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Build a Business Worth Buying brings you candid conversations with industry leaders, M&A experts, and successful founders. Learn advanced strategies to scale, optimize, and prepare your business for an acquisition—because building a business worth buying starts with smart decisions today.
Adi (00:00)
when I was running DTC, my average revenue per employee was at least 2 million bucks, right? 2 to 3 million bucks.
Aaron Alpeter (00:43)
We have a fantastic episode today. Today's guest is Adi Gullia. He's one of the most respected e-commerce founders to come out of the Canadian startup ecosystem. Adi has had lots of different ventures, but he's best known as the founder of Grace and Stella, a beauty and skincare brand that he built from the ground up. what started out as a scrappy product test turned into a globally distributed e-commerce business, spanning Amazon, D2C, and major retail partnerships. And ultimately led to
successful private equity exit. Since his exit, Adi has shifted into purely building brands to buy
and operating businesses himself, which gives them really rare perspective to be on both sides of the table.
I first met Adi at Ecommerce North, which is one of the best communities out there for the Canadian startup ecosystem, as well as the conference he is the founder of Ecommerce North. He's done so much there. And so just a really great human being, really great story. And I think you're going to love this episode.
Before we get into it, if you are a fan of build a business worth buying, we'd love to have you like and subscribe and share this episode with a friend. I think there's so much going on and I love meeting you guys in person. With that, let's get in with Adi
Aaron Alpeter (01:45)
Adi, thank you so much for being on. I have really been looking forward to this
Adi (01:49)
Hey, good to be here, man.
Aaron Alpeter (01:51)
Great, so I wanna start by diving into your earliest days at Grace and Stella. Oftentimes when people are starting a project they're not quite sure, is this real, is this just a hobby? What were some of the signals for you that this could be something more than just a side project?
Adi (02:08)
It was really when I started to see the demand of what I had and when the demand outweighs the supply that's when you know you've got something real and when stuff's flying off the shelf there's no question around whether what you have is worthy of being on the market. That's when I knew I had something
Aaron Alpeter (02:29)
great. Was it simply just that you sold out or was it that it was several magnitudes larger than even your high side expectations?
Adi (02:38)
Both. mean we sold that first and then I restocked. This started as like a side passion project which I'd always just...
been interested in business. And so I was experimenting with a different form of business that seemed to be evolving around that time. I'd met somebody who said, hey, I built an Amazon business. I wasn't aware that people sell their product on Amazon. At that time I thought Amazon sells everything on Amazon, because I didn't shop much on Amazon. So I wasn't quite aware of the phenomenon.
so I had a chat with them and then I thought, okay, I already had a beauty business prior to that. So I thought, okay, why not come up with a new beauty product and put it on this marketplace and see what happens. yeah, going out of stock was definitely a surprise, but it was not an accident. It was definitely orchestrated. There was some engineering behind the scenes from a marketing point of view.
Which had I not done it I wouldn't have sold a single unit because That would that would be sheer luck. But for me, I'd done my homework I'd sort of learned a little bit about how to get a product launched and when it sold out it was a pleasant surprise, but it was not a Confirmation that I have a home run here. And so when we reordered for the second batch That sold out fairly quickly also third batch came same thing happened. That's what
I knew this is not a fluke and then that's when I thought maybe this is something to take more seriously. And from there we just ordered a second product, third product, fourth product, and each product became an experiment on its own. Some products worked, some didn't, but it's all a matter of trial and error and experimentation.
Aaron Alpeter (04:21)
What was the time period between when you first launched to when you're like, okay, this needs to now be my main focus?
Adi (04:28)
You know, from the point that I launched until around seven or eight months in when I was just pulling in a hundred grand a month and that's the point at which I thought, okay, like I should take it more seriously. ⁓
Yeah, because even if it drops from here, it's dropping to like 50k a month, right? It's not going to go to zero because there was some legs the business had at that point. And then that's when I decided I'm going to start diversifying into other product categories.
the thing with D2C businesses is the ordering cycle is quite long. you can't ship a product out as fast as you have the idea of it, right? So if you have the idea of a product, you got to first come up with packaging, design, formulation, work with the esthetician. That could take a month. And then you got to have the right manufacturer, which if you have that in place, production can take up to a month and then shipping can take up to a month. So you're looking at a quarter.
of a lag. You can shrink that down by air shipping it, but there are some constraints around that. it eats into your margins. So, you want to start with something, or at least I did. ⁓ And this wasn't something I had really thought about. It sort of got lucky with it, was small and light. If you something small and light,
The difference between shipping it by air and by sea is not as much of a deal breaker, especially if you got good margins. So I would just air ship and instead of a three or four month wait period, which is what most businesses have to deal with, I was iterating much more quickly, which I think is the real problem is like the speed to signal is critical.
because of that I was able to just like order more frequently, test more frequently, test more different variations of the same product to see what the customer likes or doesn't like. by the time we had our third order I was five or six months in and then around the eight month mark I had my second product in. I'd say somewhere between the six to eight month mark was when I really, it became like solidified, okay, there's something.
here.
Aaron Alpeter (06:27)
I mean, 100K a month, that's the stuff that dreams are made of. think everybody wishes that they could maybe get there and be there in seven or eight months. you talked about the engineering that you did ahead of time in order to make sure that it was successful. Can you talk a little bit about what you did and maybe from your first business that you brought into this one saying, hey, this is what actually made a difference. And I imagine it's not one of those things where you spent a million dollars to make a hundred thousand dollars. You probably had were profitable and growing and doing all sorts of things from day one. Right.
Adi (06:56)
Yeah, I've always been very scrappy. there's just no room for waste or leaks. that's just sort of been in my DNA as a founder. I've never raised a dollar of funding from anybody else. And so I just watch very carefully.
operations, margins, things like that.
it's not that I got lucky, but I did try to plant my luck in some way. what I mean is the engineering that I did was you could call it the hard work, right? And there's no shortage of hard work. Like every founder or somebody that wants to be a founder is working hard, but that's not where outsized results come from. Where I've seen outsized results come from is not how hard you're rowing the boat, but what boat you're on.
Right. And so the, engineering in the background was something that I had to do. And that was the rowing and the mechanics of trying to figure out how do you rank? How do you sell? How do you get distribution? How do you market? Right. But the bigger piece of the puzzle was,
being in the right category, in the right marketplace, in the right business, right? If you pick the wrong business to be in, it's like being on an incline on a treadmill. You just can't run as fast. I had a lot of other things going for me in the sense that there was a lot of tailwinds, right? When the wind is behind your back.
It just makes everything flow a lot smoother. so margins were great. Demand exceeded supply by like orders of magnitude because there just wasn't as many brands that were aware of the immense demand from customers who wanted to buy on Amazon and not enough brands had come on to realize that. that had that I had going for me and some of of that you could call luck. Some of that was actually just, talking to people.
and realizing, okay, to get a customer on Facebook, you gotta spend 30 bucks. To get a customer on Google, you gotta spend 60 bucks. To get a customer on Amazon, you gotta spend five bucks. So there was something that seemed like the tailwinds were in this direction. So let's look here. And as far as the actual engineering, that was really just being maniacal around what works, just what is working. ⁓
fluff
just what is going to rank my product. If I want my product seen by somebody what do I need to do and let me go figure out who has already done that because if I'm going to go on YouTube and I search for whatever everybody else is searching for then I don't really have a delta between the average knowledge and you know sort of like the elite knowledge so started making friends with a bunch of people that already were
ahead of me by miles and the way they would explain certain things that was I think a critical piece of it was being with the right group of people and then the actual technical things around it you know were things like having a minimum ratio of review to sales right like so if you want to have X in sales you gotta have Y in reviews this was just like a basic
formulaic thing that I knew I had to get right and that has evolved over time. Like you used to need 20 reviews to get your first sale, now you need 200 reviews to get your first sale and someday you're going to need 2,000 and when you need 2,000 you might as well not start that game because it's too expensive to play. So those were sort of the engineering behind it right and then there was things that I could do to like
Aaron Alpeter (10:15)
Thank you.
Adi (10:23)
ranked my way to the top by manipulating the algorithm. So like, what is the algorithm? What does the algorithm reward? What does it punish? And there was a whole bunch of things that went into that. really a lot of just like diligently talking to founders, seeing what's working for them and studying it like you would say in school if you had to pass an exam. And so that was sort of like the engineering piece of it.
Aaron Alpeter (10:46)
Okay, that's
all very helpful. I mean, it's also possible to over-engineer solution and make things more complicated because they may eventually be a billion dollar idea. Is there anything that you did that you said, I'm intentionally gonna keep this simple, I'm intentionally going to try to keep this as basic as possible because I need to prove out a different thesis right now?
Adi (11:10)
know, if you're having to rely on engineering, then you just haven't picked the right boat. You know, so that's what I would say.
Aaron Alpeter (11:15)
How many different boats did you try?
Adi (11:17)
It was the first boat, know, just got in the right boat. Because the problem with getting in the wrong boat is you waste a lot of time, Like if you're, especially if you're in a business where you got to deal with inventory and physical stuff, you got inventory now. If it's a dud, you got to figure out how to liquidate it. And that whole thing just wastes a lot of time.
Aaron Alpeter (11:19)
Yeah.
Adi (11:38)
you don't have a lot of room for error on the boat itself, right? Because a lot of times, you know, I saw people that had sunk a fair bit of money into buying 5,000 units of a product, wasn't working. They started to work with a different agency to see if they could crack the code. And then they started to hire somebody else to see if they could crack the code. And the problem wasn't the talent of the agency or the person they brought on. The problem was you just didn't pick the right product. And that's where 90 % of the magic lies.
actually I should clarify myself. That was actually my second boat. I had a product that I had picked prior to that that didn't go as well and I just forgot about it.
Aaron Alpeter (12:14)
you
Adi (12:16)
product that I came across when I went to China and I was at this show called Canton Fair, which is like a...
This is like an amazing show that happens every year in Guangzhou. And there was this crowd around this one guy who was sitting on a chair. And one of the guys had set him down and he had hair loss. his hair was thinning. And within 30 seconds he gave him like a full head of hair. And this was magical to me. Because,
my family members have struggled with hair loss, obviously. So I was like, this is an interesting product that I myself might consider at some point. So I took it and then I brought it here. But that one didn't go as well, you And I was very quick to just like pivot to a different one. So I should clarify that. That was actually my second boat that worked out.
Aaron Alpeter (13:03)
you're absolutely right, being in the right boat, having the right problem that you're solving for is 90 % of the issue. And what advice do you have for people who have these ideas, and I'm sure you talk to founders all the time who are like, hey, I wanna do this thing. You're like, well, I don't know if that's the right boat from my perspective. What's the framework that you would share to help people evaluate if the idea is good or not?
Adi (13:24)
Yeah, think this one of the biggest challenges is self-honesty with how much you want what you say you want and usually what happens is the person that makes it to the top genuinely wants what they say they want and the rest of the ones who
sort of went to bottom of Mount Everest and stopped somewhere in the middle or didn't start the journey or decided to come back. Usually they just didn't want it as much as the one that made it, so to speak. it's about how you feel about the idea.
Every idea has a maker behind it that will take it to the top. Every idea has that potential. I love this one European saying where there's a top for every pot.
you're the top for that one pot,
Where you genuinely can't stop thinking about making this one thing work? Trying to figure it out not from an outcome point of view Like what I could with the door prize that I'll get at the end of this journey or the exit or the money or whatever but if it's more about
the joy of just figuring it out. This is really fascinating to me, almost like a kid, right? When you see little children play with a spoon and a plate, for them in that moment, it's just all that exists in that moment. And they could play with that spoon and that plate for hours. And that magic goes away when we become adults, right? We sort of lose that honesty and we start doing things for an ulterior motive, whether that's money, status.
whatever the case might be. honestly examining if the thing that you're pursuing is what floats your boat, that would be the first step. once you get past that major hurdle, which I think a lot of people just don't get past, ⁓ they prematurely jump to the idea. But then as far as like validating whether the idea is good or not, I think speed to...
the degree to which you can quickly identify whether this product is worthy of somebody else's credit card being swiped at the...
grocery chain or on the Amazon account or on your website is the speed with which you will basically figure out whether the product ought to exist. And so a lot of get caught up in overthinking, Or over analyzing, or over optimizing. For things that really don't matter, it just gives them the illusion that they're busy with
the process rather than the outcome. as quickly as you can validate whether somebody wants what you have and the speed with which you can continuously test against that and almost detach yourself as a third party, right? Because if you have a lot vested into it, you might cloud your own judgment to want to believe that this is going to work when there may be
opposing feedback to that belief and you may not see the truth. So I think it's really important to go in as a...
as an experiment almost to see, this is the product and this is the market. Let me bounce them against each other, see whether it's again, like clicking or not. If it's not, I got to pivot something. lack of that detachment is what prevents the speed of experimentation, right? So you sort of have to play this game with your own mind to like make sure that you're not getting caught up with the day to day.
grind that will eventually kick in and kick your ass if you're not watchful. And so I'd say like yeah, like the speed to signal, talking to customers, talking to the actual user, there's nothing like that, right? Because at the end of the day, they will give you the brutal truth around whether they like something or they don't, whether something is resonating or not. And again, the degree to which you're attached to that...
outcome is going to be the degree to which you're going to be slowed down. like really just like being out there on the field talking to customers. if you just got those two things right you're like 90 % of the way there.
Aaron Alpeter (17:29)
Yeah, I love the idea of talking to your customers, you're treating it as an experiment, that all makes sense. I think one of the hardest things that any potential founder would look at is when to kill an idea. And so maybe you can talk about that with the hair loss idea.
How invested were you in this? Did you have to have some distance and nonchalant of like, hey, yeah, if this doesn't work out, it's fine, and I put a couple thousand bucks in and that's not a big deal? Or is it something that you wanted to will into existence? Because I've always felt that there's two types of founder stories out there. There's the one that was light in a bottle, it was overnight success, and we hear about those. And then we hear about the ones where, man, John Floyd Peloton, mortgage has
house was, you know, was struggling for years and years before it took off. And you hear about those stories too. But the ones that you don't hear about are the stories where the founders should have quit years ago, right? And they're just hanging on. They're probably not capitalized. They're probably not in position where they can get to a point where it's actually going to be meaningful. what advice do you have for people who are maybe in that position where it's like, man, yeah, you had a good idea, but the execution wasn't there. The funding wasn't there.
and this isn't going to work.
Adi (18:44)
Yeah, there's like a lot in that, right? And I guess the founder, the second type they described where they just go all in, right? There's no such thing as failure. For that guy, there is no such thing as failure because it's done before it's done. he has no option. The reason he has no option is because...
There's no reason for it. That's just what it is for him, right? Whereas for the person that it is an option, where failure could be an optionality, you can't compare those two guys, right? this comes back to do you honestly want something, right? Because if you honestly want something,
then failure just is not an option, right? I just don't think failure really is an option. It's all about experimentation. Some experiments work, some don't.
is extended far, far, far beyond most people if you don't have that option to quit. But for the person that is sort of looking at it as just like a means to an end, like this is an experimentation on building wealth, creating cash flow, generating income, right? When do you know whether to kill an idea
not. It is a tough question, right? Because if you're purely doing it for financial reasons and if it's not working, you know you have to throw the towel in at some point because you're now losing money and time and so where do you draw that distinction and that's for a person to ask for themselves. But for me, I didn't feel like I really threw the towel in because I
launched my second product as I was figuring out the first one, right? So for me, again, the product was not the end all be all. It was one of many experiments that I knew I was going to run over the course of however long I was in that business in that game. so to me, didn't feel like I quit because it was just, okay, this is one strike at the dart.
didn't land on the bullseye. Let's go with the second one. If that hadn't landed, I would have gone for the third and the fourth. And so in some ways, that is also similar to the second scenario where...
If you know that eventually after throwing enough darts, you're gonna land the bullseye. You're not gonna move away from that dart. You're gonna keep throwing because you just know that it's a matter of experimentation. so ⁓ in some ways, yes, I did quit it because the product was not doing as well. Right. I think.
I don't remember exactly what it was doing. got like tens of thousands of dollars in sales or something. ⁓ it was not a, you Amazon is a very demand focused platform where people know what they're going to search for, right? It's not an interruption based platform as much as say Instagram or Facebook. So that product, people just didn't know about it at that time. So they weren't searching for it. for me to even show up on their results through sponsored ads was very expensive because I was competing against other products that people were searching for and there
Cost of acquisition was much lower because mine had a lot of educational component around it and all these things So yeah long long story short like I think you never quit You know you know to throw the towel in from an outsider's perspective of maybe appearing like he threw the towel in but that's a battle lost That's not the war that was lost
it's the journey. what is your vision? You want to make something happen and there's going to be some things that are flopped along the way. But it's all an experimentation. It's just all a big experimentation.
Aaron Alpeter (21:59)
Yeah, I definitely resonates with me. if you make a mistake or you lose money, you've got to decide if that's just going to be a loss or if it's tuition that you're paying to learn something. And it sounds like that's really goes into this idea of this experimentation you're doing where you're, learning along the way. And it wasn't that the first option was a bad idea. It's just that option number two was a, was a better boat to be in. And so I think that there's, there's a way of looking at this
and saying, okay, if I were to pay somebody and to be able to walk away with this experience, essentially, what would I be willing to pay for that? Maybe a different way to look at it. And so if you're like, hey, I'd gladly pay $10,000 to be an expert at Amazon sales and things like that. Like, okay, well great. That's probably how much you're willing to lose over a period of time, know, net any revenue or stuff you have coming in.
Adi (22:47)
Mm-hmm.
you're sort of here for a limited period of time, right? Like as a founder, your career is like what, 50 years at max, 60 years if you're lucky. It's not a long time. particularly when you're younger, right? When you're in your 20s, 30s, 40s, like those periods are very, very critical. And so the thing that you wanna really maximize for is your time, right? Like not to be wasting it rather than the money or the cash. Cause that will always come, right? You know, there's not shortage of money. They print it every day.
your time can't be printed. I'd really try to maximize for the time and the speed with which you're just running these experiments.
Aaron Alpeter (23:20)
Yeah. Let's go back to Grace and Stella because you've talked about how after seven, eight months, you're like, okay, I think I have something or I need to work on it. I'm assuming that your growth wasn't a perfect straight line with nothing else that went wrong. At what point did you get to a moment where the growth actually became either an operational risk or a financial risk?
Adi (23:44)
I wouldn't say I ever ran into a point where I felt it became an operational risk or a financial risk because I've always ran, every company that I've been involved in very lean. when I was running DTC, my average revenue per employee was at least 2 million bucks, right? 2 to 3 million bucks. And so I was just very like surgical around how lean I wanted to keep it because I
I didn't want to have disaster strike and me not be prepared. And really what is your biggest armor is your margins. That's your real army. When there's a threat from the outside, whether it's competitors, marketplace, whatever, your army is your margins. And so the degree to which your army is healthy is the degree to which you're going to be able to fight that battle when the shit hits the fan. So I wouldn't say there was any moment where I felt that until I placed really
the big bets and there were things that went sideways there. But I would say there was definitely challenges around team and building a team because when you go from a solo operator, this is one of the things that's so exciting about AI is because you can theoretically, if you have an army of agents, just have your own.
will with these agents, right? But when you have people to manage, every person has their own incentives, their own goals, and as you're scaling the business, your DNA sort of starts to dilute a little bit, unless you're exceptional at hunting talent and cultivating that talent,
which I made mistakes with early on. So I think the biggest core risk was really how do you continue to scale the people that you're bringing on? How do you have it so that the culture such that they wanna carry that same momentum?
Because if they don't, then you're having to fix
leakage that comes with that. scaling with people. Because at that point, it becomes more of a product game and a people game. Because now you're getting the people to launch the products, and the people to market it, and the people to go out and learn as much as they can. that was a challenging piece. How do you have the right team in place to be able to take this ship to the next milestone?
And then financially, there was always the issue especially with these DTC brands, where your cash flow is just tied up.
order inventory, you gotta run ads, you gotta be as aggressive as you can, cause seeing cash sitting there is like your army sitting idle, like send them out to battle, right? So there's always just this like problem of as you grow, so do your problems, but that's just the nature of that beast, and that's one of the reasons why I left that industry was didn't wanna play that game anymore.
Aaron Alpeter (26:20)
Yeah. You know, one of the things I appreciate you is you've been very open and vocal over the years of just like setbacks that you've had along your founder journey, just in all the things that you've done. Are there any particular moments that you look back to now that you're like, you know what, I'm glad that I went through that because it taught me something that's vital for my next venture.
Adi (26:44)
there's there's plenty of those things where I feel like I made mistakes or was a bit reckless or didn't calibrate the risk or just felt invincible and, wound up getting knocked out.
But that's just like, part of calibrating your own self and your confidence and knowing when to go full throttle and when to pull back. I'd say the two biggest ones for me were
Aaron Alpeter (27:01)
to it.
Adi (27:06)
problems in partnerships and
growing too fast and not being able to manage that growth adequately.
early in my career, I let emotions get in the way of effective decision making. if you're prioritizing feelings over what is rational,
There's big problems with that. And oftentimes, it's done in order to not hurt the other person. What you're really trying to do is to not hurt yourself.
because if you were to quote hurt the other person, it's about how you would feel if they were hurt, right? So it's a very selfish way of going about things, even if you're thinking that you're doing something for the other person's benefit and having tough conversations.
as fast as you can is probably one of the biggest things. I don't think there's any founder who doesn't have to have that at some point, right? Like whether it's with an employee, whether it's with your lender, whether it's with your co-founder or with your partner, delaying that is a very big problem and a big mistake. And sooner you can nip it in the bud, the better.
I just didn't have the balls to do it at that time, And I've learned you gotta have balls, because if you don't, you're just hammering your own balls. It's nice, it's gonna be painful. And so, you just, you know, that's the learning process. You just gotta come to the awareness that you're doing harm to yourself by not...
Because by not doing it, you're basically trying to protect yourself, but you're not protecting yourself, right? And so if you have somebody who's not performing well, ⁓ it's like that old saying, hire slowly, fire quickly. And there's a lot of truth to that. the other is a friendship founded on a business is better than a business founded on a friendship.
it's not for everybody, but that's just how I strongly feel. Because you can't have a blurry line when you're doing business. You gotta have a black and white. It's business or it's friendship, right? What is it? And I'm seeing this right now, right? Like I'm involved in some ventures where I'm having like conversations with the...
partners or friends who are running into these partnership problems and it's never pleasant and a lot of times it's because they're also friends and it makes it that much more difficult. So that's the first one. And the second one I would say is, if you're growing too fast and ⁓ that happened to me, you know, where we basically were like doubled every year and then an opportunity came for us to
continue to double, but if you're doubling every year, it's like, goes like that. And it's a very exhilarating process. It's like what you live for as a founder. Like there's nothing more beautiful than that. Like, know, you, the adrenaline, the,
desire to go crush, right? Like that's why you get up in the morning. but that's a very tumultuous thing, right? Like that comes with a lot of, pitfalls if not managed properly. there was one scenario in which I just took on way too much debt. and I did a pretty good job on selling everybody on why they should give me debt and they were sold cause I was sold.
when that project that I was involved in just went south, I was left hanging with the debt with like personal guarantee on like tens of millions of dollars. And that was not fun, That was not a fun period. And couple things I learned is like be very careful with personally guaranteeing anything.
Don't, it's like, forget the Warren Buffett saying, but it's like, if you're risking something that you need in order to get something you want. ⁓
Be careful because can you really afford to lose this thing that you need? greed I guess right like there was a lot of greed involved in growing businesses where like you're obviously you want to grow the business and that's like the greedy part of the human nature It's like I want to take this thing to the moon But calibrate that greed right don't get overly greedy Because you're gonna hurt people along the way you're gonna hurt yourself along the way, know There's no fun losing even the bank's money, right?
But luckily, Navigated, that was a whole different
And that's the kind of education that school can never give you. You can't go to a four-year degree for that. All these things are sort of just amazing life experiences to me, where it's just like, how lucky am I to have that gotten under my belt while I was younger, rather than when I am down the line? Because now I can sort of look in my rear-view mirror and look at that thing that happened back then.
Aaron Alpeter (31:28)
well, you not only get to look in your rearview mirror, but you also have plenty of road ahead of you. So it's the benefit of a multi-time founder. All right, so let's kind of keep walking through the Grace and Stella story. So you are growing your...
Adi (31:35)
Yeah.
Aaron Alpeter (31:43)
doing well, at what point did you start to think about, hey, this is something that somebody else may want to buy? Was that always the plan one day? Or was there a moment where you're like, hey, actually, I think that this could be something that I exit?
Adi (31:57)
exit was always in the back of my head.
I just couldn't see myself selling beauty products and promoting a beauty company forever, right? Like that was never part of the deal that I made with myself. So exit was definitely one of the intended outcomes. I just didn't know when it would happen. as I was building it, it was never preoccupying me,
was just year in year out trying to build the best business I could, make it as great as I could, make the products as great as I could. Because at the end of the day, the exit will be a byproduct of that. You can't chase the exit. Let the exit be a byproduct of building something.
Aaron Alpeter (32:32)
Was there moment where it changed
in your mind when you said, okay, I'm now ready to actually pursue this? I guess talk about how the exit happened. Were you not planning on it and then someone sent you a cold email and you said, okay, sure, I'll listen? had you gotten to the point yourself where you're like, I've taken this about as far as I think I can go or maybe I'm tired and I'm ready for a change?
Adi (32:54)
Yeah, so yeah, I mean it was a cold email. had I would receive cold emails every every week there'd be like three or four bankers or brokers or M&A advisors would email and I had like a I had like a folder in my inbox where I would just put it in like broker and I just threw them all in there for the day that I might be interested I like reach out type of thing and the broker that
Aaron Alpeter (33:02)
Yeah.
Adi (33:18)
Eventually ended up helping me out was was the one who had emailed me actually Six years prior to the deal happening, you know, so so because that 100 % 100 % because that's more of an enterprise business right where you're dealing with businesses and High-touch business. So it definitely works.
Aaron Alpeter (33:28)
So follow up works is what you're saying. ⁓
Adi (33:40)
my kid asked me one day, what do you do for that that's when I was like, okay my son's starting to like take interest in what I do at work and Then for some reason I started to think about
what my work is like what am i actually like this is this is what i've taken on as my full-time project where i go and spend you know 50 60 80 hours a week and when i sort of like zoomed out i just didn't see it as a delightful future where i was still running that brand because i i never was
passionate about the DTC space or the or the beauty space I was passionate about building a business but but when I realized like you know I have this great passion for building business but it hasn't quite intersected with the kind of business I would want to build it started to like circulate in my head that hey like
Aaron Alpeter (34:13)
Mm-hmm.
Adi (34:31)
Why are you still doing it then? Do you have that much time to waste? That's when I sent back an email to a few of the brokers said, hey, show me what you got. Not saying I want to sell today, but interested to see what might be on the market. And then they just started to bring me these groups that were...
very interested in the brand and that started the process. And that was this whole, journey that took a while. it was really like more so personal reasons that, I've done well with this brand. I've had a lot of fun building it.
I think I should try new things, right? Similar to how each product was a different experimentation under that business, the idea that each business could be a different experimentation of its own was very interesting to me. And so that's what really ultimately led to exiting.
Aaron Alpeter (35:14)
Mm-hmm.
Yeah. When you were going through the exit process, what were the sorts of things that the potential acquirers were most interested in that you were like, okay, yeah, this makes sense. Of course, they're going to care about EBIT and growth rate and stuff like that. What were some of the things that were surprising that they cared about?
Adi (35:40)
There was a lot of interest for the brand because we had done a good job of building it into something that it started as an Amazon brand, right? Like where we were primarily on Amazon, but it ventured off into different distribution channels. We had our own direct to consumer. We had partnerships with different retailers. We worked with a whole bunch of different subscription boxes. And so it's well diversified. And that was a very unique.
story which they weren't hearing from a lot of these other brands because not having all your eggs in one basket is a very rare thing for DTC brands right like most brands that tend to scale on it on on Facebook say if Facebook was taken away they'd be a fraction they'd be like a shell of their original self and so first we had fortunately overcome that over the course of the previous few years so I think that frame of going
going
in with, you want to buy this more than I want to sell this, is a very important hat to wear. Because otherwise you just make bad decisions. it was quite an easy process from that point of view because we just knew we had a very solid brand that we built.
it wasn't so much of a surprise because I knew I should have had that put together earlier but just
cleaning up the financials, cleaning up the books, cleaning up and having that be ready for a buyer. Because I'm a solo founder here and I own the whole thing. I don't have an investor to report to. I can do whatever I want, right? Like, it's like, I don't care if it's clean one month and I don't care if, you know, it's just like, I'm focused on building. All this other stuff is not that interesting. And that was a very tedious process of like going back, talking to
banker talking to the buyer and figuring out what the hell ad backs are, what not to add back, all that stuff was just like crazy. ⁓ So that was what surprised me was how unprepared from that point I was. But if you get a good accountant involved, they can help you clean that up fairly quickly.
The other thing that surprised me was how much more somebody who wants to buy a business is interested in buying it than you as a seller are interested in selling it. know, oftentimes people forget it, that somebody who's in a position to buy a business is a lot more desperate because they have capital that is...
not being put to use. And they may have sponsors who may have given them the capital to get a return on their money. And each month that passes that they haven't closed the deal or each year that passes that they haven't hit their metrics is a bad sign for them. they want this way more than you want them.
Right, and that allows you to negotiate much better, it allows you to like remain much more calm and not be under the fear that I might lose something.
Aaron Alpeter (38:28)
What was it about the final offer or deal where you're like, man, like this is life changing. I would be a fool to say no now because the option is always to keep doing what you're doing and then come back and maybe do this a couple of years later for hopefully more money. But what was it that kind of lets you know that the time was right, the acquirer was right, the deal was right, and it was
doing.
Adi (38:47)
there was a lot of great offers a lot of different groups that we were talking to you with the thing that Made us most comfortable was we just felt that the team that we were talking to was the right next Home for the brand we just thought that their direction that they wanted to take it in
was the most concrete, the most well thought out. Last thing you want is to build something, sell it to somebody who just like, takes it into the ground or doesn't take care of it because in a lot of ways it's your baby that you're putting up for adoption, right? And ⁓ you still want to see that baby go and have a great life after you. ⁓
So that was the main factor. Are they more capable of taking this to greater heights than we are? that was, guess, the first one. And then obviously there was the financial side of things where are we structuring it the right way?
Does it seem fair? Is there earn out involved? Are there people that are going to stay on the team? Who on the team wants to stay? Who doesn't? Like all those factors.
and seeing how honest they are around who they want to keep, who they don't. Because if somebody's just, you can often tell when somebody trying to close a deal is telling you, yeah, we want to keep everybody. Which may not often be the case because they may already have their own team to do certain things, which from like an efficiency standpoint. it's always a good thing to try to make a deal with somebody where you would want to make another deal with them down the road.
That was sort of like the deciding factor for us.
Aaron Alpeter (40:19)
Yeah, that's great. So since the exit, you've moved into the other side. You're now looking at companies, you're acquiring your operating business yourself. What have you learned or understood from your experience selling a business that is really important for you as an acquirer?
Adi (40:35)
I think the fundamentals are the same, where a business that customers love? and the degree to which
Customers are going to be unwilling to change the business. If the business wasn't around, is somebody hurting? ⁓ And the degree to which that can be verified, Some people call it a moat. What's your moat? To me, moat is not about defensibility as much as it's about...
Do you really have something that's worthy of existing on the marketplace? we look for those sort of elements like a capital intensive industry.
your capital is your moat, right? If you're building steel plants, it's expensive to build a steel plant. like somebody's gonna just come in and like erect one up unless they also have the capital. So that's their moat. In like a technology company, it's the really the ideas, you know, so the people are the moat, right? Where the degree to which you have like this 10X engineer is the degree to which you're gonna have a moat around how well and quickly you can scale that product. And then for something like DTC, it's I think...
It's a different kind of a, it's not really a moat. it's like an intangible bond that the customer has with your brand. Like do they resonate with your brand where it's the only thing that they wanna try? Like they love it. It's like an emotional connection to the product or the brand or it becomes part of their identity, right? So for guess for every business, there's gonna be a different set of things that make that business tick. the ones we're looking for is one, are the
customers truly finding value with this in whatever way they may define value. And the other thing I look for
a lot of times founders try to make the business as big as they can before they sell it, I think looking at it from how do I make it as lean as possible, right? Even if the numbers shrink on the top a little bit, but...
Operationally the risk profile has been reduced a lot because when you're trying to make it big you're also scaring an investor or an acquirer because now it's very it's there's a lot of chubbiness around the operations Whereas if you've trimmed it for them if they know that you've reduced the risk, right? So I think that's an that's a critical aspect of it. It's like you're yes, you're you're thinking about maximizing the
price but they're thinking about is this gonna am I gonna lose my shirt when I buy this thing ⁓ and so rather than showing them ceiling show them the floor right
Like how low could this fall if you took it and it didn't go as well, right? Rather than this is where it's gonna go to the moon, right? Which everybody does. So you wanna do that, but you also wanna show
that is in place as far as...
As a founder, example, how reliant is the business on the founder? Because that's always a high-risk profile. It doesn't matter what the founder's telling you, you just gotta watch why the business is doing well. Who's doing what? Interview the people there if you can. I may not interview everybody, but you gotta interview the people that the founder's telling you is leading charge. Because if the founder's leading charge, then you know you have problem.
be made an employee which creates his own set of problems. But if the founder is telling you that, know, I am not, I've already created the system, then you gotta verify that system. So I think avoiding situations as glowy as they may seem, where it's highly dependent on one person or two.
Aaron Alpeter (44:14)
Thank
Adi (44:15)
That would be something that I would avoid. Other than that, I'm agnostic to what kind of business. It's been looked at all kinds of
Aaron Alpeter (44:25)
Yeah, that's great. And I know we're coming up on time here. We've got one question we always like to ask our guests on Build a Business Worth Buying. And you actually teed up perfectly. And it is, what's the best example of a moat you've seen a business build?
Adi (44:37)
to me it would be Apple. Like I just switched after I think 12 years from Apple to Pixel and my wife was upset with me. That's a moat.
Steve Jobs has been gone for 15 years but the The foundation and the ecosystem that he laid down it's still bearing fruit He's made it idiot proof in so many ways right like the the the consumers loves it the experience of being able to be on their Mac and Not needing to pick up their phone to like text their partner, right? And being able to like locate their devices wherever they lose it or through their
Aaron Alpeter (45:07)
Thank you.
Adi (45:12)
find my thing and it's all just so well synchronized right
Aaron Alpeter (45:17)
That's a great example. We hear them over and over again. guess ⁓ there's a reason they're the most valuable company in the world. This has been very enlightening. Thank you so much for sharing your experience, your wisdom.
Adi (45:23)
Right. No, exactly. Yeah.
Aaron Alpeter (45:33)
I know I learned a lot, I know our listeners are certainly learned a lot as well.