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[00:00:00] Colin Keeley: So hello And welcome back. This is Colin Kelly here.

[00:00:02] Brent Sanders: And I'm Brent Sanders.

[00:00:04] Colin Keeley: And we are two guys buying and building wonderful internet companies.

[00:00:08] Brent Sanders: Yes. Indeed. And so this week, Colin went deep on another, I don't know. Illuminary of. Private equity or software, private equity, field. He did a, profile on Joe Liemandt. Who's the billionaire founder and CEO of trilogy software and ESW capital. Which is short for enterprise software ESW, I guess that makes sense, which is a holding company that just buy software companies, which is, similar to what we're trying to achieve here.

Just on a smaller scale at least to start. I guess the first question is where did you find this guy? Joe Liemandt. He's I've never heard of him. I think most of our listeners probably never heard of him. W what was the inspiration for going deep on some kind of unknown, hidden figure?

[00:00:50] Colin Keeley: So I did this a long time ago and I forgot I did it because I wrote it in Evernote.

Did this. So my initial thought was you have Andrew Wilkinson who is trying to brand himself as like the good guy in Joe Lyman's is like the dark forest and software and very quiet.

And, guts companies keeps like the software contracts and nothing else. So I initially wrote a post in Evernote, whereas comparing the two of them and how they have different approaches. And I just completely forgot I did it. So

people were

[00:01:18] Brent Sanders: Do this, that much? That you're just like, forgetting about all this work.

[00:01:22] Colin Keeley: yeah. I take a lot of notes on stuff. So I read, I think a profile on him and I took notes on it and I just, I didn't remember I had it.

and I was looking through my notes and everyone's asking me like, what are you going to do after Robert F. Smith? And I was like, I don't really have any plan for any others. And, I guess a little did I know, I forgot I did one. So

I just had to clean it up this week.

[00:01:39] Brent Sanders: What was the like, how'd you find this guy? Like, how do you know he even exists?

[00:01:43] Colin Keeley: I think there was a Forbes profile on him maybe three years ago since I started writing it like two years ago. And so he was famous, in the nineties on par with bill gates so he was like this wonder kid. He was on the cover of Forbes and he had trilogy software. So trilogy. It's like product configuration and sales software, and it was targeted towards big enterprise companies. So like the product wasn't well-known in the space, but they were really well known for recruiting and for having a crazy culture. So they were on par with Microsoft and eBay for trying to get like the young talent out of universities. And they were had this like testosterone fueled alcohol and fuse, like lawn parties out. Like they were the bad bullets. And as you think of Uber and the early days, like they were the original bro culture, tech startup kind of guy.

[00:02:36] Brent Sanders: Interesting. That's a, I don't even know what to think about that. Cause it's their booze definitely helps programming for like the first drink in a quarter or so. There's like a, I think it's called the bomber peak where, you get one beer in you and your, you also in these ideas come to you and you start working faster and better, but it definitely goes downhill pretty quick.

And I just can't imagine. Pardoning or sorry, paid like rockstars and party like them. So I guess this is a assuming this was all in the bay area. This was like the beginning and this is 1990. What? Three, five, something like that.

[00:03:10] Colin Keeley: So he dropped out of Stanford in 1990 at age

21. And I don't know when, but he very quickly moved to Austin. So him and Michael Dell, like basically founded Austin. A long time ago. And so the whole alcohol thing it's basically because they were recruiting all these smart engineers directly out of college.

And so they'd hire, attractive women to recruit them. And then they'd try to have like that college kind of campus experience of like still drinking. This is where the cool kids are.

And it was mostly a recruiting tactic and they became pretty famous for that. And to like a bill gates would talk about who are you afraid of losing people too?

And it's oh, trilogy software. They're getting all the good recruits.

[00:03:48] Brent Sanders: So the first product is a con it's something that they made themselves. And this is this. So this is all before a more structured fund. So they have a product it's for configurating things. But configurating configuring products. Sorry, we gotta, I don't know why that word configuration.

I don't think configure eight is a thing. I built a configurator once the client kept calling it a configurator. Now it's like in my mind anyways, so they have this. They're up there with, the nineties, like stars of tech and what happens next that they end up selling this business.

[00:04:21] Colin Keeley: , quickly, it was a rocket ship. It hit 120 million in sales within six years. He was the youngest self-made person on Forbes, 400 with a half a billion dollars in net worth. And then much of his initial wealth came from spinning off PC order.com, which sold thousands of computer parts on the internet. And that went public in 1999 and a trilogy on most of it. He sold $124 million in stock of it. And then he tried to do other things and nothing worked out before the.com bubble pops. And trilogy never went public. Before that time he dropped off the Forbes 400. He stopped doing press interviews, which he was famous for it.

And he hasn't really has done one since which is over 20 years ago. The outsource all of trilogies U S workforce, and he took the company private. And so you haven't really heard anything since, so with that like kind of war chest that he had, he still had those software contracts that are still profitable and he basically became a patent troll. So he like would buy up dying software companies that still had these like patent war chests.

And he started suing, the big names, sun Microsystems, Sears Toyota for infringing on trilogy and other software patents. And that's where he made enough money that he could start doing some more Interesting. acquisitions.

[00:05:42] Brent Sanders: Interesting. Yeah. So he, he made some money, I guess the question is, did he make more money from patent trolling or from his first, business and investments? I'm trying to wonder if maybe that's the right business to be.

[00:05:56] Colin Keeley: So he definitely made some, I would say on the scale of. A hundred million, at least I would say he's still retained after everything came crashing down. And then he bought up these things to do patent trolls, and that was very successful. He had some, there were settlements for $390 million. So a pretty big war chest from there. It almost all, this is his own money. Like I D my understanding is that ESW today is basically a family office. Like it is just as capital and it's like something like $3 billion

on that scale.

[00:06:25] Brent Sanders: With everything, I'm just trying to think back to 2000, right? So there's a market crash. Everybody hates. Nobody wants to invest in it, or at least from a public market perspective, it was egg on the face of the tech world. And so it probably makes sense to go dark, right?

It's no one, the public has decided what they think about this whole category. And so what's the point of being a character within that or a role within that world. So he goes to archi probably, knows, you have to think about it. If you're a player in this space, who owns what, what evolutions other companies have done, it looks like you were saying you ultimately settled, with a big judgment against SAP that the giant German software.

[00:07:12] Colin Keeley: Yeah.

[00:07:12] Brent Sanders: So did he keep going down that route or is it like he one, this big one? And that was like, okay, I got my death that game's over. And now I'm on to, buying and consolidating software companies.

[00:07:24] Colin Keeley: Ah, so the way it's phrased is he had long admired, Charles Wayne of computer associates.

that is like the OG, that's the original kind of software roll-up company before Mark Leonard, before, anyone else that you know, or we've talked about. And so that guy became a billionaire by methodically buying up enterprise software. Including Lehman's fathers in 1987. So Leeman's father comes from a line of like successful business people. They would take vacations with, So the famous Jack Welch from GE. And so he was always deep into business, any started trilogy with the goal of being a company that like Jack welds or his father would want to buy. And talked about that was his idea all along, but it's unclear because he didn't really start buying up software companies until like 2006.

[00:08:08] Brent Sanders: This is so funny. Cause I could have sworn you just said four of us that he was a self-made millionaire, but he's vacationing his family's vacation with Welch's. So I guess, I don't know, does self-made mean you have to come from. Meager or conservative or I w you know what I mean? Like you, you're not born into wealth.

I thought that's what self-made meant.

[00:08:26] Colin Keeley: Yeah, I don't know. I don't know how you define it. He was a kid when he started it. So did

he have any money? So did he have any money? No, he had all the like family connections you could want,

[00:08:34] Brent Sanders: call uncle Jack and see how you deal with a difficult situation.

[00:08:37] Colin Keeley: Yeah. What do you think self-made means?

[00:08:40] Brent Sanders: I don't know when I think of.

[00:08:42] Colin Keeley: self-made.

[00:08:43] Brent Sanders: Yeah, I don't know. Are they, or are they considered to be right? The, was it, Kylie Jenner? They said she was self-made and then people got all up in arms about it. Everyone was offended about everything nowadays, but I was just curious, it's super interesting that, if you vacation with the Welch's at dinnertime, You come away with a philosophy, you talk about how, management styles and for anybody who's listening, I'm assuming, you know who Jack Welch is.

The legendary is as competent as the executive from GE who grew it, to what it was once, I guess I shouldn't say what it is now. It was no longer. But he was famous. And I think there's some really interesting ways in which he thought about personnel, right? He had his stars, the top 10 or 15% of people that you pay them, anything they want.

And then you have the middle, what, 70% that, they get a 3% raise a year and that's it. And they don't really get to call the shots. And then anything below that, you're just turning out and there's this very methodical. Way of thinking about people and in GE it's different, it's not pure software.

And so I'm just curious or, I think it's really interesting that they, there is a connection there because I think of Jack Welch as somebody who's, a ruthless pragmatist, something like, being able to just say, Hey, it just doesn't make sense to have all these people.

We're going to cut it. And especially in software where, it's not as, human capital intensive necessary.

[00:10:08] Colin Keeley: Yes. So Joel Lyman's whole thing is basically. You need a very talented engineer to make the first Ferrari, the design, the first Ferrari, and then you just need really a mechanic to do like oil changes and to keep things running. And that is effectively how he runs ESW capital and all his, enterprise software companies.

[00:10:25] Brent Sanders: Is that is interesting. And it makes sense, right? For certain profiles. Talk about some of the companies they took in. The one thing that strikes me is that what happens? Like how do you still compete with your competitors in the space? So maybe you choose businesses that like we talk about on this podcast a lot where it's like Harbor management software, like very specific, and you're going to be the one player and there isn't.

Research and development that you need to put into this space. You just build the product and people use it and they're happy and they're gonna be lifelong subscribers versus more consumer products where right. You have to constantly be adding features and getting people excited about it. And, so maybe that's part of their thesis is just finding things that are, th they don't need changes.

And I guess, obviously it works.

[00:11:11] Colin Keeley: Yeah. So I would say it's fairly different than what we're doing. There's definitely like the older, the better. I would say if you still are, like in the fairly early days, you're not just buying purely enterprise software contracts. So this is going fairly well, but there's also these adjacent markets that are really interesting. Like you need more creative, more talented people to do new stuff and move to adjacent markets. If all you're trying to do is service enterprise software contracts not really change anything, which is more of what this is. It's more like cigar butts which is a Warren buffet term of just like buying old businesses at cashflow.

And it's unclear how much is like. Life is left in them, but if you just cut costs, you can make a lot of profit, which is more of his approach here.

[00:11:54] Brent Sanders: Yeah. Yeah. I You basically, as you, as we've looked at some of these companies where there are 10, 20% teams and they're working on new features and you could see a world where it's like, Hey, if we just froze the product where it is. You can take a team attend to a team of one or not even, you just have a lazy set, a sort of a maintainer that can come in on a quarterly basis and just make sure everything's running, because depending on the software that's completely viable.

[00:12:23] Colin Keeley: And that's the beauty of software versus like other types of businesses is you can, realistically run them with one or two or just a couple of engineers.

[00:12:29] Brent Sanders: He comes in guts, the team, what happens to marketing? So you're getting the software team, but is that also true for the other sort of capacities in, a company.

[00:12:40] Colin Keeley: So I have to say, I know much less about Joe than I do some of the others, because of the way he's operating. It's not, it's not a great way to operate people. Don't love it. And so he's super quiet about it. So being a patent troll, not to go into the press and talk a lot about that. Buying American companies, firing all Americans and moving people abroad. Not a great reputation on that one either. So there is not a lot of great stuff out there on him.

most

of what I've seen is talking about getting rid of engineers.

So I haven't seen that much about sales and marketing. We gotta talk about their general process and I think it applies to everyone, but I know at least it applies to engineers.

[00:13:14] Brent Sanders: One of the things I've been thinking about as we look at deals week to week is we really talked to a lot of companies that are in good shape, but the reason they're selling is just something underlying is broken, right? And this has less to do with Joe alignment or really any of the folks we're talking about, but it's this idea that when you sell, you create an opportunity to shake the Etch-a-Sketch or re deal out the cards, recap the company, essentially.

Where, we've talked to companies where, from everything, from investors to partners, and there's just, there's just a, I don't want to say dysfunction. That's not the right word, but maybe some incongruencies across the team. And then, when you sell, you can wipe that slate, clean and rebuild from beginning.

And now you have a product that's already built in a business and it's a much different. Model. So I don't like I'm not into necessarily this approach, but I totally get it because it's like, Hey, you already have your customers. We have a run rate. We have everything established. You just don't need the tech side of this necessarily.

If you want to just reposition, because that's the opportunity you have when you sell your business or when you buy a business is it's just a new perspective on a different stuff. And you can chart a new course. So I guess it's, it's fair and that's, I can't really say, oh, that's not a good way to do it.

It's it's clearly working for them. I'm not saying that's what we do, but I would also say we're not typically. Buying companies that were, I shouldn't say this for a blanket statement, but we typically are going to do something with those companies. We're going to either continue on the current path or the current trajectory, which means don't touch the team, let them do their thing.

If you're growing 50% year over year, you don't want to come in and try to squeeze out another 10, 20% with a new team or cutting costs. It's like trying to be overly dynamic. That seems foolish. But if you're the profile is company. It's basically on autopilot. We have 10 engineers that have been here for 10 years and they aren't necessarily getting a lot done.

And they've been here for 10 years and the culture is such that we don't fire people, or we don't do that sort of Jack Welch, constant churn the bottom 20% always turning out. Do you get to wipe the slate, clean and implement some of these? I wouldn't say these are best practices, but they sure are working pretty well for Lehman and.

[00:15:37] Colin Keeley: Yeah. I don't love his approach, but I do think he's super forward-looking. So he was way ahead of the times on like remote work. And so surprise, if you could do your job from home, there's also people around the world that will do your job for, 80%. And that same job. So you're competing with way more people.

And I think he saw that and discovered that a little earlier than everyone else. And I don't have it in this article, but the other thing he's been talking about recently is more automation. And so I think a lot of CEOs harbored this feeling of my biggest expense is all these people do.

I re really need them all. I can, this be automated. So his thing was, he was scolding everyone, like all his lieutenants in 2021, like we have two. Itemize a compartmentalize, basically break everyone's jobs down into smaller pieces

and then get narrowed down. Can this be done by a different human and just like really narrow in on that one like assembly line style, or can this be done by a machine or a robot? I didn't include that in the article cause it's harder to get sources on it, but that's been the rumors and things have been leaking out that he's really pushing his team to focus on that more.

[00:16:40] Brent Sanders: That's sensible. We've started an automation company. We've been into that space and know that's the future. Like I think that's been our general. Motivation behind it has been, we know that this is going to happen and everyone's going converge on that. So it's interesting to hear, his interest in it, because I guess there, there are two ways to look at a business when you buy it, you can either cut costs.

You can do both things, right? So I guess there's three are a blend of all these things, but to either cut costs or invest and. Invest in, in this case, invest in product, right? Invest in like a software. We're going to add features. We're going to push in marketing, we're going to do something to the product.

And so it feels like very one-sided. However, again, it goes back to if the profile, these companies are such that they're, they already have a built-in customer base and they're mildly profitable currently, but there's a way to automate, let me phrase it another way. If we start a fund tomorrow in our thesis.

We just buy existing companies and just automate everything. That's very similar to ESW. Automation,

Every practitioner is going to say, oh, we're going to, we're going to retool all those people. It's eh, it's bullshit. Like you're the inspiration is to cost cut.

That's like the most fundamental part of automation and I don't think anybody will really deny that in the automation space that we are trying to cost cut or create efficiency or, free people up to do more people work. But at the end of the day, it's the same approach. And, it seems like a new tool or not really a new tool, but a tool that's getting stronger and more prevalent that, this perspective would likely yield or wield, I should say, in, in their current.

[00:18:16] Colin Keeley: Yeah, it seems like a natural progression of the path that they've already chosen to run it. If that's a good. I think of this all is a spectrum. So like this, the equity more high growth stuff. Probably not a great fit for that. If your plan is there's push on sales, push on my growing your costs don't matter a ton.

Vista definitely has cost cutting components, but it's more so grow like Mark Leonard and Andrew Wilkinson are in a similar boat where it's grow, but like more at a. A reasonable pace and Costco, but, at, again, a much more reasonable pace to keep the teams in place. ESW is like cost cut to the bone, which is pretty radically different approach and is a better fit for different types of companies.

[00:18:54] Brent Sanders: Yeah. Yeah. So as it relates to ESW, it sounds like these aren't in, and as we've been exploring in our deals, it's like, we're just trying to do asset purchases, but they're not so much looking for that. They're looking to acquire the whole.

Which seems odd.

[00:19:15] Colin Keeley: it's a unique, so their structure, Which also makes, researching this really hard is it's all under a bunch of different names. So for the like simplicity of the article, I said, it's just ESW, but it's actually done under a bunch of different things. So it's harder to track this wall street journal did a big report on it. So they are buying. Bankrupt businesses often that are, venture back the raise a boatload of money, never really made any revenue. So they have one example of security. First that raised something like $150 million.

And they only ever made like $92,000. So somewhere out there. They have $150 billion in losses in taxes or potential tax breaks, that are available.

And so ESW made an offer for the company around $6 million. And so it sounds like they got it. And with that, if they have profits to offset it, this could

be $150 billion in tax. Benefit to them, which is pretty unique in a huge benefit of having this holding company approach, where you have profits to offset these, tax losses.

[00:20:21] Brent Sanders: Okay. I love it. I love the creativity here. But let's figure out. Number one, how do you, even if you buy a company, you basically, so you buy a company that's has 150 million. You buy it for 6 million. So there,

how do you then start funneling your oh, not debt,

[00:20:41] Colin Keeley: So if you think of a profit and loss, they had almost no revenue and they had a bunch of expenses, right? Cause they

burned through that 140, $150 million somehow. So they have

a huge negative with the IRS.

[00:20:53] Brent Sanders: Okay. And then they buy the company. And so they essentially put that on their balance sheet. They put that ledger entry of, basically negative one 50 and then they can offset their plus one 50 and then, oh, no taxes in that case. And there's no, really no way of knowing how this actually plays out though.

[00:21:11] Colin Keeley: Yes, because it's all probably that as only the IRS knows how successful it is, but yeah, you could go back and use your previous tax losses to offset your future. Tax burden, but it's only good for a few years. I know

Trump is Trump is famous for doing this

where you like pay no taxes because he had some huge loss like 10, 20 years ago that he kept bringing forward.

[00:21:32] Brent Sanders: Got it. Got it. Interesting. Yeah, I, they're playing all the games there. I shouldn't even call them games. These are strategies that seem like they're theirs. They're not like ashamed to play the game, right? There's no, it's a private company too. So it's rare for someone to even know about this.

[00:21:51] Colin Keeley: it's all private. Just to take one to the extreme. I like one of their largest acquisitions, the largest public one I've seen as called jive. They bought it for 462 million in 2017 is based in Portland and it had 250 employees at the. And through a mixture of bios layoffs, voluntary exits, nearly all those employees are gone within a year,

And less than a dozen remain as contract employees working from home. So that's their big prestigious acquisition and they just ran the playbook completely where they moved all the employees to like a global wage, they call it

so C C plus programmers should be like, $15 an hour.

[00:22:30] Brent Sanders: Yeah. Yeah. What's their profile. I would assume based on what we've talked about so far, these are companies that have an established product, like track. Record's going to be everything I'm sure, low churn, very stable. You want to find these like big turtles that are just plotting on.

[00:22:50] Colin Keeley: So they actually integrate, than other ones. So they buy. These companies, they basically effectively fire everyone or close to it. They have crossover, which is an arm that handles recruiting for all these companies. So that manages 5,000 plus employees. And then as far as what happens to the product, they roll it all together often.

Not always, but into like Netflix style software library, subscriptions. So this is, it keeps adding benefits to their customers. And then you cross sell the products effectively. So like you could have a library of software for. Or library software for like enterprise integrations or other business essentials. So you get, value on the upside as well.

Doing

that cross-selling.

[00:23:33] Brent Sanders: That's great. So it's all connected, right? So they have their portfolio. You're looking at, yeah, I'm looking at some of the companies in your article here, see, you have a list. How did you find this list of companies, especially because there's all these different, names that they're doing business under.

[00:23:49] Colin Keeley: I got one of their decks that they send to prospective, founders that they're trying to buy from. And it's like kind of the terms and different stuff like that. And so I, it was a bit of a question of this seems pretty bad, right? You're going to fire all your employees that you've spent a day in day out, like years building a company together with Y our founders selling to them versus a friendlier P buyer. And so the reason is it's quick Ash and good valuations. So they're very, founder-friendly. Not employee friendly, but founder friendly, and no earn-outs or contingencies iOS evaluation within a week in LOI and closing within 45 days. And then 98% of LOI is closed. So

all this was in that PDF, where

it's yeah,

[00:24:30] Brent Sanders: So there is, these are not competitive offers. They're just coming in with a boatload of cash and they're ready to close right away.

[00:24:39] Colin Keeley: Pretty much. They have all the casts, they need the one thing they do, that's like a little slimy. So they have this playbook that they developed a 20, 21. So it seems like they slowed down and acquisitions in 2019. Didn't really do any in 2020. And then for some reason, again, this is like the opaqueness of it makes it hard, but they really pushed on the gas in 2018. And their goal is to do an acquisition per week and they started farming it out, and have a big team on it. And so they started doing exploding offers where it's like, Hey, this offer's good. It's super juicy, but it's only good for two days. And they don't actually hold them to that. But it's like trying to pressure CEO's to take it.

[00:25:18] Brent Sanders: Oh, man, this is like Glen Gary, Glen Ross. I'm just picturing like a bunch of guys in a, an office cold calling companies, and I've got the opportunity of a lifetime for you, but it's a limited time offer. It's feels very, telemarketing, looking at these businesses, it's actually really interesting.

So first of all, did you just find the deck online or do you find it, do you have a mobile.

[00:25:39] Colin Keeley: I don't have a mall.

if anyone would like to be my mall and listening in, feel free to reach out.

[00:25:45] Brent Sanders: so it's interesting. I'm looking at the list engine yard, which is a, like a Ruby hosting platform that kind of sits on AWS. Some of these are, ignite. I am aware of jive, which was like an, I thought it was. Open source. I guess it's like slack before slack jive was, I believe you could do chat rooms and all sorts of stuff.

This was like in the early two thousands. I remember it from, but it's not like they do just like Microsoft or anything. It seems like they're just grabbing categories of what do you need? In your business and what are the, and so I'm looking at different ERP for retail, for, specific development and software tools.

So obviously software is the first thing, but then as I'm looking into these kinds of niches of application development, mobile development, it does seem like a fair amount of like software. Like the end consumers, a software company, you're selling tools, you're selling software tools to, builders or creators.

So that is a really interesting, and that we've been looking at deals in a similar space of like you're selling sort of these pickaxes. You're trying to enable people to grow their businesses. So I was expecting it to be a little bit more. Like more like a Zoho, right? When you were explaining, oh, they want to be able to cross sell things.

So I, I see some of these categories coming out though in, in how, some of these businesses are decided upon, but I guess the other part of it is there's, the commonality is these are all founders or owners that said yes. It's like these people were all in a position, which I think.

Is everyone has their thesis that, they're looking at a very specific thing and they want to see the right things. That's also like the key part of this is just, having somebody at the right time when they want to move on. And so I guess, are they looking for, these companies that they're buying?

They're obviously they're not public companies, but they're, larger software companies that have, likely had some sort of venture funding. And so this is like the first. Liquidation event for these companies. Do you have any idea as I'm looking at these names? I'm not really sure. I don't know their stories.

I know about some of them and what they do, but I'm curious, like who do they go after? And, what's the profile of the person that says yes to their deal.

[00:27:53] Colin Keeley: Yeah. So it is more flexible than I would have guessed from outside. So it leaked out. And so they have this, playbook now for outbound emailing, outbound drip campaigns, and then cold calling so that like semi scripted

calls and then everyone is judged on everything. So if your calls aren't going very good, you have to go a coaches corner and you get coached to have better calls with. But then what are they looking for? They have a hundred point, like scorecard that they fill out for each of these companies. And so I have some of it, not all of it, but, industry. So it's 25 points for software, 10 points for it services. So they are buying it. Services is not purely software stuff, which is surprising, LinkedIn headcount growth. So 10 points for a greater than 15% Courteille decline or minus 20 points for greater than 30% annual growth. So avoiding things that are growing quickly, location 25 points for the U S 10 points for Canada. The UK, we've experienced this. Europe is a. Inconvenient, that five points if there's leverage founding dates.

So more points if it's older, last fundraise, you get points if it's, further back. So all this is incorporating an idea that anything that raised recently or is growing super fast is unlikely to sell cheaply, which is what they're after.

[00:29:03] Brent Sanders: Or fit their playbook. Like that's the other thing is if you come into a company like that and then got the team that growth is going to end,

[00:29:11] Colin Keeley: Yes.

[00:29:11] Brent Sanders: that's the thing I'm keying in on is it seems like these are all companies and I'm assuming that's also just I guess it's not a truth for all acquirers, a, why would you sell a business if you're in the thick of growth and B?

Which, as I think through, I guess there are situations, but as I look at this list of companies, it looks like companies that, they figured it out. They got to a point where they started. Juice their profitability. I'm thinking of engineered in specific. This is a company started around when blink sales started right around 10, maybe a little bit longer ago when Ruby and rails was like, first really taking over the internet.

People started using it as a platform. They were a hosting platform for that stack specifically, but they ended up, growing and building on upon that. It's like they had enough time to figure out what their offering was, figuring out their, user base. And then yeah. Having somebody come in and yeah.

Rebuild the business to just sustain, but with external, or I should say like cost effective, labor

[00:30:08] Colin Keeley: Yeah,

The other thing I'd say is, so they have this prospect of going on their other hunting ground is like bankrupt companies.

as we talked about, they've bought, I think at least 10 of them and at least three of them in 2020, and that's public. So bankruptcy court is public and you could see who's making offers and stuff. And so it's like immediately huge benefit because they're able to acquire stuff a few million bucks and get, monstrous, tax deductions from it.

[00:30:31] Brent Sanders: Yeah. Yeah. I don't know what to think about that. I don't have much of an opinion. I guess it's fair. It's definitely the, When we talk about slimy or these methods, it's it's all fair. These are all like acceptable answers. It's not unethical either. I don't really think. It's begging the larger question.

If you think firing people is unethical, but, if you're definitely using all the unpopular, their methods, I think I always think of this. The profile of a person that like goes to the craps table. I don't know if crabs or play craps, but there's the past line, which everybody generally plays.

And then there's the do not pass line. Means the game's over and you're basically betting against everybody. And it just, I'm picturing this guy as walking into a casino with a whole bunch of chips everyone's playing and everyone's playing and everyone's on the past line and every time the dice gets thrown, everyone's winning money.

And then he drops, a a bunch of. Coins on the do not pass line. And is all of a sudden they're silent. Everyone's looking at them, but it's, you're allowed to play that. That's playing the game, it's, you're allowed there do not pass line exists. It's like shorting stocks. It's not, it's not very popular in a party like setting, but I'd love to, see, so this guy does not go in public.

He doesn't do interviews anymore. He's.  off the radar, when was the last time anybody's seen or heard from him? Does he do speaking? Does he do, anything where we get a glimpse for how, how he looks at the world?

[00:31:55] Colin Keeley: I haven't seen a single thing. So everyone else like Andrew Wilkinson's on podcasts. Every week you see them all the time. Robert F. Smith is on a podcast this year, which is rare, but he's a billionaire and like still doing stuff. Mark Leonard, super press shy, but still writes like a lengthy annual letter. So you get a pretty good insight into this business. This guy does nothing like the most recent photo I could find from him was in 2012. Like not a single thread anywhere on anything else. Like some of this stuff, like the playbook leaks out and you could read up on some of it. But he has a Lieutenant that runs the recruiting arm called crossover. Andy Tryba is also the CEO of 12 of the companies in this guy does interviews. And so you can go on YouTube, Google his name, Andy Tryba, A bunch of interviews with 50 views. So people just aren't paying attention to it, but that is like the only insight that I found into kind of how this whole thing is operating.

[00:32:48] Brent Sanders: Very cool. Very cool. I liked that. I like this guy has a sort of a, a lightning rod. It's it just, I dunno, when this story has mystery, it's so much cooler, right? This guy just has so much like shrouded in anytime somebody could potentially be a bond villain as well. I always liked that.

You know where you don't know of him, but like the inner circle. They know him and they fear him or not either way, he might be a really nice guy. And that's why he doesn't like to do, interviews. But my guess is he is not right. If you're, if this is your philosophy, you're probably also not that empathetic.

You're probably not, we're have like a philosophy that is maybe more warlike, Some Makaveli and something along those lines, but I guess if he doesn't, he, maybe just needs to come on our podcast and tell us a little bit more about his philosophies of life.

[00:33:37] Colin Keeley: Yeah, he's definitely I don't know the dark cloud, the dark matter where he's just like vacuuming up software companies and they're never to be seen again, like you'd never get updates on them. Andy Tryba is like Lieutenant is like a very polished executives. And so one of the darker things that they do is, actually it's similar on Upwork where if you hire. Up workers or contractors they'll have spyware on people's computers, they'll track like their clicks and their keyboard strokes. And then I'll take a screenshot of their webcam, like every few minutes or something like that. And Andy tribe was great at spinning this as like it's a Fitbit for work. It's just a way to empower workers to better analyze how they're spending. And it's, unclear, how often all that stuff is enabled, but that's what comes out is like these are, technology sweatshops like global computers, sweatshops in everything is monitored perfectly, and people get fired at a very high rate.

[00:34:30] Brent Sanders: Yeah, I have to admit, I love the, that Upwork feature. And since I'm like a newly converted Upwork, using. It is really nice to not have to ask people like, Hey, where are you at on like between commits or whatever. It's you can just see. And it reminds me it's the, remote equivalent of being in an office together where you can see over someone's shoulder and check and see, Hey, I saw you were working on this for, an hour.

Do you need any help? What's going on there that I can't imagine people go back and try to improve their time they were there. They probably knew what they were doing. But, yeah, it's I spy? Where, what do they call it? Process mining software. That's probably what they'll use it for next.

That's like the RPA sort of automation tool where you install, all these software pieces to measure. Okay. Here's the pattern of clicks that we could start automating because Jan and accounting does the same 12 clicks, every morning we can just have that happen.

[00:35:22] Colin Keeley: Yeah, that makes a ton of sense. Actually, I haven't seen that mentioned anywhere, but that would see like a natural progression of this, work smart productivity tracking tool.

[00:35:31] Brent Sanders: Oh, it's big. Yeah. A lot of companies are using it.

[00:35:33] Colin Keeley: So that's always begs the question. That'll be more fun here than other ones. What would you like to take forward, and implement that, ESW and solar monitor using.

[00:35:45] Brent Sanders: I do think it makes sense. I liked the idea of looking at companies that are more established. Like I, and this wasn't a conclusion you made, out of your notes, like this, wasn't your conclusion. The thing I'm teasing out of it is like, and  I, we should go through these companies. I think that'd be a good follow-up thing for me to do is look up some of these companies and see when did they get bought in what happened to their product afterwards?

My guess is it doesn't change significantly. There's not a big investment. Does that make sense to do to companies or to, as a train transaction for us to look at, as I look at blink cell, that's what was happening here. It's a 10 year old company. It's not really having anything happen to its product.

And there's a minimal tech team and we're able to build new things with, less pieces. It's not innovating. We're doing all the innovation now, but it hasn't changed. You could accept a credit card or PayPal and or nothing. You're just, paper invoice, paper check.

So I think about is that a better profile versus companies that are actively growing actively iterating and actively in metamorphosis? I guess to simplify my takeaway from this is, do we want to look at companies that are more stable or do we want to look at companies that are still in a growth phase?

[00:36:58] Colin Keeley: So what's tough is the company is still in a growth phase, come at a significant premium. And you

are basically with that acquisition price bedding that growth is going to continue. So you really have to look at the market and determine what is the growth factors there? Most of these folks do not deal with those companies, this, the equity and. John blink another one, but this equity in one, others are the only people that really attack these quick growing companies and are confident enough that they could grow them faster than they're currently growing.

[00:37:30] Brent Sanders: Yeah. How about you? What do you, what are you taking away from this.

[00:37:33] Colin Keeley: My biggest thing is I love how he. Puts processes in place for everything. And it's something that I think about where I do a lot of stuff over and over, and I maybe don't put in standard operating procedures often enough where I could systematize everything. The first calls with founders. It maybe coming from the venture capital world where it's more like a discussion. I don't think it really has to be like, it should be more of like a rubric or something that you're filling out. And I should probably be more systematized with that stuff and probably start handing it off to more people VAs or whatever, and trying to scale that up. That was probably my biggest takeaway from the whole thing is thinking more of like, how could this be quantified more so than the qualitative stuff that I'm

[00:38:14] Brent Sanders: Interesting. Yeah. I've seen some stuff online, mainly on Twitter, like people's accounts people that are really good at that. And I, when I see like checklists for every little thing and, and we talked to somebody. The formulated podcast about this or around automation, somebody that was all they do is just capture and turn them into playbooks.

Like they have these playbooks and then it's very easy to then turn them into automation, which is what we talked about. But I've seen some of these playbooks, it's just, I get so much envy. I was like, I wish I was that organized. I just wish that oh, I have this meeting, I'm gonna pull this playbook or better yet.

I could just hand this to someone else or you could do it if I'm not available, anyone can, have the power because they know how to run the meeting or what steps to take or just checklists. It's just, it's such an ideal state. And I'm so far, I'm so far from it. I would say it's like being a seasoned pro though.

Like when you. Really knows something. You don't have to think about like how to run or do you know some certain tasks or complex tasks, but it's so much easier to spend people up and even refine and be more intentional about things when it's written out. So I couldn't agree more about that. I didn't pull that away from it, but it's.

[00:39:27] Colin Keeley: That's like his whole thing is he was when he was scolding, all his, is you're requiring too many people that are like super smart Jack of all trades. And you just have to break everything down into like smaller specialized work units. And, it's something that I think about too is like trying to scale this. You can't be doing everything you can't require everyone involved to be like super smart, super versatile. You got to start putting in like specialists at some point. And he's, the master of it. Probably the best of anyone we've looked at.

[00:39:54] Brent Sanders: That comes at a cost though, right? To delegate or leverage out work for every person you add, there's a communication cost. And the same thing with like microservices and coding, if you can break up software systems and now you have to have a really complex thing, which is like a message bus or, in the, going back to the analogy of just having a person.

You now have the emails that go between you. And so now you have to have really good like collaboration system. And so I agree though, you have to have that it's so much infrastructure as you start to add it. You're like, ah, email doesn't work for this. I need to have a conversation with four people to do one task.

It's yeah, this is a great way to do it efficiently and cost-effectively, but then the conversation overhead, and I can see. How, when, I think you might just software called work smart. So I wonder, like having a tech enabled operating system figured out whether that's something you build or you just have a low code or notebook stack of Hey, we just use Rome and, whatever.

I think this is what everyone is envisioning. Like the office software world, like notion is trying to become cause. think everyone see that, that ideal state of Hey, we can work less, we can work smarter and we can get more done and spread the work around to more people. That's actually a cool idea of, distributed workforces.

So I don't know, probably a lot of buzzwords and corporate strategy built in there, but I can see it. I can see why you'd want to do that in, especially for, a a structure like we're working on where there's just a lot of. Stuff. You've got to do talking to people, contacting people, outreach and.

[00:41:28] Colin Keeley: Yeah. I think if you believe that all software does stay sick chicken, like this assembly line style is the natural end point. And it's you got to get to a more stable, equilibrium point to do that kind of thing. If things are still changing, things are growing really quickly. You aren't there yet.

But it works for the businesses that they're buying.

[00:41:46] Brent Sanders: Yeah. Going back to the granularity of tasks, like I. I think that I'm just trying to think, I spend my time, I'll do something a task once. And once I do it twice, I'm like, you know what? I'll start to record it. And then I just never take the time to do it. And I think that's a good resolution pulling out of this, conversation is I'm going to start doing that.

You get an hour a week, an hour, a day or something of just review the tasks. Maybe I need to download WorkSmart maybe I'm getting converted to their software, but it would be great to just record my day. And if it was easy to sort through and be like, okay, what did I do?

What can I automate? I think that's actually, that's my new, I'm changing my takeaway. This is my new takeaway, which is basically your takeaway.

[00:42:25] Colin Keeley: So I guess, I guess if you want to see it, I'll embed this in the show notes. It's at ColinKeeley.com otherwise, I'll probably add a few more things and then I'll set a live when this podcast goes live.

[00:42:34] Brent Sanders: Fantastic. Good work. Great research.

[00:42:37] Colin Keeley: I think, yeah, this is a fun one, is definitely a learning experience. But anyway, take care, everyone.

[00:42:42] Brent Sanders: Thanks for listening.