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Jason Kirby shares hard-earned wisdom with Connor, from exiting his company to Walmart, after a failed acquisition by Samsung. Jason explains key lessons for founders in the acquisition process, like getting your own legal counsel and maintaining multiple options. He also details his new venture Thunder, an investment bank aiming to provide founders with the M&A and fundraising guidance he wished he had.
The two discuss the rise of eSports in schools, navigating the stresses of being an acquisition target while running a company, and the importance of surrounding yourself with the right advisors.
Subscribe for more behind-the-scenes insights on entrepreneurship and life after an exit. Check out the links to connect with Jason and access Thunder's free investor matching tool for founders.
Chapters:
00:00:00 - Introducing Jason Kirby
00:02:30 - What Thunder Offers to Founders
00:04:55 - The Challenges of Raising Capital
00:07:56 - Building Thunder
00:13:13 - Bringing eSports to Schools
00:22:49 - The Rollercoaster of Selling Liquid Sky
00:29:12 - Picking Up the Pieces
00:32:07 - Maintaining Optionality
00:34:53 - Hard Lessons Learned from M&A
00:41:57 - The Rise of Solo GP
00:45:32 - Wrapping Up
Jason Kirby's Stuff
Website: https://web.thunder.vc/
X: https://x.com/JasonKirby
LinkedIn: https://www.linkedin.com/in/jasonrkirby/
My Stuff
Podcast: MadeItPod.com
Website: https://www.connortomkies.com/
Creators & Guests
What is Made It with Connor Tomkies?
"Made It" is a podcast hosted by Connor Tomkies that delves into the journeys of successful entrepreneurs who have not only built and exited their companies, but who are writing the next chapter of their journeys. The show focuses on the unique challenges and lessons learned while moving beyond the exit, offering insights and strategies for listeners aiming to grow their own businesses. Through engaging conversations with various guests, the podcast provides a blend of motivational stories, practical advice, and insider tips on entrepreneurship, business growth, and personal development.
[00:00:00] Jason Kirby: It's so important to kind of know who's incentivized by what at the table and give yourself the proper protection as a founder. Earnouts are one of the biggest reasons for disputes and lawsuits. Like I was just talking to another post exitive founder. Uh, company that was in 200 million.
[00:00:18] Connor Tomkies: Holy cow.
[00:00:20] Narrator: Hey, co founders welcome to made it with Conor Tompkins, a podcast where we meet with badass entrepreneurs who've successfully exited their companies, discussing everything from the wins and losses of entrepreneurship to the next steps after the exit.
To not miss out on these exciting stories, be sure to subscribe wherever you get podcast, let's dive in.
[00:00:43] Connor Tomkies: Hey everyone. Welcome to the made up podcast. We interview inventors, creators, and entrepreneurs that are helping shape the world that we live in. I am super excited to welcome Jason Kirby. He is a serial entrepreneur, founder and CRO of liquids guy, which sold to Walmart and also helped raise money for generation e sports, which is a really cool [00:01:00] concept that we'll get into in just a second.
Uh, now you can find them at Thunder VC. And the podcast funding demystified. So Jason, welcome to the show.
[00:01:08] Jason Kirby: Thanks for having me on the show. Appreciate it.
[00:01:10] Connor Tomkies: I'm really excited to talk to you about a few things, but one is you had your head down as a leader of quite a few companies and then, uh, you had to pivot to post exit life and you had to figure out what it's like to be a public facing CEO or, or founder, and, uh, you now have a podcast out.
What has that transition been like for you?
[00:01:28] Jason Kirby: Yeah, I would definitely rephrase it in the sense that I don't have To be public, but I chose to be, you know, public one, uh, you know, coming after exiting my previous companies, I was just managing teams, growing teams, uh, you know, managing people, setting vision, uh, closing deals.
It was just so much in the business and there was, that's how those businesses needed to thrive. Um, kind of leaving those, that world and starting Thunder. The one, I have a genuine passion for [00:02:00] founders in the positions that they're in. And just, it's incredibly hard being a founder. Tell me a little bit about, um, what Thunder does, right?
At what point should someone reach out to Thunder? So someone should reach out to Thunder when they're thinking that they need capital or looking to exit. So to kind of give a quick summary, we're, we're an investment bank at our core. And I chose to build an investment bank and kind of do what we do, mainly I had investment banks when I was running my previous companies and they didn't deliver what I was hoping they would, and the concept of what they're capable of as an investment banker is so valuable, but often in smaller stage stuff like sub 100 million, and.
Kind of transactions, you just don't get the level of expertise and guidance you need, uh, as a founder. And there's just so many deals happening in like the five to a hundred million dollar range out there that these founders are not getting the coaching and the advisory, uh, that they deserve when, uh, navigating these.
[00:03:00] Very complex and often first time ever and one time ever situation. It's interesting to
[00:03:05] Connor Tomkies: me because whenever you work with an investment bank or a private equity firm, they always talk about, Oh, we have this network and we'll help you get to the next stage. But essentially they're running their part of the play, whether it's like a rollup or an investment.
And the portfolio doesn't always talk to each other, right? Like they're kind of islands essentially inside this ecosystem. Um, so that makes completely, that makes complete sense to me. How do you change that?
[00:03:30] Jason Kirby: Not a lot of investment bankers that were founders previously, outside of founding their investment bank, maybe.
And so they don't really understand what founders go through and what they're dealing with on a regular basis and the challenges that they're facing. Often most investment bankers are like, Oh, I know Bob and Mike and John that I'll send them your deal and if they invest, I want my cut. Like, or they buy you, that's my cut.
Um, but there's like kind of smaller deals. You just don't really get the support that you need as a founder to kind of know what's right for [00:04:00] you. Like, You know, Hey, you want to sell your company, but did you set up all your, your taxes, your QSBS? You're like, you're, uh, the company in a way that will give you the best tax advantage outcome.
That would probably get this highest yield possible out of any effort that you put forth. You don't really
[00:04:14] Connor Tomkies: know what's out there. I mean, like, um, I didn't do QSBS for any of my deals. I really wish I did. What is QSBS? So
[00:04:21] Jason Kirby: QSBS is a tax advantage, uh, solution for founders that start a company. And this doesn't have to be just founders.
This is basically like all. Uh, early investors, kind of those founding shares or like early investment shares. That, uh, I'm not the CPA, not a tax lawyer, but, uh, effectively it's, if you hold a C corp, and it's usually always USC corps that this qualifies for, but if you hold shares over a certain period of time, uh, you basically don't pay taxes on the first 10 million of proceeds, uh, or profit.
What's crazy
[00:04:55] Connor Tomkies: about this is that, um, you can do QSBS like stacking. So like it could be for [00:05:00] you or your spouse, or if you have a trust, you could do one for each of your kids. And so that's 10 million for each of them, which is a lot, which is
[00:05:08] Jason Kirby: a very common conversation amongst post exit founders. You know that the first deal they did, they never knew.
And the second deal it's like, I'm not making that mistake again. They do their 83B election and they. Gift shares across, you know, multiple family members and trusts so that they can do the, as you mentioned, QSBS, uh, QBS, QSBS stacking, um, doesn't cost much. It's like, you know, and it's smart to do. If you just do every business that way at the very beginning, if it's a big success, it's awesome.
And if it's not, you didn't really lose much in the beginning.
[00:05:37] Connor Tomkies: Do you feel like there's any other tidbits that come out whenever you're working with these founders? Because you have a community that's pretty large, right? Yeah.
[00:05:43] Jason Kirby: So we have a newsletter about, uh, 12, 000 founders now, I think. Uh, so good, good little size.
There's obviously much bigger ones out there, but, um, steadily growing. But yeah, the, the common things that I hear most from, you know, people looking for, for help or guidance is, [00:06:00] In most cases, they went out on their own and they didn't strike gold. They went out and tried to raise money or sell the company and it didn't go the way they thought it would.
And unfortunately, that's not the best time to bring it out because either they've ran out of money or they're in a tough spot and like, you know, there's not much else that could be done at that point outside of maybe a fire assault, which is not something that we particularly help with. But, um, you know, when we catch, uh, you know, just good entrepreneurs doing good things and building good businesses, uh, we just try to make sure they understand what the current market climate is.
So many founders are usually a couple of years behind on what's going on in the capital markets because it's not their core competency, it's not what they should know, you know, it doesn't affect their business day to day, but when it comes to raising capital or selling a company and they're like, Oh, we should be able to sell for 20 X revenue and you're like, not quite, you know, sharing that education with founders.
Again, planting seats. And the unique thing about founders is in most cases, they're, they're DIYers. They do everything themselves. They have to figure out everything themselves [00:07:00] and respecting that and acknowledging that and just giving them the tools and knowledge and connections to do what they do best and allow them to kind of grow and develop as leaders, uh, is one of the unique approaches that we have in, in terms of helping them get to that next milestone.
Cause that's really what it's about. It's like, how do they get to the next milestone? Whether it's. You know, raising capital, whether it's debt or equity or, you know, exiting the company through a strategic or financial exit, um, those are the kind of core areas that I focus on now. Cause from my personal background, those are the things that I was doing as, as operator and founder.
And, um, you know, there's just so many lessons learned that could be shared in advance, kind of like see around the corner before you even get to the corner. You know, I think like that's something that helps founders plan and strategize how they run their business. I think that makes a lot of
[00:07:49] Connor Tomkies: sense. How did you get this off the ground?
How did you get the first subscribers to your newsletter and how did you bring them in?
[00:07:56] Jason Kirby: So originally I launched the company, uh, after I left Generation [00:08:00] Esports. I partnered with, uh, my friends over at Interplay Ventures, uh, you know, Mark Peter Davis and Kevin Tung there, known for a long time, wanted to collaborate on something, so we decided to launch, you know, Thunder out of the Interplay ecosystem, and the reason I chose to do that is, you know, I've been an operator for so long, and I've been in these transactions, I've done deals, I've been investing in all this stuff, but, uh, I realized, at least for my previous businesses, before I got into the venture backed world, like doing stuff alone is Not as nearly as much fun or sustainable and I wanted like a collaborative ecosystem and so I launched it through them and then the original idea was, you know, providing tools to help navigate the ecosystem.
And so we built like a, an algorithm that identifies who has a higher probability of investing in who and providing that data to founders to be able to know who they should be chasing when it comes to building relationships with investors. But we quickly realized that that's not a sustainable business in and of itself.
And I [00:09:00] found myself just giving away my time and resources and ultimately people really wanted that and that was the monetizable piece. Um, so I was like, okay, let's maybe drop the prioritization of our SaaS model and let's focus really on being that advisor and consultant and banker that founders are looking for.
And so I decided to go and, and do what I thought would be a better business model as opposed to like charging large upfront fees as like a typical like agency or consultancy or management, uh, firm. We're doing a success based, you know, model, but in order to do that, we had to be registered with FINRA, government broker dealer, all that stuff.
Look down all that, you know, squared away and get those boxes checked so we can, you know, legally represent ourselves and take a success fee. Uh, to kind of put our money where our mouth is. I'm seeing
[00:09:49] Connor Tomkies: a lot more people do, um, like email newsletters and spinning up communities and, um, what are some lessons learned that you have from, from having this many people inside a single like online space?
[00:09:59] Jason Kirby: [00:10:00] I feel that's the future of direct engagement, uh, with building brands and building companies without a, a brand or a persona that people can learn from and engage with. It's just so hard to get in front of people and say, top of mind. And I was spending so much time, I was meeting probably a couple dozen people a week in the early days of Thunder.
Just building my network, building my connections. The problem with my business though is when I sign a client they're, you know, whatever, a B2B PropTech SaaS company. And I've been talking to a million different investors, but only like five are relevant for that particular deal. How do I just stay top of mind?
How do I keep building relationships? How do I, you know, how do I support these pre seed founders that will never be a formal client of mine or at least anytime soon? How do I continue to nurture them and support them? Uh, and be top of mind for when the opportunity does come that hopefully our content resources and, you know, things that we put out there were helpful to them [00:11:00] to where they can, you know, come back to us when the time is right.
So when they've accomplished certain steps. And it's sort of, it's nice. We've only been doing this for about, the, the newsletter is about, I think we're on episode, or issue 65. So it's only like a year and a quarter long. Um, so it's not very old. Um, and we, uh, the podcast is, I think, is we just announced episode 33 today.
That's about, you know, after a year, you know, six, seven months. Um, so, you know, there's so much to, kind of, commit up front. And it's just now starting to, really, like, pay off, like people we spoke to a year ago are coming back. Uh, so, that's kind of been, I think, the most rewarding part, is just GIF, GIF, GIF, GIF, GIF, GIF, GIF, GIF, GIF, GIF.
And then eventually, things come back, uh, which we're just now starting to see the, the fruits of it. Uh, so, it's definitely a long game, uh, for us. You
[00:11:54] Connor Tomkies: We were talking to, um, earlier on the podcast, we had Aaron White who did a profit well and, and blissery. And, [00:12:00] uh, we were talking about how these like paid communities are almost like, um, the new social networks, because they're very niche focused.
They are very intentional about what reason they have bringing people together. And you're seeing like these platforms like circle and mighty and school. Um, that recent investment, like kind of take off and grow. And I'm a little curious because on one hand I could see saturation happening and being like, I don't need to be a part of 20 different communities.
But on the other hand, um, we both are a part of these like networks and these communities where we get a lot of benefit from. And we are, um, probably spending more time on these communities than we are on, on like Instagram. And so there's something to it. I spend more time scrolling through my private communities than I do.
Hey, podcast listeners. We are currently looking for sponsors for this podcast. If you guys are looking to connect with other business owners that are scaling and growing their company, and you guys are interested in a spot on this podcast, uh, we're looking for you. So reach out to Connor, tomkeys. [00:13:00] com or operator equity.
com. And we're glad to help set you guys up with a spot on this podcast. All right, cheers. Back to the pod. What are some of the things that you hope to learn? Uh, Thunder will accomplish. Do you have some aspirations coming
[00:13:13] Jason Kirby: around the bend? Ultimately, I, I see us just continue to scale up our, our client base and being able to bring in and attract amazing founders that are doing amazing things and adding immense value to them and their transactions.
Um, I think that's a, that's the given that's like what must happen for us to, to exist, because if we don't deliver value, no one's going to work with us. Um, but what I think is unique about us, and it's something that I try to set the foundation for as early as possible, is creating like an investment banking opportunity with a kind of venture startup culture.
Uh, if you've met investment bankers, uh, typically you have like the [00:14:00] 90 percent of everyone that's had investment banking on their, you know, resume drop out because it's very much like a hazing culture of just like, You know, like, oh, the bottom, the bottom, you know, analysts and associates just get pummeled with all the bullshit work and the MDs at the top are the ones just doing all the cool, fun stuff.
Uh, you know, the relationship building and the, the strategy and all that stuff. And there's just so much, some of the best talent, the smartest people in this country go into investment banking for the money. But often find themselves getting burnt out, you know, going doing volunteer work to, to, to be able to live their life.
They joined the Peace Corps. Yeah, exactly. Uh, and you know, no fault of their own. It's, it's, it, the way the culture is in a typical investment banks is it's pretty, it's pretty harsh and unsustainable for a lot of people that don't have a certain personality. And I see an opportunity because a lot of these investment bankers want to get into ventures.
Uh, cause venture is perceived as sexy, cool, and, uh, you know, very different from traditional. Um, but it's [00:15:00] also not a very sustainable business model for most venture funds. Uh, you know, we can go on that in a separate, you know, conversation in terms of how they perform. But, um, so my vision is, you know, Investment banking is not a tech back, you know, we're not a venture backable company ourselves.
So we're a very linear growth talent focused, uh, team. So it's how do we get the best talent and retain and attract the most amazing people that can then provide as much, you know, value as we possibly can to our clients. And I think that's going to be our unique edge is having one, a public facing, you know, brand where we have a unique perspective that we're actually publicly creating content and adding value to the broader good.
But also, um, having that kind of more casual start, that's what I would love to change and kind of disrupt. Just create a different type of investment bank that, you know, I think it's more aligned with our generation of millennials and Gen Z that would rather do business with us than say our, our competitors or their current incumbents.
[00:15:57] Connor Tomkies: I almost feel like traditional PE is an [00:16:00] extension of like the leverage buyout kind of culture that was in the nineties. And then you're, you're figuring out how to structure these deals in a way that, um, are creative. Um, but I think that there's some ramifications if most of the buyers in the market are these type of people.
Financial buyers. So do you feel, feel like that's your, that's your play? Is it, you're just providing this alternative to, um, whenever they have like five options and four of them are financial, they're like, Oh, this is the way I want to go.
[00:16:27] Jason Kirby: You know, I think we still have to check all the boxes that come with what the execution of the work, you know, like models still have to be built.
Practicality says, but you can be cool and fine. But like, you know, you got to still got to get the work done. Still got to know. Uh, know the numbers and know what's marketable. And yeah, ultimately like the buyer, whether that's a, uh, the acquisition, the acquirer, or the investor who's buying the equity in the company.
Um, it's about being relevant. And I feel like there's so much time wasted chasing money for the sake that it's money [00:17:00] and not realizing what's on the other side of that in terms of, you know, what are they actually putting money into, what are they actually investing in or acquiring, uh, and seeking alignment and compatibility.
You know, with them for the very get go and filtering that, uh, as early as possible. Uh, I feel so much of the capital game is who knows who and who likes who and who owes a, who owes a buddy a favor and I'll be at notorious for still getting deals done and will probably forever always be, whether there's merit to the deal or not.
Uh, but I think there's definitely an opportunity to cut through noise and allow founders that if they're going to put the effort into building a relationship with a potential investor or acquirer, like At least make sure that the outcome is viable, like somebody found her like a CBG founder talking to a B2B SaaS investor because their buddy knows a buddy, you know, and I'm just like, that's such a waste of time for everyone involved, but everyone's got this like feeling that they have to take the meeting anyways, because it was [00:18:00] referred by someone they like, or whatever, they didn't do their homework, but everyone's like, pleasantry like, oh, yeah, but they're not.
That honest with each other. Um, that's the kind of stuff I hope to eliminate. That's what our tools at Thunder. VC, but hopefully help founders with this, you know, narrow your focus and, you know, build the right relationships.
[00:18:18] Connor Tomkies: I do feel like with the startup culture, the way it is now, there's a lot of emphasis on raising traditional VC capital.
Um, a lot of emphasis on, on pitching. And, um, focusing on being the next big thing and having a big enough, a total addressable market and, and being new, um, that you're just adding on levels of risk for a first time founder. So I, I don't feel like that's necessarily the best way to go. Well, not all the time.
I guess I should add that caveat because I think that there's like, there's room to buy existing businesses that have cashflow or, um, maybe do something that's already proven out and then figure out how to innovate on it. Once you're, you're inside.
[00:18:56] Jason Kirby: It's funny you bring that up. So when I left Generation Esports, that's actually what I was focused on.
I [00:19:00] was actually focused on more acquiring a company versus starting a company. Um, timing wise, had I been in the situation I was then, but in now's market, I probably would have ended up doing that. I probably would have been more acquiring a company as opposed to starting something. But the multiple, I was, you know, it's 2021 peak market.
Every, like every business was selling for like nine, 10, 12, 15 XF, you know, ARR, and I wanted to do the deal by myself. I don't think that's doable. And like everything I went and try to, you know, show everyone's ego is just so through the roof. I was like, yeah, I don't. I think I'm better off maybe starting from scratch than trying to buy a business in this market, not knowing that, you know, it was going to collapse.
But, uh, yeah, that was, uh, something that I think is more and more of a common topic these days, especially a lot more content out these days about that strategy, which I think is opening up a lot of people's eyes.
[00:19:52] Connor Tomkies: Yeah. I think it's healthy. I mean, if you have so many people that aren't able to sell their business in the first place, or they don't know how, or they don't feel comfortable, [00:20:00] Um, getting more buyers inside the market that might be open to continuing the company.
It's better for employment. It's better for innovation. Once they, they cut their teeth, they're more likely to continue to start businesses. So it's probably a good, it's a good thing to encourage. If you're interested, go start a business, guys, go find a business to buy. Um, so. Generation eSports is an interesting concept.
Um, essentially you're bringing eSports into schools. Do you feel like eSport athletes are going to be the jocks of 2020?
[00:20:31] Jason Kirby: I wouldn't say the jocks. Uh, I think jocks has a very specific definition or identity. I think they are I think what, what appealed to me about Generation Esports and what we did there was we were taking, you know, what would in most cases the bottom performers, the kids that were, you know, not feeling that they belong.
They often found their, their solitude in their happy place of [00:21:00] like playing games online. But They're playing online in the open toxic internet, down in their basement with no adult supervision. You know, who knows what's happening. And we kind of gave them the path to get engaged on campus, doing something they love that ultimately surrounded them by like minded peers and adult supervision working toward the common goal.
And that was just such an inspiring thing to work on and hearing these kids like, I was dropping out of high school and now I'm like graduating with a three point, you know, GPA. Um, I was a team captain and it was also the, yeah, yes, it was like the best part of the job. Um, what was also cool was just seeing the diversity on the teams.
The different types of stereotypes that you see in like the, the mean girls play. It's all the stereotypes. When you go into the e sports, it's every kid from every group, from every background. From every gender identity to every, you know, race, to every shape and size. And [00:22:00] what was also cool is like some just plain suck at video games.
Like if you're not, yeah, you don't have the skill, you don't have the skill, you don't train, you don't train, like, but they were learning other skills. Like, oh, they were the social media manager. They were the, you know, the, the manager of the team or the, you know, whatever. It was just, these kids were filling roles to feel like they belong and commit to a group.
And it was just really cool to see. So I think. I think the world will be a better place accepting structured eSports in the classroom, um, and give more kids a path to get involved on campus, which, you know, whatever it is kids get involved in, once they get involved, the outcomes, the probability of their outcomes are far superior than they are if they don't get involved.
I agree
[00:22:41] Connor Tomkies: with you. This is something that needs to exist, and it needs to be out there, um. Did you ever do LAN parties? Like where you would invite friends over?
[00:22:49] Jason Kirby: Well, no, I didn't have the means to host LAN parties myself, um, growing up. We, I would usually play, there was like a internet cafe that was like, you know, [00:23:00] the strip mall down the street that we would all go to and play Counter Strike or play like Red Alert or something.
Um, my internet sucked as a kid, so. I couldn't really play, uh, I was playing on dial up, my friends were playing on cable. You get headshot and you're like, where did that come from? It's actually, yeah, it's, uh, you know, something that always bothered me because I was always like a generation behind on the technology and the internet between, you know, amongst my friends.
So I was always like trying to like keep up and I never could. I
[00:23:27] Connor Tomkies: feel like because of where the technology was at then you had to have a land to like bring people together, right? And then technology got so great. I'm like I can be wherever it doesn't matter and I can play and so this is almost like You almost see like the pendulum like just moving back and forth, right?
And this is like hey We're gonna come back together again. It was actually a good idea We can have leadership opportunities for the kids inside schools. Um, are you seeing a lot more schools open up computer labs to kind of launch these types of programs? Well, we opened
[00:23:57] Jason Kirby: up 25 ourselves. Um, yeah, we [00:24:00] landed a huge sponsorship.
Uh, while I was there, and, uh, shortly before I left, we had deployed 25 esports labs across 25 schools across 25 states in 60 days. A lot more are investing, cause like, typical computer lab, you know, in the library, and everyone's got their phone, which is more powerful than the, you know, the whole computer sitting in the library.
But, um, the, there are more and more investments going into the concept of, like, gaming compatible computers. Um, yeah, it's again, they need an esports program. They need a justification and that's kind of what Generation Esports was providing to, to kind of, they were providing curriculum, providing structure.
Uh, to be able to kind of scale those into more and more schools.
[00:24:42] Connor Tomkies: We got in trouble because, um, they didn't want like games on our computers. Um, I remember that. And, uh, we got in trouble because we had a folder called math is fun. That was on like the school district, like server. And, um, they were, yeah, it was just all
[00:24:58] Jason Kirby: video games inside of [00:25:00] it.
And they couldn't figure out how to get it off. One of the things in the early days of generation e sports, I went to one of Uh, campuses and met with a bunch of teachers and principals and superintendents and one of the superintendents at one of the best performing schools in our league was, you know, presenting and he was just like, I hate video games.
I banned video games. I was adamant against it. And it wasn't until this kid, you know, one of the kids that was, you know, on the, uh, on the team, he came and asked for permission. I said, no, he went behind my back and he built this incredible, you know, thing that I didn't, I wasn't made aware of until we won a championship.
That's amazing. Isn't that awesome? Isn't that right? I mean, he shares this whole story of how he was wrong and like how he learned and now he pumps money into it and provides all this support for the kids because, you know, He saw what was his kind of lower performing students that were, you know, not as engaged or, you know, lower grades, lower attendance, and [00:26:00] now they're on the complete opposite side of, you know, some of the top performers on campus.
And so that was something that I thought was incredibly empowering and powerful for one, to admit you're wrong and two, to then support moving forward. And to be now a voice, yeah, he goes to conferences now and talks about it. I wanted to
[00:26:19] Connor Tomkies: talk to you about your other company that you, you went through a, an exit.
So how did you sell Liquid Sky to Walmart?
[00:26:24] Jason Kirby: This started out of my partner's, you know, parents house in Tarrytown, New York. You know, we're building this technology that is making, well, I know, uh, Microsoft, Google, Amazon, all envious of how we're basically splitting GPU compute. The product itself was an interactive content delivery network.
We were virtualizing GPUs and splitting and sharing resources to enable, Uh, a more profitable, uh, unit economic way of sharing, you know, GPU resources, which our first use case was gaming. So play any game on any device by accessing your [00:27:00] cloud gaming PC. That was kind of the, uh, the offering. So we grew that to about a million and a half users.
Uh, Samsung was our largest investor and, um, Samsung actually was supposed to buy us. And so the, the real story is Walmart connects to us about a month before closing with Samsung. Hey, looks like you're doing it. Yeah, someone that's, you know, Mid, you know, mid level, not, you know, it's not like the CEO of Walmart's reaching out.
Um, we completely ignore him because we know that we, we just can't rock the boat. Hey, we're about to sell to Samsung. Walmart's probably not gonna change anything. Let's just stay the course. Um, that deal fell through. The morning of close. Um, you know, talk about I've had term sheets pulled. I've had all kinds of things happen to me in my life.
That was probably the most painful was when we get a text at like two in the morning saying that, you know, Samsung's out. What was the reason for that? Did they say, Oh yeah. Oh, it was very public. Worldwide. Um, so basically the CEO went to jail. The CEO of [00:28:00] Samsung or Liquid Sky. Okay. Samsung CEO went to jail for corruption, political corruption in 2017.
Um, the new CEO, uh, steps in and his first day of signature authority, Is the day we're supposed to close. And his thing is I don't know what's corrupt, what's not corrupt, so I'm killing every deal on the table, no matter what it is. We were one of those many deals. Um, we had bottles of champagne ordered, we had buses ready to pick up the team members taken to the office, we had all the contracts ready to print out, er, printed and ready to issue to all our employees.
Uh, we had asked our team to show up at 9am sharp, which, you know, we never did. No one ever showed up at 9 a. m. And, uh, uh, and then when they all show up, I tell the team, like, I was like, what, what, what do I tell the team? Like, they don't, because they don't know. They had no idea we're getting acquired. Only five people out of like 40 people knew that we were in acquisition talks with Samsung and know it, you know, outside of, you know, me and my founder that we're [00:29:00] the only ones that really knew all the details of the board.
And I just say, we're going to have an epic holiday party everyone. This is like December. You're just like, we appreciate you guys. Surprise champagne.
[00:29:12] Connor Tomkies: Let's go. Exactly. We're
[00:29:13] Jason Kirby: going to have a great party. Everyone, this is going to be so much fun.
[00:29:16] Connor Tomkies: And they're like, why is Jason crying inside the champagne?
[00:29:22] Jason Kirby: Um, so that was just, you know, just what the hell do you do?
You know, just like, how do you handle that? Because legally we can't tell them. And two, technically the deal's not dead dead, it's just on pawns. But like, it's a pretty clear sign things aren't going in the right direction. Um, like, strategy's gonna change, the deal's dead. Um, so, we're pretty butthurt, pretty upset, don't know what to do.
We had to do some layoffs. But the funny thing was, the next day we take that call at Walmart. And um, yeah, we meet with some higher ups at Walmart. We just start nurturing the relationship. The idea was to bring Walmart gaming. To, to their ecosystem, compete with prime and like [00:30:00] have more of a digital offering and stuff like that.
So it was like, Oh man, this actually makes a lot of sense. I think there's actually a clearer path to market and actual revenue Walmart than Samsung. It's like, It's almost exactly a year later we close the deal with, uh, Walmart. Um, there's all kinds of ups and downs in that process too. It was not a good year under any circumstances.
It was all kinds of moments where we think we might lose it. We're like balancing this house of cards like, Oh, no, no, no, no, no, no, no. Okay. You know, they're like, and again, no one on the team knows. So when you're making decisions as a leader and you're like, I know you want to do this with the product and it's a great idea, but you can't make any sense.
[00:30:47] Connor Tomkies: It's hard because that's like a, that's a full time job for you, right? You're going out and you're running this process and people are like, what's up with Jason? Like he's not acting, he's not acting normal, right? It was
[00:30:57] Jason Kirby: tough. And, and also just [00:31:00] keeping other parties, like Walmart was the main attraction, but we were teasing a bunch of other relationships.
To one, keep Walmart honest. That's something that all founders should, you know, try to do. It's like, once you think you have someone in bed with you to do a deal, as much as, you know, you have high, you know, faith in them and that relationship or whatever, it's good to have a couple side pieces. Have some, have some options, professionally speaking.
Professional offerings. Yeah, some like, like, so we're talking about Verizon, we're talking to LG, we're talking to You know, big players that, you know, could potentially, you know, be seen as a threat to Walmart so that they would, you know, amplify, you know, kind of put a fire under their, their, their butt to move quicker.
Uh, and that's something that every founder should try to do. Like don't just, you know, even with investors, uh, VC is like the, the, what happens when you have one term sheet versus two, it's, it's not a, it's like an exponential difference in conversation, you know, when you have two options on the table. So always find a way to [00:32:00] put options on the table and do whatever you can, make sure those options are respectful to all parties, but you know, that you have options.
Were you
[00:32:07] Connor Tomkies: running a competitive process with a banker and broker, like guiding each step or were you figuring out how to do this as an entrepreneur?
[00:32:15] Jason Kirby: We were figuring it out. So, you know, myself, we, I would say I got to give a lot of credit to Ian, uh, on, uh, Maintaining that right? Because I was actually in the opposite.
I was like, we're going to Walmart. Why are we wasting our time with fries when they're like giving us a run around? It's taking forever. And he was kind of adamant on keeping that back and forth going. Our banker was useless in my opinion. Um, he was more of an over blurrified babysitter getting paid extravagantly well for what little he did.
Um, you know, he was supposed to be an intermediary, but he, you know, was ultimately the board and us doing all the work. Hence kind of why I jumped into this. Like, there are definitely good bankers out there, but, um, it was not the best experience for us. So it was, [00:33:00] you know, all that work was on us while still making sure, again, one of the options we had was to continue with the acquisition, or at least giving that perception that we could.
Um, and so that's, that's always like the most important chip to have in any negotiation is have, have like, Hey, we're profitable, we can keep going. Hey, we have an investor and they're going to back us or Hey, we got two people that want to acquire us and like that, and then all they always want you to get under exclusivity, but you need to make sure you have certain precautions and protections in place.
Once you sign a term sheet, you typically have to go dark. You can't engage with other people. You like. It's basically a blind trust in some cases, but there's certain things that you can do to hold the other side accountable that either create a breakup fee or, you know, hold them to be committed to the outcome.
Um, because the worst thing that happens is you go full blind trust into it and then you're out of money. And the [00:34:00] deal's supposed to close and they're like, we changed our mind. We want to buy you for half off.
[00:34:04] Connor Tomkies: Yeah. And then from there, your other buyers are like, what's
[00:34:07] Jason Kirby: happening? We haven't heard from them in a while.
And you can't talk. The last thing you want to do is expose yourself to liability in this process. That's why having a great lawyer, great advisor to kind of navigate walking on eggshells throughout this process is incredibly delicate. Uh, there's just so many points of exposure that. You know, founders are just not aware of that come up.
Some deals, it's a little easy, clean, you know, everything's perfect and rosy, but you know, that's 1 percent and the other 99 percent of deals that get done. I was like, what deals are you looking at? Yeah, exactly. It's just like, there's all, cause like what, you know, when we get into like the post exit of founders.
Like everyone just likes to glaze over like, Oh yeah, I'm sold out. Yeah. Maybe actually poke like, Oh yeah, no, this guy screwed us. This person did that. You know, like every deal is always messy.
[00:34:53] Connor Tomkies: We had a good, uh, banker slash broker. So it helped with our process because we had some partnership stuff. We had to [00:35:00] navigate.
We had to kind of keep everyone on lockstep and keep multiple parties moving forward. But I know that's not like often the case. And I interviewed like 22, 23 people to try to find the right banker broker. And that's good advice. That was painful. Yeah. Um, if you guys are considering doing this, what I did is I built a SIM, like a confidential information memorandum before working with a banker and broker.
And then I did like a BCC to bankers and brokers saying, here's who I am. Here's what I'm interested in doing. Here's a SIM. If you're interested, sign this NDA and let's talk. Um, and that was, that was enough for us.
[00:35:34] Jason Kirby: That's actually a pretty good idea. I would say that is a great way to kind of attract, uh, run a process to get the right banker.
Cause that's the other issue is depending on your transaction size, uh, a lot of bankers just aren't interested, you know, if it's on the smaller, you know, smaller side. So, you know, it's, how do you, how do you show them that you're buttoned up and you're not going to be a pain in their ass and you're actually going to have an outcome.
Cause again, it's a risk. You know, any, any banker working on a success beat, [00:36:00] they want to make sure it's actually going to actually get a sell.
[00:36:01] Connor Tomkies: Yeah. It's a risk on their side. It's a risk on ours. Right. And on my end, if they didn't read the sim and they're asking me the wrong questions, I'm not going to go with that banker or broker.
Um, so. It kind of works out either way. Uh, Jason, so because Walmart is public, can you talk about what the purchase amount was and, and, uh, what that was like?
[00:36:21] Jason Kirby: The database never publicly released the actual numbers. Um, so like on a public podcast, I can't share the amount was unfortunately less than what Samsung was coming in at.
And, um, for obvious reasons, like, you know, we were, had far less cash and our options were right. We had options, we were able to get the deal done, but it wasn't as attractive because we were, everything was up and to the right perfect for Samsung. But, you know, deal blows up, you know, we had a small breakout fee, but it kind of messed things up a little bit.
Uh, everyone made money, which is great. Um, so it was, some of our investors made like a, I think it was like a 10 to 15 X [00:37:00] in three years. Uh, so, you know, pretty, pretty solid outcome, but, uh, our later investors, the ones that kind of, I would say made it. So me and some of the, you know, founders and our partners didn't get, or sorry, employees didn't get as much.
Uh, because of late price and warrants that came in in that last round to kind of fund us through to the acquisition. Um, so that's something that is very much a reality of dealing with those complexities of, you know, repricing, getting the cash in the door to make sure we have the optionality, but. Um, and so that's something that we, we learned a lot from and, you know, a lot of valuable experience from, from that process.
So
[00:37:43] Connor Tomkies: that's something that's kind of tricky to navigate. So like you have a potential buyer, you need a bridge in between where you are in that round and, um, essentially their preference gives them a spot in the waterfall and it kind of cuts you off to the side. Um, but on the other side, you [00:38:00] can negotiate like a bonus for that transaction to go through and maybe try to figure out how the founder The founding team or the employees can possibly kind of recover some of that.
[00:38:09] Jason Kirby: That's what we had. We had like golden parachutes for key members to kind of inflate what the team will get. Um, so that kind of like made it a little bit more palpable, but it wasn't of substantial value. Uh, and then one of the other things that I think is important when you're dealing with like a real transaction and it's eminent and something's coming up, the founder should really have their own representation.
At the table as well. And I think that's something that is not advised to them by their investors or their board, because it's technically, you know, they're going to be potentially negotiating against each other, but just given fiduciary responsibility that a founder has to its board and shareholders, um, there's certain things that you could be exposed to from a liability perspective that you're going to want someone on your side.
Uh, on the legal representation, uh, side of things, [00:39:00] your lawyer that your company hires has a responsibility to the company and shareholders, not to you as a founder. It's also true
[00:39:07] Connor Tomkies: for your broker or banker, right? Because they want the deal to go through and they're like, Oh, uh, uh, Jason or Tom is being hard, you know?
And they're like, just think about the big picture. Think about the, uh, Think about the bigger pie, right? And you're like, well, I'm going to be giving two years of my life, you know, probably in transition or something like that.
[00:39:26] Jason Kirby: It's so important to kind of know who's incentivized by what at the table and give yourself the proper protection as a founder.
Uh, just have that lawyer, it's not like they're coming to every meeting, it's just like someone that you can confide in that has a legal and judicial responsibility to you to give you the best potential outcome. That could be just negotiating your comp package post exit with the acquiring company. It could be, you know, re reworking some of the terms to make sure that you get paid [00:40:00] out properly.
If you have an earn out, earn outs are one of the biggest reasons for disputes and lawsuits. Like, Uh, if there's some kind of performance element of how you get paid, like I was just talking to another post exit, a founder that, uh, company owes him 200 million. Holy cow. Um, yeah, it's just like. And they're like, can we finance this?
Or actually like, uh, can we walk this? But he has that as an option to fight for because he had the proper representation to defend him. Uh, and so this is something to think about when you're doing a deal is, yeah, you gotta have good lawyers, transactional lawyers for the transaction, but you might want to look at hiring another firm.
Or another individual to be on your side as the founder, you should
[00:40:39] Connor Tomkies: probably bring on some other entrepreneurs that can also help you say like, this is normal. This is middle of the road. This is not, um, or here's some questions that you should ask your lawyer or even vet the lawyer. Um, there's been a couple of times when I'm.
I'm helping an entrepreneur go through the exit process and I'm meeting their lawyer that's going to take them through the process and they're talking about the [00:41:00] transactions that they've done. And it's a very small number and you're like, Oh, well, or they're not using the terms correctly. They're not the right person.
And so having another entrepreneur that can either recommend you to the right team on the accounting side and the tax advice side and the legal side, um, connect you to other folks. Um,
[00:41:18] Jason Kirby: Well, that's, that's the importance of when you're kind of raising that early capital, building a strong angel group. Uh, you know, people that are actually invested in you from the early days and are there to kind of support you.
Like, hopefully that's the people you call when, uh, when this time comes, because when they're incentivized for a good outcome, cause you know, hopefully they were an investor and they get something out of it. But, um, it's just, I think the moral of the story is, you know, surround yourself. With people that can help you see around the corner before you're there.
So before you get to that corner, you can make sure you actually want to be at that corner, uh, and know what your options are going to happen when you get it. Hey, podcast listeners,
[00:41:57] Connor Tomkies: eight years ago, I started a company called support ninja. It's an [00:42:00] international hiring, training, managing, outsourcing company to help you find the best talent anywhere.
If you guys are interested in hiring international talent, Check out support ninja. com. Cheers. Jason, I wanted to ask you about, um, this kind of like one person VC firms that are popping up. Um, what do you know about them? Because I keep on seeing, uh, some people on like tick talk that are running, like they spun up their own fund.
They're investing in these different companies. They're about to raise your next fund. Are you seeing this more often? Yeah. So
[00:42:27] Jason Kirby: they're called solo GPs. Uh, it's accessible due to all the technology that's available today. So like, yeah, Angeles, Carta, a bunch of others. They're making it so cost effective to spit out a fund that you could raise a 10 million fund and function.
Whereas like before, all your management fees would be going to legal if you raised a, you know, a 10 million fund. Uh, so I think there's just going to be a larger demand or a larger supply of solo GPs because when you think about it, it's [00:43:00] fun. You know, you, you spend your career, you know, building amazing relationships with amazing people and deploy, you know, being the, the, the hot girl at the party that everyone wants to come to because you have money to deploy.
And so you get all this like kind of attention and opportunities. I think there's a lot of appeal. To start a fund now, the actual raising the money for your fund is obviously the much harder part of building those relationships with LPs. So, you know, the ones that have the relationships that have the platform to be able to raise the money, uh, and it's, you know, fun one, fun too, like to have a partner and be a 10 million fund, you're splitting economics on a 200k management fee, like not very sustainable.
[00:43:40] Connor Tomkies: Yeah. And also
[00:43:40] Jason Kirby: understand what makes a good founder or a good founding team or an industry. As a solo GP, like the whole narrative is like getting into the deal. I have access to the best, I have access to this network. I have, I have my edge and that, you know, you can't raise money without an edge. Um, and the one thing I see as a [00:44:00] problem is no one really talks about like Portfolio construction, unless it's like a more senior fund that's, you know, raised a couple of funds that are talking to, you know, real, uh, liquidity providers, like real LPs, uh, limited partners.
And I think there could be a big issue, especially the ones that started like 2021, 2022, that deployed a lot of capital early in their fund, one fund two, they're probably, default dead now. Um, but that's something that I always kind of challenge people on is like, what's, what's the path out? What's the path to liquidity?
Because at the day, yeah, backing a GP, like, I like solo GPs. I think they're, they're great people that can make decisions on their own. Um, but it's also, you know, it could be a blessing or a curse without the proper infrastructure. Um, so it's kind of a, you know, up in the air, but again, a lot of LPs like early funds, small funds, because They typically have the outsized returns.
It's easier to return a 10 I think
[00:44:59] Connor Tomkies: this is interesting [00:45:00] because I saw two different graphs. So the first graph was showing how, uh, smaller VC firms like kind of like these boutiques sometimes have bigger, better returns than some of the larger, um, uh, firms. And so I need to find that graph. And then the other graph, um, was looking at the top 20.
Investors and compared to, uh, the baseline performance and how, uh, solo capitalists or, or the solo GPs are kind of gaining in the top 20 list, um, against traditional VC firms.
[00:45:32] Jason Kirby: I think the solo GP, uh, again, it's, it's all about the smaller funds have a higher probability of returning the funds. So it's like.
It's a lot easier to get a 5X fund, you know, as far as like DPI back to investors, when you raised a 10 million fund, you're only returning 50. Um, now there's a lot of those in the graveyard that return very little and, and you know, whatnot, and those don't ever show up in the graphs because they're just kind of cast aside as, you know, bottom quartile.
But, um, [00:46:00] those funds that do deliver those, those high returns, like when you think about it, you raise a 500 billion fund, like that's just way harder. To give, you know, to return that because it's such a hard strategy to deploy that much capital and venture in particular. Um, and to have outsized returns and not have any losses.
Yeah, it just becomes a, it becomes a more of a financial engineering strategy and portfolio construction strategy. You know, reliable returns. Maybe it's a 10 to 20 percent IRR, which, you know, is definitely better than zero, but you know, not necessarily what you want to lock up your capital for 10 years for.
Um, so I think that's something that, uh, we'll continue to see always room for emerging managers. It's just. You know, do they already have the network? Like that's, I think the big issue. If you don't have the network before you start as a solo GPE, it's going to be incredibly difficult to one, raise the money and then to have success.
I think that's the one disadvantage for a lot of [00:47:00] solo emerging fund managers. I think that makes sense. Um, so Jason, that's the pod. Um, where should people find you? You can find me at, uh, thunder. vc. Uh, it's our website. Feel free to leverage our tools to, uh, find which investors you should be connecting with.
It's completely free. Um, and then you can also check out our newsletter at join. thunder. bc. Um, and then LinkedIn is where I spend most of my time. I, um, I'll probably never get as engaged as I should on X. Uh, but, uh, definitely more of a LinkedIn person. Feel free to reach out to me again, uh, at jason at thunder.
bc if you have something interesting to say. All right.
[00:47:38] Connor Tomkies: Awesome. Guys, if you haven't already, please do subscribe. Um, this is going to be on YouTube and cascaded across the different podcast network and I'll include Jason's links below so you guys can check out some of the stuff that he's involved in. Um, but guys, that's the show
[00:47:51] Narrator: that wraps up today's episode for more inspiring stories and valuable lessons from successful entrepreneurs.
Be sure to listen and subscribe [00:48:00] wherever you get podcast. Thanks for listening until next time. Keep pushing boundaries and writing your next chapter.