The Wise Exit

Tyler Hall - Episode 36 of the Cashing Out (M&A) podcast

00:00:00:17 - 00:00:39:11
Tyler Hall
There's a radical misconception in Startup-Ville, which is if you're building a company, it's the only thing you eat and breathe and sleep and think about and pay attention to and prioritize. And it's bullshit because I promise if you do that and you allow your relationships to go away and you're not figuring out how do I develop the deepest and most connected and meaningful relationships possible with the people that I love, nothing else actually matters.

00:00:40:29 - 00:01:04:27
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. On today's episode, I speak with Tyler Hall, a serial entrepreneur and founder of Drivably, a resource inventory platform for car dealers.

00:01:05:09 - 00:01:36:13
Todd Sullivan
Tyler sold his business to a highly strategic public company, ACV, which was the leading digital automotive marketplace for car dealers. This exit was a home run for Tyler and his team, but his stories and advice about getting this deal done are priceless. In our conversation, Tyler and I not only talk about how he learned about building and selling companies from some of the top Silicon Valley entrepreneurs of our time, but Tyler also shares very private and painful moments along the way that changed his personal and professional life forever.

00:01:36:26 - 00:01:58:08
Todd Sullivan
I hope you enjoyed my conversation with Tyler Hall. Hello, everyone. I'd like to take a minute to highlight this week, sponsor Doeren Mayhew, a top 60 national accounting tax and M&A advisory firm who we frequently recommend to conduct sell side QofE or quality of earnings for our clients. In 2023, there are a lot of things changing in the world of M&A.

00:01:58:17 - 00:02:22:21
Todd Sullivan
Economic headwinds failed banks and big bankruptcies. But with the credibility of a sell side. QofE from a top firm like Doeren Mayhew more buyers will look at your deal. Buyer diligence will run faster and your investment banker will be armed with clean financial data to be able to address any buyer questions with well-conceived responses. What this really means is you're more likely to maximize your exit.

00:02:23:06 - 00:02:47:11
Todd Sullivan
Doeren Mayhew you is one of Forbes best tax and accounting firms in the United States. Check out their quality of earnings offerings and everything else they can help you with at Doeren.com. We'll make sure to put a link in the show notes. Tyler, thank you for being here. I really appreciate you taking time out of what is a busy schedule.

00:02:47:11 - 00:03:09:17
Todd Sullivan
You're you know, on the board of so many companies you're helping out so many founders you've got a podcast. But I was so excited to get into your story. I feel like I have a kinship with you because you've done multiple companies and now you transition out of that to truly helping our fellow founders. And really that's where my partner and I find ourselves today.

00:03:09:28 - 00:03:15:25
Todd Sullivan
So when we had the opportunity to get you in this time slot, I had no problem bumping Mark Cuban, So thank you.

00:03:17:04 - 00:03:20:14
Tyler Hall
Yeah, Mark's a slouch, so thanks for having me on. I appreciate it.

00:03:21:29 - 00:03:43:21
Todd Sullivan
So. Well, I, I really want to get into Drivably, right, because I think there's a lot of lessons from that M&A experience. You built up this amazing company, but maybe you could take us back. You know, you've been an entrepreneur before that and you've worked with companies that have exited before. So maybe why don't we start where you think is most comfortable to kind of give our audience some background on you?

00:03:44:15 - 00:04:04:09
Tyler Hall
Yeah, happy to. So I'm 21 years old. I'm going to school in Salt Lake City, Utah. I'm broke as a joke. Newly engaged, you know, school, full time, work full time and saved up enough money to buy my first vehicle. Right. So I wasn't like one of these sort of super fortunate kids, like I said, of some money.

00:04:04:09 - 00:04:23:09
Tyler Hall
21, buy this car, realize I got a great deal on this car. And so I decided, you know what? I'm going to try to make a buck. So I listed this vehicle and I sold it. I made a thousand bucks and didn't make a whole lot of it. Still need a car, went out, bought another car, and that work the next day realized I got another pretty good deal.

00:04:23:19 - 00:04:42:09
Tyler Hall
So I turn around and I sell that one. I make $2,000 at this point and I'm pretty smart, right? I'm like, you know what? I'm going to I'm going to buy some more. I'm going to see if I can keep doing this. So over the next 90 days, I bought and sold about 20 cars. And I walk into the DMV this one day and it's this nice old lady's like, Hey, Tyler, like work?

00:04:42:09 - 00:04:58:19
Tyler Hall
No, on a first name basis, right? Sure. Yeah. She's like, Do you have a dealer license that you forgot to leave with us, you know? And I'm like, No, what? What is that? She's like, Do you have a broker? Are you a wholesaler? Like, who are you? I'm just like, you know, I'm just a college kid, like, hustle and making money.

00:04:58:19 - 00:05:16:10
Tyler Hall
And she's like, Yeah, you can't do that. That's that's illegal, right? And I'm like, Whoa. Like, so all of a sudden here I am thinking I'm slick and I have this nice old lady telling me like, you're breaking the law. And so I go, You know, this time tight. I'm like, Rich, I've like all this money. I'm like, okay, cool.

00:05:16:11 - 00:05:34:03
Tyler Hall
Like, do I need to pay a fine or something? And I'm thinking, I'm slick, right? She's like, you. No, actually, this is a Class B misdemeanor. I'm supposed to report you to the police like you're an adult, you'll go to jail. And I'm like, Whoa. All right, So, like, I remember, like, breaking down in the DMV, like, please don't do that.

00:05:34:03 - 00:05:58:02
Tyler Hall
Please don't throw me in jail. Right? And so I get a slap on the wrist. She says, Here's a packet to apply to become a car dealer. And so I don't I, I look at this packet, I go, You know, that's not me. I'm a full time student. I can't do that. Blah, blah, blah. And to make a long story short, I figured out a loophole, which was if I could convince a car dealer to let me use this license, I could keep flipping cars.

00:05:58:02 - 00:06:17:27
Tyler Hall
But now I had to charge sales tax. So, you know, I ended up buying and selling about 200 cars going through school. I'm a junior in college. I realized college is not for me - I drop out of college. And I joined a startup. My brother, you know, I learned a lot about the auto space. I learned that there was much problems I wanted to solve using technology.

00:06:18:18 - 00:06:45:25
Tyler Hall
And my brother gave me some of the best advice possible, which was, hey, instead of like going and pursuing, you know, sort of traditional education, like go join a startup, I got to learn inside of a company from a CEO that you want to become, right? So there was a guy in Utah at the time named Josh James, who had founded a company called Omniture that was acquired by Adobe for almost $2 billion and the biggest exit in Utah history.

00:06:45:25 - 00:07:08:28
Tyler Hall
And my brother knew him and he said, Hey, go work for Josh. So I joined Josh's second company called Domo, was early there. We raised almost $1,000,000,000 of venture capital. I was there three and a half years. We grew from about 30 people to almost a thousand people in the time I was there. So this crazy, crazy rapid growth learner turn left there, went to another company that was backed by Sequoia.

00:07:08:28 - 00:07:28:12
Tyler Hall
We had raised about 100 million at this company called HireView and was early there. We ended up selling that company for a half a billion dollars. And so here I am, this young guy, and catch these two waves with these two companies and truly toll, like I learned over seven years, this wasn't like one year or two years.

00:07:28:16 - 00:07:42:27
Tyler Hall
This was seven years. I learned from some of the best entrepreneurs in sort of Startup-ville and learn how to build a company. So January 2018, I left the know startup world to start my own tech.

00:07:43:07 - 00:08:06:19
Todd Sullivan
So what a great beginning. So I don't know if we have time for it on this podcast, but I started very similarly. I found a car dealer in Massachusetts that was willing to give me a sub license and so I would go to the auctions and I would buy cars and sell them to friends. And then I started listing them and yeah, realizing that sales tax was the hardest part of actually making money for me in doing that.

00:08:07:00 - 00:08:30:10
Todd Sullivan
Yeah, that was a really fun experience and similar. What an opportunity to get to learn of entrepreneurship through guys like that that you're getting to see the building of the company, the fundraising, the company, getting the product market fit, the unit economics right and scale right. That's kind of rare ever. So I'm sure you learned a ton there and but you obviously had built in some confidence.

00:08:30:10 - 00:08:57:04
Todd Sullivan
Sounds like you had entrepreneurship in your blood already. So in 2018 you take the leap. But actually before that, did you see any of the M&A process with those two particular deals that you were in or two companies you were working for? Was there like a moment where you're you knew, Oh, this company is being sold? They have to tell us any insight, because I think a lot of our founders, right, are looking to sell a business someday.

00:08:57:09 - 00:09:05:29
Todd Sullivan
But a lot of people listening are also employees at companies that could get sold some day. So any kind of insight from your seat in those two M&A transactions.

00:09:06:10 - 00:09:29:06
Tyler Hall
Maybe the insight I’m going to share is not going to be popular or fun for some people to hear, but it's real domo. You know, there is so much money tied. If we raise $900 million of venture funding, which was at the time the highest funded SaaS company in history, no company had raised this much venture capital for that. So do you know how to spend $1,000,000,000?

00:09:29:12 - 00:10:00:09
Tyler Hall
Like it's pretty hard. So you have to like you have to just spend it. So every meal was catered, breakfast, lunch and dinner, right? We were hiring as fast as we could, and you know, And I think there was some good quality control. I'm not saying we hired anybody and everybody, but like, we grew like, pretty irresponsibly at Domo, I would say at the moment to the point where the company at one point our CEO was such a good fundraiser because he had this massive exit previously and everybody in the world wanted to back him, that he could have probably raised two or $3 billion.

00:10:00:15 - 00:10:34:02
Tyler Hall
I remember having conversations with him saying, Yeah, we have guys like Tiger and Viking and some of these massive growth funds that are willing to like do anything. And so the thing you have to be aware of when you're an employee is, yeah, yeah, you have stock in the company, but the higher the valuation goes the earlier in the company, especially when you're not like a real business and there's not real economics, like you have to continue to grow into that valuation and you have to continue to, like, grow at the right pace and enough to get the next round higher.

00:10:34:02 - 00:11:01:09
Tyler Hall
And when you IPO, it's got to. So ultimately I think the company at one point was valued at around $4 billion and when we IPO it was under a billion, right. So think of how that works for the economics of all the shareholders. It's not good. Okay. So as an employee, you have to like track that stuff you can't lose sight of, Oh, this is just look at all this hype and everybody loves us and we're raising all this money and customers and it's like, Yeah, but you have to know where you are.

00:11:01:10 - 00:11:25:03
Tyler Hall
You fit in the sort of preference of how a liquidity event would work. So ask questions, be curious, talk to the CFO, talk to the CEO, Whoever's willing to like, share that intel with you, I think is important because last thing you want to do is get strung along thinking you're going to have some significant event. And then when there's a liquidation event, all of a sudden you're like, Oh, I'm actually like bottom of the totem pole.

00:11:25:03 - 00:11:32:08
Tyler Hall
We had a down round and I might not I might not get anything right. So I think that's part of the biggest learning that is.

00:11:32:09 - 00:12:02:15
Todd Sullivan
I mean, it's so poignant. We were tending to talk to the founders themselves, right? The ones that own the majority of the equity and the conversations we have with them is, yeah, you may have an opportunity to raise a bunch of money, right? And you're going to take dilution to do that. And now you're going to have to grow this company five times and have an exit to, you know, very few buyers in the billion dollar range or you have to go public to get the same ROI that you could potentially get today.

00:12:02:23 - 00:12:21:21
Todd Sullivan
So we have that conversation. But what you're bringing to the table, you know, it's not just you, it's everybody that is in that option pool that, you know, is bringing you to the promised land and they deserve something. So I really appreciate you bringing that up because I see a lot of money thrown at these companies in later stages.

00:12:21:29 - 00:12:43:21
Todd Sullivan
And you might see a valuation number that is through the roof. But you have to understand that that late stage investor has also derisked those dollars in a way that isn't just kind of dilution, $1 to $1. Those are interesting structures that are not necessarily benefiting, you know, the employees in an option pool. So thank you for sharing that.

00:12:44:04 - 00:13:00:05
Todd Sullivan
Let's jump into to the company Drivably, right? So you've got your idea in hand. You you've got some great experience behind you seeing the full lifecycle from amazing entrepreneurs. So you must have a ton of confidence. Did you go out and kind of fundraise for for Drivably?

00:13:00:15 - 00:13:25:18
Tyler Hall
The interesting thing that I did was the idea that I had was more on the market. So the idea was this market's behind, there's a hundred things we could probably solve. I don't know which one we're going to choose, but I'm so bullish on the market that I'm going to go all in. So what I did was when I left HireView, I now had like some funds, like enough to like go and start my next thing and have a nice cushion for a couple of years.

00:13:25:18 - 00:13:44:25
Tyler Hall
Right. And this is always like for aspiring founders, this tends to be the biggest like thing that's either going to allow you to do your next company or stop you, which is do you have a little bit of a nest egg where you can be comfortable eating shit, making no money for a year or two years, three years?

00:13:45:08 - 00:14:06:21
Tyler Hall
And and that's important if you want to do it like you got to, you've got to like, sacrifice upfront, build that nest egg a little bit or it's going to be really, really painful when you go to start your company. So, you know, so I had got myself into that position and what we did was instead of like just building products and relying on dealers to give us feedback, we just became our own dealer.

00:14:06:25 - 00:14:27:17
Tyler Hall
So I started out by building a dealership first know, and then we incubated. I had like 30 ideas and I took those ideas and I crowdsourced them against a bunch of people that know the space really well and dealers and potential customers. And I said, Which of these would be the most interesting? And pretty quickly, within about a week we had narrowed that list down to two things.

00:14:28:07 - 00:14:53:00
Tyler Hall
And those two things were if we could help car dealerships understand what cars to buy, where to buy them from, and how much money to pay for used vehicles to maximize profit margin. We think that they would pay for that. And secondly, if we could help car dealerships acquire consumer vehicles as a source of sustainable supply at scale, we also think that they would use that because today they can't do that.

00:14:53:00 - 00:15:15:05
Tyler Hall
They're relying on traders and people walking in their door. So we ultimately settled on those. We incubated those two products. It's out of our dealership. I was prepared to run this dealership for two or three years until we got to a place where we felt like we had some semblance of product market fit and after a year like we had some conviction and so sold the car dealership one year later, that was actually a good business too, which was great.

00:15:15:24 - 00:15:42:16
Tyler Hall
And then January of 2019, we spun out Drivably and I went all in on that. And so we went out. I pitched about 55 weeks before I got my first yes. And at first, yes, by the way, I was two weeks away from being totally out of money. And we got that first. Yes, 750,000. And then right on the back of that, you know, that signal that was sent, we got a couple of more yeses.

00:15:42:16 - 00:15:49:03
Tyler Hall
And so we raised almost $3 million in sort of a pre-seed or seed round, and then we were off to the races.

00:15:50:26 - 00:16:09:23
Todd Sullivan
That's awesome. I want to step back because you got just a ton here that is so valuable. I think that comment around founders needing to have a little bit of cushion, a nest egg, you got to be able to live 18 months, no salary or more. And you know, I was one of our last guests. I was talking to him about that.

00:16:10:01 - 00:16:34:28
Todd Sullivan
And, you know, as a serial entrepreneur myself, I don't even think about that. I have to do that. It is part of the job you are going to suffer financially and you've got to get a little bit of financial support and emotional support from your community, your family, to be able to go do this. So your advice of having setting aside dollars and funding you, you personally for the next couple of years, that's really, really important because these things take time to spin up.

00:16:35:13 - 00:16:56:02
Todd Sullivan
I love that. I love businesses that start with a customer in hand and you manufactured your own customer by building the dealer. So you had the proof point, right? You could go and say, This is the case study, this is why it works. And then pressure testing a bunch of ideas with other dealers to understand which are the ones that are people are going to gravitate to.

00:16:56:08 - 00:17:17:13
Todd Sullivan
It all sounds like genius. So when you leave, you just know a lot that other people don't know. You know what to build. And I can see venture capitalist saying he knows where the market's going, right? He has unfair advantage in the insight here so that as a fantastic startup story. All right. So you got 3 million bucks in the bank and how many people are on the ride with you right now?

00:17:19:12 - 00:17:42:08
Tyler Hall
Way too many. We had about 16 people at this time in the company. We got all super top heavy. Our very first hire was a like a CTO, so this is like I founded the company. I brought a co-founder in about a year and Andrew and then the very first person we hired was a CTO. And you know, we went back and forth on do we hire a CTO?

00:17:42:09 - 00:18:00:13
Tyler Hall
Do we hired these people and how or do we outsource this to a development partner? We're back and forth, back and forth. We decided we're going to do it in-house. We got super top heavy hire of six or seven engineers, which you know what American engineers cost, right? And when you're not making any money, the burn got really high really fast.

00:18:01:03 - 00:18:31:11
Tyler Hall
And we started building product. One of my biggest mistakes was my co-founder and I were too similar, so we were both business sells relationships. Have you and I should have brought in a technical co-founder? That would have been the right move. And Andrew, I love you. It works great, right? And he knows and we both talk about this later on our next one, like one of the biggest mistakes that we made was just was just pairing up together, brought in the CTO.

00:18:31:17 - 00:18:52:21
Tyler Hall
I spent nine months building a product, neither of us being very technical, and so we couldn't really understand like, are we making good progress? Is this working? Like? And nine months later we had blown through the majority of our capital and we had nothing to show for it. We had no customers, we had no product, we had nothing.

00:18:52:21 - 00:19:11:24
Tyler Hall
We're running out of money. And so I had to go back to the well, back to my investors and say, Look, I know we've just spent all your money. I know we have nothing to show for it, but I've learned a lot and I promise we're going to do things differently the next time around. And they believe that.

00:19:11:28 - 00:19:35:20
Tyler Hall
And so we basically fired our entire engineering staff, everybody, CTO, the whole team. We started over with an outsourced agency, and within three months we had a product that we were selling and taking to market. So now we're going into 2020 and the business is actually doing well, like we're growing 20% a month for three, four or five consecutive months.

00:19:36:07 - 00:20:05:04
Tyler Hall
And we go to this massive national conference called NADA and we have this bang out NADA in which we sound like 100 customer, and then COVID happens and our whole business basically goes to zero. All of our customers cancel. And it wasn't clear what COVID was actually going to be, right? Like, is this a year or two years, five years, like dealerships are non-essential businesses, they're shut down, and many of them went out of business fast.

00:20:07:00 - 00:20:28:00
Tyler Hall
But I said, you know what? Like, I cannot live with myself if I let the company die because of a global pandemic, if it was lack of execution or something, fine. Right. But this is not going to be the thing to kill us. So at this point, I'm like 15 people again, I have to fire everybody. We go back down to four people and I see that very I don't say that lightly.

00:20:28:06 - 00:20:44:25
Tyler Hall
It's it was the hardest thing I'd ever had to do. These people become family. I mean, it's you're convincing them to come and pursue this dream and they're fully on board. And I have to call 70% of our team and get rid of them. Right. So.

00:20:46:03 - 00:21:07:06
Todd Sullivan
Yeah. Can I let me jump in there because I think our fellow founders really understand that position. And it's one thing to say, you know, oh, it's that was the worst thing or the most painful thing. You know, I've had to lay off 25 people in a business at one time, and that was excruciating. And, you know, you have to do it for the business.

00:21:07:06 - 00:21:24:06
Todd Sullivan
And just like you said, those people are there because you sold them on a bill of goods that this we were going to take them to the promised land and mistakes were made. And now you're you're fighting for survival. And some people are not going to come along for the ride. It is gut wrenching. I still think of those moments today.

00:21:24:26 - 00:21:49:19
Todd Sullivan
Entrepreneurship is not for the faint of heart, and firing people is awful. So, you know, again, appreciate you mentioning that. I think just the other thing, this isn't really like a podcast for startup advice, but, you know, I see and I've done and I and my friends have gone through trying to build the product that is the best product in the world out of the gates in software, I think is a real mistake.

00:21:49:19 - 00:22:09:26
Todd Sullivan
And we've all made it. And like you did the second time around, going to an agency, getting that minimum viable product, get something out in the market that you can sell. I've got a really good friend that says revenue solves a lot of problems. And I think if as an experienced entrepreneur, I know that every three years I have to re platform anyway, right?

00:22:09:26 - 00:22:27:15
Todd Sullivan
So if you can create viable economics even with a product that you're not incredibly proud of, you're going to have to redo that soon and you're going to do that every three years. There going to be new iterations and you'll get more and more professional. You know, just kind of my personal advice to founders on that. So thank you again.

00:22:27:21 - 00:22:36:23
Todd Sullivan
It's a it's a great story. So now you've kind of right size of the company. You've got revenue coming in, the product is working. And, you know, where do you go from there?

00:22:37:12 - 00:23:04:03
Tyler Hall
Well, it was working. COVID happens, the business goes to zero. We fire the whole staff. Right? So like, this is the darkest moment of my entire career. My entire career is the moment that literally in two days, our entire customer base left us. They all canceled. And so, you know, after having consecutive months of momentum, we're feeling good.

00:23:04:03 - 00:23:26:29
Tyler Hall
And and then all of a sudden, covid's their dealers are shut down, customers cancel fire, the whole staff, and a really, really dark time for me. And I remember, you know, we were by the way, we were basically out of money at this point. There was an acquisition that would have really been an aqua hire at the time that we were pursuing, and we were close to entering an alleyway.

00:23:27:12 - 00:23:49:21
Tyler Hall
And then when COVID happened, the buyer pulled out and we were basically out of money. And so the good thing was I was in conversations with a couple of voices to raise our next round, and Porsche, of all people, stepped up and wrote a check in the middle of COVID. And it really provided us the clean air to be able to poke our heads up and say, okay, well, where do we go from here?

00:23:49:28 - 00:24:10:20
Tyler Hall
How do we adjust, how do we pivot? And so, you know, at this moment we made a life or death decision which was we're going to go acquire a company, we're going to totally pivot the business, and it's either going to work out exceptionally well or we're going to go to zero and we're going to die. And the board was like, okay, cool.

00:24:10:25 - 00:24:40:16
Tyler Hall
Like, if that's what you want to do, let's let's do it. So we acquired this company, which was called Auto Buy based in Canada. We integrated the two companies within like six weeks, super rapid integration. We start selling that product and pretty quickly all of the sudden the tide turned and the automotive market all of a sudden was on fire because you had an all time high, all time in the history of automotive, high demand for vehicles and an all time low supply of cars.

00:24:41:22 - 00:25:16:17
Tyler Hall
And we were positioned right in the middle of that perfect storm, enabling dealerships to acquire inventory directly from consumers as a source of supply. And so we did this acquisition, the tide turned. All of a sudden our companies moving at a tear. We're hiring as many people as we can as fast as we can. And, you know, fast forward seven or eight months now, Q1 of 21, I actually get cocky at December 1st of 20, and I think I can go raise a series, a 20 million before the holidays, and I take meetings for two weeks.

00:25:16:17 - 00:25:46:11
Tyler Hall
So by I said my deadlines, December 15th, we're going to accept an alleyway. No other way comes December 21st, rolls around, still no alleyway. Now we're going into the holidays and now I'm screwed, Right? And the holidays happened and these investors called off the New Year returns. There's no positive signals. And next thing you know, we don't have that Ron Paul Together we have about six or 8 million softly committed and at the same time, the market's still on a tear.

00:25:46:11 - 00:26:09:10
Tyler Hall
It's still on fire. We have a couple of public companies, a couple of big companies approaches to acquire the entire business. And, you know, I'm feeling like I've been through the ringer. I've been on the rollercoaster now a few years. I'm tired, I'm pretty depressed, even though things are going well in the company. And we say, you know what, let's take advantage of this market timing and let's see what's out there.

00:26:09:13 - 00:26:32:29
Tyler Hall
So we have a little bit of inbound interest. I don't engage a banker. I did what I call a ghost process. So I, I pretended as if I was representing the deal myself as the CEO of the company. I had bankers and attorneys in my back pocket that were reviewing everything with me. And the advantage of doing that is when buyers believe there's not a banker involved, they will move a lot faster.

00:26:33:04 - 00:26:49:16
Tyler Hall
They get a lot more sort of horny for the deal, right, Because they don't have to go into a bake off for. Meanwhile, I pick up the phone, I call five or six other public companies, CEOs, guys I was friends with. I said, Hey, we're thinking about selling the company. And we did this ghost process with five companies.

00:26:49:16 - 00:26:52:26
Tyler Hall
And so what happens next is quite a lot of fun.

00:26:52:26 - 00:27:21:06
Todd Sullivan
Can I talk a little bit about the ghost process? Right. So what I've found is you might have some really good personal relationships so people trust you and they say, Hey, Tyler Hall knows M&A. He knows what is coming and this isn't a waste of time, but cold calling up potential buyers saying that you're for sale. And without an investment banker for real buyers, that's kind of a sign of that is going to be a waste of my time.

00:27:21:06 - 00:27:32:08
Todd Sullivan
They have no experience selling, so I would just give the caveat that, you know, you're calling on relationships, you're a known quantity and you have real experience doing that.

00:27:32:09 - 00:27:48:23
Tyler Hall
Exactly right. And the phone call by the way, Todd was, Hey, George, CEO of HCV Public Company, here's where we're at. We're either going to go raise a big series and we're going to compete with you or we're going to sell the company. Do you want to have a look? I have a data room prepared. I can send it over to you.

00:27:49:08 - 00:28:07:20
Tyler Hall
Do you want to have a look? And it was basically like, hey, I'm not going to run a process. I'll let you look at this all me exclusively. And I replicated that call four or five times. Sure know. And and so I let a couple of companies under the covers and basically, you know, these guys, I can't believe he's given us access to the data.

00:28:07:20 - 00:28:18:11
Tyler Hall
Like we didn't we didn't care. It was like, let's get some momentum here. So by within three months we had term sheets from three of the five that I called.

00:28:18:18 - 00:28:18:26
Todd Sullivan
Penthouse.

00:28:19:01 - 00:28:40:20
Tyler Hall
And it was the market was that hot. One of them was clearly not going to work and the other two were really competitive. And it did become a bit of a bake off between the two and some feelings were hurt on the one that we didn't accept. But ultimately, Summer of 21, we signed an alloy with TV auctions and then we started the due diligence process.

00:28:40:28 - 00:28:53:00
Todd Sullivan
And through that negotiation and then into due diligence, did you not bring a banker in? But you had what M&A attorneys, you had people that you could rely on to make sure documentation.

00:28:53:21 - 00:28:55:04
Tyler Hall
Yes, exactly. Wow.

00:28:55:14 - 00:29:13:06
Todd Sullivan
Yeah, I love it. I love this story. And yeah, I would just say again, right. You had a lot of credibility in the market and relationships to be able to do that. But, you know, I don't know that you really felt forced into it with the fundraise not going your way. I think it's just such a smart thing.

00:29:13:06 - 00:29:32:06
Todd Sullivan
I think, as we said earlier in the podcast, that having an understanding of how the market values you is a really smart thing to know at really every stage, because you could be really surprised and say, Hey, why would I give up more of my company? This is the time to exit. And it's not just, you know, a single number.

00:29:32:06 - 00:29:50:15
Todd Sullivan
It could be the right partner that is in the right partner with the right structure could create incredible wealth for you and your partners. So it's great. It seems like, you know, you you tested the waters and the waters were warm and you're ready to jump in. And. And what an acquirer. Right? This is a public company, right?

00:29:50:15 - 00:30:02:05
Todd Sullivan
They're the leaders, right? In a space that's very tangential to what you're doing. Right. Do they feel like they were buying a direct competitor or that you're just kind of very additive to what they're doing, giving them another arrow in the quiver?

00:30:02:20 - 00:30:22:15
Tyler Hall
Yeah, I think it was not direct competitor yet, but they were either going to acquire us or they were going to go build what we were doing. So, you know. ACB As a dealer to dealer online auction, the biggest one in the world. And so they help to dealers sell cars between each other. Their dealers were asking for consumer vehicles as a source of supply.

00:30:22:23 - 00:30:41:26
Tyler Hall
We were one of the only companies in the world that were really good at acquiring consumer vehicles. So the tuck in was like was almost perfect. And really they were the first ones I called. They were the ones that were tracking us from the beginning, Like I wanted to do the deal with them. And we felt very fortunate that it worked out the way that it did.

00:30:42:23 - 00:31:07:00
Todd Sullivan
Tyler What I love about that story in that acquirer specifically for your business is for them. There's yeah, there's some calculation to do on how much revenue you drive what your EBIDTA is, but the fact that they have a product that is demanded by their customer base, they can actually model how much money are they going to make by rolling your company and your product offering into their existing customer base.

00:31:07:00 - 00:31:16:00
Todd Sullivan
So I mean, that's a strategic deal and those pay a premium. So. So how did you end up negotiating price and share whatever you want on that side of it?

00:31:16:08 - 00:31:34:28
Tyler Hall
Yeah. So we we end up basically structuring a deal that's 50% of the deal for on cash. It's it's all still very confidential. They're still members of the team, they're still working on an earnout and then 50% of the deal is as an earn out rate, which I think most listeners know what that is. But it's basically we set a target.

00:31:34:28 - 00:32:05:23
Tyler Hall
It's time bound. If you hit that target or a percentage of that target, you get paid the rest of the deal or a percentage of the deal or above the deal, depending on where you land by that date. So so we have structured it that way. You know, one thing that I think most founders who have been through an exit will say is the day you signed your first LOI to sell your company is the best career day of your life, but the day after quickly becomes a hard core reality check.

00:32:06:07 - 00:32:31:18
Tyler Hall
And just because there's no sign does not mean there's a done deal. And I would guess that half of deals fall apart, maybe more after signing another one. So it's nothing but a clear path to the finish line and actually funding and deal talks. You know, and for us we've we sign the otherwise we go into some deep due diligence and I'm talking like we're basically putting the pressure on them to move quickly because we don't have a ton of cash in the bank.

00:32:31:18 - 00:32:53:14
Tyler Hall
And there's some external factors where I'm like, we need to get this done because this market is not going to be this way forever. And so we're putting the pressure on them. They're doing a great job moving quickly and during due diligence they uncover something that was seemingly catastrophic, which was one of the ways that we acquired customers was borderline illegal.

00:32:54:01 - 00:32:55:07
Tyler Hall
Okay, so do.

00:32:55:07 - 00:32:55:20
Todd Sullivan
That again.

00:32:56:01 - 00:33:12:25
Tyler Hall
I guess I'm just a criminal. Like, luckily I haven't gone to jail for some of the stuff. But, you know, one of the ways we did it was we just scraped third party marketplaces and we would automate the texting or the engagement of those consumers. You know, and for a small private company, that's fine. Like you can get away with murder.

00:33:12:25 - 00:33:37:07
Tyler Hall
But when you're a big public company that's highly regulated and highly scrutinized, you can't. And so when they realized that a big portion of our customers were acquired in that way, they said this is like 70% of the business is going to go away tomorrow if we acquire this company. So I remember sitting in my office and I get a text from the head of legal and M&A, and he's basically the right hand man of CEO, the company.

00:33:37:07 - 00:34:01:09
Tyler Hall
And he says is this, Hey, can you chat? And this wasn't his normal style. And I said, Yeah, I can. And I was very nervous. And I remember answering the call and he says, It's Tyler. This is he starts off by saying, This is the worst part of my job and my heart sunk into my stomach. And I said, okay, what's going on?

00:34:01:09 - 00:34:23:29
Tyler Hall
And he said, We uncovered some stuff during due diligence and it's a it's a show stopper. We're not we're not going to be able to move forward with the deal just very bluntly. And I'm like, well, like, what do you mean? What did you uncover? And he unpacks it. And I remember being in shock, like, there's nothing I can say in this moment.

00:34:23:29 - 00:34:43:18
Tyler Hall
He's made up his mind and so I said, okay, so where does this leave us? And I said, Maybe the other company will still acquire us. Will you send me a from our exclusivity? And there was some negotiation there which made me feel like, okay, maybe there's still something here. Hmm.

00:34:44:00 - 00:34:44:16
Todd Sullivan
Yep, yep.

00:34:44:24 - 00:35:07:27
Tyler Hall
I hung up the phone, my head drops to the floor and I just remember feeling like, How am I going to tell my wife? Right? We've been now planning, what are we going to do to travel the world? Your house, You know, all all the things in life have been planned out. Big mistake the way. Don't do that to your wife and your family until you have a deal.

00:35:08:00 - 00:35:34:16
Tyler Hall
Yes. Yeah. And I walk out of the room and I'm literally in tears. And I walk up to my wife and I say, Honey, the deal's not going to happen. And stone cold, my shirt, you know, she looks me in the eyes and she says, So what? Yeah. So I'm like, Did you? You must have not heard what I said.

00:35:35:10 - 00:35:59:01
Tyler Hall
The deal for things, the money, all that stuff. It's not going to happen because I heard you. So what? So that doesn't change the way that I feel about you or our kids feel about you. So. So what? And I remember just feeling like, okay, the pressures, the pressure is off. She's right. She's right. We have each other.

00:35:59:01 - 00:36:23:26
Tyler Hall
If we ever family. And there was definitely a sense of relief, not that it still wasn't very depressing. And to make a really long story short. Okay, we were able to do some concessions on the deal. We were able to get it back. I could tell a very long story about that and how we made it happen. And jumping on planes late at night and me going to them and them coming to us and ultimately we got the deal back together.

00:36:23:26 - 00:36:31:00
Tyler Hall
And October 6th we closed the transaction and it was good. Yes.

00:36:31:18 - 00:37:00:17
Todd Sullivan
Fantastic. Fantastic. That was great. That was a great story. I think what I want to kind of harp on a little bit, right, is that, you know, it's a little self-serving, but when you're going into a transaction and a data room is being built and your business is really being understood by an investment banking team, one of their jobs is really to figure out what are the red flags, what are buyers going to get scared about?

00:37:01:03 - 00:37:27:12
Todd Sullivan
And it's one of those moments where as entrepreneurs, we're we're kind of natural salespeople. We're painting the rosy picture. I would just advise every founder, when you're going to sell a business and you have advisers around you, you share everything, because what you're doing is giving them the ability to be armed with the right responses or you're they're going to make adjustments to make those red flags understandable by a buyer.

00:37:27:13 - 00:37:45:25
Todd Sullivan
Right. And when you said, you know, how you were acquiring customers, I was wondering, is that mean that your buyer is going to have to give up past revenue or give customers back or they're just not going to be able to grow at the piece that you were expecting on growing. But ultimately you have the widget that their customers need, right?

00:37:46:03 - 00:38:07:01
Todd Sullivan
And that's where I would have really kind of thought they got to get over how you grew because that's your solution, that vision that they really need. But anyway, that advice from me really stands in that when you partner up with an investment bank, they're not somebody that you're selling anymore. You want them to know everything so they can protect you in that situation.

00:38:07:03 - 00:38:15:03
Todd Sullivan
For them, you don't get to lie and do all that due diligence without the buyer fully understanding that this is what they're getting. Their salesmanship for sure.

00:38:15:03 - 00:38:33:01
Tyler Hall
Okay. Yes, fully. And here's the deal, right? Like, if you believe you can get a deal done, a real deal done by hiding something or sliding. So it's. No, it's impossible because literally everything comes out in due diligence. Everything. Everything.

00:38:33:02 - 00:38:33:20
Todd Sullivan
Absolutely.

00:38:33:20 - 00:38:42:18
Tyler Hall
Your weight, your height, your social security. I mean, everything is attached to this deal. So there's no hiding anything. So just you got to realize that.

00:38:42:19 - 00:38:59:08
Todd Sullivan
It's a it's a great point. I think we can hit that over and over and over. But, you know, the makeup of business owners and founders, right. Were where, you know, we're inherently a little bit private. We're very, very optimistic. So it's hard to make that switch. But you will inevitably have to do it in due diligence. Thank you.

00:38:59:08 - 00:39:16:28
Todd Sullivan
That is awesome. Okay, so you get the deal done and who's your first call, right? I know your first call when it fell apart is your wife. And you get this unbelievable support that lets you breathe, which is fantastic. Remarkable, frankly. But now that the deal is done. Who's who's your first call?

00:39:17:21 - 00:39:39:02
Tyler Hall
I think it was my wife again. I was we were in their offices in New York. You know, a number of sort of actually signing on the dotted line. And that feeling was incredible. Called my Wife. And I remember her reaction was similar to her reaction when the deal fell apart, was sort of like very stoic, like, awesome, nice job.

00:39:39:18 - 00:40:04:04
Tyler Hall
You know, not too high, not too low, just like, great, cool, more money. Fine, But still love you. It's great. Whatever. So it was a great response from her and yeah, certainly a good feeling for us and the team and, you know, happy to kind of share the impending six months after the deal, the integration and then, you know, an experience that our family ended up going.

00:40:04:11 - 00:40:34:27
Tyler Hall
So, you know, we start integrating these companies. It's never very straightforward. You can have a perfect plan. Integrations are tough. They always are. Yes. And, you know, but I would say, like overall, we were we were happy. All of the employees were happy. They retained everybody in the company, which is great. And, you know, three months after the acquisition, I remember being in Dallas and just a little preface to a story that I'm going to share and I got to my hotels, Marriott, I got on the elevator.

00:40:35:05 - 00:40:52:19
Tyler Hall
As the doors are closing, I'm by myself. The guy sticks his arm and to to open the door and he jumps on the elevator and I say, just simply, how are you today? And the man looked at me and he said, I'm I'm not doing very well. He said, I had to bury my 26 year old son today.

00:40:53:23 - 00:41:17:18
Tyler Hall
And it's totally caught me off guard. I literally was speechless. And I just said, I'm so sorry. And he said there was a good kid. He didn't have a drug problem. That was totally unexpected. It's been the hardest day of my life. And he said, I don't know who you are. I don't know if you have a family, but if you do cherish them, hold them very close because you never know what it's going to be their last day.

00:41:18:07 - 00:41:34:16
Tyler Hall
And we're on the 10th floor. The doors open up. He's getting ready to get off. I remember just opening my arms to embrace this guy and I gave him a hug and he left. And the moment the doors closed, I again got very emotional to get up to my room. I call my wife first timer, and I'm crying.

00:41:34:16 - 00:41:52:02
Tyler Hall
And she's like, What's going on? You know, I just had this experience on the elevator and I'm so sorry that I haven't been there as much as I wanted to. And here I am in a hotel traveling right again. And she's like, you know, you've been a great father and a great husband. And so this is this crazy moment.

00:41:52:02 - 00:42:16:13
Tyler Hall
I'm almost one of these out-of-body experiences that I wasn't sure if that man was real or if it was like an angel sent down from heaven to, like, wake me up. Right. And two months later, again, I'm traveling. I'm in New York City. I'm with the CEO of the parent company we're getting ready to present at Nasdaq. It's a big day for me and my career, one of the biggest days ever.

00:42:17:07 - 00:42:38:23
Tyler Hall
And I wake up on a Tuesday morning. It's March 1st of last year, 2022, and I wake up from a call from my mother in law. And my mother in law and I are close, but we don't talk on the phone. It's not a thing that we do. Right. And let alone at 5 a.m. Arizona time. And I knew something was wrong.

00:42:38:23 - 00:43:02:11
Tyler Hall
And I remember answering the phone and instead of saying hello, I said, I said, what happened? And she said, she said Brooklyn, is hers. My wife, her daughter is is being rushed to the hospital in an ambulance and we're not sure what's going on. And I said, you know, how bad is it? And she said, it's it's bad.

00:43:02:21 - 00:43:22:20
Tyler Hall
You should probably get home. And so here I am getting ready to do one of the biggest moments of my career. And I'm as far away as you can possibly be from Arizona in the Northeast. And I texted my assistant, say, I've got to get out of New York City. So she orders me a car, jump an Uber ahead of the airport.

00:43:22:20 - 00:44:00:27
Tyler Hall
And as I'm going to the airport, I'm getting updates from my father in law, who's the only one allowed to be in the hospital at the time because of COVID restrictions. And the updates are just arrived at the hospital. A They just did an ultrasound. Hey, they found two liters of blood in her abdomen and by this point, I'm standing at the airport at my gate, and I get a text that's a picture of the diagnosis the doctor wrote on the white board and it said ruptured ectopic pregnancy.

00:44:01:29 - 00:44:25:02
Tyler Hall
And I immediately got to Google to find out what this is. And I find out that in most cases when this happens in the home, it's lethal. And, you know, so I go from like definitely feeling hopeful that maybe she got lightheaded, maybe she forgot to eat the night before. Maybe she just passed out because of that, too.

00:44:25:27 - 00:44:52:19
Tyler Hall
There's a there's a chance, a high probability my wife is going to die and I'm a pretty even keeled person. I don't get too emotional about things I don't get to. I know I've described many instances of me crying, but these are like all of the ones in my life. Yeah, this rocked me. I got really lightheaded. I wasn't sure I couldn't operate.

00:44:52:19 - 00:45:14:11
Tyler Hall
I mean, I was in shock and I end up getting on the plane the next 4 hours I get for updates. Which are they rushed her in for an emergency surgery. Still in surgery Still in. Surgery is still in surgery. And at this point in my life, we've delivered three babies and the doctor is in the room for about 5 minutes.

00:45:15:06 - 00:45:40:11
Tyler Hall
So when you deliver a baby generally and I felt me and she's been under the knife for 4 hours. And the last message that I got before the plane started to sending from my father in law was something to the effect of brace yourself. It's not looking like she's going to make it. And this was the message that the doctor had relayed to him, moments, moments earlier.

00:45:41:23 - 00:46:09:18
Tyler Hall
And so that moment I had, I was convinced she was actually dead, but that they weren't sharing that information with me until I got to the hospital. And, you know, I had every thought that a husband and a father could have in that moment of what is my life all about them. I fulfilled to I a purpose. Am I happy?

00:46:09:18 - 00:46:30:29
Tyler Hall
Am I being a good father? Have I been a good father? My God, Every thought in a matter of minutes goes through your mind. And I'm just holding onto this hope that maybe if I get to the hospital fast enough, I can see her before she dies. And so I run through the airport. I get in the Uber rushed to the hospital.

00:46:31:24 - 00:46:54:24
Tyler Hall
I run past the reception desk in the emergency room. I go up to two floors and I remember walking in a room and the first thing I noticed was that the heart rate monitor was still beeping, which meant she had a heartbeat. And I felt this sense of sort of relief like, it's great, but at least I made it before she passed away.

00:46:54:24 - 00:47:16:11
Tyler Hall
And I remember I sit by her bedside and I sit down and I ask the father, I say I say, you know, hey, how's she doing? And the moment that those words came out of my mouth, she had a scary episode, almost seizure like episode. And the doctors and nurses had to come in and it was a really scary thing.

00:47:17:11 - 00:47:40:22
Tyler Hall
And when they got her calm, I asked him, I said, Has that happened before? And he said, that was the first sign of life that we've seen. And I remember just feeling gratitude that I got this one more moment with her. And that one moment turned into one night. I woke up the next day she's still alive and then another night.

00:47:41:14 - 00:48:08:04
Tyler Hall
And then on the third day, she's starting to come back to health. She's starting to communicate, become coherent. And I'm sitting at her bedside and I say, I said, Hey, do you remember what happened that day that I walked into the into the room and and you had that little episode? And she said, Yeah, when I she said, When I heard your voice, it gave me life.

00:48:13:17 - 00:48:50:01
Tyler Hall
It's still hard to talk about. I've shared the story. I pretty sure the story 50 times now and it still is still difficult. But that sense of like, you know, we're truly a team. Like, she was always there for me. And, you know, I felt a lot of guilt because I just I wasn't always there for her when she really needed me and caused me a lot of grief and it caused me a lot of guilt and the silver lining is she she fought.

00:48:50:01 - 00:49:03:18
Tyler Hall
She ended up making it. It was 30 pretty rough days, but she made it through. And today's very healthy and we're actually expecting our fourth again, sort of against all odds in September.

00:49:03:27 - 00:49:35:20
Todd Sullivan
So unbelievable Tyler, thank you for sharing that. I know that was not easy and I'm really happy that it has worked out. But this this experience. Right. Has really kind of changed you and what you're doing in your present day career, giving you totally different perspective, right, of what we go through as entrepreneurs and and how you can help maybe center other entrepreneurs into what some really important maybe you can give us just a minute or two on that.

00:49:37:06 - 00:50:20:11
Tyler Hall
Absolutely. I think there's a radical misconception in Startup-Ville, which is if you're building a company, it's the only thing you eat and breathe and sleep and think about and pay attention to and prioritize and it's bullshit. There's no other way to put it. It's it's a lie. It's a trap. It doesn't to be that way. Because I promise if you do that and you allow your relationships to go away, you never know when it's going to be Your last day.

00:50:20:18 - 00:50:44:05
Tyler Hall
Could be your last day today. It could be your boyfriend or girlfriend or spouse or parents or your daughter or your son. It could be any of their last day. And if you're not living your life that way and you're not figuring out how do I develop the deepest and most connected and meaningful relationships possible with the people that I love, nothing else actually matters.

00:50:44:28 - 00:51:11:00
Tyler Hall
You know how many times I thought about money and work when I was trying to save my wife's life? Zero. And even one time. And it makes you realize chasing the next coin, having the next car, having the next money, it doesn't matter. It just doesn't matter that much. And so you can find balance. It is possible, I promise.

00:51:11:00 - 00:51:37:02
Tyler Hall
I'm doing it now. I'm helping lots of other founders figure out how to achieve balance. And actually, when you have balance, I believe that it creates a competitive advantage on founders that don't. Because then when you're working, you're that much more focused, you're that much more energized, you're not thinking about and feeling guilt about how shitty of a person you are to your your spouse or your kids or your boyfriend or girlfriend.

00:51:38:28 - 00:51:47:00
Tyler Hall
So to me, you have to have it. Now. It's a competitive unlock. And so that's the message for those who are rebuilding in the thick of it.

00:51:49:18 - 00:52:08:25
Todd Sullivan
Tyler I think this is going to maybe one of the first times I don't have anything to add, right? It was perfect. I love that advice. Hopefully people are listening and can take that to heart. Really. Thank you for being here. This is there are so many good nuggets in there that I think all of us I know I've learned.

00:52:08:25 - 00:52:13:24
Todd Sullivan
I know a lot of us are going to learn from. Really appreciate you sharing the whole story. Thank you.

00:52:13:24 - 00:52:15:11
Tyler Hall
Thanks to thanks for having me on.

00:52:16:18 - 00:52:38:22
Todd Sullivan
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 exercise dot com and the cashing Out podcast are for entertainment purposes only. This should not be relied upon as the basis for investment decisions.