Prepare to dive headfirst into the world of business, wearing nothing but ambition and a keyboard. Oh, wait, that's us. Welcome to the FounderQuest. Well, you're back, John. Yes, I am. back from rails world and back to found request much like michael jordan i'm back it was great for me i want to hear uh from you guys as well because i'm curious i feel like this time like rails conf i basically just attached myself to you too and just followed you around
we got to see each other a ton and rails world it didn't it was not that way i feel like we got to see each other a little bit but like it wasn't near as much so i was exhausted from the talking because i just i went to one talk the keynote and then i didn't make it to another one i had picked them all out ahead of time i had no reason not to go they looked awesome they look great i just kept having really nice fun conversations with people
who i hadn't seen in a while or had never met and it just didn't happen so it was amazing yeah that was same Same here. Like I went to the keynote and there were at least a few talks I was really wanting to get to and just didn't happen. For one, it's a two-day conference, not a three-day like Rails Conf is. also you have way more variety of people who are there like i thought that was another big difference for me it felt like there were many more europeans there
And it was cool because like you see all these different Ruby groups online that you don't always get to see in person and put them all together with the US people. And it really was Rails world. I think, you know, Ben and I are trying to do our, we're trying to do our business stuff. We do sales and networking and all that good stuff. We're like walking around with our pagers. Yeah. You're wearing your suits. I actually paged you a couple of times. I got no response. So yeah.
Sorry about that. I actually do have a pager. That's a different story. it's not live right now but it was i i wanted to this i think we this was from like an old founder quest episode where we talked about this but i learned you can still buy a pager And there are still pager networks that you can use. And I was like, I want to use a pager for pager duty. So I did it. Yeah. And believe it or not, pager duty also supports actual pagers. Oh, that's cool. Yeah.
They have to. So yeah, pro tip. That's cool. I'm curious about the pager thing and pager duty and being woken up because like I've literally never been on call during the night for a thing in my life. I think. technically maybe like once at github but generally i have not been and like i guess i've just been lucky like i i've
haven't really had any problems because of that. But yeah, like I was here, I've heard you guys talk about that a few times being on call and rotation and all that kind of stuff. And I'm like, I can't imagine I'm too old to be woken up during the night. I almost feel like I that would be my first hire yeah just be like you look i you're gonna be on call 24 7 you don't have to do anything else
i would almost go for that because i'm like i just the thought of being woken up it's like oh yeah it is like you're working the night shift yeah ben's basically like always watching our slack alerts channel anyway so like he he usually knows if there's an incident before the pager do alerts get triggered
That's crazy. Yeah. But yeah, it is nerve wracking, I will tell you. And especially since I'm paranoid about not being woken up. And so I put like, you know, the most blaring iPhone alarm ringtone with the emergency critical. or override stuff so it breaks through my do not disturb settings or focus settings and yeah it doesn't happen too often but when it does it definitely gets your uh whatever adrenaline pumping
Yeah. And it would take a while to fall back asleep. And then you're looking at a screen, which makes it even worse. You've woken up startling. And I'm like, do you guys have docs internally or does PagerDuty have docs of like, here's how to make sure things get through to you? And yeah, basically. Yeah. Yeah.
Yeah. And then pager duty, like we have a rotation. So, you know, we were each on call for, cause that's the other thing. Like you don't, you can only handle that so much. Like it does make the week stress more stressful for me just knowing that I have that. that looming even though we don't have very many incidents it is a little extra pressure so it's nice not to be on call like all the time which was ben's role at one point and that's how we created a rotation
That's a lot. We'll see. Yeah. I was like, I was waiting to tie it back to that because I was going to say like, there's going to be a lot more rails developers on call for servers in the future. If no pass is the way forward.
which i don't think i think that's one thing that i don't know about you john but ben and i aren't entirely convinced of that i hope everyone likes pager duty i guess if that's a if that's a question not that we have to go into it but i think i believe in it for certain things and not for other things yeah i mean heroku we use that for box out and it's small fractional percent of all of our revenue and you know probably maybe one of the bigger of the
expenses but it's not the biggest still and so I'm like it's fine I don't think about it ever and if we have an outage it's something that I can't do anything about and I'm actually like that's where I want to be in life if it's an outage and it's something that i can do something about i'm super stressed so if it's like somebody else messed up and it's an outage we're just like hey
it's an outage this is the provider we'll let you know when it's back up and it's pretty rare for us i feel like it's you know a few minutes here and there and they usually are pretty quick and it's usually on the postgres side and there's other options there if we wanted to switch that but like on the app server side I mean, I feel like I have not had an app server down and that being a problem a customer has talked to me about or worker or things like in I don't even know how long. So.
Yeah, that's my take. Like, I think the app server, like running apps are like, sure, run Docker on a VM or something and Hetzner and run your app servers. But the thing that no one wants to run is the database. And yes, you'd like a database and services. You start getting into those and it's like, use a pass we'll go use crunchy data or whatever i am completely on board with that i think that's totally the way to because i don't want to run a postgres yes
And he did tweet that the other day. He tweeted something about, I think I saw something about like, crunchy is great, but seriously, if we're running app servers with no state, let's just try something, do something different. I'm trying to be less afraid of that because I definitely turned into the pink elephant.
totally true and i'm okay with that right now i really don't mind being the pink elephant but i kind of miss hacking on servers too back in the day i remember setting up like mana and munin and all these og like tools that were super ugly but you got them working you're like i can see my cpu over time. This is amazing. Now, of course, I use Honey Badger Insights for that kind of thing. But no. Yeah, I just get that I was not afraid and now I am.
I don't think it's solely because I was brainwashed. I think it's also because I'm experienced and now there are problems I want to solve and problems I don't want to solve. And I don't want to solve server problems. I don't want to solve code problems. I want to solve.
Problems for like, you know, businesses and stuff like that and customers. And so that's why I like I'm OK with pass on some of that stuff. But yeah, totally agree on crunchy or whatever. Something for Postgres, Heroku Postgres, like something where your state is at least.
you don't have to worry about that yeah that seems like a pretty good deal to me if you know what like sres cost these days yep yeah yeah yeah there's definitely a lot of stuff like that that i completely agree i'm just like i don't want to think about that i just that's not what i want to solve that's not the level or the layer now on like personal projects for fun or things like that i'm like okay
I yeah, maybe I should I stood up a Hesner server and I have like chat dot flipper cloud like as a once campfire thing running there and I got to dip my toe in. It's kind of like I grew up on the farm. And now I have a Kubota with a cab and air conditioning and that's what I mow my field with. Like I get to feel like a farmer without any of the risks or like the long hours. So that's what we're looking for here.
Yeah, that's a great analogy. I love it. Speaking of like things to keep online, you have a few new things or at least one new thing to keep online. You recently made a new acquisition of a business. Yeah, we acquired fireside.fm.
2016 kind of og podcast host it's a real stack and actually all the stuff you're saying right now again this was completely unplanned but it's all the stuff i'm going through right now it's like self-managed postgres on linode so i'm like okay crunchy stuff like that i'm like do i move app servers off like how complex is the stack that whether that's worth it or safe or any of those kinds of things i'm definitely not moving cloud flare in front it's crazy good for the
terabytes many many terabytes of bandwidth that a podcast host that is this old has to deal with the stuff that we're talking about right now is exactly that it's vps's at this whole time where like i've always been on pass and heroku and now i bought an app and i have
not pass and and in the meantime i've been thinking like oh maybe i need to start going not pass maybe i need to fire up some app servers and i've even went to the linode website because like back in the day i was like i used linode for a bunch of stuff and i was like
I'll just go to the website and just see what's happening here recently. And then it's like I buy the app and I have that. And I'm like, oh, I kind of miss Heroku. Like, I wish I could just slide a thing and not. Yeah. So it's definitely it's interesting to hear the shift in Rails. and me be on the past and now i have the opposite again and it's going to be an ab test it's capistrano i mean it's it's definitely you know it's older stuff so like figuring out
what to update, when to update it, how to keep things stable while we're doing those. Yeah, there's a bunch of different stuff in that. Nice. So it is a Rails app. That's nice. Yeah. We talked about this Rails world, but I forgot to actually ask that. That makes things a little... easier for you with your team. Yep. That was a requirement, honestly, like I should be more nimble.
But again, we've talked about earlier how important sleep is. We're old men. And so I'm just like, I called a kid, a kid today and he was 20 some. And so then I quickly changed it to like young adult, but I still asked him to get off my lawn. But like, it's that kind of a thing.
was like, I have to... i love rails i love ruby i've tried all the other stuff not the javascript stuff but i already know the answer to that so it's fine but i've tried python i've tried cold fusion i've tried php like there's a bunch of stuff out there and i'm just like i don't want to i want to stick with rails
So that's the thesis, I guess, with this one. This is the first and we'll let the dust settle just before there's possibly any other ones, unless it's just some crazy scenario. But I've always had this like kind of dream of maybe buying an app. just because like you guys know how hard it is to grow something. And so if you can just if you can get that head start, that's really cool.
to have the links, the people referring to it, the customers paying for it already, customers asking for things already. especially when you get in the product market fit range where it's making good money and the customers just reach out to them and be like, what do you want?
like what would be nice we can survey we know exactly who the customer is because they're paying us already we don't have to figure that out should i talk to this customer or this customer and who's my icp and you don't have to figure that out you already know so i always wanted to do that and it's just like just dropped in in our lap basically like it was not a planned thing i've spent many moments where i like looked
Like, I don't know if you ever have, but like where you go to like, whatever, acquire.com or like Ben's shaking his head again. Ben's like on there every morning, I think. Yeah. Yeah. Like there's.
so many of them and and i've been thinking for like a long time i'm like there's probably all these like rails apps where people have solo or a couple founders and again i'm speaking to the choir but you guys have been doing this for a while and like you do it for a long time you got to find new ways to find energy and stuff and if you don't
then you just lose the energy and then they just sit there and they go down. And I think there's more people out there that have those. And so I'm curious about like, and I have more friends that I'd like to employ. So I'm like,
that seems like an interesting way if you can make the financial side of things work and this one just again just dropped i've spent time looking this was literally just like a like i wrote in the post it's like a text on a saturday afternoon hey what about fireside it's like okay you know yeah so we'll link your blog post in the show notes but i am curious so
You get this text from Garrett and he's, Hey, like, do you want to acquire Fireside? Which is a podcast host. If you want to start a podcast that you can go here and it'll handle like the distribution and you. I assume. Okay. Garrett, I think he had worked on this with Dan before, like as a contractor or something. Is that how he.
something like that so that's and he and also uh dan was an advisor for him on sifter so they had a relationship already on sifter and knew each other there and then also and like the guy who does the servers on the infrastructure and stuff like that on fireside also did that for garrett and so there's a lot of commonalities between the two so yeah that's where it came from that's cool this is dan like dan benjamin is a kind of well-known guy i remember like reading hive logic his blog like
his og blog back in the 2000s or something that's one of the most like that's i probably it's one of my most remembered or like memorable websites that i used to visit how to install ruby on rails on mac os whatever like those were like I mean, I don't even know what I would have done without those. Might have given up on Rails back in the day when it was actually hard. Like now it's so much easier. But yeah, he's definitely OG. I think he started the first Rails podcast.
And then eventually like it moved into five by five and then he handed it off to somebody else and then they handed it. And again, now it's changed hands several times, but definitely, you know, OG rails and stuff like that, but also, you know, podcasting and other things. Well, that's really, yeah, it's really awesome. I've always been a big fan. It's cool how that worked out.
I'm curious about the process of actually acquiring the business, I think. Because you kind of, you talked a little bit about, and we can get to the partnership, like how you chose your partners and your team and what the roles are. And there's like so much. good stuff I think we can talk about. But I'm wondering, how do you acquire a business once Garrett texts you and, hey, Dan wants to talk? I assume you didn't know Dan too well at this point.
what happened like what was that two month what's in the two month period where You know, you get the text and then you're suddenly signing the deals and transferring money and all that stuff. Yeah, I didn't think about that, that I literally skipped over all the work. That's kind of funny. It's fine because, you know, it gives us something exclusive. For this podcast. Yeah. I was like, I saw that. I'm like, okay, that's what I'm going to ask him about all that stuff.
And honestly, that's the stuff that that's been the last two months. And that's the stuff that's the most interesting to me because it was but I think a lot of people are just like, oh, business, whatever. I'm like, I. Again, it's like I'm seasoned in rails, brand new to some of this stuff. And so that was the stuff that was really fascinating. I guess how it went down, it was like he sent that text.
And I was like, yeah, sure. And so then he texts Dan, would you want to talk? And he's like, yeah, sure. So he gave me Dan's number and I was like, how about I call you in like an hour? He's like, cool. so i was finished up some stuff outside so i just called him and like i literally just paced around on my deck as we're talking and i was just like tell me what your goals are like what do you want because i was like it doesn't none of it matters what i'm thinking
if i'm not going to meet his goals and so i was like why do you want to sell why did you start it so he went back to the beginning he's like this is why i started it this is how i grew it this is when it stopped growing and this is why and These are, he went through like, these are the other offers I got and told me all exactly the, all the details about them. And he's like, and I said no to them.
and so then i'm like oh maybe i can't maybe i can't get this you know because i'm looking at it from the standpoint of like if you look at it from just money you know like those are great offers i'm not going to offer what other people have and so
we went through all that stuff and then at the very end i was like okay like this is cool so like what i hear from you i just repeated it back i was like i hear that you want to find a new home so the customers are taken care of they're not like harvested like you don't want this to just be like
what charitable that just got bought by spotify they shut it down take the tech he doesn't want to like some private equity firm to come in and just chop it up and yeah exactly and so like you want it to live on you want to deal with like nice people and you don't want to be on the hook for a long period of time because you're really busy
And that's why you're interested in selling is because you're really busy. You don't have time for it. So the thought of a long arduous due diligence process or a long arduous like handoff period or a six month retainer with like a kicker at the end or like any of these kinds.
of things. He's just like, I don't want any of that, you know? And so it's like, once you learn all those kinds of things, you can say, okay, well now we know all the levers that we can work with to come up with something that works for everybody, which is the goal. Like you want everybody to be like, yeah, this is okay.
so i think that was probably like the first thing was just that that first call and then at the very end like somehow watches came up everything comes back to watches and so somehow watches came up And he's like a huge fan of mechanical watches. I am also. And I was like, oh, yeah, I'm a huge fan. And he was like, no way. And so then we start talking. And so then we've got a rapport. We've established friendship. We start immediately texting watch picture back and forth before.
talked price and any of this kind of stuff a watch was involved in the deal i was gonna ask you've got to have like there's got to be some kind of in-kind trade or yeah it i shipped it like two weeks ago today there's a part in my heart that still kind of misses that watch but i know it's on a good a nice good hairy wrist like mine and so it's okay you know but yeah that's how it started and then it's just at some point
I was like, okay, now I know where he's at, but I don't know what offer he would say yes or no to, how he's valuing it. So I was like, look, I'm probably going to finance this. The only way that I'm interested is probably to do that. I've never done that before. I don't want to put... all the risk upfront. I'd rather finance it, spread it out over time. And I don't want to, I hear from you that you don't want to sell or finance it. You just want to be done. And so I was like, well, what
I needed like P&Ls, like taxes, things like that for like at least two or three years. I know a bank is going to ask for that first. So we got those. And thankfully, all that was like in really good working order because Dan was like maybe a couple of years ago was like, let's do this as a real LLC.
get an accountant, do all those kinds of things. That made it super streamlined. So I took those to the bank. They were like, this sounds cool. And they gave me a couple different options and stuff. I can talk about that if you want to.
But basically that was like the start of it. And then I was like, okay, I'm not doing this by myself. So now I've got to like Avengers assemble. And so it was like, okay, who's going to be involved? Well, Garrett was like, yeah, I definitely want to be involved. And he's like, dude, I've been thinking.
what if there's like more out there like this like what if we do this get it under our belt and just standardize the process of taking over a rails app for people and continuing it on and hiring and have some shared services, you know, like at the top of a holding company because.
you don't need a full-time marketer for quite a while. You don't need a full-time this and that. It's like, what if you shared some resources across? And I was like, funny you say that. Because that's literally been everything I've been thinking about for three or four years.
This just seemed like a good opportunity to do that. It had enough kind of cash flow and stuff. It's like mid six figures kind of a thing where like I could immediately pay people to work on it. So it's not like I'm not buying myself a job.
Am I going to work on it? Yeah, I'm going to work on it. Like I'm excited to work on it, but I don't want to buy myself a job. I don't have free time to do that. So those are the stages. Go ahead. Oh, I was just going to say, like you also wrote a recent blog post, how to find a business partner, which I think.
You talk a little bit about this, like you just, you didn't want to do it yourself. I agree. Like it's much less scary and it's nice to spread the responsibility of running and owning a business around if you have co-founders. Yeah, we already covered. I don't want to wake up in the middle of the night. So that's like the worst case scenario is that. So I don't want to be solely responsible. I've like had those moments in my past where.
servers are down and I've got to figure it out. And I might still be the most skilled on that in the group. That's fine. But at least there's somebody else over my shoulder who's like, it's okay, buddy. It's fine. We're going to get through this together. I wanted that. And also I'm like, I really like in business. I like this idea of just like bringing other people along. And the reason I like it is because I'm a scaredy cat and because I'm a scaredy cat.
Would I have ever gone out on my own and started my own company? I don't know if I would have, but like Steve went out on his own. He started a company. He started getting some consulting revenue and he's the opposite where he's, I don't know that I would ever start a product by myself.
And I'm like, well, I don't know if I'd ever start consulting or like leave a job by myself. I joined him and that reduced the risk for me. He's like, I've got like X in the bank and I have some consulting clients. We'll be fine. you know and so i was able to like jump out and join that and the rest is history and stuff so i feel like because that was available to me i mean steven are the same age he's not like it's like he's a mentor but he like
He took the risk first and that made it easy for me. And so I try to like actively do that for other people. Like my goal is these are some people that are working with me that might, that probably won't take this risk on their own, but they see me like.
take have having taken the risk and they're like i want to do that but i'm a little bit nervous and i'm like what if i just put a little bit of padding around it and then would you you know i just think like that's a really interesting concept for me of like how do you bring other people along who you think would be a good entrepreneur who you think would be good at doing this kind of stuff but maybe aren't quite ready to take that
risk and like how do you get them in and help them take that risk so that's the other reason that i wanted other people is not just to not do it alone but also just because i like bringing other people along if I can be helpful in that way, just like other people have helped me in the past. Yeah, that makes total sense. And actually, that resonates with me because that's how I was. That's how I got involved in Honey Badger originally, because Ben and Star were working on Honey Badger.
And I was been working with them, but I wanted in basically, I don't think I was at the point where I was going to go start my own thing. Like I had, I was like starting a consulting business. That was my dream at the time until I realized like the, the hamster wheel of. consulting. And, you know, yeah, so I think that's really cool. And then what you're talking about is like keeping the ladder down for the next person who you could bring in. So yeah, that's really cool.
Again, I'm just, I'm fortunate that I can be in that spot. I'm also fortunate that like I've taken the risks in the past, so it doesn't feel risky to me anymore. This stuff doesn't like, you know, everybody, I talked to like.
40 probably 30 40 people before i did this all different skill sets some in podcasting some in other stuff i just everybody that i knew that i thought might have some opinion or value on this i just sprayed it out to everyone just like let i want to talk i want to learn so i did that and the number one question everyone always asks is the first thing i thought is like well what if it goes to zero and i'm like oh yeah oh that'd be terrible but they don't do that
Like realistically, this is kind of sat here and chugged along, but you've got like this spectrum of apps. And on one hand is an app that's like hard to get into, but once you're in, like it's really sticky. And then on the other side, so that's like a content management system or something like that, like to switch.
your content out is a lot of work so you're like i'll just leave it and just keep paying it's fine and then on the other side it's like an analytics system and maybe we've even talked about that on here but like analytics you just drop a javascript in you can have it in while you have other analytics to try it and then you'll be like i don't like it and take it right back
out it's very not sticky and so it's easy to get in easy to get out and i was like you know what is this app and i'm like this app is hosting this app is creative work that you want to stay up forever for people to consume even if you stop podcasting like you want you don't want the podcast to disappear from apple podcast or spotify or wherever and yeah that's i imagine that's a huge pain to migrate yeah
Exactly. So I'm like, to me, this is that kind of an app. It's not going to go to zero. It's not a real thing. Even SaaS apps that are not as sticky, don't just go straight to zero. And so I'm like, that's not going to happen. So I talked myself off that ledge. Then I'm like, okay, well.
what would it look like to have debt service with this? Because putting that much cash up front into something, it's a big investment. Again, you guys know that as well. And so it's like, okay, what would debt service look like? And I was able to do the math and I'm like, you know what? that's really not that scary. Like I'm already paying this out of pocket towards Garrett to work on flipper and stuff. So the alternative way to look at it is I'm buying fireside.
to fund flipper there's almost like that kind of a scenario going on where it's like nobody else may be like so of the people that Dan talked to like they're either too small can't put a deal together it would be like seller finance Dan's taking on the risk that they're going to even run it well versus like just letting it sit until it goes to zero you know and
Like that doesn't, none of those options sound good. The alternative is somebody bigger comes in and buys it and they basically buy it for a smaller multiple, shut it down, harvest the customers. That's not great for him either. And so maybe there's this in between.
where we can make those things work where we're like okay let's take on let's find a purchase price that kind of works everyone that i talked to said if you can get a sas app for two and a half times ebitda profit whatever you want to call it that that's a no brainer. Like you should definitely do that. That's a good price. Three good price, like not a great price, but a good price. And more than that, like five or seven, you got to have a plan and you probably got to be pretty funded.
And so I'm like, again, I got a, I joked in the post, a merry band of like SaaS people that I work with. And so I'm like, you know, if Garrett can do some dev, Chris can do some marketing, like Steve can help with strategy, like that kind of stuff. And everybody puts in.
some capital and everybody puts in some not everybody but garrett and chris will put in some work sweat equity and then steve is just like a passive investor just for now like he might work on it someday that's fine but there's no expectation of him to work on it you figure that kind of all out and you're like okay well that would reduce our debt by this much
And that means we have this much profit. And if we take these amounts of salaries because we're working on it kind of part time and maybe this person's working on it more so they'll get more. because we're going to value the effort. But like these two people are going to get the same equity because one's maybe going to work more, but one's putting in a little more money. So that evens it out. Like again, you just have.
talks. And that was a lot of it was probably 100 some hours over the course of six weeks or something like that was just like a lot of phone calls with all the people. organizing everything the bank all that stuff and then it's like okay now it's just like how do we finance it what do we choose do we do an sba loan do we other stuff which i i'm happy to go into like those kinds of things as well because i learned a lot um but i feel like the key thing was just like
nobody else was going to get the deal done but me like just the spot that i was in i had the collateral to put up i had the team that could help me with it right away and because of that that i was the perfect buyer Just lucky. Just super, super lucky. So figuring all this out, when did the letter of intent come? Have you already given a letter of intent and then you went and found the team?
worked out everyone's equity. And I know you eventually started an LLC to be an umbrella over all of this, but what was like the deal process in terms of like, as you're figuring this stuff out, spending those a hundred hours. So it's probably 20. 10 or 20 hours in when I like basically Dan and I did a handshake over the phone to say like, does this price seem fair? I was like here on the left side, he's here on the right side and we met in the middle. It was literally that simple.
Cause I was like, you know what, I'm not going to go in and do crazy hard due diligence and waste all your time, which I think is, that's your valuable thing right now. Cause you're putting a bunch of time into other things. I'm not going to go in and say, how many annual accounts do you have? And how do you prorate that based on when they paid? And how much is in the bank? And we need to have working capital. I'm not going to go through all of that stuff.
And then if you can just help me with the price to where I don't feel sweaty at night. And so that was basically, I would say, maybe two weeks in. And probably 10, 20 hours of like probably five hours of conversations with Dan and probably 10 plus with various other people. Like I talked, I talked through it with Steve.
at that point he was not going to be he wasn't i hadn't asked him to be in i was just like what do you think about this i talked with garrett a whole bunch because i knew garrett was in it was basically originally at the beginning it was just garrett and i And then I was like, hey, I want to bring in my friend Chris because I think he could really help us with this. Chris and Garrett have never met ever.
And so I was just the transitive property of trust between them. We did one Zoom where they got to meet each other and say, Hi, I'm now going to be your business partner. But then I met in person. Have they met in person yet now? No.
okay yeah i was gonna say so because like we were saying like i well i met ben at one point but i hadn't like star and i haven't met it hadn't met in person for i forget probably the next year after we started the company it was yeah it was like it was like the internet is a wonderful place
it is it is a wonderful place and like with that i was like okay so that got us to a price and i didn't ask anybody else like i didn't really say do you think this is a fair price are you okay with this or like i mean i i talked about it but for me it was really like look if i'm going to put up the collateral and i'm going to do the work i'm just going to come up with a price that makes sense and then i'm going to come up with something fair for other people to join and then
If it's not fair, tell me and we'll negotiate it. And we did. I bumped all of them up. percentages wise from what they were at the start in my head and what I told them. And then I bumped it up even higher at the end. And then I had to bump it down 0.1% because of banks. And I, again, I can explain that as well, but that was probably the first couple of weeks was just like. get to a price no letter of intent no sign to anything dan was like
you're the person for this. I'm not going anywhere else. I'm not talking to anybody else. I've said no to all the other, any other offers I have, we're going to figure this out together. So I didn't do a letter of intent. I didn't do any of that stuff. Cause I was like, we're good at this point. I've operated on handshakes with.
Steve back in the day. I've operated on handshakes with the GitHub guys when they bought us. We were like, we can start now or in six months. And they're like, let's do it now. And then the lawyers are like, no, no, no, no, you can't do this. And we're like, We just did it. Sorry. And then three months later, we signed the paperwork. And I'm like, that's it's OK. In some instances, you can get away with that. Papers are for when things go horribly wrong. Like that's what.
papers are for so i was like there's nothing that can go horribly wrong in this other than he sells it to somebody else and like that it was meant to be then that's fine so once i got a little farther with the bank they're like we need something in writing We're not going to send this to the board for approval. The bank won't take a handshake deal. They won't. It wouldn't do it.
I said, I got my hand. Would you like it? It's not sweaty. But they were like, no. I quickly just did a letter of intent. I have a friend who's a lawyer. He helps me with basically all this kind of stuff. And he whips something together. I sent it to Dan. Dan's like. Good. Signed it. We gave it to the bank. Bank was good all the way until basically two days before closing when they were like, we need a purchase agreement.
this isn't enough and we're like okay so we made a purchase agreement really quick same thing and then we went back and forth a little bit about like stock sale versus asset sale and things like that and tax benefits for him and all that stuff and eventually worked it out so i would say like Going back to that original question, like the first week or two is like, let's be friends. And now it's cool. We're friends. Now let's figure all this crap out. And so mostly it was on my end.
two to four weeks to talk to everybody get concrete numbers you know it's never fun to talk about money people don't like to talk about money i'm getting more comfortable with it because i just have to i'm like if you hire people you know their salary if you are gonna hire people you have to know what they need if you're doing equity deals with people like you have to talk about like garrett and i are very frank about money and finances because i was like look i want you to work
full-time on box out and flipper like what do you need how do we do this well we can i can give you more here less here but ownership more here but no ownership and all that so like i i've got some practice with it so that but that still took a while because not everybody
you know, it does that as much. So that's kind of like, I guess that's that portion. Does that answer that all kind of? Okay. I think so. I started to sense I was rambling. Well, I do want to hear some more about the financing. So you decided that you didn't want to throw down the cash. and dan had already decided that he didn't want to front the cash he didn't want to be the lender so where'd you go from there and how'd you decide what to do yeah so thankfully i had just recently done two
Smaller real estate thing, smaller from my standpoint of investment. So one was a small one where I bought a building with Chris, who's on this as well. And then he has inside of it a print shop, like t-shirts, swag, that kind of stuff. And he bought the business with his mom.
So because of that, we had an existing relationship with a local credit union. And then we used the same credit union for a different real estate project where there was more people involved. And so I had enough of a relationship with that.
lender and that person who's running point on that, that I just kicked him an email. I was just like, I'm interested in financing this. Can we just talk and just tell me if it's possible or not before I say yes or no to the other side? And they'd be like, yeah. So we did a really quick talk. It was 15 minutes. And I was just like, okay.
How does any of this work? And he's like, we don't lend for software because we don't know how to run software. So if you want to do software, the only way to basically do that is with personal guarantees or collateral. And so you have two routes there. And so the personal guarantee route, you go at like an SBA loan and the bank will do that because the government's backing it up to like 75%. And so what they typically want you to do that route.
with the sba loan is they want you to put down like 10 they want 15 of like seller financing so that they know the seller is going to help you transition this and then the 75 is what the bank does because they know that's covered by the government anyways there's literally no risk it's free money for them and so if you go that route your interest rate is basically like i don't remember what he said like prime plus two or something
And I was like, ChatGPT, what is prime plus two? ChatGPT, what is prime? Okay. And if I do, what's a BIP? What's a, you know, I'm just putting in all the number, the things. And I realized, okay, that's like basically like 11%. and i'm like that's quite an interest rate and so that's that was like the start and he was like we can definitely do this i'll talk to my people and see if they're okay i did these several of these at my previous job i'm comfortable with them i don't know if this
place I work now is. So he went back, talked to him and he's like, I don't know how comfortable they are with that. And I was like, well, I'll be honest. I don't know how comfortable I am with 11% interest rate. That feels like you're literally risking nothing and getting 11%. That's how do you get in that job? I would like to do that. I want that job. Exactly.
And so I'm like, well, what's another option that I can do? I was like, can I like take out like a mortgage? I said, my house is paid off. Can I take out like a mortgage? Or can I like, I have some farmland with my like split joint tenants with my dad. I was like, can I like.
do something with that that's paid for too and i was like i have collateral but i don't know what to do with it you know and they're like oh you have collateral yeah oh we can help you let me show you this shiny interest rate that's much better and like
it's really cool and also like with an sba loan before i go to the other side you have to pay it off in like five years 10 years is like the max and so you're talking a really jacked up rate and i was when i was looking at i was like on this deal basically at 11% interest rate on a five-year payback, over half of the free cash flow was just going to go to that. And I'm like, I bought myself a job if I do that.
Because I can't really pay anyone to work on it, or at least not as many people as would be necessary. And that just felt too risky. So I was like, okay, what's the next option? So then I went down the commercial loan path. And so they were basically like, look, the fastest and easiest way is you just do a commercial loan. You do house or land or something else as collateral. And then what we do is as a bank, we give you like different.
percentage of appraisal value is like click a button receive funds. So if you put your house up, they deal in houses all the time, super comfortable with houses. And they're like, you know what houses don't just drop 20% overnight. So they're like, we'll give you 80% of your appraised value. If you own your house, that means, and your house is worth 100,000, they'll give you 80,000 and done. The interest rate.
They don't lock the interest rate in when you start talking to them, which is really good because we had a couple of drops in the two months. Thank you, Fed. And because of that, when I started, I think my interest rate was going to be seven and a quarter. And when I actually signed the paperwork, it was under six and a half.
So it dropped a significant, almost enough that you would refinance. Like refinancing is, I think, in the one to some percent range where it's worth refinancing and paying the fixed cost to lower everything. I thought, well, that's pretty cool too.
And so on a different thing that they're not as good with farmland. So like farmland, it's like, well, what do I do with this? You know, and they're not as good with software at all. Like they're just not going to do that period. But with farmland, they would do like 50 to 60%. And so it was like, okay, well.
farmland it's going to be close the house it's not going to be everything is fungible like worst case scenario if it goes to zero and i have to like liquidate a bunch of whatever investments and then pay it off. Or if I don't want to do that, I have to sell the land and pay it off. Or I'm not going to lose my house, basically. At this point, I was like, I have other things.
that i could figure this out if it went to zero and i still owed the money and so that was the the side so it's basically like you can either do a sba loan or a commercial loan with collateral i went commercial loan with collateral i got six and a half below six and a half i think interest rate which i talked to several people who are really into eta which is entrepreneurship through acquisition and
including Jess from Indie rails. I'm going to throw him out. He's been an awesome resource and he, he like, crosses t's dots his eyes knows all the stuff inside now because he's been listening to a lot of podcasts about it and doing a lot of research and so he told me like a whole bunch of stuff that was super helpful but i got a very good interest rate everyone i talked to was like how did you get that and i'm like i just
signed my name i don't know i got really lucky um and so the way they work i did a 15 year term because i could do any term because they're like well we got your house we don't care right and so i was like let's do 15 year that gets my payment similar akin to what I was paying Garrett before. It's more, but it's similar. And then additionally, I can pay it off early with no prepayment penalty. And I was like, so you lower the risk cashflow wise.
but you can pay it off early with the profit. So that was my approach, basically. So the goal is to pay it off. Initially, it was like, pay it off as fast as I can, like three years. Now I'm like, you know what? Some amount of leverage is actually like, it's okay. I don't have any really leverage anywhere. I'm like, I should just use some leverage. Someone is giving me money for free to make money with it. I should try this at least for a little while.
and just learn to stomach the fact that now I owe somebody something. Lots of people say it's smart to do that and I should at least try it and see what happens. So that's the bank route. Yeah, I like the long.
loan term with no prepayment penalty like i did the same thing with my house oh cool but i'm i feel the same way now where i think there's a good argument still for paying off your house early i know a lot of people say that's not whatever i know the math doesn't work out versus the stock market but there's i think there's all kinds of like psychological benefits of not having that hanging over your head and one of those i think is i think now i would be much more comfortable taking on some debt
Yeah, good point. Because I just feel more stable. That's a good point. I think that's exactly it. If my house was mortgaged, the land was mortgaged, my cars were all mortgaged. Like if all of that stuff was, and then additionally, I'm financing this software thing. I'm doing some real estate stuff. That would be.
that's a lot of risk. That's how you end up in a bad spot. And like how you don't is if you again you guys know this entrepreneurship is just risk reduction it's like how do you i feel like it's less risky to have three things than to have one job like
I realized that you might think you, not you guys, but you, someone else might think that's different, but I'm like, it's not, you get laid off, boom, you're done. And I've seen that happen to friends over and over. And I'm like, it's way less risky for me to have. I joked the other day, I was talking to somebody and I.
Cause you, I don't know. Do you remember trace commas from a Silicon Valley? Yeah. So like, I was like, I don't, I don't have trace commas. I'm not even close to Russ Hanneman or. yes yeah yeah but i was like but what i do have now is i have a business making five figures a year six figures a year and seven figures a year and they're in completely different industries so i was like i have a what was it five i have a five six seven i don't have a trace common
I have a five, six, seven. And I mean, it's a joke, but it's funny. But it's also like that's diversification to me is spreading it out like that. And I would love to spread it out more and then I can maybe hire more friends and stuff like that. But I don't. My wife was like, I joked about something just a little bit ago and she was like, you're not going to.
buy another one like all right i was like well i'm talking a lot of podcasts maybe i'm gonna get some good deals yeah i was like i don't know and garrett's like no let the dust settle bro let the dust settle but i don't know we got this other we've got this other business in the corner we can sell today let's talk after Uh, yeah. Yes. I mean, it is like, I think it's really fascinating to me because it's just some skills that.
I have actively tried to learn over the last two or three years, never got to apply them really a little bit at box out, but not much. Talked with a ton of PE people through that because they just start sniffing around at a certain size. learned how they talk, learned how they think, learned about multiple arbitrage of buying for like two to four X selling for four to six X after you grow it. I'm not looking to sell fireside at all ever.
Like I want to try holding for like a long time now. I've done my selling in the past. Like I'm curious what would happen if I didn't. But it's really interesting to finally be able to apply some of those things and be like, all right, again, Avengers Assemble. Who's in? Who's out? How much? Let's figure this out.
Who's going to do what? How, if we're going to start a company from scratch, what are our values? Stuff that like I joined box out. So it kind of maybe counts as like my first investment or something I bought in, but like I didn't.
it's not like i'm creating the culture there or like there was already culture i'm just joining another culture but it's like we're starting this from scratch what do we want to do we want to be calm you know we want to like cash flow we want value like the value that's coming out of the company goes to those who contribute
whether it's capital or just even writing some of those things down was really neat. So sorry. Yeah, that was a lot. And this is this is pretty good software is the name. Yeah. Yeah. Very good. Yep. Yep. Very good software. And that's good. Very good. So very good. Pretty good. Very good. It's from parks and rec. If no one's seen it, you can view the source on very good.
software.company. And the YouTube URL is linked in there to Ron Swanson's very good building and development company. And he does a commercial and he's like, buy our very good buildings or do not we are not beggars i gotta watch that show again it's so good like i love he says nothing forever and he just looks at his clock and he's like commercial done
And I'm like that. I love that. So you got to put Ron Swanson and like the humans text on your domain. You know, like, yes, that's a really good call. well i didn't even think about that your benefits package must have a treat yourself line item right oh yeah so once a year you got your 401k you got your health benefits and then there's the go self
Yep. That's what one, one time a year, the company will help you treat yourself. Yeah. Yeah. That's a great idea. So you've got your Avengers. What's next for you all? Like what's next? Very good. We got to deploy the app once. So that's the next goal. I'm not even joking. Like, again, it was like, it was last month. So, you know, recording on Thursday, Monday was a week.
of the signing of the papers tuesday we kind of started transferring stuff again a week ago so we're on day like 10 we've got most of the stuff transfer the stripe you know change the bank update the i had to get a credit card i was like oh i don't even have a credit card to pay for anything so i had to put in my personal one
And then it got the Cloudflare bill dinged on it. And that's like the literally the biggest expense. So now I got to reimburse that. And again, it's all the stuff that next time I'll be much better at someday. But this time I wasn't. So the first goal, the goal for this week is to deploy.
get our ssh keys on all the servers we got that now and now it's we got to do a cap production deploy there's currently a branch deployed so i need to merge that branch and then get that kicked out just so i've done it once and i'm like okay cool now i can change it from made in austin with a heart y'all to whatever made in colorado and indiana or whatever we change it to or tips from dan becomes tips from us kind of a thing so we can start doing those things that's really the next step
And then we've taken a very conservative approach to this again, because like debt ratio to profit. that's coming in is maybe like 25% or 20% or lower. I'd have to do the math to know exactly, but it's pretty low, especially once we get, like the plan is all the other guys who are contributing, when their money comes in, we're just putting it right on the debt.
So we're going to lower the debt so that because as soon as that debt gets paid off, there's a lot more. The profit gets used for that instead of for paying off the debt. So that's good. And then additionally, we don't have the debt service, which is X amount of the cash flow. The plan is basically.
conservative it's look the first month or two we're on ruby two seven we're on rails like six or something so let's get to like six one seven seven one let's get to like not not like we don't have to be perfect we're not gonna be like rails eight beta or like stuff like that we're not switching to come all overnight like but i'm like get some stuff updated so that we can iterate so that's like the first really like month or two is just the goal is like
Don't mess anything up and get some stuff upgraded, which we have a lot of experience with. I think we're bootstrap three. So maybe we try to get to bootstrap four or, you know, stuff like that. And then the goal is that's the rest of the year because we're October. So we have two, three months left. who works in December. Am I right? Right.
we don't so right yeah exactly and so that's the plan for the rest of the year and then next year it's like okay what are some things that we can start hitting feature wise so garrett when he worked on it back in the day was working on dynamic ad insertion and it was basically like all written
and it was just sitting waiting to decide on the pricing and ship it and stuff so we're definitely going to look at that because the functionality is all there so it's like okay how would customers want to be charged for that
Some amount for free, some amount paid, you know, like what you guys went through with insights and adding like a second bit to it. That's on our radar for sure. I got some good suggestions from people for features because I've reached out to like Adam at the changelog and locally there's a guy that I'm.
Quayton's friends with who does podcast editing. Another guy who is podcast producer has 20 or 30 podcasts that he manages and stuff. So like those people, I'm like, it's meetings. Talk to them, figure out like, what do they need?
Do we want to service what they need or not kind of stuff? What are they like? What are they not like? Just learn about podcasting. Talk to a bunch of podcasts. We've talked about basically... starting a podcast about like where we talk to podcasters so that and some of our customers so we know what they want what they need how they do things it helps people learn how to start themselves that kind of stuff yeah and it just
talk to everybody about it so that's i literally i think this i think i hate to say this you guys are not the only people that i'm talking to before it was like it was exclusive you know i i talked to maybe three or four podcasts this week and all and counting you guys and i've got a couple next week there's a couple people i ran into at rails world who were like oh like you should talk to my friend who's in marketing and like
they want to buy apps you guys should just know each other it's like some of that stuff got scheduled for next week and stuff so it's a lot of of talking which i'm terrible at you guys can tell i'm just i know you just can't yeah it's hard hard to get you to say anything
Yeah, I know. So that's pulling teeth. That's the short term. The short term is stabilize. Don't mess anything up. Three months. Maybe there's some new stuff, little new things. And then long term. Okay, let's start looking at what's our...
thing that we want to do that's different than everybody else is there anything and we don't know the answer to that yet i i honestly like i said before i did not do i didn't look at the code before i looked at the financials because that's really all i was worried about because i'm like how different can a rails app be
you know? So I was like, and it's, and a rails app that basically had two people work on it. Like you're, and one of them I've already worked with. I'm like, we're going to be fine. That's a pretty good fit. Yeah. Yes. Yeah. It's pretty nice. So yeah. So that's kind of the plan. That's cool. And I think you're eventually you'll be moving flipper into you want to hold all your company or all your, your SAS and you're starting like a SAS holding company. Yep.
acquisitions i i see more acquisitions in your future sorry to your wife but i i think this is your job now I mean, I think it'd be cool. I still want to hack on them and stuff. I made room in my schedule to like start hacking on Flipper regularly and then Fireside dropped in literally the next week. And I was like, why do I do this to myself? Every time I get room.
Yeah. So like do the thing I want to do. I fill it with something else. Yeah. It's just, that's the way it goes. So. But the stuff, the stuff we're interested, like the valuable things, it's the business product. thinking side it makes total sense to bring more come put more apps in the company because you can take advantage of the people you hire to use their time efficiently i think that's really it would be really fun to try so i'm i'm excited i'm living vicariously through want to try
If you want, maybe there's, you know, we'll see. Yeah. Maybe there's some honey badger, a very good collaboration in the future. You know, it has to be very badger.
honey good i don't know something i will come up with something like bennifer yeah we'll make it happen um i was gonna say on that front too like honestly the reason i want to merge flipper in is a hundred percent to align incentives because i feel like again reading too much Buffett, but I'm like, the number one thing in a company is what are people's expectations and then what are people's incentives?
you know if people have different expectations that causes conflict and if people have different incentives that causes conflict i'm really fascinated from box out and other stuff about those two things and i'm like if garrett's like x percent owner over here and bigger percent over here and i'm bigger over here and chris is more over there nobody's aligned
we all have our own things that are different than that. And so I'm like, that's why I was like, I just want to figure out a way to merge them all together so that every, and Garrett pushed for this very hard as well. He's like, let's just make them all aligned. Let's get them all together. Now, Chris still has speaker deck. It is separate. And I'm giving him a whole lot of crap about that. Someday he'll listen to this. Maybe speaker deck will be coming in too.
Yeah, exactly. I don't know how we're going to tax wise merge Flipper in. There's weird things with what I would like to do is merge Flipper in and like nobody's percentage changes but mine. Like mine just goes down or something. Because Brandon, there's two of us in Flipper, Brandon and myself at this point. And because of that, we can merge it in.
And then he'll just dilute. But then it would also dilute the other people. And I don't want to dilute them. What I want to do is just give him some of my percentage to move my percentage and his percentage in. Or maybe it's better if we just give him cash and buy him out. or buy us out or so i don't know so some of that stuff well i'll have to spend some time with the accountants and just be like look this is the end goal what's the most tax efficient way to do this so that
Cause this is what we're trying to do. And we're really not trying to, nobody's trying to cheat anything. We're just literally, we just want to merge these in and make it legit. And like, I want these people to own more, but I don't want it to look like I sold a chunk of mine. and now i need to pay taxes on that when i didn't realize the gain technically i'm losing out of this so i'm losing equity and also this other thing but that's i'm okay with that
But I want the government to be okay with that. So that kind of stuff you got to figure out. But then everyone's incentives are aligned. And I think that's the best thing. And that's why I wanted to merge everything into one.
is because i think that long term then it's every new deal that comes in however we do it like very good is going to be the owner so like we might do it where if there's outside investors for some reason or like somebody else helps with it okay then very good is like 50 and they're 50 or 60 40 or whatever we'll figure that out but like the incentives for everyone inside of very good are aligned that's the goal yeah
we'll see makes sense well i'm excited i'm excited for you yeah thank you appreciate it yeah i'm excited too And I'm glad we caught you before you're completely tired of talking about it. Yeah, we got to get Addison on the editing for this episode so we don't get scooped. Exactly.
Well, you guys will definitely, yeah, it'll get out. It'll get out fast. Probably everybody else is slower. So I don't know their schedules, but yeah, we'll see. We normally record earlier in the week. So I told him it doesn't have to be out this Friday. Cause that's a little bit of a, that's a bit of a time.
crunch but you know he's yeah he can do an all-nighter it's all good yeah just get him some uh get him some red red bulls get him a beeper just send a message every hour every hour yeah i know he's just shaking his head listening to this right now yeah in the future Well, this has been great. I think we learned a lot and the listeners will learn a lot. So appreciate you sharing. I hope so. I, again, if I can save somebody else time.
That's my goal because I learned a lot of the stuff the hard way and there was a lot of back and forth at the end and it was very painful. Hopefully most of that is shared and some of it's not, but I'll put it up somewhere. So cool. Well, thanks, John. Yeah. Well, this has been FounderQuest. FounderQuestPodcast.com. Go give us ratings and love on the whatever podcast platforms. If you need to start a podcast, maybe. Yeah. Check out, uh, fireside and we'll catch you next week or whenever.
FounderQuest is a weekly podcast by the founders of Ani Badger. Zero instrumentation, 360-degree coverage of errors, outages, and service degradations for your web apps. If you have a web app, you need it. Available at honeybadger.io Want more from the founders? Go to founderquestpodcast.com. That's one word, where you can access our huge back catalog of episodes. FounderQuest is available on iTunes, Spotify, and other purveyors of fine podcasts. We'll see you next week.