The Wise Exit

Today, we are joined by Rick Marini, a serial entrepreneur with 25 years of operational and investment experience - Rick has had three exceptional exits in, and BranchOut. In today's conversation, we dive into Rick's learnings and advice from selling to monster for a hundred million dollars, as well as his experience in investing in more than 17 unicorns as an Angel Investor. We also hear the story behind how Rick and his team bought the company Grindr and are taking it public later this year.
One of my favorite characteristics about Rick, which you'll hear about throughout this podcast, is his willingness to spend time to mentor and invest in and genuinely root for his fellow founder.

Show Notes

E3: On today's episode we hear from Rick Marini.  Rick is a serial entrepreneur with 25 years of operating and investing experience in the technology space. He founded and successfully sold 3 companies (Tickle, BranchOut and He is an active angel investor in 50 tech start-ups including 17 unicorns (including Snapchat, Reddit, Opendoor, and AngelList).  In 2018, Rick was named a "Top 50 Angel Investor" by Forbes.

Rick is also the Co-founder & Managing Partner of Catapult Capital - a private equity firm that focuses on transactions in the Internet, advertising, media, consumer and broader technology sectors. Full buyouts include Grindr and JibJab. Rick currently serves as the COO of Grindr and on the Board of Directors for JibJab.

Rick was the Founder & CEO of BranchOut, the largest professional network leveraging the social graph with more than 800 million professional profiles. BranchOut raised $49 million in funding from Accel, Redpoint, Mayfield, Norwest and Floodgate. In 2014, BranchOut was acquired by a publicly-traded recruiting company.

Rick was Founder & CEO of, an enterprise messaging app. In 2014, was acquired by Hearst Corporation. Rick ran the Digital Innovation Group at Hearst from 2014-2016.

In 1999, Rick co-founded, one of the largest social media sites on the Internet. In 2002, Tickle won the “Rising Star” Webby Award as the fastest growing site on the Web. Tickle grew to more than 200 million registered users and was a top 20 Internet site. In 2004, Monster Worldwide acquired Tickle for $100 million.

Beyond Rick's depth of knowledge and experience, he is an amazing human being - he generously gives his time to coach and mentor early-stage companies and is a huge advocate for new founders looking for advice, support, and investment in Silicon Valley.


This episode is brought to you by Exitwise:

Exitwise helps business owners create the exits they deserve by assembling the best teams of industry specific, M&A experts, who will help maximize the sale of each business.

How Does It Work:

1. Schedule A Call:  Schedule a call with one of our M&A Advisors and we'll walk you through the entire process of selling your business, from market valuations to M&A expert fees and from due diligence to the signing of your purchase agreement. We're here to answer any questions you may have.

On this call, we'll want to learn about the history of the business, your financial performance, your management team and listen to your thoughts and requirements for selling the business so we can make sure to find the best M&A experts to help maximize your exit.

2. Review Top Experts:  Once we've had a chance to process all your business information, we'll share with you, our top choices for investment bankers, M&A attorneys, and tax accountants to help maximize the sale of your business.

We’ll present each M&A expert’s transaction history, estimated valuation range for your business and their fee structures. Then we’ll talk through the pros and cons of each choice to help you prioritize and make the best decisions.

3. Negotiate & Hire:  Finally, when we've narrowed it down to your top choices, we'll negotiate your engagement letter with each M&A expert to make sure fees and terms are fair for everyone. We know what to look for and we know how to keep everyone incentivized for your optimal outcome.

Once your M&A experts have been selected and you’re ready to move forward, we’ll collect signatures and get everyone to work.

What is The Wise Exit?

The Wise Exit is an open dialogue with fellow founders and former business owners sharing real stories and offering honest advice around selling their companies to some of the top acquirers in the world.

Beyond the entertaining and educational exit stories, host and M&A Advisor, Todd Sullivan is here to help demystify the Mergers & Acquisitions (M&A) process. For example:

- How much is my business worth?
- What is Net Working Capital?
- When should I get a Quality of Earnings analysis
- Should I hire an Investment Banker, M&A Advisor, or Business Broker?
- When do I talk to my Key Employees about a possible transaction?

We hope you enjoy... and learn a few things along the way!

Cashing Out Podcast | Episode 3 | Rick Marini | $100M Exit to Monster + IPO

Todd: [00:00:00] Welcome to the cashing out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today. We have a special guest who is also a personal mentor of mine.
Rick Marini. Rick has had three successful exits in, and BranchOut. In today's conversation, we focused on Rick's experience and advice from selling to monster for a hundred million dollars, as well as his experience in investing in more than 17 unicorns. And finally, we'll finish up with how Rick and his team bought the company Grindr and are taking it public later this year.

One of my favorite characteristics about Rick, which you'll hear about throughout this podcast is his willingness to spend time to mentor and invest in and genuinely root for his fellow founder. I hope you enjoy my conversation with Rick [00:01:00] Marini. All right, Rick, thank you for doing this. I'm just really excited that you agreed to be on this.

You've had an amazing run as an entrepreneur. Three exits that I know of, right. That are really exciting to read about. And I just know that your advice, your insight into what those exits look like are just gonna be, you know, gold for our founders. And I gotta tell you, when you agreed to do this, I bumped Mark Cuban immediately from this time slot. So thank you for doing this.

Rick: Always happy to, bump him. So thanks for having me.

Todd: So, I can give a little bit of your background, but I clearly won't do it justice. I think a great place to start might be, you know, you come out of the gates just swinging after Harvard Business School and launch tickle.

And so maybe you could start and take us through that experience, building the company, but more the decision that you made when it was time to sell. And what was it like kind of [00:02:00] moving from there.

Rick: Yeah, so it was a different time. It was 1999 when we founded tickle. And, uh, I started the company really in our dorm room with a classmate named James Courier.
And, James had this idea when we had taken the Meyers Briggs test at HBS and, and everyone started to kind of open up and, and talk more about, you know, where they were on that spectrum. And, what we realized, and this is early days of the internet. This is probably actually 1997 or ‘98.
When we had taken that test, that the internet could make all of this so much more fun and immediate and shareable. So we started around that idea and we ended up raising money. Initially from angels, our first money was actually a professor at HBS and eventually, raised money from August Capital and, that took us about a year to get there.
And in that first year, I mean, we were eating ramen, James and I were living with three other guys [00:03:00] in Cambridge. And really doing the true startup thing, moved to California in 2000 raised money from August Capital (about 8 million) and, put our heads down and, tried to build an online testing platform at scale.

And it was going well until March of 2000 hit and the internet tanked. We started the company at kind of peak internet and then the internet tanks and, you know the “.com crash” happens. And we really had to buckle down. We had raised enough money. We had enough runway, but we also knew that it was gonna be really hard to raise money again.
So we just kind of went heads down and continued on the mission to build this online testing platform around personality tests. And, fortunately kind of came out the other side after being really gritty and conservative on our cash. Found a couple [00:04:00] hits. Um, the “IQ test” was one. We had another one called “What kind of dog are you? and “the celebrity matchmaker” and, and all these that we are kind of the first to do that stuff back in kind of the early kind of 2000 period. And, ended up, a couple years later winning the web award for the fastest growing site on the internet. So we found something that worked and again, we had only raised one round from August Capital and some Angel.

As well, and we got to the point in 2004 where we would either raise a series B and we had a series B all lined up with Excel. Excel was one of the best venture capital firms on the planet. Or that is a good time to kind of pick your head up and look around and say, well, is this a good time for M&A.
And I think that's a, that's a good lesson for entrepreneurs when you're raising money. Something is probably going right, because somebody wants to give you money [00:05:00] to continue on. And I think that's a good time to kind of take stock and say, well, you know, do I wanna continue on this journey for, you know, for the next five or 10 years and the expectations that would be on you?
And what happened with us is that another HBS friend of ours, Chris Michael who's a close friend. He had been acquired by, which was, uh, the big, online professional platform for jobs. He had been acquired by monster about six months prior and the CEO said to him, “Hey, who should we buy next?”

And we had talked to Chris about, Hey, we are looking at raising a series B and he said, you know what? Hang on a minute. So he went and talked to Andy Mackel, the CEO of monster, and he said, you know, they're not only the largest personality testing. They're the largest career testing site in world, too. And this could be kind of a west coast labs for monster, which was based in Massachusetts.

And Andy said, Hey, uh, James and Rick come out to New York, let's meet [00:06:00] the team. So we met with them and, we very much fast tracked it because they knew we had another offer from Excel that we couldn't sit on for very long. And when James and I first started the company in 1999. Our goal was to either take it public, which is a really hard process to ever get there.
Very few companies get there or sell it for a hundred million. That was our number. Yeah. Big round number. And along the way, especially to the year proceeding, these conversations with monster, we had a lot of interest from potential acquirers and, I think we had gone through seven or eight M&A processes with them.

And none of them worked out. They always died for some reason either. Um, either they wanted to pay too little or we wanted too much, or it just wasn't gonna be the right cultural fit, whatever it was. It never worked out. And by the way, those are the stories you never read in Tech Crunch. You never hear about the eight, you know, the eight failed attempts to sell.

You [00:07:00] only hear about the one that happened. So anyway, so we got, we got to the point where we had built a real company with at that point, probably 35 million of revenue, profitable, slightly profitable, you know, maybe three or 4% margin, you know, but net margin, but you know, a profitable company.
And we got in front of Andy and he knew that we were raising money from Excel at a hundred million dollar valuation. And he said, you know what? I will match that valuation and I will buy you. Yep. And it's not an easy decision ever as a founder to sell your company, but that was that we were waiting for that number.

You know, once we had that number from him, we then had to make a decision. Did we want to go forward. And some of the things that we thought about were we went through crash and it was hard. I mean, it was really hard in San Francisco when everyone is in moving U-Haul and they're leaving and all these [00:08:00] companies were going under and it was a, it was a hard, sad time.
And, you know, and we're human, right. I mean, we felt it too. And, it was, it was difficult. Number one, number two. James and I both grew up in New Hampshire. We didn't know each other until HBS, but it turned out we are in neighboring towns, in New Hampshire. Neither of us had ever made any money. So that becomes a factor too.

Hey, I can cash out and make real money here. And another factor that was important was Excel was going to want kind of a 5X on their money. A series B is looking for five to 10 times their money and we're like, well, they're investing at a hundred million dollar valuation. Can we get this company to a $500M to a billion dollar valuation?
And James and I did not see the clear path to get there. We knew we had built a good company, but we were also very realistic and pragmatic on how much further we could take the company. And, we didn't, we weren't sure that we could get there. So for all those reasons, we ended up accepting the [00:09:00] offer for monster - a hundred million dollar offer and then ended up as monster employees for a couple years after.

Todd: That’s awesome. That's a great story. So, it's not only the hundred million, right? That, might have been the number in your head, but it's that return on your investment your time. So, you did that in a five year time period. If you're gonna take money from Excel, not only are the goals much higher, but you're also taking dilution.
So, yeah, you really have to take a serious look at that decision. I just wrote in our newsletter today that the best time to sell a company is in the third or fourth inning. Where you've put some runs on the board, you've got a lead, you know, a promise of the future is ahead of you and buyers want to buy that future.

And that's what you were selling. Can you tell me, cuz I've been in these very difficult board meetings, the internet crashing or all these kind of internet investments are crashing. What are those board meetings? Like they gotta be a lot of pressure on you to say, Hey, [00:10:00] do we cut our losses? Is there another way out?
And then you gotta believe into this vision to drive to the hundred million. So there had to be a lot in between there. That was tough.

Rick: What makes it easy in the early days is that often you only have one VC on your board. Later on, you might have five or six VCs and that, you know, that cap table gets complicated and those board meetings get more complex.
But for us, we had one VC, August Capital. We had Andrew Anchor. Who was the partner and David Hornick, who was still a very good friend of mine and in a very well known VC. Now, I think we are one of his first VC investments and he was a board observer and the board was me and James, the two founders and Andrew.
So the three of us were, it was very easy to be aligned. But I will say, about a year before that, or maybe a year and a half before that we are getting to a point where our cash was running low. Right. I mean, we're in this period where. crash happened. There were no, you know, the advertisers all kind of went [00:11:00] away and there was just no money to be had.
And I remember our lawyers talking to us and saying, Hey, you're getting close on cash. You might wanna consider a wind down and think about, you know, getting your employees some bonuses or whatever, and getting, you know, soft landing and James and I, you know, were fighters. We're saying no F-ing way.

Yeah. Are we doing that? We've got, we're gonna figure this out. Right. It's fight or flight back against the wall. And we're like, flight is not an option here. We're gonna fight. And, what happened is I had mentioned that IQ test, we started doing that and that was the one test that really, really changed the game.

And a lot of times when you have content businesses, it is hits driven. Right? You find that one big hit, you know, Hollywood has us all the time with movies and game studios have it. And, you know what we are doing, you know that one test changed everything and it turned it from, you know, looking at a wind down to, because of that being the fastest growing site on the internet.
And, you know, we [00:12:00] had something like, 200 million users. Over the period of that five years when the internet was only about 800 million users total, I mean, so one out of four people had taken a tickle test at some point. Um, and it was, you know, sometimes you just gotta keep fighting and, you know, see your way through.
And the hope is that you have enough cash. And we literally had like three months of cash left when we had that conversation.

Todd: That's awesome. You're obviously making some very calculated decisions. The kind of true heart of the entrepreneur comes out and you go to battle and save it and grow it.
And then you make the decision right. To sell the business. I've given advice to founders that are in the position of changing their lives, like life changing money. A lot of security. And I like to say, you live to launch another day, right? You put some money in the bank and this is a career path that we love. So to make that decision to sell the business after five years, you [00:13:00] know, that's remarkable, you got tons of credibility and you get to go out and start your next thing.

Rick: On that thought. You know, another learning there that not a lot of founders or new entrepreneurs think about is. I think everyone thinks that they need to have the billion dollar exit to make it.

And the reality is, you know, James and I for tickle had only raised one round of capital. So we own the majority of the company and the vast majority with our employees. So even selling a company for a hundred million, which is not a small amount, but it's not the billion dollar exit or multi-billion dollar kind of public company exit.
It was life changing. Even if it didn't get all the big headlines of a Google or Facebook or, you know, a big public company, it changed our lives. Not only did it put money in our pockets and allow us to, you know, whatever we're gonna do next and be able to personally fund a lot of that. It also, you know, gave us that credibility that you mentioned, [00:14:00] um, that we had a sale, a big sale, real sale and that changed everything too. So I think, you know, even if you have, you know, at a lower scale, if you own, if you're a founder and you own 80 or 90% of a company, that's worth 10 or 20 million for most people, especially the first exit that does change your life. Right. So it's not all about being, you know, on tech crunch every day or having the big, big exit.
I think, a lot of founders. Discount the, um, how life changing it is to even sell your company for $20 million when you haven't been diluted and taken all that, that outside capital. And by the way, the more capital that you take on the higher, the expectations. And I talked about that and the series B and the expectations from Excel.

What they would've had, but also you, you start to have sometimes a misalignment of incentives where the VCs need to have the 10 X return, or it just doesn’t work for their fund where you could be happy [00:15:00] selling for 20 or 30 or 50 million because it changes your life. So the more capital you take on you, you better be able to shoulder the, that new expectation and responsibilities that you now have to your investors.

Todd: You hit on something that we see quite a bit. So when we're trying to help a founder think through the process of selling a business and they have a big venture capital firm behind them, that venture capital's firm objective is to pour as much money into their winners as they can and get as much share of those winners as they can, and really shoot for the moon.
And that is not always in the best interest of the founders. So we have that conversation. It's so rare.

Rick: It's rare that those companies, you know, you get to that level and listen, if you are sitting on a rocket ship and everybody wants to give you that much more money at increasing valuations and the metrics and the economics and everything is all is in place.

Keep going. I mean, listen, Mark Zuckerberg almost sold Facebook for a [00:16:00] billion dollars to Yahoo. That deal was like very, very close. Okay. And, from what I understand, Yahoo had come back and tried to lower the valuation at the very end and Z said, no, no, no, we agreed on a price. If you're lowering it, then forget it deals off.

And he kept going. And obviously that was the right call for him. James and I in the tickle example were very pragmatic about how big can this get? Right. I think Z had all the numbers, the data that said this thing can continue to get much, much bigger. So I think as an entrepreneur, you want to be optimistic, but also you have to be realistic.
You have employees that have equity, you have investors that have money in where is the right time to exit. And, if everything says, keep going, then keep going. Yeah. But when you've got, you know, a real number in front of you, you should at least consider it.

Todd: All right. This is, I mean, this is awesome.
People are gonna take a lot from this. And I think. As a serial entrepreneur, we could dig in to and superfan and branch [00:17:00] out and everything you've continued to do as a serial entrepreneur. But what I think's really interesting is that you've gone from this operator, jumped into the angel investing world, right?

One of the more prolific angel investors that I know of right over 55 companies invested in, but 17 unicorns. You've built that over a long period of. So maybe we could jump a little bit to, how do you think about the startups that you invest in when you're thinking about liquidity as an investor? Cause I tell a lot of my founders and I say my founders, just friends that ask for advice that you often have to be able to put yourself in the shoes of the people that are investing in you and really understand why are they doing this?

What are their expectations? And are you creating that alignment? So I don't mean to step over your full entrepreneurial path, but that might be the next best step for our listeners.
Rick: Yeah. And I'm, you know, I'm a pretty typical angel investor in that I'm an [00:18:00] entrepreneur, I'm an operator that was very fortunate to, you know, to make some money along the way.

And for me, I look at angel investing in a couple different ways. One, it is truly a way that I can give back to the next generation of entrepreneurs. Both on the financial side and funding them as well as bringing, you know, Whatever level of expertise I have to, hopefully help them. So I look at that as both a privilege and, and somewhat of a responsibility, actually.
So, as you said, I've done 55 angel investments and had, you know, lots of unicorns, fortunately, along the way, but I've been pitched a thousand times. To find the 55 that I thought were the best. And, and by the way, some of them have been zeros. I've had a couple that were a hundred X, and, and some of it is luck, but you know, a lot of it really is.

Um, the advice there would be to really kind of know your lane, like I'm, you know, I'm a [00:19:00] consumer facing early stage tech guy, you know what I mean? So that's where I should be spending most of my time and finding companies that are in that space because I can both understand them. As I look at these companies, but also I can help them if I make the investment and the entrepreneur should be seeking out people like that who have an expertise in their area.
So, if you're a consumer person, don't try to go find a bunch of SaaS people or biotech or whatever, go find people that are gonna be value add, um, to, you know, to your, your project, your company. So as I look at these companies, one of, so I, I started in angel investing, about probably 12 years ago and a guy who's a good friend of mine Naval Racon who's a very well known angel investor, probably one of the best in the world.

I would say Naval got me into angel investing. and he said, you're gonna do too many too fast. Like you need to like ease into it. And one of the mistakes that I [00:20:00] made early on that he warned me about, and I still did was I would hear the pitch and I would immediately go into entrepreneur mode and be like, okay, I know exactly what I would do with that idea.

And what I learned eventually was. But I'm not the operator here. I'm not the entrepreneur. I'm at best a board member and mostly just really an advisor or mentor to the company. I can help guide them, but that CEO, that entrepreneur is gonna make the ultimate decision. So I better be aligned with them and not expect that they're gonna, you know, listen to all my ideas and execute.
So I better really believe that, um, that they have the right idea and that. Can do a lot of things. And one of those things is that they can not only have a vision, but they can continue to execute on that vision. Which also means that they can. Attract a great team because you really, at the end of the day, it's about team first and ideas.

Second, you know, I like to say ideas are easy executions hard, so you have to have [00:21:00] the best team and can that entrepreneur attract and retain a great team? Mm-hmm so I'm looking at that, um, I'm looking at their co-founders who have you already attracted in? And by the way, if you're not, a tech person, you better have a great CTO sitting right next to you and you guys are aligned, because I need to see that too.

That's really important. But another thing that I think about is TAM, the total addressable market, because I need to look at that for a couple reasons. One, I need to think about if I'm usually in the seed round and I'm thinking ahead to the series a investor, this is something I learned later on.
I need to make sure that that series a investor is also gonna see this is the right entrepreneur. And the TAM is really big in that they're gonna wanna invest because otherwise, if they don't invest, it's probably gonna end up being a very small exit. And then that probably wasn't worth my time to get in there and, and pick this, you know, this is my 55 companies out of a thousand, [00:22:00] right.
I gotta pick the ones that I think are gonna be the winners. And then when I look at the winners, What usually happens when companies are coming in to disrupt an existing industry, 80 to 85% of the value accrues to the number one disruptor, and then another 10 to 15% to number two. And then number three in the rest of the long tail share the other 5%.

So even if you had the right sector and the right timing, if you pick number two, you probably got your money back or maybe a small return. If you pick number three, the bronze medal. You are gonna lose your money. You've gotta figure out who's number one. And that means you've gotta talk to pretty much everyone in the sector.
And then you can start to, to kind of compare why that team is gonna be better than, any of the other teams. As an entrepreneur, you have to understand all of that. Why am I the best in the field? What is the moat I've created? What is the special sauce I have? What is the IP that I have the [00:23:00] experience?

What is it that if you said, Hey, Rick, I'm the best at this and you need to invest. And if I say, you know what, Todd, I met five other companies in the last month. I do exactly what you're talking about. Why are you better? You better have an answer. Sure. A really good answer to convince me and other people that that could back you.
Why you truly are the best. And if you don't have that answer, you may, maybe you shouldn't be in the game.

Todd: All of that is so familiar to me because entrepreneurs come to me, why am I not getting funded? And they don't realize that you're looking at hundreds of opportunities and scrutinizing them in this way.

If you're not an investor, not an experienced investor, you don't have that perspective. So I think that's helpful for everybody to hear. I wanna just step back on your comment of kind of giving back right, as an angel investor, but I don't know if you remember when we first. I had just come out to Silicon valley.

And I am reaching out to anyone that can kind of [00:24:00] indoctrinate me into this environment, which is like the Disney World for entrepreneurs. And I'm not exactly sure how I was able to reach out to you, but really not knowing me or anything about me. I remember meeting in San Francisco and you were clearly very interested in this very green person and how could you be helpful?
And so you, and there's probably one other person, maybe Rich Wong at Excel were like, you guys were my mentors. You guys never made me feel afraid to ask the stupid questions. You made me much smarter going into these conversations. As you know, I was getting businesses funded and built. So what you're saying about giving back, I can vouch, like this is a very real thing for you and, and I very much appreciated.

So as an angel, right. You're gonna start seeing exits. And I think there's a lot of threads to. But the vision that a founder has, you also have to balance that with coachability. I think I tend to look for that when I'm making angel investments and I'm not sure that I'm even the [00:25:00] best coach for this particular founder.

So I tend to invest in an area where I can bring founders together that might let's say marketplace businesses, bring them together that they might be fighting similar challenges, but in other industries where they could be helpful. I always thought that would be a competitive advantage for me as an investor.

It doesn't work. Right. I'm not getting these founders to really share with each other and then take actionable information and, and have it be very useful. This is really just an aside. How do you think about an entrepreneur's coachability and your ability to like improve the outcome eventually through.

Rick: So I think the coachability is important, not just because I wanna have that relationship with them. Like you shouldn't bring in someone like me, unless you think I can add value to your company. Right. You know, there are maybe other people that also could write a similar size check. So if you're bringing me in, then I hope that you value my, my opinions.[00:26:00]
I understand that you're gonna make the final call at the end of the day, but I hope that we can have a productive relationship. Right. So that's where the coachability comes in that alignment. And it's not just with me, you know, I want that, that you have that coachability with your other board members, with other investors, with potentially, you know, the press and also with your employees, right.

And being able to be accessible and transparent and relatable. And, all of those things are important, I think, as a company grows. Right? So, coachability is kind of one part of the personality that I'm looking for. But for me, I like smart, hardworking, high integrity people with a good attitude that wanna go build.

Right. So, um, so I'm looking for people like that. I think the coachability is definitely one part of that. And I think if you have all of those other things, you're typically. You know, coachable because you are looking to learn [00:27:00] and to build. And if you're a builder you want to take on kind of any asset, you can bring into the company.

And, I think, you know, great entrepreneurs, you know, they're, they're gonna attract great people and information and talent and data, and they're just thirsty for as much as they can go.

Todd: Okay. So why don't we jump to kind of third or fourth phase of your career. So now you've jumped from angel investor.

You continue to do that. You're mentoring founders growing, helping grow businesses, but now you've jumped to the private equity side in a very different way, right? So you are an operator coming in and deploying capital into these businesses that could use the capital, but taking control ownership. Talk to me about those, I guess exits from the other side of the table right now, you're on the buy.

Rick: And, it is different. It's, it's different than starting a company and I've founded three. And now we are buying companies, that are, [00:28:00] existing. I'll give you two examples. We bought a company called JibJab a couple years ago, and that's an e-card company that's been around for 20 years. So I'm not the founder, but the founder was a friend of mine and there were circumstances where he needed to sell the company, cuz he was pursuing another, um, uh, another path and we came in and bought the company.

And what's been wonderful about JibJab is that it's got this, you know, this great brand and it had a great team in place already, including the COO who we elevated to CEO and he's done a great job in the business. My partners and I are very active board members. And, you know, one of the benefits of being an entrepreneur for whatever it's been now, or 25 years for me is that you've been in hundreds of board meetings and, you know, what's productive and you, by the way know, what's not productive.

So I try to make sure in those board meetings, especially with a smaller company, like JibJab that we're being productive. We're being [00:29:00] helpful. We're not just being negative, you know, it's our job to help grow this company. And we own the whole thing. Right. I mean, the employees have some, but I mean, it was a full buyout, so JibJab, I think is a, you know, it's a smaller deal, but one that we, you know, we love the business and it's right down the fairway.

As I mentioned, consumer facing tech, I mean, it's really what I've done for 25 years. So that's, a nice, smaller business. And we like that. The other, the big one that we did about two years ago, we, acquired Grindr. So, Grindr is by far the largest dating app in the LGBTQ space.
And we partnered with another PE firm, a more traditional PE firm, to buy Grindr. A lot of this is public, so I can talk about it. It was, um, roughly a 600 million purchase Grindr was already a, profitable company. Um, by far the biggest brand in the niche, the LGBTQ dating space. And, [00:30:00] we've come in to run the company, cuz it was such a big deal for our, you know, our small firm.

And I'm the Chief Operating Officer. I'm the COO and my partner, Jeff is a CEO and my partner, Gary is a CFO. And with Grindr, it was really about. And this is a company that's 13 years old, so we're not the founders. We respect the founders of all the companies. But we've come into a situation where the prior team who had bought it from the founder, by the way, was kind of stagnant.
Like the company kind of stalled a bit. It was still a strong company, but it just, it wasn't accelerating the way it should have been. And, we came in to fix some things and, really there was a heavy lift in the first year and now we're two and a half years in. And, I'm happy to say that we recently filed to take the company public.

Todd: That's amazing. So yeah, I want to get into the public side in a minute, but I'm really interested for [00:31:00] our fellow founders in the negotiation when you're going to sell something like tickle to monster, you had some leverage, right. Meet evaluation expectation that you're anchored in that buyer know that they match it.

And the negotiation goes forward. Probably not as smoothly as I just said. But now on the buy side, I didn't understand that you purchased this from a group that had already purchased Grindr from the founder. So you weren't really just negotiating with a founder and their board. It was a buying group or an operating group. Was it private equity?

Rick: Kind of a funky situation. What happened is a guy named Joel Simi founded Grindr 13 years ago. He then sold the company to a Chinese gaming company called Kunlun and they owned the company for about, uh, maybe three years and then CFIUS. The committee for foreign investment in the US.

Forced the sale because they didn't want China to have all of that data because it could be leveraged in potentially negative ways. So they forced the sale. They basically [00:32:00] said Lin, either you sell this company by this date, or we are taking the company away from you, cuz it's a Los Angeles based company in the US.

Uh, so there was a sale process and we ended up, um, partnering with another firm and then negotiating with Kunlun again, the Chinese gaming company to purchase Grindr from them. Um, with the expectation that again, we would come in and run it, and we knew that Grindr was already of a size and a brand reputation, this global reputation that if we did the right things, the exit here could be a public offering.

Todd: Why do you think you were selected as the buyer? I can't imagine you were the only ones. Once the edict is laid down, that this business has to sell. How did you guys end up?
Rick: Yeah, for a deal of this size, you know, a lot of it does come down to price um, for smaller deals I could say with JibJab it was because my relationship with the, the outgoing, you know, founder and [00:33:00] CEO.

Yeah. And that was truly because he needed to sell the business and knew that we would be good stewards of his and his employees and things that matter, you know? With, with Grindr, it was a much bigger deal size. And I think a lot of that came down to things like, price, deal, certainty, being able to show that you had the debt lined up from, you know, a top tier debt firm and the equity, and you had a backstop and you had everything ready to go.

And then there was a CFIUS process that you had to go through and improve that, you know, everything lined up with what CFIUS would want for. Based ownership. So all of that had to, to align and we got that through that process and, um, fortunately won the bid and now we're, you know, on track to have a really, you know, nice exit.

Todd: So let's talk about that. That's what this is about is exits. And I think very few [00:34:00] founders get the opportunity to take a company public, even though it's a, it's the goal. When a lot of us start these companies. So now you've bought. You bought Grindr and you filed to go public. So, what's that been like?

What are the expectations going forward? And what's any surprises that you've seen so far?

Rick: Yeah, so I think the public process is for people who have not been there or people who are another analogy would be, I think a lot of people wanna be in those board meetings. But when you're in the board meetings, you actually realize, oh God, I'm just getting yelled at, by board members as an entrepreneur.

You know what I mean? Even when you produce great results, it's like, well, that's good, but it could have been even better. And, you think it's this like fun, sexy thing, you know, board meetings. And I would say that it's analogous to the process of going public, which is it's a lot of work. It's a lot of, communication with lawyers.[00:35:00]

And bankers and auditors and accountants and IR firms and PR firms. I mean, there's a lot that's involved. And a lot of that really, you know, is preparing the company, including documents that you need to file with the SEC and then they need to review that and give feedback because they need to, you know, they need to approve and to bless that before you can go public and it's a long process, um, it's distracting because you're not working a hundred percent on the business and that's really what you wanna do as an entrepreneur, as an operator.

But it's also at the end of the day, it's exciting. I mean, I, look forward to, you know, ringing the bill and that's you know, that's a milestone for the company. It doesn't change the company in that, you know, it's not game over. We didn't just win the super bowl and, you know, everybody celebrates and goes home.

We celebrate, and then we go back to work and keep going. Um, but it is an important milestone. And for Grindr in particular, I think it's exciting because I believe Grindr will be the first LGBTQ [00:36:00] focused company to ever go public. So we are really excited to be, you know, the team that helped that happen.

Todd: That's amazing. All right. This has been incredible. I am really thankful that you took the time to chat with me about this. The goal here really for Cashing Out is to give entrepreneurs that perspective of if somebody comes knocking on the door or they have to think about selling a business.

What are the things that they're gonna go through cuz largely the M&A process is a, it's a black box, right? You've been through it on both sides now and taking one public. So any words of wisdom, like just guiding advice that you would give to our fellow founders that are gonna be presented with this opportunity at some point in their lives?

Rick: Yeah. So let me give advice on both the beginning and the end, the beginning would be don't found a company if your primary goal is how [00:37:00] do I sell this and make a lot of money for myself? That's not why the best founders start companies. They start companies because they wanna build something that they believe the world needs.

They wanna make their dent in the universe. They wanna build something for the long term, and it's not about how do I structure this to, you know, to make my money and get that exit like don't ever put in your initial pitch deck. Um, you know, towards the end. And here is how I think we're gonna exit all these companies would be interested in buying us.
It's like, you don't even have an MVP. You don't, you haven't written any code. You're two people with an idea and a whiteboard, like I will decide how big the TAM is. I'll decide about the exit. Like don't tell me that because I want you to be so excited about this thing that you just wanna build this for the next decade or decades.

So don't think about, don't overthink the exit too early. Yes. You can think about it and just be like, wait, am I building something of value? Because if you build something of [00:38:00] value, the exit will take care of itself. I think almost every investor would agree with that. If you build something of value that people love and people will pay you money for it, there will be an investor or an acquirer or a public, you know, a path to a public market.
So just worry about building a wonderful company that people love. Number one, on the exit side though, if, and when you get there, You know, one piece of advice is that you need trusted people around the table with you, and that may include in your investors, or they may have different, you know, different incentives.

But one thing is that you need good people. Either it's a banker or an M&A advisor definitely, a law firm that's aligned with you. Hopefully you. Fairly cost effective depending on the deal size. But I will tell you that having a really good law firm, there's usually one or two lawyers that end up, you know, with you along that process and might save you [00:39:00] lots of money or heartache because they know what they're doing.

That stuff goes a long way. And I remember. Um, Michael Glaser I'll call out from Perkins Coie when we sold tickle and Buddy Arnheim. Um, also those two guys were, you know, we were calling them 24 hours, like all, all hours, cuz when the deal's happening, a lot of stuff is, you know, a lot of moving parts and building those relationships and having people you trust that know what they're doing.
That's a big deal when you sell a company because you know, you took the company all the way to the one yard line don't fumble, right. Get, get the right people around.
Todd: I really appreciate you saying that because maybe to a fault, we focus on bringing the best investment banker in because they typically have the relationship with the buyer.
That's really gonna pay a big number, but we have learned over and over and over that a very specialized M&A attorney who works in your space. They likely have relationships with the attorneys on the other side. And so there [00:40:00] isn't a lot of like chest pounding. Yelling and arguing, they know the points to work on.

They are deal makers, not deal killers. And at the same time they are protecting founders post transaction. So that is awesome advice. I think I have to give that more. We bring those attorneys to the table and we can typically keep fees very reasonable. And that seems to be what resonates most, but, you know, getting the right deal done and protecting founders is really, really where that value is.

So I appreciate you. Look, man, thank you for doing this. I really, I look very fondly back at time. I don't know what street we're on, but I just remember standing there with you and you giving your time and mentorship, and really means a lot. I think there was one other guy and it's not just to name drop, and you may know a Matt Kohler.
Of course, when I was out there doing the tech crunch 50. I had no idea what I was doing. It was just, you know, coming from Boston at [00:41:00] the time, dumped into this competition. And Matt took the time having not knowing Matt to look at my presentation, reorganize the deck, say this, don't say this.

And you know, we end up being one of the Tech Crunch, 50. So there are a few people out there. And like I said, it's like a Disney World for entrepreneurs out there. I wish everybody could have that experience good or bad, knowing that everybody is, has a, has a similar idea and they're smarter than you, and they're gonna work harder than you. And that's just the world of entrepreneurship. And then the few people out there that are willing to give their time to educate. And as you said, you know, even feel it as a responsibility. Thank you. I was the recipient of that gift. So thank you. This was, this was awesome. Rick, thank you for doing.

Rick: Well, thank you, Todd. Thank you for those kind words that actually really does mean a lot to me. So I appreciate that. And thanks for having me on this was fun. I hope the audience, you know, hopefully get something out of it. I'm sure they will. And, uh, yeah. Thank you.

Todd: Sounds good. [00:42:00] Thanks again for listening to the cashing out podcast for more founder, exit stories, please subscribe to the caching out podcast on apple iTunes, Spotify, or wherever you listen to your favorite podcast.

And please remember and the cashing out podcast are for entertainment purposes. Only. This should not be relied upon as the basis for investment decisions.