know, we have examples of it and play it at home on occasion for Christmas to reminisce.

Brian: That’s amazing. Okay, so now we get to Michigan.

Todd: Yep. We both go to Michigan. What is it at that point, 2005? Before that, a after it, we sold that business. My dad was producing products at that point T-shirt sweatshirts in El Salvador. And he'd jump from kind of country to country chasing low cost. So he was there the last 13 years were of his business career was in El Salvador.

And I decided to join him for a few years and see how, you know, large scale production happens. And so that was just eye opening to see how a product is made and at very little cost. And then see how that product sells at a Walmart for 10 bucks and a Banana Republic for 20. And where does all this [00:32:00] cost go?

And thinking like, okay, let me take this kind of newfound knowledge and go to business school. So I was like, I wanna start a company. I wanna figure out how you go from factory floor to a person's home with a product. And that was kind of the an idea and thinking like, yeah, maybe I can figure out product.
But figuring out a real business, an organization to surround that product and make it successful would take business. Yeah, off to Michigan focused really on entrepreneurship for a couple years.
Brian: You won a fairly prestigious award right through that process. The Entrepreneur of the Year at Michigan. Yeah.

Todd: Graduated as maybe There weren't many of us there, so I was the last man standing. But yeah, I mean, Michigan was enormously supportive because I was doing business plan competitions all over the country. Went to the world competition in Austin, Texas, and teams from all over the world were competing. Um, I think my partner and I, Ben Lewis, we placed first in the business plan competition and second overall in the pitch.

[00:33:00] So Ben wrote the plan and came in first, and I fell apart in the finals and we placed second. And what was awesome at that event, Google called Ben and said, if you can build businesses like this on your own, come build them for us. And so Ben made the smart move to not go into business with me, uh, but to go to Google and report to Sergey Brin and Larry Page, of course.
And we've had him on the podcast and you know, he is done amazing, amazing things. But yeah, Michigan was amazing, right? The, the support that you had when you entered that school was not only from the students and all the professors, but they just felt like they were organizing around you to. Your success.

So it was just emotional support. It was financial support, it was everything. I had coaches traveling around the country with me to try to win business plan competitions. So yeah, I got good at that. It is not the same as running a business successfully, winning a [00:34:00] business plan competition, but invaluable experience and eternally grateful for what Michigan has given and continues to give me.
Brian: It's really exceptional, right? I went into that program, you know, wanting to clean up my finance kind of background and really learn some tangible skills. And although I certainly did that and you know, the curriculum was great, as I look back, it's really unbelievable the network that has been built, the alumni that continue to graduate from that school, the connections that we have, whether they're partners in our business or supporting our business or just doing incredibly well in all of these different industries themselves.

It's really unbelievable and I am so thankful for that experience that I had in Michigan, and I know it, it means so much to your life as well.

Todd: Yeah, it's a very, very special place because you and I today, we can pick up the phone and if the person on the other line went to the University of Michigan, no matter who they are, they're gonna pick up that phone and give us time.

And they're not asking what's in it for me. And I think that that attitude is something when you [00:35:00] see it and you feel it, you wanna be part of it. And so the wheel starts to turn right and you and I give a lot back to the university. I talk in every class. I have a chance to, I judge all the business plan competitions.

I reach out to the students and you know, try to give back just a little piece, even if it's a mistake that I made. Don't make this mistake. It's just a feeling that you have a gratitude and something that you want to continue. When I talk in any of those classes, whether it's entrepreneurship or engineering or school of information, I tend to finish every class by saying, I want all of you to look to your right and now look to your left.

And those are the people that are gonna be running the world someday, and you are gonna help get them there. And that's what's really special about the University of Michigan and the Ross School of Business.

Brian: Yeah, that's well said. So we graduate. We graduate what? ‘05, is that right? Yes. What do you do on that first day post-graduation?

Todd: Yeah. For me it was, uh, I had already started a company in school and I was recruiting [00:36:00] co-founders and employees, and so I don't even remember the kind of graduation day, bled right into the fundraising and the building of that company. And Michigan gave me so much access. This amazing co-founder guy that already built an enormous business at Michigan and ad agency, essentially digital ad agency.

I couldn't even explain it at the time. I didn't know what it was. And he sold it to Yahoo and he was the first one that said, Hey, let's put a real economic model around this business idea of yours. And we founded Spirit Shop together. His name was John Behrman. And John really pushed me to be better as an entrepreneur.

I can still remember modeling with him and how the lesson for a lot of entrepreneurs as a business is built in Excel, right? It is the business model, and you can talk about your brand and your colors and your message to customers and anything else, any of the kind of softer things. But unless the economic model works, your business is not going.

John was a fantastic product person too. [00:37:00] So we built the company called Spirit Shop, and the idea for Spirit Shop was to take every store that was inside a high school across the country and there were, you know, 20,000 high schools. And instead of having kind of the local screen printer take six weeks to make 12 shirts that I'll look the same, let's give them the ability to have a full line of products on demand, no inventory all ordered online.

And so we built these 20,000 stores for every school in the country and we outsourced the on demand production, which I kind of learned down in El Salvador. And we went into business and we'd raised some capital and that business was super exciting to build. And really John drove kind of the product side of that, and it was incredible what was happening on the web.

The ability to customize a product back in 2005 was not easy, so he jumped a lot of technical hurdles to get that done. We just got to a point where we were having [00:38:00] inbound interest. There was a much bigger competitor backed by Kleiner Perkins. And, um, for the people that understand or, or know about venture, John, do you know, just one of the most famous venture capitalists at the time was on the board of this company.

The company was called Zazzle, and Zazzle made an offer to buy us, and we had to make a decision at that point. Do we go out and raise more capital to grow and dilute ourselves or do we, you know, take kind of burden, hand return capital and dollars to investors and ourselves? And, you know, when we got the number where we wanted it to be.

And I, we did that frankly with Rick Snyder. He was kind of a, a tacit board member and investor walked us through that kind of m and a discussion. So we didn't hire anybody at that point. He walked us through it and we got to the point where we were happy and I flew out to Redwood City, California. And they showed me where my office was gonna be.

I met everybody on the Zazzle team. They drove me where I should find my apartment. And basically [00:39:00] they told me, we don't need any of the employees, we just want you. We have the technology, we don't need the marketing side of it, we have the production. And while this was going on, they said, why don't you move all your production over to us?

We'll give you better pricing than you have in your outsource model. And so we did that. I went out there thinking we had sold the company. We were weeks away from signing. And I'm in the office and I get a tap on the shoulder by Zazzle president, the president of the time, or I guess he was head of M&A at the time, and he says, I'm sorry, we're canceling the sale.

And I was like, what do you mean? And he said, it's August of 2008 and we just, we're in a board meeting right now and they told me to come out and tell you they're saving all of their cash and they're telling every company that they've invested in Save Your Money. Wherever you can. And they canceled five acquisitions on that day.

They had bundled them all for signing at this board meeting. So, [00:40:00] you know, I'm stunned in the process of going through this. We told all the employees, you won't have a job here, so we'll keep paying you until you can find something new or until we're purchased. So everybody found something new and I came home kind of tail between my legs to Rick and the board and said it fell apart, right?
Like we were all gonna be, you know, in the money. And for me, I was really excited to work for a Kleiner Perkins backed company. So professionally I thought, wow, I get to go to Silicon Valley. And it just disappeared with like in minutes. It was really amazing. So the only thing to do at that point was we had to shut the company down.

We, we didn't have any production, no employee. All our production was by Zazzle, and as soon as they canceled it, they hiked up the prices on us. And so it wasn't even economically viable. And to switch back to anyone else that we had just kind of canceled was really tough. So I ended up just telling the investors, we gotta shut down.[00:41:00]

And we had some like credit card debt. I agreed, agreed to pay all the debt in exchange for the url, spirit And so it was, it, it went from, you know, making millions of dollars and having a really nice exit for everyone to just disappearing because of a macroeconomic environment, frankly.
Brian: Yeah, I know a lot of businesses were obviously affected in that downturn as well as recently.
Right? It speaks to the, you never know what's around that corner, right? Okay. You could have an amazing business, you can be 99% of the way through a process, a transaction, and the the rug can get pulled out from under. Right? Yes. Um, I guess that's, that's probably the learning, right? I mean, in some ways there's not anything that you did wrong.

It's that the kind of macro world just kind of changed everything at the last minute and, and put spirit chop in a, in a bad spot.

Todd: Yeah. I mean, we always hear the term time kills deals, right? And we've seen it, right? We had a big aerospace deal right before Covid, eight days before signing get [00:42:00] crushed because the buyer did the exact same thing that Zazzle had done for me.

So it's not an anomaly. This stuff really, really happens. And that was a phenomenal life changing exit for that founder. And it all crumbled because of what's happening on the world stage. Nothing they really did wrong. The advice I would say is, you know, once you're going down that path of selling, you wanna be very diligent in watching the clock and not worrying about things that are not material.
You get your deal done when you've decided to get it done, go get

Brian: it done. I'm curious, looking back, if you were the advisor today in, in your shoes at Exitwise. How would you counsel a founder that was contemplating that transaction and contemplating moving on from their employee base and migrating production before the paperwork was all said and done?

Todd: Yeah, I think the advice would range based on the size of the company. You know, ideally we would've had a signed LOI with a breakup fee, right? So some economic deterrent for them to [00:43:00] do what they had done. Now, ultimately, would that have done anything other than put what, $500 grand in our pocket? The business would have been decimated.
So I think more the learning is that several steps before that probably should have been more conscious of where we stood economically and had the cash and the employees and production make sure we had a second option. If things didn't go forward. We really put a lot of eggs in this basket because the whole process was like, this just makes so much sense for everybody.

You know, what could derail this? This acquisition was worth a lot of money to them, and I was coming over and building a new division for them that I really understood and they didn't. So the whole thing made sense, but we really should have had, you know, plan B thought through and properly financed and staffed.

That would be the lesson.

Part I - Exitwise CEO, Todd Sullivan's Entrepreneurial Journey - Hockey, the University of Michigan, and the Creation of his First Companies
Broadcast by