Subscribe
Share
Share
Embed
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!
Jean Anne Booth - Episode 58 | CASHING OUT M&A PODCAST
00:00:00:09 - 00:00:17:08
Jean Anne Booth
The truth of the matter is, you go where you put your attention, right? You go where you're focusing. And if you're focusing on what happens, if there's a down round, what happens if we run out of cash and we have to sell? Well, you know, frankly, if that happens, you've got plenty of time to worry about it because all of the time pressure is gone.
00:00:17:10 - 00:00:25:07
Jean Anne Booth
So focus on getting where you want to go. And if the bad things happen, they happen. Don't plan for them.
00:00:25:09 - 00:00:48:18
Todd Sullivan
Welcome to the Cashing Out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today, my guest is Jean Anne Booth, a serial entrepreneur with a number of successful exits, including selling Luminary Micro to Texas Instruments.
00:00:48:18 - 00:01:17:11
Todd Sullivan
In 2009 and selling in Intrisity to Apple in 2010. Jean Anne has over 30 years of experience in high tech ventures and has raised over $100 million in venture capital for her companies. Now on our fourth tech startup, Jean Anne shares her insights on having multiple strategic investors on your cap table, being prepared for your buyer to change the terms of your exit days before signing and knowing what you should say no to when raising capital or selling your company.
00:01:17:13 - 00:01:44:01
Todd Sullivan
I hope you enjoy my conversation with Jean Anne Booth. Jean Anne, thank you so much for being here. I've been excited to chat with you. You know, having multiple exits under your belt, coming from being a systems engineer and creating products that delight customers and taking that through to building real businesses and having sales. I think just our founders are going to get a ton out of this conversation.
00:01:44:03 - 00:01:52:22
Todd Sullivan
And I know we were always looking for a date to get you on, and when you finally committed, I immediately bumped Mark Cuban from the spot. So thank you. Thank you for being here.
00:01:53:00 - 00:01:57:18
Jean Anne Booth
Yeah, right. Yeah, yeah.
00:01:57:20 - 00:02:12:11
Todd Sullivan
Well, listen, I know our listeners really like to get to know our guests. So a good way to do that is just to start is like, how did entrepreneurship enter your life? Where did it start? And kind of take us to the building of the first company?
00:02:12:13 - 00:02:41:13
Jean Anne Booth
Sure. So super quickly, I did an electrical engineering degree and an undergrad and a computer engineering degree in post-graduate. My masters and I actually worked in corporate in a range of positions from industrial process control to semiconductors for, I know ten or 12 years before I had my first opportunity to do something entrepreneurial. And actually the first one, I had an opportunity to do a spin out for the corporate that I was with at the time.
00:02:41:15 - 00:03:10:00
Jean Anne Booth
And I was scared and I didn't do it. And then about two years later, I left the corporate and actually joined my first startup. That one failed nine months later, didn't have anything to do with me. But it's an interesting story. And then started was part of the founding team of the next one. That's the one that sold the apple and then left that one and then later started, you know, a third one second one that I started.
00:03:10:02 - 00:03:19:00
Jean Anne Booth
That's the one that sold to Texas Instruments after selling that when I retired for a little bit. And then came out of retirement to start my current company for and with my mom.
00:03:19:01 - 00:03:37:23
Todd Sullivan
That's great. All right. So let me go back to the spin out opportunity, because we have had guests who have been in that situation in that they've broken a piece of technology out that that corporate was going to just pass on. And they started companies and created kind of successes. What was that situation? What made you decide, like, I'm not ready.
00:03:37:23 - 00:03:40:12
Todd Sullivan
I'm not ready to make the leap.
00:03:40:14 - 00:03:59:21
Jean Anne Booth
Oh, gosh, it's easier to answer the second question first. I was scared, right? I didn't I didn't know anything about entrepreneurship. I knew a fair bit about business. But, you know, it's not like I have an MBA. I have an experiential one that's quite. But, you know, I we had an opportunity to take a product line out that did well in the market.
00:03:59:21 - 00:04:27:06
Jean Anne Booth
It just really wasn't where the corporate needed to go. And, you know, I didn't understand anything about funding. I didn't understand, you know, anything about entrepreneurship. I thought I kind of probably would be a good entrepreneur because I'm super stubborn, but that just wasn't the time. So it was actually the greatest luck joining that first startup that I joined that failed nine months later because I got to see all of it, You know, how does funding work?
00:04:27:06 - 00:04:34:10
Jean Anne Booth
How does funding not work? What happens in the worst case? So and that that set me up to do the next three companies.
00:04:34:12 - 00:04:46:20
Todd Sullivan
So let's jump into the quote failure right, because that can be defined in lots of different ways. What happened to that company, the founders, the investors, nine months after you launched?
00:04:46:22 - 00:05:12:01
Jean Anne Booth
Yeah. So this was a semiconductor company. They were doing a CMOS specialty semiconductor process that allowed you to run really, really fast microprocessors, you know, super techie stuff. And it was when Steve Jobs was allowing the cloning of the Macintosh. So they had a microprocessor that was a cloning Macintosh. And then he changed his mind. So that was the end of that business.
00:05:12:03 - 00:05:41:21
Jean Anne Booth
So, you know, at that point, you know, since you can't clone anymore, you know, they had the super fast microprocessor, but it was intended to run on an Apple Macintosh. So they went out to raise money. They were not able to raise money. And so they ended up just shutting down the business. So during the shutdown, I actually was working with the board on some of selling the business, you know, and we sold the desks and the computers and all that kind of stuff.
00:05:41:21 - 00:06:06:10
Jean Anne Booth
And so, you know, pennies on the dollar returned. But after all of that was gone two years later, the efforts that they had continued to make to sell the intellectual property and the patents that that company had generated actually resulted in a $66 million patent sale, which was twice the money in which that's a healthy exit for any company.
00:06:06:12 - 00:06:20:10
Todd Sullivan
Yeah, particularly one that's considering it a failure in the people have left. Right. So yeah, salvaging that in that way probably mostly for the investors. I'm guessing that the founders probably didn't see a whole lot out of that.
00:06:20:12 - 00:06:39:14
Jean Anne Booth
That's correct. Yeah. The investors the investors actually carried that. But nonetheless, I mean, it did really inform, you know, for me, you know, part of the way that I approached exits because, you know, so many people approached the exits the way I approached that first spin out opportunity, you know, with fear. I'm scared. I'm not sure I can.
00:06:39:16 - 00:06:58:07
Jean Anne Booth
And the truth of the matter is, you know, you can do the exit. And if it doesn't work out and you fail, it might be the end of the universe. Everybody may get nothing. But actually, you've got plenty of time to figure out whether or not you can salvage something from it.
00:06:58:09 - 00:07:19:04
Todd Sullivan
Okay. So after that, essentially learning, right? You got to see the full spectrum of entrepreneurship and maybe not the ideal outcome, but how companies can sell for the pieces of that company can sell certainly intellectual property and then asset value. What made you kind of jump into the next company?
00:07:19:06 - 00:07:44:22
Jean Anne Booth
So that next company that we started, this is the one that went to Apple. We actually everybody kind of looked around and at the time engineers on an aqui-hire basis were about $1,000,000 ahead. And so we we were a team of 27, I think, and at the time, so we were worth about $27 million. And, you know, everybody's looking at the corporate jobs that they came from and said, you know what, we really don't want to do this.
00:07:45:00 - 00:08:12:12
Jean Anne Booth
And so we decided to start ourselves and we did a little bit of contract work, you know, just to pay the bills and everything. And then we developed a very unique semiconductor design technology that was perfect for high compute, parallel processing like sound or vision in the day. And Apple actually used that technology. They did a contract with the company, starting with the first generation of iPads to do the display controller.
00:08:12:18 - 00:08:31:09
Jean Anne Booth
And today I wouldn't be surprised if they're using that technology still. But for their AI work and the purchase in that case happened when the tech royalties got high enough that Apple, you know, just decided to use that cash forecast, you know, bank that they have and just, you know, buy it.
00:08:31:11 - 00:08:53:09
Todd Sullivan
Yeah. You know, I actually have some experience in licensing technology to, you know, a big corporation and then those royalty payments becoming, like why do we not just own us? It's actually how I sold my first company. So in a familiar with that process. But it's got to be it's a great feeling, right? When you build something that has real kind of sustained value.
00:08:53:09 - 00:09:12:09
Todd Sullivan
And now a big corporation is is using that in products that affect people's lives, that's got to be very rewarding. You know, I see you as kind of this semi you're in the semiconductor space. I know a little bit. I sit as an advisor to a company called Mythic doing analog processing. You smile so you may know them.
00:09:12:11 - 00:09:19:15
Jean Anne Booth
Of course I do. I mean, they they have an Austin office, so. Yeah, yeah, they've got some of some of the folks from some of my companies.
00:09:19:17 - 00:09:44:16
Todd Sullivan
Yeah. Yeah. Fantastic operation. I just I love how that company has evolved and, you know, waiting on big things from them. So you went that was intensity that we were just talking about that went to Apple. Right. Right. But, but then next comes Luminary Micro. Right. So can you tell us about building that? Because I think all the real the M&A learnings here, you know, in our discussion are really going to come from Luminary Micro.
00:09:44:18 - 00:09:53:13
Jean Anne Booth
Yeah, probably some of the biggest ones are from Luminary Micro. So Luminary Micro was the lead partner in the development of Cortex Microcontrollers with with ARM.
00:09:53:13 - 00:09:54:15
Todd Sullivan
ARM.
00:09:54:15 - 00:10:21:21
Jean Anne Booth
May be kind of top of mind for people because they just went public. Again, that particular market place cortex and micro microcontrollers is now about a $28 billion worldwide marketplace. And you know, we were the ones who got that going, but when we exited so I started that company in 2004 or five. Now, I can't remember we did that in in 2009 that I do remember.
00:10:21:23 - 00:10:41:21
Jean Anne Booth
The real reason for the exit was a couple of things. First of all, the exit was 2009. So that means that there was an impact from Black Monday, October of 2008. Yes, it was horrible. Right? Overnight, I watched millions of dollars of backlog just disappear from the books. Sure. There were two other things, though, that were super important.
00:10:41:23 - 00:11:03:05
Jean Anne Booth
The next one was that we were nearing the end of the ten year term for the VC funds that had invested in us. So it's not like the VCs had ended. But that fund was nearing the end of its ten year life. And so at the end of its ten year life, they need to actually give all of the limited partners and general partners, you know, what they've earned.
00:11:03:07 - 00:11:30:12
Jean Anne Booth
So that means an exit has to happen, whether you're ready or not. And then the third piece was what drove that to be done for real was that without realizing that this is what had happened, we had already done what the VCs considered to be an inside round. So it was actually with a different lead. But but basically it was the VCs saying, you know, do this round with our portfolio company.
00:11:30:12 - 00:11:43:18
Jean Anne Booth
And then when we were talking to the VCs about the next round of funding, they're like, Well, you've already done your inside round. So when you put all of those together, it was kind of like, okay, well, I guess we're exiting.
00:11:43:19 - 00:11:49:09
Todd Sullivan
Can you explain inside round the way you're describing it?
00:11:49:11 - 00:12:25:18
Jean Anne Booth
So, so in that case, inside round just means from their perspective, they made the funding happen using their financial capital. Right. So it might be that the inside round was that it was a follow on round, sure, but not led by somebody else or it might be that the inside round was actually led by somebody, but it might be like a fund of funds or something along those lines where that VC has a significant presence and the ability to kind of pressure that funding round to happen.
00:12:25:20 - 00:12:52:14
Todd Sullivan
Okay. So once an investor comes in, an institutional investor comes in, and then you're saying the next time they invest, maybe it's unexpected. You were the most entrepreneurs might think they go back to market and find another lead investor and your existing investors try to hold their pro-rata or their share by continuing to invest right? But in this particular case, your past investor became the lead again.
00:12:52:16 - 00:13:04:07
Todd Sullivan
And so are you saying that they ended up owning too much of a percentage of the company that the next transaction really had to be an exit because they were going to drive? That? Is it. Is that where you leading it?
00:13:04:09 - 00:13:24:06
Jean Anne Booth
No, for that particular one, you know, it's kind of a it's an unwritten rule. And and that's actually one of the challenges that I mean, if you're going to be funded by VCs that people have to look out for is what are the unwritten rules. You know, back in those times, one of the unwritten rules was only one inside out.
00:13:24:07 - 00:13:48:05
Jean Anne Booth
And so if you have to have a second inside round, then we're done with you. Right? So the one thing you can say about most venture capital is that it's not patient capital. And so, you know, finding out what those unwritten rules are are really important. It's also very, very hard before you get funding from a VC, the you're likely to need to get that from other founders that the fund is invested in.
00:13:48:07 - 00:13:59:18
Jean Anne Booth
And the older the company is, the better so that they have more experience with the VC and they can tell you what unwritten rules they ran into. So it's hard, hard, hard, but important.
00:13:59:20 - 00:14:11:02
Todd Sullivan
I think. I think I understand. Right. So, so you took the second round from the same investors and when it was time to say, Hey, I might need more money, they said, No, we're done. You're going to sell this.
00:14:11:02 - 00:14:18:13
Jean Anne Booth
Business in combination with the other two. It was in it was nearing end of life for the fund. And of course, we also had Black Monday.
00:14:18:15 - 00:14:39:01
Todd Sullivan
Yes. Okay. Yeah. I too was caught in Black Monday. It was August of 2008. We were selling our company and I had moved to the acquirer deal. The board was signing the deal and they canceled five acquisitions that this company was making and we were one of them. Because of that, the board said, The world is ending, save all your cash.
00:14:39:03 - 00:14:59:10
Todd Sullivan
So that was a tough time. A lot of kind of entrepreneurial dead bodies in the water after that. Right. All right. So this is Luminary Micro selling to Texas Instruments, right? So. Right. You've got kind of a lot of things that are pushing you in this direction. And a lot of times I like to understand what is driving an entrepreneur to sell a business.
00:14:59:10 - 00:15:10:07
Todd Sullivan
So you've been really clear about that, right? It's a lot of external factors. It's investors, it's the time. So how do you go about selling this business to Texas Instruments?
00:15:10:09 - 00:15:33:00
Jean Anne Booth
So so I think in this particular case, the this was actually the biggest mistake that I made in M&A. So we didn't actually run a full process. Right. So if you can imagine the situation, right, it's 28 crash. You know, the VCs, tons of pressure from the VC’s and we had an offer from Texas Instruments, a valid offer.
00:15:33:00 - 00:15:50:13
Jean Anne Booth
You know what? You know, we'll pay a dollar for you and all I did was call a few of the other larger semiconductor companies that were in microprocessors and microcontrollers at the time told them we had a valid offer and asked them if they wanted to play. Some said yes,, said no, but that was the extent of the process.
00:15:50:13 - 00:16:14:08
Jean Anne Booth
We didn't look outside in any way and we really should have. So knowing what I know now, I think we could have done better had we cast a wider net. Not that we did poorly, mind you, but I do believe that we left some money on the table. So as we went through the process, which goodness, it started at Christmas, just before Christmas.
00:16:14:14 - 00:16:28:05
Jean Anne Booth
Well, Christmas Eve was when the board voted to accept the term sheet from Texas Instruments. Okay. And it didn't close until May of 2009. So it's long, long term.
00:16:28:06 - 00:16:42:07
Todd Sullivan
Absolutely. So before making that decision, the Texas Instruments, that was the term sheet that you were going to accept. Did you have investment bankers? Did you hire outside counsel or this was kind of an internal decision?
00:16:42:09 - 00:17:07:13
Jean Anne Booth
It was internal. We didn't use investment bankers. Now we do have outside counsel because we didn't have any inside counsel, right? We were a startup. But but yeah, I mean, the extent of the of the net casting was simply me, you know. And, you know, I'd been in semiconductors for 30 years at that point. So I, you know, I kind of knew all the people we needed to talk to, you know, at least in that narrow look.
00:17:07:15 - 00:17:14:20
Jean Anne Booth
But at the time, it never even occurred to me to think about the wider net, which might have actually valued us even more.
00:17:14:22 - 00:17:45:16
Todd Sullivan
You know, I've given this advice before, but when you have an investment banker on your team that really understands your industry, right? So they're industry specific and you're having that conversation with TI to say, hey, is this the right offer? The just the sense that you have or just the fact that you have an investment banker on their team means that they know with a couple of phone calls they can introduce competition or that they can pause a process and widen the number of buyers, the types of buyers that they go to.
00:17:45:18 - 00:18:07:01
Todd Sullivan
And so I don't know if I agree or not, because I don't have the crystal ball of whether you would have done better or not. But having a banker on your team just allows you to even bluff that you're going to market in a Broadway. And it can force not only the purchase price, but what you just alluded to was the time that it took to get a deal done.
00:18:07:01 - 00:18:25:11
Todd Sullivan
Right. So you can really control the timetable, but. Right. Okay. So you've made this decision to go with the Texas Instruments offer, right? Presumably people are going to make some money on it because I think it was a good exit. Can you talk to me about just the next stages of that M&A process? And really who is running it?
00:18:25:11 - 00:18:28:12
Todd Sullivan
Was is this all you know?
00:18:28:12 - 00:18:53:04
Jean Anne Booth
And in fact, actually, I played a role in a lot of it, but I also didn't play a role in a lot of it because interestingly enough, I got diagnosed with breast cancer at the same time. So I was a little distracted. So so I mean, the next part of the process, though, was that, you know, we did a ton of due diligence with with TI, right?
00:18:53:04 - 00:19:27:16
Jean Anne Booth
So they crawled through everything, the customer list, your financials, you know, your designs, everything we did at the time, you know, one of the big, big things everybody had to worry about was how much open source software are you using? And, you know, is all of your licensing clear? And it just took forever. I mean, it was, you know, the number of I's and T's and everything that you had, the dot in cross was pretty incredible because really, you know, once the term sheet was agreed upon and signed and the board had voted, you know, that part of it was done.
00:19:27:16 - 00:19:36:09
Jean Anne Booth
It was just a question of, you know, are you going to back out now or are you going to go ahead and go forward? Yeah, but but that took five months.
00:19:36:11 - 00:19:53:21
Todd Sullivan
Yeah. You and I have talked about that process of, you know, are we really going to the dance together? Are they going to back out? Are they going to change the terms? Right. Is this the one where you get to the goal line and things change, the structure of the deal changes.
00:19:53:23 - 00:20:23:20
Jean Anne Booth
Yeah. And actually, I mean, my experience has been that whether it's selling right, your M&A process or even just funding, I think maybe any time you're talking about money, you've got to know what you're willing to accept as the bottom line. You've got to be willing to seriously actually hold to that. You know, so almost I can't think of any time either in an exit or in a funding round where you haven't gotten almost to the end.
00:20:23:22 - 00:20:49:09
Jean Anne Booth
And then they hold up the deal and go, sorry, you know, I know this was the valuation, but we're going to cut it in half or sorry, you know, I know your option for was post-money, but now it's going to be pre money which just took your valuation down or sorry you know, here's the exit amount we're going to take this much of the exit amount and move in and post-acquisition earn outs which by the way are now so awful.
00:20:49:11 - 00:21:20:17
Jean Anne Booth
So don't do them. So, so you know, there's always that time. So, so it's really hard because you while you're shooting for the stars, you also kind of like a Stockholm syndrome. You've got to be able to hold at the same time in the same brain a reasonable understanding of what is likely or possible. And so just because you're in the process and even if you're in the process and really far down the process, that doesn't mean this is the time or prospect you're working with is the one that you're going to be going with.
00:21:20:19 - 00:21:45:12
Jean Anne Booth
You've got to be okay making a decision to end that process that isn't going where you know that you can go. And so when you get, you know, in that funding or M&A and this happens, you're almost there, the deal's about to close and all of a sudden the basic structure or basic value changes and they're trying to emotionally push you into this, take it or leave it situation.
00:21:45:12 - 00:22:07:23
Jean Anne Booth
Right. It's you know, you have so much economic value already invested, but it doesn't matter actually. So it feels horrible when it happens. But you need to know that in all likelihood, you're going to have this moment. And so when it happens, you go, oh, here's that moment. I stay strong. I know what the exit’s going to be.
00:22:08:01 - 00:22:31:15
Todd Sullivan
Okay. Yeah, I think that's great advice. I think I distill it in down to your BATNA, right. What's your best outcome or alternative to a negotiated agreement? And I think that that there's a lot of emotion that goes into not only is what what is my best financial option, but deciding what your number actually is and how that number is structured.
00:22:31:17 - 00:22:53:19
Todd Sullivan
And so I encourage every entrepreneur to really do a deep dive, get some analysis of what you actually need for the next phase of your life, whether you're going to go buy a business, start another company, retire, you know, fund children through college, whatever it is, you really should have a good understanding of that number because then you know what you can say no to and everything else.
00:22:53:19 - 00:23:18:18
Todd Sullivan
You know, you can say yes to, you know, what your limits are. So that's in addition to what another agreement might look like. But you're absolutely right. It's whether it's a negotiating tactic or, you know, the world changes just like, you know, August, September, October of 2008, things change and they affect valuation. So I think that's great advice to be ready for that moment and know where you stand.
00:23:18:20 - 00:23:41:00
Todd Sullivan
That is a fantastic point to be making. Now I see it. It's kind of two different worlds, in my opinion, the M&A world versus the fundraising world, M&A, you may be, you know, the times are forcing you into this sale. And so if Texas Instruments makes a change at the goal line, you all gone through this four month, very emotional, very difficult process.
00:23:41:00 - 00:24:07:16
Todd Sullivan
You are committed to the sale and you in fact, you're thinking about what your next steps are. So very, very hard to say. No, we're walking away, right. Particularly when the company doesn't have cash, you know, to continue operations. I'm not exactly sure where you were, but it sounds like, you know, it's closed doors or sell. So how do you and the team think through the adjustments those that goal line adjustment that Texas Instruments wanted to make when you were selling?
00:24:07:18 - 00:24:35:19
Jean Anne Booth
You know, it was really more about holding those two pieces in your head, right? So here's what I want and here's what you know, if I put on my reasonable hat, here's what I think is reasonable. And of course, you know, you can always do the okay, well, we're going to buy you guys for another New York, because in some respects, part of what is being acquired in a sale like that one was an aqua-hire.
00:24:35:21 - 00:25:01:11
Jean Anne Booth
So they were buying engineers, they were buying technology. And so they had to make sure that the deal meant that they were going to get the engineers they needed. And so so that that gives you back some of the negotiating leverage. And I guess part of my deal is I like to make sure to the best of my ability, starting from, you know, the learning of the company that failed.
00:25:01:13 - 00:25:29:11
Jean Anne Booth
I want my businesses to sell above water for as wonderful a return as we can get for all of the investors. And because all of my businesses have had this really heavy R&D component, you know, without the investors, there isn't a business. We haven't been able to create these products that delight people and change the world. So if you're going to make sure that a great exit that happens, I'm really firm about making sure we're always planning for a successful exit and driving toward that successful exit.
00:25:29:13 - 00:25:47:14
Jean Anne Booth
Because, you know, the truth of the matter is you go where you put your attention, right? You go where you're focusing. And if you're focusing on what happens, if there's a down round, what happens if we run out of cash and we have to sell? Well, you know, frankly, if that happens, you got plenty of time to worry about it because all of the time pressure is gone.
00:25:47:16 - 00:25:59:10
Jean Anne Booth
So focus on getting where you want to go and if the bad things happen, they happen. Don't plan for them because it takes away your attention for driving for success.
00:25:59:12 - 00:26:20:13
Todd Sullivan
I think you're in an interesting position in that the Aqua Hire was a fallback in your case, having the backgrounds that you guys did, the value put on the actual people. So I understand you're not building a company for the outcome to be an aqua hire, but you know, in the back of your mind, that's the fallback. And maybe that's the right way to think about it.
00:26:20:13 - 00:26:44:23
Todd Sullivan
You're you're building a company, you're shooting for the stars, but maybe you have some goals on ROI, right? Return on your investment, your time and the investors dollars. At what point is the right point that you should be shooting for? Because you're right, wherever you put your attention, that's where you're going. I think these are great lessons. Jean Anne, can you tell me, is there is there anything else in your experience with M&A that you would like to share?
00:26:44:23 - 00:27:11:08
Todd Sullivan
Any other kind of pitfalls? You know, talking about failure, I think is a great one. In your case, failure. That company selling for, you know, double the dollars invested is is a rather nice failure. And then you've had you've pulled success out of seemingly impossible situations. Right. External factors driving real problems in a business. And you've been able to survive and thrive, in fact.
00:27:11:10 - 00:27:19:08
Todd Sullivan
So before we get into your latest, is there anything else you could share with our listeners about your advice in during M&A?
00:27:19:10 - 00:27:44:21
Jean Anne Booth
I mean, I think there's probably two. And so the first one is something that I feel pretty strong about. It's what I call the easy advice, right? So, you know, when when you're talking to people about a startup, an entrepreneurial journey, and you're talking about your exit, you know, 99 out of 100 people are going to say, make sure your business is B2B, get strategically important to some big company so that they buy you.
00:27:45:02 - 00:28:06:14
Jean Anne Booth
And although that's an exit, that's really an awful hire. So that's the that's the fallback, but that's not the best exit that you can get for your investors by, you know, by definition. So, so if you don't have any investors, that strategic acquihire is a great exit. But again, since my companies have all had a heavy R&D component, that's not been the case.
00:28:06:16 - 00:28:30:05
Jean Anne Booth
So I feel pretty strongly about this. I mean, I think if you if the strategic joining together with a strategic company is good for your business, then the thing you want to make sure to get that exit that is the best one you can is, in my opinion, two things. First, no strategics are ever on the board. And then second, you have more than one strategic.
00:28:30:07 - 00:28:56:11
Jean Anne Booth
Right? Right. So. So now you've at least got, you know, some competition. So I'll tell you one story. Early on in the company that we sold to Apple, actually the first money in was Texas Instruments. So that that's really funny, right? Then I turned around and the next one sold to TI. The first money in was actually Texas Instruments. And as we were negotiating that money in, one of the things they wanted was first right of refusal to buy the company in the case of an exit.
00:28:56:17 - 00:29:16:07
Jean Anne Booth
Right. And they set a price on the stock. And I said, absolutely not, because, you know, if you do that, you have already sold your company. The only question is when. Right. And nobody is going to make a valid offer for it because, you know, they know that, you know, in this case, it would have been Texas Instruments.
00:29:16:12 - 00:29:19:09
Jean Anne Booth
All they have to do is offer one more dollar and they've got it right, you know?
00:29:19:10 - 00:29:20:12
Todd Sullivan
Exactly.
00:29:20:14 - 00:29:28:07
Jean Anne Booth
So so, you know, they'll try anything and you can't blame them for that. But it's up to you to not accept it.
00:29:28:09 - 00:29:54:08
Todd Sullivan
You know, I think I have to refine the advice that I give based on this because I say you really don't want strategics or potential acquirers on your cap table. So when you bring them in as investors, you know, they're on your cap table and they get information rights that the general public doesn't get. So inevitably, when you are trying to sell a business, everyone's going to look at the cap table or buyers are going look at the capital table and say, well, why aren't they buying you?
00:29:54:10 - 00:30:20:16
Todd Sullivan
They should buy you, they're going to pay the most were out. And so I just say you just say no to that. And you keep strategic partnerships at strategic partnership length and you try to diversify them, right, Because you're creating relationships with potential acquirers down the road and you want to create competition. I guess, based on what what you're saying is that maybe you can take investment from strategic partners as long as you have more than one.
00:30:20:21 - 00:30:38:15
Todd Sullivan
And I would say that maybe that's tricky to do. Having more than two, More than three, right? You really do want diversification. But yeah, having more than one for sure. Or just like you said, you've this is where you're selling your company and it's just a matter of when. So awesome advice. You know, I'd love to hear what you're doing.
00:30:38:15 - 00:30:51:13
Todd Sullivan
Now. We have a client that is doing something at least in a similar space. And so it's fascinating to me. It's such a small world moments. Right? But can you can you can you tell us about your business today and how you're how you're building it with your mom?
00:30:51:15 - 00:31:20:14
Jean Anne Booth
Yes, sir. So the company that is still going today is called UnaliWear and what we offer is the Kanega Watch. And it's service. So it's a wrist worn medical alert device, voice activated with a patented battery system in the band. That means you never take it off to charge. And it's the only true 24x7 medical alert on the wrist connected with automatic fall detection.
00:31:20:19 - 00:31:44:02
Jean Anne Booth
You know, connected to medical alarm call centers who can automatically dispatch emergency services. So, you know, Unali is Cherokee for “friend” and Kenaga is Cherokee for “speak” so or the friend who speaks to you and this is how it actually sounds so that for if anybody sees the video you can see my watch. Should Fred Astaire get help?
00:31:44:04 - 00:31:55:01
Todd Sullivan
I think I heard you ask for help. I am contacting the operator for the crown button once. If you do not need help and I will cancel the call.
00:31:55:03 - 00:32:20:12
Jean Anne Booth
And so that's exactly how it works. You talked to it, It talks to you. It has cellular Wi-Fi, GPS, Bluetooth for hearing aids and telemedicine devices and and a patented automatic fall detection on the wrist. That is, you know, fantastic, fantastic stuff. So The New York Times Wire magazine just named you UnaliWear Kenaga Watch, the best medical alert on the go solution.
00:32:20:13 - 00:32:37:10
Jean Anne Booth
And you know, it's it's going really well. And, you know, as you said, it was all because of my mom. So when when my mom turned 80, which by the way, was a decade ago, she's gone now. But when she turned 80, we had that discussion. You know that you have Mom, I love you. I want to keep you safe.
00:32:37:12 - 00:32:57:10
Jean Anne Booth
Here's all the pendants that you can choose from. And she she said, absolutely not. Yeah. And she was a model. Right. So, you know, when I thought about it later, I realized, look, I'm a I'm a nerd. I'm totally an engineer, I'm totally a nerd, and I wouldn't wear a pendant. So why would I expect my mom the model to wear a pendant?
00:32:57:12 - 00:33:16:14
Jean Anne Booth
And so so I said, Fine, mom, you know, you're going to get to see the advantage of having an engineer for a daughter. We're going to build a company that builds a medical alert that you would be willing to wear. And she was personally responsible for the first 100 people of the 400 plus that came through our focus groups while we were doing design.
00:33:16:16 - 00:33:32:11
Jean Anne Booth
And she personally weighed in on everything we did in terms of how did it look, how did it sound, was it loud enough? Is the display bright enough? You know, does that fit? Is it comfortable? I mean, everything she weighed in on. So it was fantastic.
00:33:32:13 - 00:33:42:07
Todd Sullivan
So it sounds like you've got a bunch of technology around it. And knowing your background, you probably have some patents that are of of real value. Where do you see this? Where do you see this one going?
00:33:42:09 - 00:34:07:06
Jean Anne Booth
Well, you know, like I said, I am always looking for the best exit I can get for our investors and entrepreneurs. And I think in this particular one, it's it should actually be a really nice one. I mean, there's there's over 70 million people in the United States today above the age of 65. And, you know, less than 7% of them today wear a medical alert.
00:34:07:06 - 00:34:34:01
Jean Anne Booth
But then again, you know, if most of those guys are like my mom, they're going no I'm not wearing a pendant. So the opportunity here is absolutely enormous. You know, the accolades that we've gotten for Kanega watches, you know, from the reviews from wearers. And we have wearers in every state of the U.S., including Alaska and white and, you know, all of that says that we have built a company that has product market fit and we are scaling today.
00:34:34:01 - 00:34:48:22
Jean Anne Booth
So I'm hopeful that we're going to be seeing that that really rewards the investors who have been a part of what was actually a ten year journey getting to here. So we're we're a ten year overnight success.
00:34:49:00 - 00:35:06:06
Todd Sullivan
That's fantastic to hear. Yeah, I wish you the best of luck. And if we can be helpful, you know, we'd be happy to happy to try. Jean Anne, this has been this has been awesome, right? Such great advice. I love that you are this entrepreneur at heart that started out being scared to jump in, you know, on a spin out.
00:35:06:06 - 00:35:19:06
Todd Sullivan
And now this is this is who you are and you're having making your next success. Really appreciate all the advice. I know our fellow founders, business owners are going to take a lot out of this one. So really just thank you for being here.
00:35:19:08 - 00:35:23:17
Jean Anne Booth
It's totally my pleasure. Thank you so much for bumpin Mark Cuban for me.
00:35:23:18 - 00:35:47:09
Todd Sullivan
Any time. 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.