David Senra on What Drives Founders, What It Costs Them & When They Should Sell

In the first episode of Prof G on Entrepreneurship, a three-part Office Hours special, Founders podcast host David Senra joins Scott to answer listener questions on what motivates the best entrepreneurs, whether founders can build something big and still have a life, how to compete with incumbents, and when to sell a company. Want to be featured in a future episode? Send a voice recording to [email protected], or drop your question in the r/ScottGalloway subreddit. Plus, you can now call or text Scott a question at our new Office Hours hotline: ‪(201) 472-3656‬. Learn more about your ad choices. Visit podcastchoices.com/adchoices

• 0:01Speaker 00

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• 0:43Speaker 01

  Welcome to Prop G on Entrepreneurship, a special three-part series about starting a business, building wealth, and what it takes to succeed on your own. Today, we're joined by David Senra, historian and host of the Founder's Podcast. Together, we'll answer your questions about what drives the best entrepreneurs, how to compete with established players, when to take risks or cash out. David, thanks for joining us.

• 1:05Speaker 02

  Thanks for inviting me.

• 1:07Speaker 01

  You're very welcome. All right, let's jump right into it. Question number one comes from Gen Z Advice on Blue Sky. They ask, what motivates the best entrepreneurs, ego, legacy, family, strictly money, who tends to last and who tends to crumble? David, thoughts?

• 1:23Speaker 02

  Well, I would say that if your goal is to build a durable business and you're looking for your life's work. So some of my favorite entrepreneurs on this, like Steve Jobs, I would say Elon's into this, like John D. Rockefeller, Henry Ford. Usually, a lot of people think people get into entrepreneurship for money, and obviously, it is a good path to wealth creation. But they're on some kind of mission, or they have some other primary goals. So on my desk, as an organizing principle to myself, I have three words that Steve Jobs would repeat when he was 20 and repeat decade after decade. He would repeat these three words when he was dying, which was insanely great products. And so for him, the organizing principle, the reason to start Apple is just the whole point of having a company is just so he can build insanely great products. That was his main goal when he was 20, it

• 2:08Speaker 02

  was still his goal when he was dying from cancer. So if you're talking about somebody who's going to do something for decade after decade and build something and hopefully outlives them, I think the main motivator is they feel what they're doing is really important, and they have a mission that's larger than themselves, is how I'd answer that question.

• 2:27Speaker 01

  So I don't have, David has more empirical data. Mine is just anecdotal. I haven't worked for anyone else since the age of 24. When I got out of UCLA, I did the Tier Analyst Program at Morgan Stanley, and since then, I've started my own companies and done my own thing. Other than, I've been a faculty at NYU for 22 years, but I'm largely a free agent there. So we tend to romanticize entrepreneurship. I would argue that my venture into entrepreneurship was more self-awareness and a recognition of the assets and attributes I did not have. To be successful in a corporation, you have to be politically savvy, you have to be patient,

• 3:10Speaker 01

  you have to actually be quite mature, because the only thing I can guarantee working for a corporation is a series of small and big injustices. People will get promoted over you that don't deserve to. Projects you're working on will get canceled for, you can't even find out why they were canceled. But if you can navigate that and put up with it, the US corporation is still the best place to get rich slowly, is what I've found. There's never been a wealth generator like the US corporation. I recognized fairly early at Morgan Stanley, I did not have those skills. If people went into a conference room, I would think they were talking about me. I literally did not have the maturity to handle

• 3:53Speaker 01

  a lack of information. And I recognized that the only way I would be happy would be to have control and start something. And also, I wanted to play into my strengths. I'm very risk aggressive. I like to sell. Entrepreneur should be the first synonym for sales. You're always selling. You're selling people to join your company, you're selling capital, you're selling customers, you're selling clients, and you're selling key employees to stay with you after they get an offer from Salesforce. You're constantly selling, and you're willing to take risks, specifically the risk around public failure that most people aren't. So for me, it was just an assessment of not only what attributes I

• 4:34Speaker 01

  had in the opportunity, but quite frankly, my deficiencies. The people who tend to crumble are, how do you handle public failure? I have a lot of friends who are wildly successful coming out of business school in the 90s, went into the alternative investment space, and their fund gets closed down, or they start a fund and it doesn't work, and they just get stuck. They've never known failure. So your ability to mourn and move on, I think is really the attribute. Because if you start several businesses, many or most of them are going to fail. So many moons have to line up for a business to be successful. And then the key is, what do you do after you fail? Do you get stuck? True entrepreneurs

• 5:13Speaker 01

  are sort of like, okay, this didn't work, next. So the undergrads at NYU typically make better entrepreneurs, because if someone has decided to go to business school, it means they're sort of risk averse and taking a more certain path. But yeah, my venture into entrepreneurship was a function of, 70% of entrepreneurs are entrepreneurs because they have no choice. If you immigrate here from Korea without the certification of an education, you don't get to go to work for Google or JP Morgan. So you start a small business. So anyways, I think it's honest self-awareness around if you're really cut out to be an entrepreneur. Any thoughts before we move on to two, David?

• 5:53Speaker 02

  Yeah, I think my favorite quote on this, again, comes from Steve Jobs. He just says that half of what separates the successful entrepreneurs from the unsuccessful ones are just pure perseverance. It's exactly what you said. It's kind of there, impervious. It's like, yeah, this is a problem. That's okay. I'll just get back up and try it again, do it over and over again. I'm a big fan of MMA, and I actually think there's a lot of analogies from sports that are helpful in business. And I heard one of these guys in the UFC said one time, what was like, his strategy, where he has this advantage, is like, I need to get my competitor on their back. So I need to do a takedown to get to my best position, right? And my opponent's goal is to stop me from getting there. So they stopped my first takedown, that's fine. He's like, you stopped the second one, that's fine. You stopped the third one, that's fine. Get ready for four, five, six, seven, and

• 6:37Speaker 02

  eight. And his whole point is just like, I know what I need to do, and you can play defense on this, but I'm going to keep doing this until essentially I die trying. And I think a lot of entrepreneurship entrepreneurs like that. And I loved the point that you made, where it's like, well, a lot of this is at a necessity. If you immigrate here from Korea, and you can't get a high-paying job, then you might want to start a restaurant, or start washing cars, or doing something, anything that you can do on your own without permission, I think is the key there.

• 7:05Speaker 01

  Question number two comes from a listener who emailed us. A lot of founders seem to have given up their health, marriage, or kids for their company. Is it possible to build something big and also have a life outside it? David?

• 7:17Speaker 02

  Yes, but the same kind of personality type that wants to build something big usually doesn't want to do anything else. On my other show, where instead of just reading histories, biographies of history's entrepreneurs, I start having to sit down and conversations with them. And I just released an episode recently with this guy named Nick, who runs Revolut, and it's the largest private company in Europe, like $115 billion valuation. And in the episode, he says, 99.5% of my time is spent on work. And in the comments, some people are like, yeah, but he's missing time with friends and going for a walk in the park. And she's just like, well, that kind of personality type is not interested in going for barbecues and ballgames. He found his mission in life. He has excessively high

• 8:00Speaker 02

  agency. He's just kind of chasing after this with this monotonical focus. There's a ton of examples from the history of entrepreneurship, people building big things. So Sam Walton is one of my favorite entrepreneurs. I think his autobiography is like a central reading for anybody. And he still found time in his day. He'd work from the time his eyes were open until the time they closed, but he would take breaks throughout every day. So he liked to hunt with his dogs. He'd like quail hunt during the day, and he liked to play tennis. So if you look, let's say he's awake for 17 hours a day, he's probably working 15 of those hours, but he's still making time to try to have dinner with his family, to get exercise, to do the activities he wants. It's much more of, Jeff Bezos has this line where he doesn't believe in work-life balance, he believes in work-life

• 8:42Speaker 02

  harmony. And I think that's what you see. Now, with that being said, there's way more examples of people destroying every single other element of their life for business success. There's this book by this guy named Larry Miller, and it's called Driven, an autobiography. He was writing it when he died. Larry Miller was the richest entrepreneur in Utah. The average Utah citizen could not go a day without spending a dollar in one of his businesses. So he owned things from car dealerships to movie theaters to restaurants. He just owned a ton of businesses. And he wrote that book as a cautionary tale, because he ignored his health. It was such poor health, as he's writing the book, they're literally having to chop off parts of his body. He's having, because his circulation's so bad.

• 9:22Speaker 01

  Diabetes, yeah.

• 9:23Speaker 02

  Diabetes, so bad. And then he talks about, hey, I don't know who my kids are. I don't have a relationship with my wife. And it's a devastating, devastating story he's writing. He's like, I'm in a 30,000-square-foot house on top of a mountain overlooking the town, the city that he lives in. And he's like, none of this mattered. And he goes, and worst of all, I didn't even have fun. And the last chapter is actually written by his co-author and his wife, because he dies in the middle of that book. And his wife thinks, I think his wife says the most devastating thing you could ever hear. And she's like, yeah, I miss him, but it's not like he was here when he was alive anyways.

• 10:04Speaker 01

  Yeah, so through the lens of an entrepreneur, like,

• 10:09Speaker 01

  I often joke that, and this is true, from the age of 22 to 42, for 20 years, maybe 25 years, other than a two-year respite in business school, I did nothing but work. I pretended to have hobbies, but I didn't. Occasionally, I would work out, or I've always tried to stay pretty disciplined about that. But I wasn't a very cultured, interesting person. I just worked all the time. And I say, it cost me my hair and it cost me my first marriage, and it was worth it. And, you know, it's just, look, there's no,

• 10:43Speaker 01

  I don't think there is any balance. There's this trade-offs. And the reason why I have so much balance now is because I had very little as a young person. And I don't think there's any getting around it. The market is very efficient in trading off stress and commitment for upside. And if you want tremendous upside, or a shot at tremendous upside that entrepreneurship does offer, success is in the last 10%, and there's an equivalent entrepreneur, an equivalent small business down the street, or down the state, or down the country, that is working harder than you. And it's not aspirational. I'm not,

• 11:18Speaker 01

  it's like Brian Chesky says, you can have it all, you just can't have it all at once. And occasionally, and this does create tension with my partners in my life, kind of the feedback I get is, where are you? You're just not present. And I'm like, okay, see this big fat fucking house we're in? The reason we're in this big fat fucking house is because I'm not present, because I'm thinking about business, because I am and going to be better than anyone on Monday morning. And that's come at a cost. I just don't want to, this is not a, I'm not here with a message of hope. If you expect to have a successful small business, or you expect to be very successful, even in a corporation, in a capitalist economy,

• 12:02Speaker 01

  get ready to work your ass off. And it comes at a cost. Now, having said that, that's my way. I'm not saying that's the right way. There's a lot of people who do well, don't need to be the CEO, don't need to start a hedge fund, or a tech or SaaS company, and they move to a lower-cost area, they do well, find someone who's also competent, they manage their finances well, they go to church, they coach Little League, they take nice vacations, they have really nice lives. And by the way, I'm not sure they aren't the smart ones. I get it. Most successful entrepreneurs are wired such that they are constantly at the office. Now, the challenge is that once you get to a certain level of economic security,

• 12:45Speaker 01

  and it sounds like the individual from that book never did this, I have purposely said, okay, I did this for economic security. I wanted to take care of my mom, I wanted to take care of my family, I wanted to be more interesting to strange men and more attractive to strange women. That's why I wanted to make a lot of money, and I saw the blue flame path there was being an entrepreneur. Once I got to the point where I had economic security, I purposely tried to, and it wasn't easy, and I still have a difficult time with it, get off the hamster wheel and enjoy some of the fruits of my labor, specifically balance, specifically time with kids, specifically getting involved in some things bigger than myself that I could have an impact on,

• 13:30Speaker 01

  trying to spend a little bit more time giving yourself to other people, and, you know, being kind isn't, it's not a big effort, but it takes time. Being philanthropic takes some time. Being a good dad takes real time. But there's no getting around it. It's not like you can flip off a switch. When you're taught, when everything good that has come to you has come from working harder and busting your ass on Saturdays and Sundays since you were an adult, it's not like you can go, oh, I'm here, I'm gonna stop. But again, just have an honest conversation. Where on the continuum do you want to be? If you want to be in the top 1% in terms of influence and economics,

• 14:14Speaker 01

  then come to grips with the fact that you're probably going to be in the top 1% in terms of stress and sacrifice. And maybe that's not where you want to be, and maybe that's not the right place. But entrepreneurship is, for me, it's, I used to go in on Sundays to make people for morale, because we were all there on Saturday, and the people who showed up on Sunday, I wanted to show them that I was in it to win it as well. But it is not for the faint-hearted. It requires, and, but it's true, I don't care if you're Beyonce, or Barack Obama, or, you know, Dario Amade, these people are working around the fucking clock, because they're not, they don't want to be a backup singer, a VP at a tech company. They want to have extraordinary success. So anyways,

• 14:59Speaker 01

  an honest conversation with yourself around really what your, if your desires match to the requisite commitment.

• 15:07Speaker 01

  Any thoughts, David?

• 15:08Speaker 02

  Yeah, I actually have a question for you, Scott, before we move on. Why do you think, why did you say that it cost, it cost your hair and your first marriage, and it's worth it?

• 15:18Speaker 01

  I have an extraordinary life now. I'm relevant, I get to do whatever I want, I get to spend a ton of time with my kids. I have an absence of stress, which makes my partnership stronger, my friendship stronger. I can walk the walk and give money away. I just have a wonderful, rich life right now. And as someone who wasn't smart, who was not smart enough to be born to rich parents, I would not have this richness of life now unless I had made that type of sacrifice as a younger man.

• 15:51Speaker 02

  Yeah, I think something you hinted at too, which is probably true. I think in many cases, like the archetype and the personality type that chooses the path of entrepreneurship for their life's work, it's like they don't have any, it's not a choice. I don't know much about Jordan Peterson, but I haven't seen any of his lectures, but I saw a clip one time that definitely backs up, you know, I've spent 10 years reading 439 now, biographies and autobiographies of successful entrepreneurs. And he said that successful men are insane, that even if you put them in a forest somewhere with nothing to do, they'd walk around with an axe trying to cut down trees. They just have to have some kind of activity. And I thought that was like a great, like, summary of, you know, these extreme personality types that build these companies.

• 16:29Speaker 01

  Yeah, I think that's right. And I think a lot of it's in the batter. I have one son that is studying biology, and I'm pretty sure he's going to be a professional, either in research or some sort of graduate school. My other son is waiting in line at 8:00 in the morning on a Saturday to buy, for a Pokemon card, re-drop, and then drop, and then going on AI and trying to sell them at a 30% markup. Like, that kid's an entrepreneur. We just didn't treat him that differently. There's something in the batter about entrepreneurs and non-entrepreneurs.

• 16:55Speaker 02

  Well, this is interesting, real quick.

• 16:58Speaker 02

  In Sam Walton's autobiography, he talks about, you know, did a lot of people expect, you're a successful entrepreneur, that you try to direct your kids into the same path? And he was just like, I knew I was a fairly overactive fellow. That's the direct quote. He's just like, I don't think I birthed, how is the chance I sired five me's? Like, I'm a once-in, probably, he probably understood, he's like, once-in-generation talent. Like, what's the chance that my kids are gonna be like that too? He's like, I didn't put pressure on them, they can do whatever they want.

• 17:22Speaker 01

  Yeah, that's right. It's, I think as a dad, and we're getting to other areas here, you just want to help your kids become more like themselves, whatever that means. All right, we'll be right back after a quick break.

• 17:38Speaker 03

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• 18:24Speaker 01

  Welcome back. Question number three comes from It's Christian Reese on Instagram. How do you build a meaningful product and service in an industry dominated by incumbents? Hmm, thoughts?

• 18:37Speaker 02

  Okay, so one of my all time favorite, maybe if I could only recommend one book, okay, say somebody's only, they're only gonna take time to read one biography or autobiography of an entrepreneur, I would recommend James Dyson's first autobiography, it's called Against the Odds. He was like, his late 40s when he wrote it, he wrote another one in his 70s, they're both great, but the first one is excellent because it comes right after 15 years of struggle. 5,127 prototypes James built before he built the first Dyson Cyclonic Vacuum that, you know, he owned, controlled, and it was up to his standards. And, you know, people owned vacuum cleaners for a lot longer. There was huge companies, there was companies he was competing against that were making like 500 million a year, just in Europe, just selling vacuum bags, much less the vacuum cleaner. So his, essentially,

• 19:22Speaker 02

  you know, mantra that he would repeat over and over again is like, difference, difference for the sake of it. And so his point is like, well, if you're gonna walk into a store, right, why, I'm the sixth vacuum cleaner you might see. You see the Hoover, you see all these other ones, they all look the same, they kind of function the same. So his point is like, he really liked attacking markets that he didn't have to create. So there's already existing products, people understand the value of it, they're already making the purchase. So his whole point is like, the only way to succeed in an existing market where it's full of incumbents, like this Russian thing is directed at, was by being different. And so obviously, not having a bag, it was the very first vacuum cleaner ever, not to have a bag. So that was an invention, it was patentable, it was very valuable to

• 20:03Speaker 02

  the empire. He still owns 100% of Dyson to this day. And the rumor is, you know, he's been paying himself a couple billion dollars a year in dividends for a long time. And then, so the function of the machine was different, but then he also purposely made it look different. So you walk in, you see six other, or five other vacuum cleaners, you see six one, it's clear, it's yellow, or it's purple. So like the other ones don't have any color, so he made a different color. He made it clear because then you test the vacuum cleaner on the store, this is when he first launched, and you could see the result, which is, the dirt comes into the canister. So the dirt is hidden in his competitors. Now I say, oh, I know it's working because like, look at all this dirt that's coming

• 20:44Speaker 02

  in, it's in this canister. So I think he has the best framework for this, is like, you have to, there's no point in an existing market to just be the 10th, or 12th, or 14th player. You know, all the profits, all the revenue, you know, power laws rule everything around us. It's gonna be dominated by the first, the second, or the third best company. So you don't, and he even says like, you don't even have to be better, his happened to be different and better, but you can build a business just by being different. So that would, I think that's the way that he would answer that question.

• 21:14Speaker 01

  Yeah, I think that, so total addressable market, competitive dynamics. To a certain extent, I think those are questions better left to capital and VCs. I think as an entrepreneur, your challenge is to find something you think you're really good at. And that is, you know, JCPenney and Sears seemed dominant when Walmart was started. It didn't, it didn't make a lot, it wasn't like he looked at a whiteboard and said, oh, I'm gonna open a low cost retailer that has supply chain competence in small towns that aren't being served by department stores. It just, I think he probably decided, I have, I have these skills around this. I've always, I think as an entrepreneur, you wanna say, what am I really good at? Because even

• 21:56Speaker 01

  in industries that are dominated by big incumbents, the great thing about big incumbents is they have a tendency to overpay for anyone that seems like a threat. You don't have to go public and be Google, you just might wanna be a company that Google acquires. So I would more focus as an entrepreneur, I mean, if you say, I wanna start a search engine, you know, you may wanna check in with some people around, can you raise the kind of capital to start a search engine? But Walmart comes in, okay, retail's over. And then Amazon comes on, Amazon's over. No, especially retail, whether it was Lululemon or Sephora carved out incredible niches, because they brought something, and like you said, the word used was differentiated. I think the challenge as an entrepreneur

• 22:35Speaker 01

  is, what can I do that is just really different? I looked at this, this clothing brand called something Aces, or it's just this weird motorcycle brand, but they charge like 2,500 bucks for a hoodie. And they charge, you know, $4,000 for a pair of jeans. And I look at this shit and I go, this makes no fucking sense for me. But these people had a vision for something entirely different. And they're obviously very good at it, ingenious designers and merchants, and they built something worth tens, if not hundreds of millions of dollars. So I'd be, you know, trying, an entrepreneur who's trying to assess is being led to a

• 23:16Speaker 01

  business based on the total addressable market in the white space, no. What are you amazing at? Like, what can you do better? What do you think you could do better than any, are you truly artisanal and just are passionate about candle making? Do you have a vision for a different type of stationery? Do you think you understand technology and healthcare? So I think as an entrepreneur, let capital, and have a series of advisors that can tell you when you're being a little bit, I wanna build nuclear submarines. All right, okay, maybe, maybe we wanna think this through. But in general, I think the question for employees zero, one, and two is, what could we do that we would, that we'd just, we'd

• 23:57Speaker 01

  be amazing at? That it would be hard for anyone to replicate. The right out of the gates, people would be really into our product because we can build something truly differentiated, as opposed to trying to pick a sector and then go into that, where you just build a good product. Like, what are, what were you born to make, so to speak? Any closing thoughts before we move on?

• 24:19Speaker 02

  I agree with your point wholeheartedly. This idea of like, I'm gonna put it on a whiteboard, I'm gonna be like, oh, this is the TAM. Use Sam Walton's a perfect example. Obviously, he gave away the equity to his kids before it was valuable. But if, let's say, you know, all the wealth came from one person, which was him, if it's concentrated in one person today, it'd be, it'd be like, I think the market cap, something like, the family, Walter Family, Walter's be something like half a trillion dollars. And he had one little store, for, he had, this was retail, this wasn't even discount retailing, which is what he got into with Walmart. He had one store for the first five years. He was just obsessed with retail. He actually, you mentioned JCPenney and Sears. Sam Walton actually worked at JCPenney. He met the founder of JCPenney. The founder of JCPenney was

• 25:02Speaker 02

  a mentor of sorts for Sam Walton. And so what he learned, but he's like, hey, I really like retailing, I think I'm really, really good at retailing. And then he just stuck in that for the next 50 to 60 years. So much so that the best opportunity of his life came 25 years into his career, which was Walmart. He was in retail for, you know, two decades before he started his first Walmart. And I think you just nailed the, it ties to the differentiation point, is because he's like, hey, discount retailing seems to be the future, I should get into this. What are the existing players? And at that time, Kmart was the biggest one. And so Kmart was doing these discount retailers, but they were in huge metropolises, huge cities. Sam's like, well, I don't have any money, I'm underfunded, and I don't know anything about big cities, I don't wanna compete head on

• 25:44Speaker 02

  with Kmart. Why don't I try discount retailing out in these little towns of 6,000 people, of 2,000 people, of 10,000 people? And he writes in his autobiography, he goes, turns out, there was way more business in these little towns than we could have ever predicted. So much of this stuff, it's not predictable. You can't sketch it out into a formula, you know, on day one. You just have to pick something, I think your advice is great. What do you like to do? What are you good at? And just stay in the game long enough to get lucky.

• 26:08Speaker 01

  We'll be right back after a quick break.

• 26:16Speaker 04

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• 26:38Speaker 01

  Welcome back. Question number four comes from AXNR0 on Instagram. How do you decide when it's the right time to sell a company or a business? I have some thoughts here, go ahead, David.

• 26:49Speaker 02

  I think you should go first, because you sold businesses.

• 26:53Speaker 01

  Simply put, do not trust your emotions. As a matter of fact, go the opposite. On when to sell or not sell, go the opposite way. Because this is what happens as an entrepreneur. Oh my gosh, business is awesome. Let's hold on and ride this out. Of course, we're not gonna sell. Things are just jamming right now. Oh wait, things are wobbly, the economy looks wobbly, our business is wobbly, I got some key people who are threatening to leave, oh God, we should sell. The opposite. Acquirers are smart. When you're jamming and it's so bright outside, you gotta wear shades.

• 27:36Speaker 01

  That's if you get an inbound offer, that's when you hire a banker. Now, having said this, I've sold companies for hundreds of millions. I've never scaled a company to billions because once a company is really jamming and I get an offer, I start thinking about selling because I think it is hard to get. There's infant mortality, but also there's a lot of death among adolescents. And I was always, I had a huge fear of being the guy who built a company with a hundred or $200 million in an effort to go to a billion, gave it all back. That's my biggest fear or one of my bigger fears. So what do you do or what I've done? When things are jamming, that's when you take the calls because acquirers are smart. And when they come in and do diligence and see, oh, my gosh, the revenues are up 50% this year.

• 28:21Speaker 01

  And no one has left in a year. They have almost perfect retention and their clients love them. And their profitability is reaching scale. That's when you sell because whereas when things are shaky, the acquirer figures it out really fast. And your emotions are your enemy. You want to hold on and keep on trucking when the business is good? I believe that's actually the best time to sell. And then when things aren't great, you've got to hunker down, make hard choices, work your ass off and right-size the company. But that is not the time to sell because selling is an enormous distraction. And when the company isn't doing well, if you're distracted through a sales process and you don't have capital, it can end up being the, the, the walking pneumonia

• 29:06Speaker 01

  that takes the business down because if you don't get sold, you were distracted. The business was hurting to begin with and you can, you can really, if you will, fall into a bit of a downward spiral. So in sum, don't trust your emotions. When the business is jamming, that's the time to sell or consider a transaction versus when the, when the business isn't doing that well. Thoughts, David?

• 29:28Speaker 02

  So I would say, um, to the degree that, I mean, there's obviously a ton of entrepreneurs that listen to both my podcasts all over the world to the degree that I have any influence on this. I'm kind of like anti-start, scale, sell. I think, I think podcasting is my life's work. I've been doing it for over 10 years. The first five and a half years I was doing it, no one even listened at all. People are always like, oh, if you love what you do, you know, they.

• 29:52Speaker 01

  The money will follow.

• 29:53Speaker 02

  Well, I was, I was gonna say something else. It's like, well, if, if you love what you do, you do it for free. It's like, no, no, I paid to podcast.

• 30:00Speaker 01

  Yeah, it costs you money. Well, that's being an entrepreneur. You write a check at the end of the month.

• 30:04Speaker 02

  Yes, my savings went down every month. And I was like, no, I, I just believe I'll figure out the business model, uh, you know, and, and things will turn around. It took me five and a half years to do that. So what I would say is like, there's countless examples of people selling and they're very happy. It sounds like in your example, you, you, you know, obviously I think you'd fall into that category. I would offer some other, like, uh, one of the greatest autobiographies I ever read was the guy that, that started Trader Joe's. And the book is called, I think, Becoming Trader Joe. And he loved Trader Joe's. Like he built a cult following. It was his life's work. I think in the seventies, things are really shaky. The interest rates were high. There was the, the oil crisis and he decided in like, kind of like a, in a panic to sell Trader Joe's.

• 30:47Speaker 02

  So 90% of the book is him developing Trader Joe's, loving it, you know, being completely obsessed. Then the last 10% is after he sells. He starts to live like another three or four decades. He's like, yeah, I did some consulting, invested in real estate, wrote some angel checks. And then the very last page, he goes, I have to tell you something. I have to be honest with you. I regret selling, uh, you know, essentially just the biggest regret of his life. I had to live with that, you know, for multiple decades. He goes, thanks for listening. And he signs off, I think his name's Joe Colombo or something like that. Book comes out, dies the next week. And I, the reason I bring up that book is I think that that book is actually a service to future generations of entrepreneurs because a lot of people say, yeah, but you got all this money. He was like, but the money wasn't what I was going after. He was just like, I had a business that I love.

• 31:31Speaker 02

  So I think you have to ask yourself, one, like, why are you doing what you're doing? If it's economic security, then yeah, start, scale, sell is a hell of a good path to wealth generation. But if you, if you think this is your best idea and your life's work, I would say never sell. There's Ted Turner's autobiography when he sells his media company. He can't understand after he, you know, gets a bunch of money, gets billions of dollars, why they're not listening to his ideas and then eventually kick him out of the company. And they're like, yeah, that's what the money's for. Uh, I'm friends with John Mackey, the founder of Whole Foods. I've talked to him about this bunch. He's also in his book where he sells to Amazon for 13 or $14 billion because, you know, he's worried about the future of his, his, his baby, which is Whole Foods, something he worked on for 40 years. And then they're like yelling at him. He's on Zooms with Amazon executives because he's like, hey, I think we should do this. And like, shut up, John, you're not running the company more.

• 32:14Speaker 02

  And when you talk to John today, that's like devastating. It's like heartbreaking to him. So again, those are like missionary. If you're like these kind of missionary founders, then, then the answer is like, hold on to it. Essentially what I would say is like, for me, like my exit strategy is death. Like you're in the podcast business, the, the amount of acquisitions or investments or stuff that I've turned down. And it's just like, I don't even want to know the number. I don't care about the number. I want to do that. You're gonna pry the microphone out of my cold, dead hands. Like I'm not doing it for money. I'm doing it because I love to do it. I get sad when I don't podcast. So for that, like the, the, you know, the equation there is simple. It's just like, I'm already, there's a great line in the, the, the show called Yellowstone that I love where Kirk Costner is playing like the patriarch of the family. They have this giant ranch in either Wyoming or Montana, and they've, they've had it for a hundred years.

• 32:59Speaker 02

  And his adult kids, they have the offer to sell the company or to sell the ranch for like $500 million. And his adult kids are like, dad, take the money. And he has this great line. He goes, leverage is knowing that if you had all the money in the world, this is what you'd buy. He goes, if I, you give me $500 million, I'd want to buy this ranch. I already have the ranch, but therefore I'm not selling. And I think there's just a lot of wisdom in that, you know, throwaway line on a TV show.

• 33:21Speaker 01

  Yeah, the, so again, I'm not a Hallmark commercial here. And that is, I've always started businesses thinking I was gonna sell them at some point. And you're not supposed to say that most of the time. And I, I, I think I'm more like most entrepreneurs, especially tech entrepreneurs who usually get on stage and have this bullshit. I just wanted to build something I love and I never thought about the money. That means they're obsessed with money. Like I don't, I've always, and the issue I have is, so take Prof G Media. I find building enterprise value and third party market validation is really good for a business because it keeps you honest and the, the, there's a core correlation between the economic value and the actual value you're adding.

• 34:04Speaker 01

  And that's not to say that that's the only measure, but it holds you accountable and it creates, I like having value, enterprise value as a metric because it forces us to be innovative and add more value. And transactions have always been key to my business strategy because my business strategy has always been, and granted, I've never scaled to a billion dollar. I've sold companies for, my first company I sold for $30 billion. My second company with public on the NASDAQ at a market cap, I think of 120. And I sold my last company for 158 million. So I've never scaled a company like some of these guys we're talking about. But I have had successful, you know, eight and nine figure exits.

• 34:45Speaker 01

  The only way I've been able to get there is by hiring and retaining great people. It's just the only, greatness isn't the agency of others. And while I'd like, you know, while I get most of the credit for these companies, the reality is the only thing I did really well was I found really talented people and I figured out economic and non-economic compensation to keep them in the company when they were getting offers from Google and Salesforce and other companies. And part of my compensation strategy has always been the following. I give on average employees two to three X the equity they would get at a venture-backed startup because I'm the venture capitalist, so I have more equity and more control to throw around.

• 35:29Speaker 01

  Whenever I've exited a company, I usually own, you know, kind of 30 to 40 or 50% because I, and because I've given, not because I've done a multiple rounds of financing, but because I've given a lot of the equity away. And at some point, people want to recognize value from that equity, whether it's through some sort of secondary sale or something like that. So for me, an exit is key or a potential exit is key to my ability to continue to grow a company because, you know, at Prof G Media, we have several podcasts that don't involve me much. And the only way we keep a Jess Tarlov or my partner Catherine Dillon

• 36:12Speaker 01

  or Ed Elson or our producers engaged is I give them large equity awards. And unless a transaction is a possibility and it was a realistic a possibility, I think I'm gonna lose them to someone else. I haven't, so for me, it's part of the business strategy is, is liquidity fund or a transaction is key to the compensation metrics for maintaining the best employees who want the life I have right now, right? Whenever I run into, and I'm, I'm gonna, I'm gonna get your take on this. I get a lot of calls from other small business owners in the services business, consulting firms, PR firms, and they sit down with me and they go, and I'm not being humble here.

• 36:54Speaker 01

  They say, I admire your ability to sell and scale and I'm having trouble creating an enterprise value. And I say, let me see your cap table. And they act like I'm asking them to take off their clothes. I'm like, what's your cap table?

• 37:07Speaker 01

  And when they pause, I go, let me guess, you and one other partner own the entire firm. And they're like, yeah, but we're generous with these young employees and they learn a lot. I'm like, boss, you're flying private. You don't think your employees maybe want one day their own home and see the whole, your home in the Hamptons. The thing that stunts these small businesses at letter D, if they have product market fit and all that, is the owners are under the impression that the, the, the mid and lower level employees don't want to be rich too. Yeah, they do. They don't want to just make good livings. They want to be you. They, they want to have equity. They want to know that they might get outsized compensation. And this plague or this virus that infects a lot of really talented entrepreneurs is, I'm the business. They should feel fortunate to be here. They

• 37:52Speaker 01

  make good money. No, no, no, no, no. They want to own 2%, 3% of this company. They want you to sell it for a shit ton of money and then they want to buy their own fucking house in Watermill. And I find a lot of companies get stuck because the founders are under the impression that they're Jesus and everyone is acolytes that should be following them. Show me a cap table and I'll show you the value system of the founders. Any thoughts, David?

• 38:16Speaker 02

  I'm kind of obsessed with family businesses. So I think like the apex of entrepreneurship. I mentioned James Dyson, you know, he tried to, to sell equity, like in his company. No, like no, no investors would give him any money. No angels helped him. He had to put up, you know, his house for collateral. He could have been homeless. He had to literally get, go into debt to, to build it. And then I have a friend of mine who, you know, is managing very large pools of capital and buys family businesses and, you know, used to be a needle mover, used to be like a $500 million business. And now he's got to buy, you know, billions. And he told me, because he knows I'm obsessed with James Dyson's story. I've done like, I don't know, like five podcasts on James Dyson's books. And then I actually had him, James, on my other show. And so I talked to him about this. But

• 39:01Speaker 02

  he put a flyer out to, to Dyson, you know, saying, you know, he, he estimates that if, if Dyson would ever sell, again, he's the only shareholder, that the business would go somewhere between 60 to 80 billion dollars. And so he put a flyer out, hey, James, you know, would be interested in, in, you know, acquiring your company. And he said, he paraphrased the response, which was, fuck you. This is a family heirloom. So James's point was just like, I already have more money than I have ever needed. I don't, I'm not doing it for money. He's literally obsessed with design and, and engineering and working, you know, building physical things. But I spend a lot of time with like family businesses. And some of these businesses, people have never even heard of. Many cases, the family owns

• 39:44Speaker 02

  100% of it. You know, they're essentially cash machines. They, they might manufacture a boring part that is key to some, you know, specific industry. You've never heard of them, but they've, family's been pulling out 350 million a year in dividends or something like that. I think, working back from all this, it's just like, just depends on, all the questions that we've been answering today is just like, really, the starting point is, for the person asking the question, the person listening, he's like, you got to know who you are and like, what is important to you. You know, I think me and you, Scott, come at things very differently. We're like, I'm worried about enterprise value. I want to start, I want to like, I like selling companies. Sometimes I start them from doing that. Mine is more of like, just I'm weirdly, I can't even know why I'm obsessed with podcasts the way I am. I just am. And so therefore I want to prevent anything stopping me from

• 40:29Speaker 02

  doing that. I, I think like, there is no right or wrong answer. It's just like, first like, figure out who you are and like, what's important to you. There's people that make a ton of money by owning tiny percentages of their company and giving it to a bunch of their employees. There's some that make a ton of money by owning 100%. And there's everything in between that. So I think the right answer is just like, it's, it's dependent on the actual person.

• 40:50Speaker 01

  All right. Let's leave it there, David. David Senra is a researcher and historian, best known as the creator and host of the Founders Podcast, where he reads and analyzes biographies of history's greatest entrepreneurs. David really enjoyed that. Thanks for joining us.

• 41:05Speaker 02

  Thank you so much, Scott.

• 41:06Speaker 01

  This episode was produced by Jennifer Sanchez, Laura Janier, and Asher Schwartz. Our editor is Brad Williams. Kami Reek is our social producer. Juberos is our technical director and Catherine Dillon is our executive producer. Thanks for listening to the Prof G Pod from Prof G Media.

• 41:29Speaker 05

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