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Episode 80: Tony Petrucciani, Part 2, To be or not to be…acquired??

The challenges of getting acquired, Part 2 with Tony Petrucciani
Episode 80: Tony Petrucciani, Part 2, To be or not to be...acquired??


In Part 2, Tony explains the challenges he went through to get his company acquired, the difficulties he faced having to fire employees, and how he eventually managed to negotiate a 7-figure acquisition deal…


The acquisition of Tony Petrucciani’s business was in no way an easy ride, it took years to pull off and taught Tony a lot about acquisitions.


Today, Tony shares with us the challenges he faced in his company’s acquisition, what he learned along the way, and how he now helps other founders through his angel investing


“The harder you work, the luckier you get.” – Tony Petrucciani


“We wouldn’t have been able to do it without the employees, we had the bonus sharing program and we took a chunk of the proceeds from the sale and wrote checks to everybody.” – Tony Petrucciani

Time Stamps:

01:09 – Growing a company to 65 employees and almost getting acquired.

05:26 – Letters of intent, the acquisition deal falling through, and getting fired.

10:45 – The challenges of firing people you’ve worked with for a long time.

14:30 – Losing over a million dollars and the bank taking away their line of credit.

16:00 – Building revenue back up and getting another letter of intent.

22:38 – What it was like getting over half a million dollars in royalties for the first time.

25:02 – How Tony negotiated the amount the company was acquired for.

32:10 – How Tony rewarded the employees that had worked with him.

34:24 – How Tony became managing partner of VisionTech Partners and started angel investing.

37:00 – Pattern matching and the value of a founder that is coachable.

40:34 – The importance of being flexible to pivot as a business.


VisionTech Partners

Boomerang Studios

Money With Mak and G – Podcast

Connect with Tony Petrucciani:



Connect with Ben Jones:



BEN: So was that right when the bubble was happening?


TONY: No, that was, yeah, that well, it was around there. But that was 2001.


BEN: But it wasn’t due to the bubble. But that was like a very tough time for you. And was at the time, I don’t know if my sister, your wife, was that the time of your cutting cable bills and cutting everything at home and you know…


TONY: We went down to basic at the time, you could get just the local stations from the cable company for something like $9 a month. So we went all the way down to that. Because, you know, at the time, then I think that was still dial-up, internet. So when I was doing anything on the internet at home, I had to dial in right on my phone. So I had to keep the phone lines, I had to have a phone line on as well.


BEN: But you had cable at nine bucks, then you fast forward. So that’s what 2001 And you fast forward. And can you tell us? kind of quickly the story right before you got acquired because of those two years? Yeah, I thought it absolutely just blew my mind going, “How did you ever survive this?”


TONY: Yeah, so it’s actually things were looking pretty good after the 2001 recession got over, and we got all paid, and that new company was in charge. And our business started picking up. Yeah, and we started, we grew pretty rapidly. Gosh, I can’t remember how many people I don’t know the exact numbers. But like in 2001. When we came out of that it was probably you know, 25 employees, maybe 30. Somewhere in there. We grew up until 2007. We were at 65 employees, we were really cranking.


BEN: You go from one you started the first year, two years, whatever, to 6565. And that was over what, 20 years?


TONY: That was over 22 years, 22 years. So here we are, we’re rolling into 2006 2007, things are cranking. And, you know, we’re coming up on the 2007-2008 Great Recession, right. But we didn’t know that at the time. Of course you did. And we were cranking and we were the top partner provider to get to this company’s primary software line. So we were the guys.


BEN: So they have the primary software that they put in, which covers most of it. And then you have all the bolt ons?


TONY: We have all the bolt ons, and we’re doing and we’re experts in the Service Management Area. Yeah, we probably got two dozen bolt ons we’ve written. So every New Deal, every new customer that buys from them puts probably four of at least four of our bolt on products on there. So we were at the point now where we’re global. We’re in 29 countries. My job is a product guys to go around and train everybody how to position and sell our products, and we’re just killing it. I just had a great time. I would go around the world to different sales meetings, tell these guys how to sell our products and come back in at the end of each month, they’d send us a royalty report and say, here’s how much of your stuff we sold.


BEN: Dude! That’s awesome. It was great. Here’s how much money we owe you. And I think you told me at one point in time, I don’t know if you can say the number. But you know what Terry comes into you and says, Tony…


TONY: I get that report. Gotta report. Yeah, so Well, the fun part. Yeah, the little story, there’s this big brass Bell, we hung out. So whenever we’d sell a new deal of our own, not one of our bolt ons, the you know, whoever the sales guy would get a bang and get to go ring it, you know, so everybody in the office would hear. Oh, this is awesome. So we decided we’re getting paid this weekend. But that didn’t tell you how big a deal our guy could have sold, you know, like a little bolt on product could have been $2,000. Or we could have sold a brand new ERP system, like our biggest one that we sold was probably 450,000. So two to 450,000. Right? And so like, you know, you get one thing for $100,000. Deal. One thing for $2,500 didn’t seem fair. So we came up with a new rule that every $10,000 of a deal you got to hit at once. So when they heard the bell go ding, everybody stopped. They’d start counting one, two. So we get like, they’d stop at 770 $1,000 deals. They go, you know, at these things. We didn’t close them very often, right. But the cool thing was, is almost everything was going through the royalty system now because this company was selling our software, right. So once a month, we get the royalty report. And nobody rang a bell for it, because there was no salesperson associated with it. So I made Terry, my right hand gal. She’s been there, she’s still there today. She’s awesome. Love her. So we said, Terry, you have to ring the bell. So royalty report would come in and tell you not only the new sales that you had, but all the renewal maintenance contracts would come in and so it’d be two numbers and you’d add them up. And so, you know, a lot of the royalty reports at the time would be 5070 $80,000 You know, so royalty reporter committed to doing thing and you know, everybody like what was that and it’s like she denounced a royalty report. Rather. Right and then and here we are we’re coming up on 2007 and this company approaches us and says we’d like to acquire you guys. We’re paying you a lot and the royalties stuff. You’ve got this huge consulting practice, programming practice. You got all this recurring revenue, we just want to buy it. We’re like cool, so we went into talks with them. And we are doing some negotiations. I had never been acquired before. So I was trying to learn as we went along.


BEN: This sounds like your first shot that you did. How much do you want?


TONY: Yeah, how much? How much? Is it?


BEN: 50,000? No, you could probably go higher. So you’re learning. So everybody thinks, oh, you automatically know because you’re a great businessman. But every time you step into a new situation, it’s like, I don’t know what the heck I’m doing.


TONY: Yeah, so there’s these things like an LOI, Letter of Intent letter of intent. And they always say they’re non binding. Well, there’s a couple things are binding, like, you know, we’re not going to tell anybody about it. But non binding means they’re just gonna it’s open for renegotiation on everything, right. There’s no commitment, but they always tell you what the amount is. And you’re negotiate that a little bit up front, but it’s still kind of non binding. Do you know, based on due diligence?


TONY: We’ll get you close to there. But if we find something bad, we’re gonna knock it down. Right?


TONY: And then they have a department. They do nothing but acquisitions. They’ve got a team of people. What’s that? m&a, m&a, m&a, mergers and acquisitions department. Kobe is awake. Good. Kobe has been through this conversation. That’s Yes. And then all they do is they look at their due diligence to come up with ways. And I know, I’m being a little bit flippant here, but you are like, Oh, well, we need to knock it down a little bit here. Oh, we didn’t know that you were spending this kind of money, okay, that we’re gonna have to spend twice as much. So that’s not worth as much and oh, wait, we’re gonna need more working capital over here. So it takes some. And next thing you know, they’re just start chipping away at it. Because you’ve already as a founder, you fallen in love with the number they gave you at first. And if they just chip it down by 5%, you can talk yourself into taking 95% That number you’d like that number? 95. That’s not that bad. Yeah, I’ll keep it was the percentage they knocked it down. They went down 10% after the little Nixon cuts.


BEN: Yeah. What is it called? Death by 1000 Cuts? Yeah. I don’t know what you actually made on it. But you gotta think seven figures to 10%. If you’re multiple, seven figures, that starts to get to be a big number.


TONY: It’s a big number. And at the time, they were reducing, but we were a little disappointed. But we’re still excited to be acquired and become part of the team and the 65. But mostly, most of the 65 would become part of their team and continue to be great. So it was going to be good. Well, we didn’t realize that the recession, the recession was coming. And they kept delaying the closing. Well, we gotta have you meet with this one person, we need this one final term. You know, we had this the agreement, the purchase agreement was done. But they kept needing one more meeting and they kept delaying it three weeks. And finally, we got into like October. And they were like, I’m like, dude. I said, I’m not an expert salesperson. But I have enough sales deals. I know you guys can’t close this for some reason. And I know that you won’t tell me why. So destroy all the materials, and come back and talk to me when we can make this happen.


BEN: So you went from this huge rush, like, Oh, my God, I’m getting acquired. I’m gonna do my big cash out after 2227. It would have been 22 years or 22 years where you’re so excited about it, and a huge letdown. Right? So the emotional roller coaster for me when I talked to you is, that’s pretty devastation.


TONY: On top of that, because we were in the middle of all this due diligence and the planning of all this acquisition during that year midway through the year, that gal that used to be our boss, for our reseller part of the business where we’re reselling their software, who had fired us once before. So she wasn’t really pleased with us to start with. When the new company acquired that was back when they almost went out of business, right? The new company came in and we made a pitch to the new company said, Hey, look at all of our experience we want to sell again. He’s like, hell yeah, you’re selling. So they hired me back. The VP hired us back against her wishes. But she was still my boss. Oh, great. That sounds like fun. She allegedly didn’t know that this acquisition was going on. And then she came and called us one day, and she put us on double secret probation. Like if you don’t sell a half a million dollars worth of our stuff over the next 120 days, you guys are fired. We’re like, okay, and we were kind of like giggling a little bit is like, we’re going to be acquired in 30 days, who cares? Oh, like so the acquisition goes off. And then. And now in the meantime, the email they sent us is like, you got to do a half a million dollars in business net to us in 120 days, right? They didn’t say what product lines and in the middle of that our sales rep had gotten into one of their other product lines and got a deal done that was worth like 400,000. And we’d sold 170,000 other stuff. So together was 570. Right over so we didn’t care. We didn’t really care because we’re getting acquire, we found out we weren’t get acquired didn’t matter because we still hit the number, right? So she calls us with her boss and says, Hey, I’m just here to inform you that you didn’t hit your number. So you’re terminated effective immediately. like wait a second. Your email I’m reading right here says we have to do a half a million dollars in product. She goes That’s right. I go. Well, we did the $400,000 deal over here the 170 because we you know we only met about the 170 side, not that 400 That doesn’t count like well, it doesn’t say that in your email. I’m not gonna argue with you. You know, that’s what we met. So you’re still fired. So we got fired. So we went over the edge from being acquired from being acquired not being acquired. And now our business has been shut down with them, which is pretty much most of our business.


BEN: Oh man. And on the horizon…


TONY: And then the economy just fell out from under arrest. Right. So we went, we were allowed to continue working on the clients that we had, we are in the process of implementing, but we couldn’t sell and how nice of you. Yeah, well, we have to keep our surface people busy.


BEN: No, no, but I have a nice company. Oh, we still do that.


TONY: So anyway, here we are in January. And the first thing we have to do is figure out why we got to cut staff, we don’t have a way to sell new stuff. So we’re up to 65.


BEN: So you’re six years later?


TONY: Yeah. From that, from that? Yeah, from that time that you got kind of whacked and now you’re back on now. You’re number 65. We’re at the top of our game. Now you’re getting whacked again. Now we have to act. So we go from 65 people to 52 people. Okay, so 20% Again, so we’re like, Okay, that’ll help us get there. Well, you know, this, the economy thing was way worse than everybody thought it was gonna be and it keeps going, it keeps going. And this company won’t let us back in. So 65 To 52 to 52. So now, but we’re still partners, they’re still selling our partner products. But for a year there, they weren’t selling anything. Nobody was buying anything, right. And now we can’t sell their product and we can’t service you know, it’s hard to find service. These things that we’re not selling them. Anyway. So we go to 52 people 65 to 52. And that was oh, that’s a serious bummer. I hate firing people. It’s like, it’s way harder.


BEN: It’s not easy. When people talk about it’s like, yeah, I had to fire 32 people, but each one, there’s a Mary in there that has three kids, there’s a Dave in there, that mother is sick, either. I mean, it’s gut-wrenching.


TONY: It’s excruciating. And you think about us hate. I mean, I’m sure it’s bad for us. It’s worse for everybody who’s getting fired, but then you’re thinking about it worried about it, and you’re but you’re multiplying it by 13 that you’re getting rid of Yeah, man, you know, it is my fault, because they’re being terminated. But we but we just got, we got screwed by this company, because they’re taking us out of the channel.


BEN: But like your lesson that you learned early on, Tony, it’s your damn response, but it is. So we saw I get it. I’m not trying to excuse.


TONY: And you know, at first if you look at an organization, 65 people, there’s, there’s gonna be a ton of great people. And there’s probably a few that, you know, you could probably justify it, you know, you’re still developing, they’re not fully contributing. So okay, so that doesn’t, it’s not as hurtful to the organization for those three people to go because they, they weren’t really fully but, but but the rest of them, you know, it’s a serious bummer. And some of them have been with the company for more years, or longer. So that we did that, and the economy keeps some freefall. And here we are, like three or four months later, we’re still losing money.


BEN: So you went from 65 to 52. And didn’t you have to cut more?


TONY: Then yeah, I was about three or four months later, still losing money every month. We cut and we went from 52 to 40.


BEN: Whoa, 62 all the way down to 40.


TONY: Yeah. 65-50-40. Now this one hurts because those are longer term people. They’ve got tons of experience with our company. They’ve been there forever, but we don’t have any money for him. We’re losing money every month. So we got to cut him again. And then that was just horrible. And as soon as the first time you can’t you do it on a big group. We’re doing this because we think we’re getting it right sized. Everybody believes they’re okay to hang on.


BEN: Oh, yeah. This is okay now, this okay, now. The Earth is settled? Yes. And it’s like we can build on this. This is cool.


TONY: Second time I have zero like, what when’s it? When’s the next one coming? Yeah, the waves. And we did open book management. So we are sharing financials, everybody, as a matter of fact, before. Before, right? When the acquisition was about to happen, we were sitting on $1,600,000 in cash in the second account.


BEN: This is the part that crushes me when I hear that you are just like, awesome. Your position making money now you got no acquisition, the money is going away so quickly.


TONY: So we start going over the hill, we’re like losing $100,000 a month. So we cut those first, you know, 65 to 52 people, right? And then we and then the losses accelerate or lose 100,000 A month again. So then we had to cut down to 40 people, we’re trying to get to the point where we’re just breaking even and we got cash. Well, we had cash, it’s going away, going away. Long story short, we end up having to go another round later on to down to 30 people to get that half 62 to 30. And then and now we’re at and now, if you go fast forward 18 months later, we have $0 in cash in the checking account, we went from 1,000,006 We burned it all trying to save the people and the company, that’s gone.


BEN: And your entire businesses halved, more than halved.


TONY: The entire business is cut in half. Now at that point, we’re kind of at a breakeven point but emotionally we’re drained. Those people are just drained.


BEN: 18 months. It’s like this whole COVID thing. In the last year, it’s taking that number.


TONY: And everybody’s waiting for the next round. I know we’re at 30. But so and by this time now the economy started turning around a little bit, and now we’re down, you know, we’re really super skinny and we start. So anyway, we need to, we need to borrow, we still got accounts receivable, right. It’s just a much smaller number than what it was a pain either was that people may not be paying Yeah, we had to work through some of those write offs process. But then we got to a point where we’re out of cash, we got to use a line of credit. And then the banks like to do it. They said, Well, can they call them we’re like, hey, we want we’re gonna need about 50 to 100,002 Big payroll, we got accounts receivable about borrow against her like now after the last 18 months amount of money loss note, we don’t want to lose any money. So we had to, we had to switch banks, ci, unfortunately, we were able to find our way through that. And then they got a new CEO into this company. And they started focusing resources back towards the main product we had built up bolt ons for and then things started really picking up gradually at first and and start picking up and then I was like, You’re not hiring anybody. Like, we’re staying at 30 because I’m not sure.


BEN: Because it’s too painful not to paper, you don’t want to do it again, you’re just lost, you’re trying to keep your culture together, and you’re trying to keep the emotional, you know, of everybody, they’re still going.


TONY: And we’d burn a million and a half in 18 months, we’re like 1616. So we started to see things start coming back, we start making money, the military reports start popping back up again. And it keeps accelerating. And with the focus on the product, that product line starts picking up and things are good, but I won’t let them higher. I still super lean, but you’re doing it for me. And I feel bad because there was a gal that ran our support department and she was making a case. Like we’re picking up new customers, right? We need more support people to handle the calls that come in and do the tweaks and bug fixes and whatnot. And I kept sending her back, she’d make a big great case where it would have normally would have said, Yeah, hire two people right now. And she go, I want to hire two people. Here’s why I’m like, you know, go check this date out, and I’d send her back. In the meantime, in the meantime, this is the beginning of this through 2010. And now beginning of 2011, I get a phone call from this company. Again, they’re like, hey, you know, we got a new CEO. And this time we think we can get through a deal with when you talk to us about acquisition. So is this When is this 10 years later? This is from 2007 2007 to the beginning of 2011. Okay, for so yeah. So he ended up EIGHT and a NINE and a 10. Year three and a half years later, maybe? Okay, so now they’re like, Hey, would you guys talk to us about this acquisition thing. And we know we can get it done this time, because you know, they left the state at the altar wouldn’t answer my phone calls last time.


BEN: And so now you’ve got some bad blood a little bit. You’re just like, you jerk me around, I spent a lot of time emotional roller coaster had to beat it through the last 18 months, barely surviving, and now they want to talk to you.


TONY: And thanks for going well, so that’s good with us. And we don’t need to talk to him. And the other thing that was cool is going through all that due diligence, or as people like to call it do daily, d, d, d, d, Double D, maybe we go through all the due diligence, and we see how they negotiate that 1000 cuts to get us down that 10%


BEN: Yep. Okay, we had a little bit of technical difficulties. So we’re gonna keep going from this point forward. Tony, what were you saying bud?


TONY: Then had to go potty.


BEN: But I did get a drink on the side. So you were getting really ready to the good stuff, right?


TONY: Oh, my gosh, yeah. Let’s see. So the beauty about what had happened when they left me standing at the altar was I had to go through all those death by 1000 cuts pieces where they were reducing the amount that they wanted to pay the first time. Yeah, first time. So I took note of everything they did, and some of the arguments that used as far as how they valued the company, and the multiples they use and what kind of categories of expenses. And so during that period, when you’re cutting everybody back, we actually restructured our entire accounting system be based on financial acquisition and what we learned back at that point.


BEN: Which is dangerous for you, which was awesome for anybody’s coming in, because now you know, the speech, you know, where they’re gonna hit you, you know how to fight back too, right?


TONY: Oh, yeah. Well, and you know, it wasn’t it wasn’t wasn’t about fighting and being emotional, although that’s a hard thing. It’s your baby you’re talking about, right? Sure. And, but it was like, I know, they’re gonna say this. And when they say this, this is how we have to respond. So they started asking about, you know, EBITDA.


BEN: Yep. Earnings before interest, taxes, depreciation, amortization.


TONY: It’s like, yeah, like is a C to F, A. or something.


BEN: C, P. Certified pain in the batusi. Got it. Okay.


TONY: So, they called us back in early 2000 levels a hey, you guys cool. We got different leadership, we’re really interested. And by that time, we had developed a brand new product, which was really hot.


BEN: And they’re paying you a lot of money now because right, a lot of royalties, is that right?


TONY: Yeah, the royalties. This product we developed was to a very small price tag, but what happened is they had like an 80% Attach rate meaning out of every deal that they sold New Deal 80% of time they would use this, that one product would be attached there. Not only the other products they were selling of ours, but this thing was attached to 80% of all their new deals. Yeah. Product Management is like we want that product. Well, I’ll take that. Yeah. And it was a little amount, but it just kind of built up really quickly. It was crazy.


BEN: So weren’t you telling me though, they wrote you the checks, like, every month, it was like four grand, and then six grand than 10 grand it got over a particular level, which got to the C suite, which was CEO, CFO.


TONY: When they had to write us a check, it was so big, it had to be approved at higher and higher levels.


JACOBI: And they’re sitting there like why the hell am I paying this guy this much money every month?


TONY: They knew exactly why they were paying us because of quality.


JACOBI: They’re sitting there looking at an enormous cheque and being like, why am I writing this? Right?


BEN: Can’t we just own this? Who is this cat? You know, who’s a Tony Petru-we’re-cooking-yani? Yeah, Tony Pepperoni.


TONY: So they approached us early 2011, things are gone. Well, by this time, I won’t let anybody hire anybody. Because I know this acquisition is coming. And anybody we hire is going to affect the price.


BEN: Because right now, if you keep the expenses low, and you keep the sales up, then that looks super good for an acquisition.


TONY: EBITDA is bigger.


JACOBI: You won a multiple on your revenues and everything.


BEN: So all that stuff we talked about is very important, a way to go.


TONY: And we weren’t quite at the cloud software arena where we could do just pure multiple of revenue that they were buying, which is kind of really popular now. Because Kobe is, you know, the cool kids are all doing it that way.


BEN: Yeah. So if they’re doing everything in the cloud, then people really love it, they’re willing to pay a bigger price. And paying that price is a multiple of whatever your revenue is. So if you had a million dollars, they don’t care about all the expenses below, they just take a million multiplied by seven they go, we’ll give you $7 million for this. So you weren’t there. But you had a really good setup. And it changed a lot.


TONY: And yeah, so our typical thing was if they bought $10,000, with the software, they would pay us 20% or 20,000 10,000. They pay us $2,000 A year for the maintenance of support. So we keep putting new functionality in there and answer the phone tell them, you know, Ryan come through. So we were still getting recurring revenue. It just wasn’t recurring at the top line of the software. It was kind of the maintenance side. But anyway, they approached us early 2011. We got this other product that’s taken off. The company is really doing well themselves with the refocus that they had done with the new leadership team. And so we get this, we get this. I think it was May, Terry Terry comes in my office because there might be something wrong with this royalty report. Why is that? It just looks too big. Like, oh, that’s a kind of problem I’d like to investigate.


BEN: Terry’s going oh, my arms gonna get tired if I have to ring this bell somebody times.


TONY: We had, it was our only time it happened, I think in the whole history. But that one month rule to report was over half $1,000,000.50 times Bing Bing Bing Bing. So she’s back there she was Ding ding ding. Everybody in the building gets up and starts walking over to where the bell was the hallway when she’s rounded up.


BEN: But like the 10th time or the 15th time?


TONY: I think it was probably in the 20s and was starting in the 20s. They thought somebody’s screwing around like somebody’s kids in here beaten on the bell. This isn’t real.


BEN: That Jacobi Petrucciani kid, he was always loved to ding the bell.


TONY: And they all come around. And then when she stops the last one, they’re all like, they don’t want to applaud yet because they’re like, is this real? What are you guys screwing around? And I was like, this is real interesting. Because we did, we did a profit sharing program was so Oh, that’s right. Once we went over a certain amount of profit for every, for every $50,000 or profit we had, we would take a percentage of that and give that to the employees. We had to fill the bucket. And when the bucket was full…


BEN: It was over fluid.


TONY: Overfluid. And I think I can’t remember. I think we’re doing like 8% or something, you know, like it was when you start filling up multiple buckets in a month or in a quarter it started being significant amount of money. So that was good. And after, you know, after having lost a mill over a million and a half in a year and a half, two year period, it was good to start filling buckets up again.


BEN: So now you’re to a point where you just got your butt kicked you just emotionally got drained. You’ve got rid of all of your money. You’re licking your wounds because you’ve just been brutalized, things are starting to turn your new product is 80% Attach the royalty comes in big these guys now want to buy you and you’re like I don’t really even know if I want you to buy me whatever did and so you’re in a great position after just being just brutally hit with rock after rock. Nice bat.


JACOBI: That’s when you’re ready for negotiation to get acquired.


TONY: So yeah, so I started with the you know what, I’m gonna put the Gather based on how I know you guys like to acquire stuff and how you’re going to look at me, and I know how you’re going to look at me, we’re going to take these, and we’re gonna make four components out of it. And I’m gonna tell you what we want to be paid for each of those. And then here’s, and we wrote it up and send it back to him. And it was a pretty big number.


BEN: That comparison wise, what it was to clear.


TONY: What we agreed to the first time around this thing was like three times as much as we agreed to. And we’re half the number of people.


BEN: Three times and half the wow, that does blow your mind.


TONY: Now that’s what we started with. And they came back like, we can’t do that. And they came and we negotiate, we ended up coming. It was a little it was between two and three times what they offered us, but we came up with a top number. But it was pretty good conversation. And then it dragged on a little bit, but not much as we were trying to get through the agreement again, because really, we actually wanted to get a if they backed out, we wanted a deal termination bonus or payment to come to us like you guys back out of this deal. We’re getting money anyway.


BEN: And you really kind of screwed us before because you probably made decisions based on the fact you’re gonna get acquired. Right?


TONY: Right. So now, they wouldn’t agree to that. And we eventually agreed not to go for that. Let’s just get it done was what we said, both sides, like, let’s just get it done. So here we are. We’re, we’re scooching down the end. And we knew that they were basing everything off of the trailing 12 months EBITDA, right for the particular business unit they really wanted. And then the other stuff was kind of we’re negotiating Well, and that’s still going up, right? Well, that’s the thing is he calls he calls me one day and he says, You know, I am waiting for this call, because he did it before. And that’s his job. That is their job. They’re supposed to get the best deal they can. That’s how they get. You know, that’s how they get promoted and graded. Right.


BEN: So you know what’s coming. You’re ready. Now you weren’t the old time naive, ignorant individual just said yes. Okay, sir. Now you’ve read that. I mean, you showed it to me, how many pages was that thing again?


TONY: Gosh, I don’t know. It’s like 800 pages or something.


BEN: You spent entire weekend, I think oh, just one week already. I think it was like an extra day, though too.


TONY: It took me two days to go through the contract to double, triple check everything, I did it three times. But on the very last one I went through personally read the whole thing.


BEN: You’re like locked and loaded now. I know it’s coming.


TONY: Spreadsheeted the numbers.


JACOBI: Those things are so dry to you. It’s just all legal.


BEN: And therefore subsection A of what l might be yeah, it’s like brutal.


JACOBI: I remember ours, it was nowhere near as long as yours and I fell asleep trying to read that.


TONY: Red Bull.


BEN: Red Bull and contract.


TONY: I did a lot of Red Bull back then. And that helped me get through it. But so I kept spreadsheets the numbers every month as we went I kept, I kept telling them up. And I just didn’t call him say anything, but I waited. And he called one day says hey, we’ve been looking at some of the numbers and we’re gonna have to drop the offer. And I can’t remember, it was like a million dollars, it was some big number. And I’m like, I am so glad you brought this up. Because I’ve been tracking the numbers, and based on the trailing 12 months, you guys actually have to pay us a half a million more, not a million less. And he goes, you know, why don’t we just get this deal closed the next week or two and not worry about the numbers.


JACOBI: Don’t worry about what I just said. It’s fine. It’s fine.


BEN: I’m so happy for you. That’s great.


TONY: But the funny part was my partner Marty, you know, he’s very compartmentalized about work and home. And so you know, the first time we were getting acquired, his wife never knew that acquisition was going on. So when it failed, it wasn’t it wasn’t like a big deal. Because she wouldn’t know and I you know, I told my wife and I was super disappointed and super stressed out when everything should hit the fan, you know. So here we are. We had actually, we used to do this trip. Now that we have money we were doing this trip as every year, any of the sales reps that hit their numbers, we go on a trip and sometimes you know, we go to Cancun or Florida or somewhere and we go take everybody hit their numbers, the owners would go down there. And then we start doing this thing where anybody who had been there 15 years or 50th anniversary, they got to go with a guest, you know, spouse or significant other. So here we are, we’re coming down the stretch. I’m trying to sign this deal. And we had planned this trip. And it was in October, it was September and so we are October and so we went on this trip, we go to Bermuda. Yeah. And we’re all there. But one of the people that was there was one of the 15 year trips and wasn’t in on the acquisition. They didn’t know what was going on. So we couldn’t talk about it on the trip. So we’re at dinner and I know that Marty hadn’t told his wife or whatever. And you know, we’re at dinner one night, and we’re all kind of code talking around so we didn’t disclose.


BEN: Pass me the my tie.


TONY: So Kelly, Marty’s wife’s sitting over across the table and the code word was,she looks at me, she goes, The Eagle has landed. The eagle has landed and meant that Marty told her what had happened. Gotcha. Now this is like, this is like a couple days before we sign the final documents here. Sure, it was all done, all we had to do is sign it and get the money transferred. But of course, there’s a lot that could go wrong there, as we know. So I said, ain’t done until it’s done. So I looked at her, she goes, The Eagle has landed it, she goes in the eagle is very happy. So that was fun. And then we got to make the big announcement to everybody. The following week, when we were back, they came over and we did the deal. And it all got done really quickly. From there, but that was like, it was November 1 1111. One 2011. Wow, the deal got done. And then it was there was they split the payments, there was an immediate down payment of a third. And then they paid us a third in three months and a third and six months. So we’re all holding our breath for the second payment, and then the third payment. And without fail. That morning, you know, before lunch on the day that we’re supposed to have the money wired in the account, it would show up and our CFO would call you check the account. It’s in there.


BEN: So, you know, if we look back on all this stuff that you just talked about, you went from this passion in computers by running into what’s it called the hardware store? RadioShack RadioShack. Thank you. It’s been a while RadioShack enjoying that working with your dad starting your own business, maneuvering the high to the low where, oh, my God, you’re going down to $9 Comcast a month, which is a real deal. And then you actually sell out. You’re so you’re feeling pretty darn awesome, right? You’re looking back and you would have never imagined you’d be there. Right? Right. 65 employees, your dad didn’t want you to go to college, you went to college kind of thing. And now you’ve have a few dollars. You came from nothing, have a few dollars, just a couple. Yeah, a couple a couple of nickels together. And and you decided that you used a lot of this knowledge that you use, because you got kicked around quite a bit. And you’re like, hey, I can help other people. And now you’re into venture capital angel funding.


TONY: Yeah. So one thing to wrap up the show? Sorry. No, that’s good. That’s a good segue. There is lot of the employee a lot of them. I mean, we wouldn’t have been able to do without the employee. So we did have the bonus sharing program, bonus bucket program. So we gave that but and then we took a chunk of the proceeds from the sale and we wrote checks, everybody, awesome. And some of them, you know, some of most of them went on to work at the company that acquired us. But there were four of us that stayed behind because the company didn’t want everything, we had some stuff that we had built for another software company called Sage. And we built some products for sage software, and they didn’t want those. So we kept them. So I kept, you know, we get to pick for employees to keep and then we gave them equity in what was left of single source source two point net single source 2.0. So they and that still today is still there. It’s still going and they’re doing other stuff, they went back to work with the company that acquired us. We’re looking at other stuff that we’re doing, but it’s kind of cool, because I got to be more of a board member, board member mentor as opposed to a day to day working in the company. Yeah, so trying to help them and that was the thing is like, how do I help people? based on my knowledge and mistakes I’ve made like, it’s still kind of hard to do is like, Hey, don’t touch the hot iron because it’ll burn Yeah. Right? Because it’s easier to learn that when you touch it yourself and burn yourself. But now I’m like talking to people with so I became a managing partner where there’s a little story there was like, What am I going to do now that I’ve sold the company? Do I just retire, go into some sort of a golfing lifestyle and…


BEN: Which isn’t you. Your golfing lifestyle. But it’s the other side. You got to have some work?


TONY: Yeah, I’m a little ADHD probably self diagnosed, I don’t know. But I’m like, how can I help.


BEN: It’s the spectrum Cobi. It’s the spectrum.


TONY: There’s a 50 chance that I am. That’s true. That’s how statistics work. Yeah. Can you explain that Cobi?


JACOBI: I mean, either your ADHD or isn’t. I don’t know.


BEN: It’s 50-50. I love that.


TONY: Cobi went to Purdue and he took statistics so we, so we trust him. I mean, he didn’t graduate that duty. Well, that’s another story. No, wait. We already did. I told that story. So anyway, I was really interested in the art of the deal and not in the true Trump side of things I never read that book, the deal, but the art but but being in the deal of how much I learned in the first deal and the failure and then the success of the second version, and I probably now that I’ve been through that a couple times, I probably could have made a better deal if I had to. Of course you could have, but we all know you can’t look back. So I talked to your sister, my wife who’s like, she is just always improving herself and being educated. You know, she’s got the industrial engineer from Purdue and an MBA from Butler, and she’s a naturopathic doctor, and she keeps learning and I really did, I was kind of in Kobe shoes. I went ahead, I did finish college. But I really didn’t want to. But I really could have gotten it. I was already had my business started before college, and I didn’t need to finish college, but I did. Right. Not and it didn’t really, you know, the stuff that I was doing my senior year didn’t help me with my business really, right. So I could have been on the exact same path that the Kobe was, so I’m not really a big, go to school and take testing. But I was talking to Lori one day, I’m like, you know, I’m thinking about going back to school, getting an MBA in finance, because I love these deals. And I think MBA finance might be the thing to do to help me with deals like this in the future. But I ran into an old customer had been a customer of mine for close to 30 years. And he was general partner in this firm that did investing in in startup companies. And I met with him and I got introduced to the partners. And it’s called Vision tech partners. And it’s like, basically, they invest in Angel rounds, which is just like the beginning. Sure did a podcast of it. Remember, yes restaurant, so we know what that is if you go view that but so I said, Honey, I could write a check and become a managing partner over here and learn it from day one the hard way. Doing it real, doing it real life not there. I can go to school. She goes, Well, you’re gonna write a check either way, right? And I said, Yeah, she goes, I don’t see you going back to school. You’re right. So I became managing partner. That was end of 2014 14. Was that actually that long? Yeah. Was in 2014.


BEN: So wow, I didn’t think it was that long ago.


JACOBI: I thought it was 2015-16 because that would have been, really? Because that was two years into my college.


TONY: I was still paying for college. No, so yeah, so I got into that. And I started learning. And now we’ve invested Vision Tech’s, invested in over 50 companies, I’ve invested in some companies outside of vision tech. So I’m in over 50 company investments. And now I’m starting to learn that pattern matching happens slower, right? Because you’re invest in a company and four years later, they do something good, or they go out of business. And you’re like, Okay, what should I pick up? Over those four years? What should I watch for next time? But yeah, so I got into that. And that is, that’s fun. I try to tell the, you know, the founders if I can, and not all these companies, I’m even involved. Sometimes it’s right, check, right? Sometimes I’m on the board, sometimes advisor. But as like, you go to him, you’re like, Hey, don’t touch the hot iron. Sometimes you tell them some stuff. And they gotta learn their own mistake anyway, from their own mistakes. But I can help them when it comes time for a deal or the LOI or things to watch out for how you structure your financials.


JACOBI: That’s what you’re always talking about right, it’s like, you want to find some founders that are coachable. Right. coachable bingo founders because yeah, like I mean, obviously, he’s been there done that. A lot of people who are much younger and not as experienced, like, it’s, it’s very valuable to have that knowledge. And a lot of people don’t want to listen to it or don’t want to take it to heart. And that leads to some interesting situations.


TONY: Yeah, I mean, just the other day, I was talking to some millennial founders, and I started telling them about the stuff that they should watch out for. And they just went they looked at me they go, Boomer. Okay, Boomer, who was that? I’m kidding.


BEN: I was gonna say, somebody that we’ve got to know.


TONY: Hey, the thing that I’ve tried, really hard to learn over the last few years is what is a meme? And so Kobe still doesn’t tell me but he tells hard to explain. He goes, Well, that’s the meme. That is the meme. What does that, what is that? Because that’s the meme Boomer. Yeah, anyway, so that’s been a lot of fun. And some of these younger or less experienced founders, you know, really, I could tell they appreciate the interaction. And I learned from them still too, for sure. But that kind of stuff. I really want to be involved with them if they think they know everything already, right. My pattern matching now tells me is less likely to write a check even if it is cool tech or cool company.


BEN: Because it really plays a huge role that people and the people that think they know it all versus the people that are coachable and willing to do the work is a big difference, right?


JACOBI: Yeah, that was a huge thing with Y Combinator too, is they were like, we don’t really care too much about your idea. I mean, obviously it plays something but they meet you and they just like with you and everything, and it’s all about, you know what they think of you as people, not so much the idea. It’s like, do we think that this is like a team that can make something happen? Because there were plenty of companies that pivoted out of their original ideas to completely something different.


JACOBI: Didn’t you tell me like Twitch. That’s a lot why it always stuck with me, it was a guy walking around all day with a camera?


JACOBI: Oh yeah., it turned into, which got acquired by, you know, Amazon for billions of dollars.


BEN: Who would suggested walking around and doing everything that he does all day. And then it turned into Twitch.


JACOBI: Yeah, it turned into just this insane idea, but they were just like, we really liked this guy, or for whatever he’s gonna do. We like him in his team.


BEN: And you liked him, too. When you met him, you’re like, Yeah, that’s awesome. So Tony, you’ve had just kind of a very, really interesting life, you’re down to vision tech, you’ve got these 50 companies, I think part of our discussion was, let’s get some of those guys in here. And let’s talk to some of those guys about their stories. And we’ll have a little bit of fun in relationship to that.


TONY: Absolutely. I’d love to. And just a little side plug is the founder of vision tech, Oscar Morales, he was in the life sciences side of things. And he’s decided, gosh, I guess that’s about a year ago, he’s going to create a studio. So I’m part of that effort, there’s about five of us involved with spinning up a venture studio, which is basically a company that helps people take their ideas and build a company out of them. A lot of times in the angel side, we’re investing in companies that already exist and have already started to figure stuff out about their product and product market fit and customers. And this is an incubator, right? It’s like an incubated additional, earlier stage, it’s, it’s, it’ll actually spin it all the way up through the funding. So it’s, they’ll help them take an idea. And a lot of times it’s a founder that has an idea that doesn’t know how to build a company. They know more about the technical side of the idea they’re trying to get in. And they may become the CEO or, or one of the co-founders. But the studio reps a bunch of people resource around it, and then spins it out and knows how to do all the fundraising, the management, they have the expertise to kind of beat up the idea and make sure it’s the right one for the market. So that’s boomerang studios. So I’m part of boomerang studios as well. So we’re going to have that whole lifecycle from the start of an idea to the incubation idea to acceleration of that idea to the spin out of the company to the funding of the company in the seed round to the series a venture capitals.


JACOBI: And billions of dollars. Was that and then billions of billions of dollars.


TONY: And we’re looking for billions of dollars. We’re looking for this is not a solicitation. This is a you’re looking to make money do not promote boomerang to or VisionTek. Yeah, well, that’s a pretty cool, yeah. And I’d love to bring in some of the other companies, we work with some of them. You know, we’ve been through a tough period. And some of these pivots, you mentioned pivoting earlier, there are a lot of companies have started off trying to do something that would go out of business, if they don’t change what they’re doing, they figure out oh, this isn’t going to work. And then they pivot to a new idea. There have been some companies that have had some interesting pivots here over the last couple of years, especially with COVID, where some of them that weren’t doing very well at all, that turned into huge, great opportunities because the right place, right time with a pandemic. And then there’s others are getting smoked by the pandemic. Yeah, so I think we can do an interview later on, some companies are getting smoked by the pandemic.


BEN: I know that one. I keep waiting for the right moment. But I haven’t quite got there yet. But that’s absolutely true. And I think what you’re doing is just so interesting. I mean, the fact that Kobe has kind of gone through it. You got involved with it after you did your own thing. I just think these are. I don’t know, I’m just honored to be like involved with you guys. I think you guys are fantastic. And you’re doing some great work, and I can’t wait to see where it ends up. Anything else you want to part with before we kind of say goodbye?


TONY: You know, couple of couple thoughts. Cobi’s probably got some. Buy low, sell high?


BEN: No, the market goes up.


JACOBI: Buy high, sell low. Yeah, at least make your horse.


TONY: Right. One of my favorite sayings is, the harder you work the luckier you get. I love that. Yeah, that’s a good one. And you know, you know, back in the day, when I used to do those 80 and 100 hour weeks when I had the company go, you know, starting up, which was crazy. If you think about it, I wasn’t getting paid very much. And if you’d look at the hourly rate, it’s ridiculously low, right. But I did that, and it paid off in the end. Yep. But now what I want to do is I want to find founders of companies that want to go bust 80 and 100 hours a week and just have that passion and that belief, and I want to back them because sometimes you don’t have the money to do it. That’s what I want to be. I want to be an investor and those kinds of people are not necessarily their company, people but that kind of all comes with it. So that’s some exciting stuff. There’s so much there’s so much opportunity out there.


BEN: So really stay tuned because we’re gonna have some more people come on and give their stories and talk about all these interesting things. And I’m pretty excited about and I’m excited that we got the two of you and I think we’re gonna get Sam Strausbaugh Next, which is slightly different, not the incubator accelerator from the start, but somebody that buys companies does really good things with them grows them, and sometimes sells them sometimes keeps them and so he’s gonna have a good story too.


JACOBI: I had one more thing I was gonna say earlier. But like, yeah, like talking about entrepreneurship and being a founder, right? Like, obviously, it’s not for everyone. I mean, it’s very difficult. Like, when he was talking to earlier, you know, about the, you know, getting close to the edge, like you were saying, right? Like, the highs can be really high, the lows can be really low. And it’s just, it’s not for everyone. But it’s definitely, you know, it’s an emotional roller coaster. And it leads to some amazing experiences. But yeah, like, it’s just something to keep in mind with that type of stuff. It’s like it from the outside, right? It just looks like everything’s great. Like, you know, you sold your company made a bunch of money, like, very successful, but like, people don’t see what’s behind the curtain.


BEN: And that’s a little bit what we’re talking about here. Yeah. A little bit. But it is amazing. And I think the cool part, especially now is the fact that it seems like there’s a lot more paths that are out there to start with an idea to make it actually Oh, absolutely. And so I think it’s a fascinating time to be alive. Yeah. And with all your background, Tony and your tech, you starting to see these things and you can be very instrumental in growing a lot of companies and touching a lot of people’s lives. So I think it’s just super cool.


TONY: And then the last one is don’t touch the hot iron.

BEN: We’ll end there. Thanks for being here. We really appreciate it with Money with Mak and G and until next time, say goodbye, guys. Goodbye.


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