A Silicon Valley Bootstrapper Tells All
Introduction:
This week, special guest Sharon Gillenwater lets us in on some dirty little secrets about Silicon Valley. She is the founder of two businesses. The first one was backed by venture capital and then destroyed by venture capital. Despite that experience, Sharon tried to raise capital for her second business, Boardroom Insiders, a software-as-a-service marketing tool that helps businesses sell to the top decision-makers at big corporations. But this time, the VCs weren’t interested. So she bootstrapped the business with the help of an angel investor—and proceeded to learn some surprising lessons, many of which she shares in her book, Scaling with Soul. Perhaps the biggest surprise came when she sold her business and learned the happy lesson that the founder of a relatively small bootstrapped business can walk away with more money than the founder of a venture-backed business that sells for far more. In our conversation, Sharon is unusually candid about what it took to build her business, what she learned about B2B marketing, and precisely how much money she made along the way.
— Loren Feldman
Guests:
Sharon Gillenwater is founder of Boardroom Insiders.
Producer:
Jess Thoubboron is founder of Blank Word.
Full Episode Transcript:
Loren Feldman:
Welcome, Sharon. It’s great to have you here. I don’t often get to talk to Silicon Valley entrepreneurs. You have a slightly unusual Silicon Valley story, which is why I’ve been really looking forward to this conversation. Maybe you could start by telling us about your first experience with venture capital, which came with a company you started during the dotcom bubble years.
Sharon Gillenwater:
Sure, and I’ll just preface that by saying even though you position me as a Silicon Valley entrepreneur, I feel like I’m only that by virtue of where I’m located. I never fit into that world or had access to that world or those resources. And despite trying to break in, I was repeatedly shut out—which didn’t stop me, but I just wanted to make that clear. I’m not part of the “in” crowd here at all.
Loren Feldman:
Which is exactly why I wanted to have this conversation with you. I use that term only because I believe that’s where you’re based and have been based.
Sharon Gillenwater:
Yes, that’s true. I’m right in the middle of San Francisco. And that was a really interesting place to be back in the late ‘90s, during this big dotcom boom, the first major wave of disruption driven by the internet. And I did start a company in 1999 called Fidget.
And I started that—it was kind of a family endeavor—with the help of my sister-in-law and my brother-in-law, who both had a lot of executive experience. And my sister-in-law was dabbling in the early internet, and she was one of those early domain-name speculators. She bought up a bunch of domain names. But at the time, she was an executive at Sony and didn’t have time to do anything. So she had this idea for a hub or portal for email newsletters, which were really coming online in those days. And so she said, “You should go build it.” And so I did. She had the domain, and I built that out. It was a family business.
Loren Feldman:
You were kind of 20 years ahead of Substack.
Sharon Gillenwater:
Yes. It was more email newsletters for entertainment. We had our own branded newsletters, but we started syndicating content from the print world. So you could get Dear Abby every day in your email box or Miss Miss Manners or Art Buchwald and all those kind of old-timey print columnists.
And so we bootstrapped it for the first six months or so. And then it kind of fell into our lap—this incubator based in Burbank that had a bunch of ex-Disney people attached to it. So they understand content and entertainment. They offered us $3 million dollars for a little over 50 percent of the company, which was a great valuation. And so we took it. And another attractive thing about incubators is they do your accounting and your HR and your legal and all that stuff that’s not core to your business that you may not have the expertise or interest in doing. So it sounded like a great deal for us.
When we raised it in April of 2000, the NASDAQ was already in freefall. So we just thought we were so lucky to have been able to do this. But in the end, that decision killed the company. Because when the crash lasted longer than was anticipated, the CEO of the incubator was out, and they brought in a new CEO who only wanted to focus on biotech companies, which of course, we were not. And they ended up shutting down the company because they had a majority stake. So there’s the first red flag.
And they tried to get out of their contract by suing us for fraud, and so we ended up settling with them. But because we had started to make these big investments in long-term server hosting contracts and office space and all these things, we had to shut it all down because we could not afford those expenses without that $3 million. So it really killed the company, because I know I could have bootstrapped that thing through the crash, and it was an unfortunate lesson. So when I started my second company in 2008—
Loren Feldman:
Let me stop you there for one second. The basic business model of a venture capital organization is to throw 10, 11, 12 companies against the wall and hope that one sticks. And to my mind, it’s not just that the other companies don’t go on and flourish, but what gets lost in the conversation a lot, I think, is that many of them would, in fact, have done well if they had not taken venture capital—which means, I think you can make the argument that venture capital, kind of by definition, destroys more companies than it builds. You seem to have had that experience. Do you think that—were you unusual? Or is that common?
Sharon Gillenwater:
That is a bold statement, but I don’t know that it’s not true. It might very well be true. I don’t think I have enough experience to know that. But what I do know—and I’ve done a lot of investigation into this—is that bootstrapped founders very often have much better exit outcomes than those who have raised venture capital. And this is something that I didn’t really understand until two years after I sold my own company. And how I discovered this is, I had a viral video where I talked about how much money I made, when I sold my company for $25 million—how much I paid in fees, how much I paid in taxes, and how much I walked away with. And that video went hugely viral.
And one of the audiences that showed great interest in the video were venture capitalists and venture-backed entrepreneurs. And at first, I didn’t understand it, because I thought, you know, “I’m not in this inner circle. Why do they care about little old me and my little, tiny $25 million exit, which seems like small potatoes in Silicon Valley?” And it turned out, after I started talking to people, the reason why it captured everyone’s imagination is because, as a founder, you can raise $50 million and sell for $200 million—so around 10 times as much as I did—and walk away with a lot less money than I walked away with.
Loren Feldman:
I want to come back to that viral video, but let’s go through the story. Tell us how you wound up starting your next business.
Sharon Gillenwater:
Yeah, so after the disaster of Fidget, I took some time to regroup. I had a second child in that timeframe. And I took a job after 9/11, because I was desperate—the job market had still not recovered from the dot bomb, and then we had 9/11 after that. And so I took on a terrible job. It’s kind of unbelievably hilarious. But after that job—I worked there six months—I decided I’m never working for anyone else again.
So I hung out my shingle as a consultant for whatever anybody wanted me to do. I was good at writing and communicating. And one of my former employees from my first job in the city contacted me and said, “Hey, I’ve started doing marketing consulting for big tech, and I think you would be perfect at it.” And I said, “I don’t know anything about that.” And he said, “It’s okay. It’s great. You’re gonna be great.”
And so we started. We became a little duo working for various agencies, working for companies like Intel, and Cisco, and PeopleSoft, Sun, all the biggies. And I’d started to develop this expertise in helping those companies effectively communicate with and engage the C-suite at their customers. Because tech deals were getting bigger and bigger. They were starting to attract the scrutiny of CFOs and chief information officers and even CEOs. And these tech companies did not know how to approach and have conversations with those folks. So I started coaching sales and marketing teams on this. And before too long, after a few years, I was kind of the go-to person for this type of work.
Loren Feldman:
How did that happen, Sharon? Did they just come to you and say, “We’re having trouble reaching the C-suite. Can you help us?” Or was it your idea that these companies were missing an opportunity, and you sold them on the idea?
Sharon Gillenwater:
It was both. It was both the push and the pull. At the time, I was really focused on high-level events. These companies spent millions every year on trade shows and small summits designed to attract higher-level C-suite players and SVPs and the like. And they were having trouble getting people to come to these events. And I could see why: Because they were only talking about themselves, basically. They weren’t making it about the audience.
And then I did a whole research effort where I started interviewing people who worked for C-suite leaders, and I even interviewed some C-suite players themselves to figure out what attracts them to an event. Like, what are the events they go to? And why? And how do they evaluate all the invitations they receive? Because they do receive many.
And so, I was able to create a body of research that said: This is how you get C-suite people to your events. This is what they want. This is what you talk to them about. And I developed a point of view that it’s really one-to-one marketing. If you want the chief marketing officer of Procter & Gamble to come to your event, you’d better make it a one-to-one value proposition for him or her.
And how you do that is you research them. You learn about them. You look for anything they’ve said publicly about what they’re working on, or what they’ve done in the past. And you approach them and you say, “Hey”—and by the way, you have to have your CMO or your CEO approach them. It can’t be some salesperson. You say, “Hey, I loved what you said about X, Y, and Z last year. This really resonated with us because we’re doing A, B, C. We’re having an event, and we would love to have you come and share your story.”
So it’s a hard thing to do. It’s very time consuming, but it pays off. Everyone wants to just make everything super easy, but it’s not effective if you just send them blanket emails. They’re not going to respond to that. But the core of it, to be effective, you have to know a lot about them. So I developed this template for an executive profile that was like seven pages long, very detailed, very current, and connecting the dots between company initiatives and that person’s role.
So even if you didn’t have them saying anything specific—maybe they’ve never given an interview—you might have the CEO saying about the marketing team, like, they’re gonna spend 80 percent of their budget this year on personalization initiatives, right? So that’s something you can take to that CMO and say, “Hey, we saw your CEO said this. Our solution helps. It would help you do exactly that. In fact, your competitor is using it. Would you like to have a conversation?”
Well, it’s that person’s job, per the CEO, to explore that. So they almost can’t say no to a request for a conversation from someone who says they can help them with that. And so this is the kind of consulting that I was doing for a number of years. And at some point, I thought, “Hmm, everyone is chasing the same 2,500 people at these Fortune 500 companies. What if I put these profiles in a database and sold a subscription to the database?” So that’s how it started. That’s how Boardroom Insiders started. And then it evolved and was enhanced over the years. But I started the company in 2008, and then we sold it in 2022.
Loren Feldman:
One of the things I enjoyed about your book is that it’s nothing if not painfully honest, in certain ways. You’re the only entrepreneur I know of who I’ve seen compare his or herself to Elizabeth Holmes, in terms of trying to fake it until you make it. Tell us about that.
Sharon Gillenwater:
Yeah, and by the way, one of my closest girlfriends read that, and she said, “That is ridiculous. You need to take that out of the book. You’re nothing like her. You’re not a fraud.”
Loren Feldman:
Well, the truth is, you did deliver. So that was different, but you were figuring it out as you went. Correct?
Sharon Gillenwater:
I did deliver. And I wasn’t playing with the dollars of some of the most famous people in the world. And I didn’t have Henry Kissinger on my board. But what I did do, and why I did compare myself to Elizabeth Holmes, is when you create a database that has these incredibly detailed profiles that are very expensive to produce, you can’t just launch with a database of thousands of profiles, because you can’t afford it. So my early customers would find the website online, and then they would contact me. And it was just me, at that point, and some contractors, and they’d say, “Oh, do you have a profile on this person?” And, you know, they couldn’t see what I had and what I didn’t have. So I would just say, “Oh, yes, I do. But you know what? It hasn’t been updated in a while. So let me refresh that a little bit. And can I get it to you tomorrow?”
And then I would stay up all night completing it, and then I would deliver it the next day. And you know, sometimes they wanted multiple profiles. And I remember one time, I think Lockheed Martin wanted these profiles, and my husband and I stayed up all night doing them. I trained him to do them, and he did a lot of the graphic stuff. So that’s what was happening.
And so it did remind me of Elizabeth Holmes, because there was this story about how they would bring these visitors into the conference room. And they would take a drop of their blood and put it in this machine that was in the conference room. And then they would take them for a building tour, and someone from the lab would just race in and take it, and take it back to the lab, and manually complete the test. And that’s exactly what I was doing in the early days.
Loren Feldman:
That left you with the challenge of figuring out how to move from consulting to making this kind of a DIY project where someone can do the work themselves, going into your database. You wanted to scale the business, and I believe this was the point where you needed some money to start doing that. And you had to think about what you would do to raise money, raise capital, to build this scaled up version of what you were doing. Is that basically right?
Sharon Gillenwater:
Yeah, I was making a really good living as a consultant. At one point, I had multiple people working for me, although my clients didn’t know. I trained them to create these frameworks and decks that I had developed, and I would train them to do all the research, but I would be the client-facing person who would present all the work. So, I mean, there were months I was making—and this was back in, I don’t know, 2008, because I kept doing that work for six years after I started the company—I was bringing in like $35,000 a month or something with that. And I had to pay my contractors, but the point is: I was taking money from my consulting, not only to live and support my family, but I was using some of it to build Boardroom Insiders. But there came a certain point when I had to really build out the database.
And it was very expensive to do that in those days. It was actually more expensive than it would be now, and I needed money. And I knew this personal friend, actually my husband’s, who my husband had worked with. And he had created a company, and he had sold it and made a lot of money. I have no idea how much, but I knew he was loaded. He’s a great businessman. And so I talked to him about what I was doing. And he was very intrigued because of the price point that I was getting for these profiles at the time. I was getting like $1,000 a profile. And he said, “You’ve got to get those in a database and keep them updated.” He said, “Even if you slashed the price to $200 a profile, that’s huge.” And I said, “Well, I don’t have the money to build a database.” And he said, “I’ll write you a check right now. How about $125,000 for 10 percent? And it was like a two-minute conversation, and he wrote me a check.
And that was a huge motivator for me. And I wonder—because I really didn’t know what I was doing—if having that money was what made me keep going all those years. I mean, I think it really was. The more people you get involved in what you’re doing, the more is on the line. And for me, it was a huge motivator. So first, it was taking this money from a personal friend, and I was determined I wasn’t going to lose it. And then the second step was, when I took on a partner who also had a family, then we’ve got two families depending on the business. And then when you hire a team, you’ve got more families and people depending on you to succeed. So it was a real motivator.
Loren Feldman:
Did there come a point where you started thinking, despite your original experience with venture capital at Fidget, that maybe venture capital was the way to finance this company, too?
Sharon Gillenwater:
Oh, yeah. I mean, there were several inflection points where my partner and I wanted to tackle something, and it cost more than we had in revenue. And so we created a few decks over the years and shopped them around, and nobody was interested. And I think we just weren’t something that had a large enough TAM for them to be interested or that—
Loren Feldman:
A large enough?
Sharon Gillenwater:
The total addressable market. I’ve learned all this stuff, actually, since I sold the company. I did some research. You know, VCs are really only interested in companies that have a billion-dollar total addressable market potential. We were kind of a niche product, targeting a very high-end audience in tech, at the time. Now, the total addressable market is more applicable to all sizes of tech companies. And in fact, the company, which still exists, has a lot of companies of all sizes.
But at the time, it was really only the big tech companies that were experimenting with C-level engagement and this kind of one-to-one C-suite selling. So VCs aren’t really interested in that. And they’re not interested in companies that have a lot of people doing the work, which we had, because of the type of information that we were providing. It was absolutely mission critical. It had to be accurate and current. We didn’t do data-scraping, which was the fashion at the time, so we had a very contrarian production model and business model.
Loren Feldman:
Despite your first experience with Fidget and with venture capital, you were ready to take venture capital again with your next business, but nobody offered it. Is that right?
Sharon Gillenwater:
Yeah, we were cautiously considering it. And we did talk to a few firms. And they just declined to get involved, for the reasons that I mentioned. And then at a certain point in our business where we were consistently profitable and growing, there emerged these groups targeting women entrepreneurs who would invest in women entrepreneurs, but the numbers were too small, at that point.
I mean, if you’re hitting a million dollars a year in revenue, and you’re still growing, 100 grand isn’t going to help you. You need to raise a million, right? And then if you can’t find that, and you keep growing, at some point, you look around—you literally lift your head up and look around at your business, and you say: Wait a minute. Why would I raise money now? We’re doing really well. We may not be able to grow as fast as we like, because we can’t invest as much money as we ideally would like to do. But it’s not worth giving up a huge chunk of equity to accelerate that. Let’s just keep plugging along. And so that’s what we did.
Loren Feldman:
What was the company like when you really hit your stride? What was the high watermark? And then how soon after that did you start thinking about selling it?
Sharon Gillenwater:
The company really started to hit its stride in 2016. And that’s when we hired our first employees. Was it 2016? Or somewhere at the end of 2016, early 2017, we actually started hiring people. So from 2011, when I took on my partner, to 2016, it was just the two of us and some contractors. And that’s a bootstrapping hack right there. Don’t hire your first employees until you absolutely have to. You just use everyone as contractors, so that you can scale up and back if you have a revenue issue. And so that’s when things really felt great.
In 2016, I got an idea for a true SaaS product that we could build on top of our database, and I sketched it all out on a bunch of paper. And then I put it in the closet for three years, because we couldn’t afford to build it. But I had the plans for that ready to go. It was just a matter of getting enough revenue so we could build that.
And so 2017, 2018 on, it was just really exciting and fun. Because my partner and I were paying ourselves a reasonable amount—still under-paying ourselves, but we were paying ourselves a good amount. We had a team, so things weren’t so chaotic for us. We weren’t having to do absolutely everything. We had a great team. It was very engaged and focused on our customers, which was fantastic. And we were winning deals, and we were winning deals with some of the biggest tech companies in the world. You know, Amazon Web Services, Adobe, Salesforce, Cisco. I can’t even remember them all, but all the big ones were coming across, and we were closing deals with them. And that felt really good because we were just this little, tiny company. And these companies were validating what we were doing, and they loved us.
So we kept growing. And then the pandemic hit, and we thought that was going to kill us. But it actually gave us another shot in the arm. Because if you think of what was happening in the Fortune 500, they were trying to figure out how to not lose their customers, their suppliers, their partners. So CEOs, instead of flying across the country to have two meetings, they were sitting in their homes having 10-12 meetings a day. And they needed intel on those people they were meeting with. And at the same time, the event marketers I talked about earlier, they spend millions on these events. Those were getting shut down. So the marketers had tons of budget they needed to redeploy or lose it, and so they gave it to us. They gave a little bit of it to us, which was a windfall. And so we doubled in size in 2020, both almost revenue and our team doubled in size.
Loren Feldman:
How big did you get, in terms of revenue?
Sharon Gillenwater:
When we sold, we were at $5 million ARR.
Loren Feldman:
Annual recurring revenue.
Sharon Gillenwater:
Yes, annual recurring revenue. That’s what the people who will acquire you really care about. You know, we had some consulting revenue as well. Because when you work with tech marketers, you could have the most easy product to use ever, but they still want you to do it for them. And they want you to add a bunch of info. And they want you to create decks for them and give them recommendations on how to engage people, to the point where I was even writing emails coming from their CMO to an executive at their customer company saying, “Here’s the information on this person. Here’s what your CMO needs to email to them.” So we had all kinds of side things going on that brought in revenue. But when you’re acquired, all the buyer cares about is that annual recurring revenue. So that’s very important to keep driving to that at all times.
Loren Feldman:
So Sharon, it kind of sounds like you were living the dream. You were having fun, your company was growing, you had the team, you weren’t working as hard as you had been previously, your customers loved what you were doing. Why did you start thinking about selling?
Sharon Gillenwater:
Because my partner and I were very worried about a tech crash. Our customers were heavily concentrated in big tech. And when tech crashes, they all crash. We had a team in Russia. We never hired technology folks or developers. We outsourced all of that to a great team. The company was based in Charlotte, but our team was in Russia. And there were rumblings about Putin invading Ukraine. And that could have really disrupted—and, in fact, it did disrupt eventually, after we sold.
And we also had not quite figured out some critical aspects of the business, and we thought that that would come back and bite us eventually. Specifically, we never built a solid, effective marketing funnel. Our customers came primarily from referrals and a few trade shows that we went to, and people moving from one company to the next and bringing us along. So you know, that’s a double-edged sword. If your customers love you, they keep renewing. If they move to another company, they bring you in. They refer you to all their peers. That’s all fantastic. But you should have some kind of lead gen, where you can predict how many of those leads will convert and to what kind of revenue so that you can forecast your sales pipeline. And we never figured that out, and we tried. And so we thought that was going to come and bite us, at some point, when times got tougher.
Loren Feldman:
Let me ask you about that, Sharon. Didn’t your own services help you with marketing? Weren’t you able to reach into C-suites?
Sharon Gillenwater:
Yes, they did help us, actually. I used to say we ate our own dog food. They used to say that back in the 90s. We had Slack, because we were a distributed team. We’re all over the place, especially after the pandemic. And so we had a Slack channel where our editors, who would read earnings call transcripts all day long, would notice things that said, “Oh, this company wants to shorten their sales cycle and increase their deal size by engaging C-suite leaders as their customers.” Well, that’s a sales trigger for us. So our editors would paste that into a Slack channel that was all about prospect intel.
And so they paste it in, and the salesperson would run with it. So we did do that ourselves, and we closed deals that way, too. That’s one way we were able to shorten the sales cycle for ourselves and kind of fast-track deals. But that was more episodic. Towards the end, before we sold the company, I experimented with an initiative where I licensed a tool that collected an archived earnings transcript. They had a very powerful keyword search feature. So I would search for “CIO engagement,” “C-suite selling.” And I found all kinds of companies that were talking about it on their earnings calls. And I spent a good couple of weeks just pasting those leads into Slack for our sales team.
Loren Feldman:
All right, so you made the decision to sell. How did you go about it?
Sharon Gillenwater:
There was one more thing that happened. I mean, we were thinking about all this stuff. And we would worry about it. My partner and I would go for drinks after work and talk about it, like, “Oh, when is there going to be a crash? What should we do?” And one day, we were kind of heads down, and I got a call from a private equity firm that I’d spoken with a couple of times before. And they kept saying, “Well, let’s see where you are in six months,” type of thing. And they called and they said, “Well, how are you doing?” And I said, “We’re doing great. We have a mammoth pipeline, going into 2023. And we’re really excited, so we’re just keeping our heads down.” And they said, “Well, that’s too bad. Because we could give you a term sheet for $48 million today.” And I was like, Whoa.”
No one had ever put a number out there in any of these conversations. Because we’d had quite a few conversations with private equity firms and M&A bankers, and nobody had ever put out a number. And so I looked at my partner. I said, “We’ve got to take this seriously and take a look at it.” So I ran out into the hallway so my employees couldn’t hear me, and I called my angel, who has done many of these deals. And he told me they were full of shit, that they were just throwing a number out there to get me excited. And then they would hook us in, and then they chip away, chip away, chip away till they got it way down to half of that.
And so he said, “Look, last time I talked to you, Sharon, you weren’t considering selling. What’s changed?” And I said, “Well, we’re just worried about a crash. We were attracted by this person throwing out a number.” And he said, “Look, if you’re going to sell, you need to hire a banker and run a process.” So I hung up the phone, and I ran into my partner’s office. I said, “What’s a banker? And what’s a process?” Like, I didn’t know. I don’t have that background. My partner was a commercial banker, so he knew more than I did. And so he said, “It’s not that complicated. It’s like hiring a Realtor, except instead of selling your house, they’re selling your business.” And he said, “And you have the most to win or lose from this process, so you need to run it.”
And so, in May 2021, I set out to find a banker. I talked to a dozen entrepreneurs who had sold their companies and learned from them. And then we formally launched the process in September of 2021. And we sold the company in January of 2022. So it was pretty fast.
Loren Feldman:
With some interesting twists and turns along the way. What did you learn from that process?
Sharon Gillenwater:
Oh, boy, I learned so much. It’s actually a shame that I’m not going to do it again, because I’d be much better at it the second time. But one thing I learned is, as an entrepreneur, you fall in love with your product and with your team and with your customers. But when you’re going through the deal, all anyone cares about are the numbers. That’s it. I set up 50 logins for our product for the acquiring company, for some consultants they had hired to kick the tires, for the finance people. I think two people logged in once. [Laughter]
It’s almost like they didn’t know what they were buying. I mean, I’m sure they did. I’m not trying to knock the buyer at all. But it just astonishes me—and I’d been told that it’s all about the numbers. It’s all about the numbers. It’s about renewal rates. It’s about churn. It’s about deal size and growth. And it really is, because they spent hours and hours and hours on the numbers, and the pipeline, and the churn, and determining the quality of the revenue. And, you know, they throw out some revenue because they don’t deem it real, and that’s really all they care about. So that’s the first thing that I learned.
And another key takeaway, I think, is you hire your bankers and they are absolutely aligned with your interests because of the way they’re compensated. But there can come a time, depending on what else they have on their plate, that you get deprioritized. And they’re just trying to get you to agree to the deal. And if that happens—and I’m not sure that’s what happened in my case, but I suspected it was happening—you’ve got to grab the bull by the horns, because this is your financial future. And you have to control the process. And you have to tell them what you want, and what’s non-negotiable. And that’s what I had to do. And I did it with the encouragement of my angel, who was always having my back. I would call him in these critical moments, and he always clarified it for me and gave me the courage and the confidence to do what I thought needed to be done, even though I’d never done this before.
Loren Feldman:
You describe that in the book. And I think what you were referring to with the priorities of the bankers is that you had reached a point where you were still negotiating details with the buyer, but those details were meaningful to you, not to the banker. And the banker had other deals. Your deal was probably relatively small compared to the other things they were working on, and at that point, they just wanted to get it closed.
Sharon Gillenwater:
Yeah, that’s absolutely right. And basically, I got $5 million more than was offered, because I pushed, and I framed it in a way that I thought made a lot of sense. And I think, the banker, sure they were gonna get more money, but I knew from overhearing their conversations that they were working on a $120 million deal. So ours, at the time, the offer was like $17 to 20 million. So they just wanted us off their plate, I’m sure. And I’m not faulting them for that. That’s a business decision that’s valid. But for me and my partner, an extra $5 million is absolutely life-changing, right? And for our employees and everyone else who got paid, the shareholders.
So I wrote the banker an email, and I said, “I want you to go back to the buyer, and say this exact thing.” Because in the email, I framed how, at one point the buyer had said, “We have four other companies we’ve acquired, and your company is going to allow us to tie everything together and really have this very robust product in the people intelligence space.” And so I put that in the email: “If we are the linchpin, you should be willing to pay more.” And I asked for 50 percent more, and I ended up getting 25 percent more than they had offered. So that was huge. And it was very scary to do this. Because again, I’d never done this before. I don’t know a lot about deal-making, and I haven’t done any deals. And who am I to go up against these people who do these deals every day? But my angel, and also my accountant, gave me the courage to do it.
Loren Feldman:
Looking at those numbers, with $5 million in revenue, I don’t know what your EBITDA was, but selling for $25 million, that seems like a pretty healthy multiple. I guess you were able to do that for the reasons you just described: It was a strategic purchase for the buyer.
Sharon Gillenwater:
It was a strategic purchase. And it was a very clean deal. It was all cash. And I didn’t even realize at the time how great that is. It’s astonishing to me how I did all this stuff, and it was only a year or two later that I understood and could reflect on exactly what I did and why and why it worked. I didn’t know any of this while it was happening. I was just kind of feeling my way through it. But at the time, multiples for SaaS companies were sky high. They were seven to 12.
And so, my partner and I maintained this spreadsheet where we had done all the math of what we would get after tax, both of us, and after all the fees. And we had all the different multiples, you know, across the top horizontal axis of the spreadsheet, and we would just stare at it. So we knew very well what we would be getting for different multiples. And so, we were offered, I think, a 4.2 multiple, and we ended up getting 5. And it was low for the market. But the company that was buying us, it was a strategic deal, which was great. We also wanted a nice landing place for our team. We didn’t want our team to get thrown out. But it was a public British company. They don’t do crazy multiples like they do in Silicon Valley. They are very conservative. And I also knew, because they were a public company at the time—they’re not anymore—I could look and see what they paid for all those other companies, those four before us.
Loren Feldman:
Oh, interesting.
Sharon Gillenwater:
I read their earnings calls, and I knew exactly what those multiples were. And they were like 1 to 2 for the other companies, so I felt really great that we got 5. And I don’t think this is in the book, but I made a video about it. One of the companies they bought before us had raised $120 million in venture capital, and they bought them for a little over $7 million. So, ouch.
They had bought a few distressed assets. And we were absolutely not a distressed asset. We were in great shape. And so it was a different kind of deal for them. And I think it was going to be a very valuable, good acquisition for them, given our product, which if I do say so myself is amazing, and then our team, which was just stellar. And I’d say more than half of those people are still with the company.
Loren Feldman:
So there are a lot of twists and turns before you ultimately got the deal done, and the checks landed in your accounts. But there was one big surprise, if I read correctly, which is, I believe you expected to go on running the business after the sale.
Sharon Gillenwater:
Well, I didn’t expect it. I knew that there was a very large possibility that we would be out. I just was surprised at how quickly that happened and how late we found out about that. I was in South Carolina—we were like a bicoastal company. Most of our team was in South Carolina, and I was there with my partner the last two weeks before the deal closed, trying to get everything done. And my angel called me one night. He was just amazing. Because at the time—he still is—he’s a public company CEO, and he still would take time to be like, “What’s going on?” Because he just loves the deal-making part, right? And this was like eight o’clock on a Tuesday night: “What’s going on?”
I said, “Well, we’re supposed to close on Wednesday.” He said, “Do you have your employment agreements yet?” And I said, “No.” And he said, “You’re not closing.” He’s like, “Either they don’t know what they’re doing, or they don’t want you, and they’re just not telling you. Or they’re just not ready.” And he said, “This is not going to close without that.” And he said, “What do your lawyers say?” And I said, “Well, they haven’t mentioned it.” He’s like, “Ugh. That’s shitty. You need to call your lawyer right now.” So I got on the phone with the lawyer, 9 o’clock at night, and they said, “Oh, yeah, you probably should have those.” [Laughter] It was a big oversight on their part, which was irritating. And so the next day our lawyers really pushed it, and that’s when we found out that we were going to get a three-month consulting agreement.
So that was a shock. And then, what was even more of a shock is after the deal closed, we were basically out within three weeks. And even in the first week, when we were transferring control, I probably only worked like, I don’t know, 10 or 15 hours. They knew what they were doing, and they took over and transitioned the team very quickly.
Loren Feldman:
Did you care?
Sharon Gillenwater:
Oh, I did care. It was so abrupt. And you know, I’d been doing this for 14 years, and I loved the team so much. And I was having a blast running the company with my partner for the last five years. And so it was very upsetting to me, and I cried for like a month. But I couldn’t tell anybody except my family because, you know, everyone’s like, “Well, she just got millions of dollars. What do you have to cry about?” But I’m motivated by a lot more than money. The money is fantastic, and I needed that money to make myself financially whole, as you probably read about in the book. But I loved what I was doing.
And so, I’m still a little bit mourning it. I still follow the company. I’m like, “What’s going on?” I have a couple people in there who I talk to every now and then, and I’m thrilled to hear that it’s been a great place for them to work and for them to land and for them to thrive. So I’m very happy about that. And I know, rationally, that it was the right thing for them to say goodbye to me and my partner, because we were a little bit like mom and dad with our team. And they needed to run the business the way they wanted to run the business. So it was the right thing, but it was a painful separation process for sure. And I felt very aimless for like a year.
Loren Feldman:
Now, let’s go back to that TikTok video. What exactly did you share? And why did you decide to share it?
Sharon Gillenwater:
Well, after I left the company, I started talking to people who maybe found me through LinkedIn, or were referred to me through one of my contacts. And these were entrepreneurs, early-stage entrepreneurs who wanted my advice about something or other. And the more I talked to people, the more I realized that I knew a lot more than I thought I did, and that it was a lot more useful to these folks than I thought it would be. When you’ve been doing something for a long time and it’s easy, you just think everybody knows it. “Oh, everybody knows this.” Well, they don’t. And if you talk to people, you can provide a ton of value.
So that’s when I started thinking about the book. And then I got on TikTok, and the reason I got on TikTok is because I was trying to sell the book and no publisher would take me on. They said, “You don’t have a platform. You need to have 20,000 followers,” or something like that. And I had intentionally removed myself from most social media for obvious reasons—politics and all this misinformation that was going on—and so now I found myself in a situation where I had to get back on. And I met a woman who had written a book, and she said, “Get on Tik Tok.” And I’m like, “What?” I said, “I thought that was just for dancing.” [Laughter] And she said, “No, there’s a lot of business content on there. It’s a fantastic medium for building an audience.”
And so I got on TikTok, and I started making videos, just like one- to three-minute videos on specific topics about entrepreneurship, like: how to validate your product, how to find your product idea, how to motivate your team. And I was gaining followers, but then my son, who’s a Gen Zer said, “You know what you’ve got to make? You’ve got to make a video on how much money you walked away with, because that’s really what everyone wants to know.” And I thought, “That is so true.” Because when my partner and I, we’d hear about someone we know selling their company, and for days, we’d be like, “How much do you think they got?” And we tried to do the math, and we’d be speculating, but nobody would ever tell us. And so I thought, “I’ve got to do this.”
And it was very scary, because I basically made a video that said: Here’s how much we sold for. Here’s how much we paid in fees to the bankers, accountants, lawyers. Here’s how much we gave our employees. Here’s how much the other shareholders got. Here’s how much I paid in tax. And here’s how much I walked away with. And so I made the video. And then I didn’t sleep—it was scheduled to send, and I didn’t sleep for like three nights worrying about it. And then it went out, and it kind of did well, but then maybe a month in, it just exploded. I was taking a walk with my husband and my dog on a Sunday, and then my phone just started exploding. I’m like, “What is going on?”
And a couple of venture capitalists had posted it who have huge followings. And so that was on a Sunday. I think on the following Tuesday, I got a text from a friend of mine, and she said, “My daughter just saw you on Twitter.” And I thought, “Oh no,” because I was off Twitter. I hated what was going on on Twitter. I thought it was toxic. And so I didn’t post it on Twitter, but not realizing that just because I don’t post it on Twitter doesn’t mean that someone else can’t post it on Twitter. So I got over a million views on Twitter and a ton of comments. And I was so terrified to open the comments. So I made my son read them to make sure that I wouldn’t, you know, be terrified.
And that opened up a huge new world to me, of people wanting me to come on podcasts or people wanting me to come to an event and speak, or people wanting me to formally consult with them. So that did actually open up more opportunities that are generating a little bit of revenue, which is fun—but most importantly, and most enjoyably, just meeting some amazing entrepreneurs. That has made me realize that even though a lot of the most high-profile entrepreneurs do behave like assholes, the vast majority of the rank and file, smaller-scale entrepreneurs are amazing people who care about building great companies that serve customers and employees alike.
Loren Feldman:
For our listeners who are not on TikTok, can you tell us? You sold the business for $25 million. How much did you end up with?
Sharon Gillenwater:
I got a little over $13 million, and after all the taxes, I walked away with about $9 million.
Loren Feldman:
Sounds pretty good to me.
Sharon Gillenwater:
Yeah, it was great. It’s amazing, just absolutely amazing. And I also made another video, which was my second most viral video, much to my chagrin, because I just threw on an old sweater that had cat hair all over it and didn’t do my hair. Because one of the biggest questions people had was, “What are you spending the money on?” And so I made this video explaining that I actually spent like $2 million almost right away, because I had what I call pent-up expenses from years of underpaying myself. Because once I stopped consulting, and I was actually putting some of my consulting money into the business, I didn’t save for retirement for 10 years. I didn’t invest in my home, which was being trashed by kids and dogs. [Laughter]
Loren Feldman:
Your kids, I hope.
Sharon Gillenwater:
Well, no, sometimes it was other people’s kids, too. But I needed to completely redo my home. My mother was going to move in with us. She’s 86, and so we built an apartment for her. We excavated our yard and redid that. We paid off our mortgage. There was a lot of money that went out the door right away. And I still had plenty to live off of, but I just explained that in the video, and people are like, “Well, you don’t owe people anything. Why do you explain it?”
And it’s like, I’m explaining it to give a real portrait of what you’re signing up for, when you’re a bootstrapper. And even you can have a great exit, which I did, but you’re kind of making up for some lost time and income—especially when you didn’t start your company until you were 43 and you had two kids. So it’s real, right? People need to understand the reality of it and not just look at these success stories and make assumptions like, “Oh, everything’s great.”
And that’s what was going on on Twitter. People were making assumptions about me. And one of the biggest assumptions was that I must have already been rich when I started the company, because they couldn’t understand why it didn’t take—it’s called QSBS, Qualified Small Business Stock exemption. And the reason I couldn’t take it is because you have to be a C corp, and I was an S corp. And I did that on purpose, because that’s the only way I could afford to stay in the business in the beginning, and my partner the same. We needed those tax exemptions and benefits you get from being an S corp to survive and stay in the business for the first eight years or so. And so, that’s telling people that, and having them understand that you can do it, but there are some lost opportunities, opportunity costs, for the first however many years. That’s important that people understand.
Loren Feldman:
Do you mind saying how old you are now?
Sharon Gillenwater:
I am 59. I’m going to be 60 next year.
Loren Feldman:
Congratulations. You’re still young enough to do this again, if you want to. Do you know what you’re going to do next?
Sharon Gillenwater:
Well, I am open to lots of different opportunities. And I’m not trying to force things. I’m just staying open and embracing opportunities that come to me that I’m interested in. And what I’m learning is, I have two ways I could go. I could go right into another startup, although it’s not going to be something that I found and is my idea, because I just don’t think I can do that again. But if somebody else is working on something, and it makes sense for me to become a partner, I might do that.
But the other route, which I seem to be going more into right now, is doing all these different kinds of thought leadership activities that add up to a compensated way of spending your time. I’m doing coaching. I’m doing TikTok. I’m doing the book. I’m doing events. I’m doing speaking. And I’m about to launch a course this summer on bootstrapping secrets: how to succeed without raising venture capital. And I’m working on that right now. I don’t tend to do things in a small way. So it’s a very comprehensive in-depth course on bootstrapping that I’m going to be launching on Kajabi. And so I’m doing all the video and materials for that right now.
Loren Feldman:
That’s great. My thanks to you, Sharon, and to our sponsor, the Great Game of Business, which helps businesses use an open-book management system to build healthier companies. You can learn more at greatgame.com.
