A candid story for founders eyeing an exit who want to see what getting noticed, and getting paid what you’re worth, actually takes.
You will discover that when it comes to mergers and acquisitions, there’s more than one way to skin a cat.
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Transcript
I once helped sell a company for $20 million using stand-up comedy. When you read that sentence, I’m sure a lot of questions enter your mind. Most of them start with, “What in God’s name possessed you to?” And the sad but true answer is, “I have no idea.”
We obviously didn’t work with Quiet Light. I was a liberal arts major. I wasn’t schooled in the vagaries and nuances of the mergers and acquisitions process. Apparently, nobody in this organization was, because the CEO came into my office.
I didn’t make slides, but if anyone wants to connect on LinkedIn, that’s me.
So the CEO came in. He said, “Matt, don’t tell anyone. We have to sell the company. I need you to make funny product demos.” So the idea was, we’re going to make a funny product demo. He actually hired a professional comedy writer to script them, and we’d go to executive conferences like Davos, only a bit one step down, demo the funny product, and people would laugh and see it and buy our company.
The First Demo: Atonement.com
The product that was the strategy. The product was, and you know it worked, a dynamic website, WYSIWYG builder, 1998, drag and drop, build a website. Only this one lets you connect to databases, client-side interactivity. Middle of the dot-com boom.
So we decided to make a fictitious .com and demo that. We were Jewish, and they say you’re supposed to scratch your own itch, and our itch was guilt. So we made Atonement.com, where you could go and repent for your sins, enter your religion, and what was the nature of your sin, venial, mortal, carnal, whatever, and it would mete out Hail Marys or tell you to wait to the Day of Atonement. Or if you were the wrong kind of Protestant, it was bad news.
Worst Warm-Up Act Ever
Anyway, so we got to the event, and these conferences happen. I didn’t know they’re secret, like Allen & Company. They put the most important people in the front of the room. Unlike BoS, they put the least important people in the back.
So I was sitting in the back, and just to give you a sense of who was at this event besides my CEO: to my right was Yossi Vardi, who was an Israeli entrepreneur investor who just sold the company for $300 million. Me, Peter, and Peter was sitting next to Eric Schmidt, who was still at Novell. So we were the least important people.
And then the first guy got up on stage. The main speaker was a chap named Steve Forbes of the publishing empire, and he was trying to get the Republican nomination for president. It was political, and not only that, but in America, Republicans are not only pro-business, you may know that they have a socially conservative streak. It’s a combination of like populism and evangelical Christianity. So, no one doubted Forbes was pro-business, so he decided over dinner to talk against abortion, and not only that, but to describe the procedure in graphic detail.
So in stand-up comedy, there’s something called a warm-up act. Worst warm-up act ever. The tension in the room was palpable, but we got on stage because we had no choice. Did the demo and just took the house down. I think people wanted a reason to laugh. I think it was just so tense. So we did it. It was hilarious.
Our VC was in the room getting business cards, belle of the ball, met everyone there, but none of them offered for some reason. None of them offered to buy our company. So, it’s a startup, you pivot, you try again.
Take Two: Start Your Own Religion
So we said, okay, maybe the problem was we weren’t big enough. So instead of just guilt, we made a new fake .com site for the next conference where you can start your own religion. So we hired the comedy writer, I built the funny product demo, and we actually then decided maybe it’d be better if it were musical. I’m not making this up. We hired a composer who writes like commercial jingles in Hollywood, and a professional singer who got on stage and sang two original songs as part of our demo.
It was hilarious. Again, took the house down. Everybody laughing, but for some reason, they loved it, they didn’t buy our company. I don’t know.
Third Time Lucky
So we’re like, okay, we need to be more obvious. So the third time, lucky, we decided to make the demo about IPOing, make it just like more on topic. It was the middle of the election, the middle of the dot-com boom. We’re going to IPO the country. So, hypocrisy. And we brought the singer back and wrote new music.
And then, just to make sure we didn’t screw this up, Peter went through the attendee list, made a list of all the key people in the audience who could potentially broker or buy a company like ours. He gave them each a speaking part on stage in the demo. Mary Meeker, Vinod Khosla, like half a dozen big muckety-mucks, I’m not making this up. Brought them up on stage. They did their speaking part.
And sure enough, after this one, the chairman of the board of Macromedia came up to Peter and said, “We’re actually looking to buy a company in your space. Blah blah blah. Can we talk?”
Negotiating for Dummies
Next thing you know, negotiations ensue back and forth, and at some point during the negotiations, I walked into Peter’s office to get him for a meeting or something, and I noticed on his desk, God is my witness, a bright yellow copy of the book Negotiating for Dummies. Not Never Split the Difference. And so I just, I was like, “Peter, come on,” and I like stuck it in the drawer and took him out.
Anyway, so eventually it went through. We sold the company for $20 million, and I thought, great, this was a great outcome. I went over as part of the acqui-hire. I made a bit of money. Investors made a bit of money. Peter made a lot of money.
The $78 Million Memo
Went over to Macromedia, and like my first week on the job, they gave me a cubicle there, and whoever was in my cube before me left all their crap. So I was just cleaning out, and there was binders on the shelf. And I grabbed the first binder, and I opened it, and it was like a deal memo for an M&A transaction, straight to the recycling bin. Grab the next one, it’s another deal memo to the board.
And then I thought, wait a second, I wonder if there’s a deal memo up here to purchase our company. So I very quickly start going through the binders, and I find the one, you know, proposal to purchase Elemental Software. I flip through and get to the very end of the thing, and it says that the board authorizes Macromedia to purchase Elemental Software for up to $78 million.
I was having a great day. Amazing how perspective can change.
Twenty-Five Years of Silence
But as it happens, I was having dinner with Peter that very night, so I tore that paper out, stuck it in my pocket, left, went to dinner, and I waited till he had a couple drinks in him. I said, “Peter, you’re not going to believe whose cubicle I got. What I found, the binders.” He’s like, “And?” I’m like, dragging it out. I gave him the piece of paper. He looked at it and he said, “Fuck.” He crumpled it up. He stuffed it in his laptop bag and he said, “Never tell anyone about this.”
And I didn’t, for 25 years, until now. But I caught up with Peter over Christmas, and we were just reminiscing. And I was like, “Do you remember I found that piece of paper?” He’s like, “No, I forgot about that.” I said, “You swore me to secrecy,” and he said, “No, you have to tell that part. That’s the punchline. There’s no point in telling the story if you don’t tell them the piece of paper.”
So he, you know, removed my non-disclosure agreement, and here I am telling the story. And thank you for the opportunity.
Matt Lerner
Founder, SYSTM
Matt Lerner is a bestselling author and 15-year Silicon Valley veteran, and three-time BoS speaker. Matt was part of the early growth team at PayPal, and a Partner with the VC fund 500 Startups.
Since founding SYSTM, Matt has worked with over 200 seed-stage startups to help them develop and execute their growth strategies.
He’s been featured in the First Round Review and the Harvard Business School podcast, and he’s guest lectured at Stanford Business School.
You can check Matt’s talks at BoS here.
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