Andrew Smith is the founder and CEO of Outrider which provides autonomous yard operations for logistics hubs. The company has raised over $53 million from investors such as NEA, 8VC, Loup Ventures, Schematic Ventures, Fraser McCombs Capital, Prologis, Koch Disruptive Technologies, and Goose Capital. Prior to this, he cofounded ATDynamics which got acquired by Stemco.
In this episode you will learn:
- How massive this space of yard trucking is
- How Outrider is preventing future supply chain disruptions during crises
- What CEOs should be spending 90% of their time doing
- Why to ditch your NDAs, but ask better questions of investors
- How IP is your moat for protecting all of your progress
- Andrew’s top advice for other founders
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About Andrew Smith:
Andrew Smith is the founder and CEO of Outrider which provides autonomous yard operations for logistics hubs. Andrew Smith is dedicated to the rapid commercialization of environmental technologies.
Prior to Outrider, Andrew Smith was Founder and CEO of ATDynamics, Inc., an Inc. Magazine Top 500 Fastest Growing Private Companies in America. With ATDynamics, Andrew Smith redefined the shape of the modern semi-trailer with TrailerTails®, rear-drag aerodynamic devices capable of reducing trucking industry fuel consumption by over $2 billion annually.
STEMCO/EnPro Industries acquired ATDynamics in 2015 after the successful deployment of over 40,000 TrailerTails® with over 500 trucking fleet customers in 9 countries. Prior to ATDynamics, Andrew Smith was a management consultant focused on international economic development, worked for GE Wind Energy and managed an electric vehicle demonstration program at the Massachusetts Division of Energy Resources.
Andrew Smith serves as Director or Advisor of Azevtec, Branch Technology, Xstream Trucking, Aperia Technologies and Rockywold-Deephaven Camps. Andrew Smith work with environmental technologies stems from a passion for pristine wild places.
Andrew Smith has led expeditions in Patagonia, the Himalayas and Alaska. He holds a Physics degree from Middlebury College and an MBA from the Tuck School of Business at Dartmouth.
Connect with Andrew Smith:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting founder. A founder that I think is going to teach us a thing or two about entrepreneurship and building something from nothing, scaling it, financing it, competitors copying your technology, and you name it. So without further ado, let’s welcome our guest today, Andrew Smith, welcome to the show.
Andrew Smith: Thank you so much for having me. I’m excited to be a part of it.
Alejandro: So originally from Massachusetts. You grew up traveling back and forth to New England and spending some time in the woods. So, tell us about growing up.
Andrew Smith: I thank you for that. Yeah, I grew up in Salem, Massachusetts, but spent a lot of time in my childhood going up to northern New England, spending a lot of time in the woods, and got very passionate about exploring pristine wild places. That certainly had an impact on how I thought about what type of career and businesses I wanted to start in the future.
Alejandro: And also getting into some excitement with Ferraris and Porsches also gave you some perspective as well.
Andrew Smith: Yes, absolutely. I directly credit both of the companies that I’ve founded and built with having a passion with the outdoors, but also in my early days, I received some car and driver magazines, and I got really excited about Ferraris, Lamborghinis, and Porsches. In fact, I covered the walls with a lot of posters of them. Then in seventh grade, I had this fantastic science teacher who pointed out that Ferraris, Lamborghinis, and Porsches got really bad fuel economy. So, I declared to my parents in eighth grade that I was going to focus my life on environmental technologies. You had a lot of different opportunities there. I’ll say it’s as applicable back then as it is today that with 7 billion growing quickly to 10 billion people on the planet, I feel the biggest business opportunity is how we do everything we do, whether it be transportation and sports cars to the food we eat, the materials we use, how we ship product, etc. To be more environmentally and sustainable is a massive opportunity for entrepreneurs.
Alejandro: That’s amazing. In your case, you ended up studying physics, so what got you into physics?
Andrew Smith: What I realized early on is, there were fascinating things to be built, but there were also fascinating things to be learned about why technologies weren’t out in the market already. My first job ever, I was managing an electric vehicle demonstration program in Massachusetts, and here was this incredible thing. If you took the engines out of Geo Metros and put in lead-acid battery packs, rather than going to the gas station and burning fuel, you could drive your car by plugging it into the wall. That really inspired me that there was great technology out there. There was a bigger question, though, as I did these initial summer internships on this electric vehicle program. I realized it wasn’t just science alone that was holding things back; it was understanding the markets and how to package these products to change consumer behavior over time. So I studied physics. I wanted to get a good education in science, but I realized I really wanted to also understand the business side of things. So coming out of school, I complemented that physics background with being a management consultant and working in a lot of different industries and a lot of different companies.
Alejandro: What do you think makes consultants. There are so many entrepreneurs that have been consultants in the past. You also have the ones that have been investment bankers and perhaps VCs, but there are a lot of entrepreneurs that have been consultants before. What kind of background do you think consulting gives you to tackle entrepreneurship so well later?
Andrew Smith: That’s a great question. There are various tracks that can give you different strengths, but I’ll tell you what I’ve found from the consulting background. Being a consultant, what it teaches you is that you can dive into a brand-new industry or brand-new company and be really intensely looking at the dynamics of that industry. Literally, in a few weeks’ time, you can understand 80% of what’s going on. The additional 20% takes time, and experience, but consulting empowers you to understand you can learn new industry quickly. For example, with my first company that was involved with tractor-trailer aerodynamics, I had zero experience with the trucking industry. I had a little physics background, but it never focused on aerodynamics. But that consulting background, once I learned about an interesting market opportunity, it gave me the confidence to say, “In a few weeks’ time, I can start to understand what’s going on here.” That’s critical to any entrepreneur. Some entrepreneurs are diving into things that they know well. Others just have this incredible confidence and drive to learn everything about a new sector and dive in headfirst.
Alejandro: Would you say that during this time at one point you made the decision that you wanted to be an entrepreneur, or what happened there because, obviously, it took everything a different course, and you decided to go to business school.
Andrew Smith: Yeah, absolutely. I had a great experience where I was talking to another entrepreneur at one point, and I talked about the consulting background. He said, “Whispering to the pilot is great, but eventually, you should take over and fly the plane.” So, I absolutely, from early on, knew that I wanted to build something that I wanted to solve big problems. Entrepreneurship was certainly something that I was excited about from day one. There is a great question about when is the right time to do that transition, and when is the right time to dive in? Again, through consulting, it was an ability to see lots of industries, study patterns across industries. I went to business school, then with the objective of starting a company, and business school created a great environment to incubate various company ideas until choosing one and going full force forward.
Alejandro: Tell us about your frustrations, and the problems that you saw, and some of the gaps because that really got you into starting your first baby. Tell us the process.
Andrew Smith: Absolutely. When I went to business school, I knew I wanted to build an environmental technology company, and I looked at a lot of sexy areas. There’s a lot going on in the sustainability space, but just like anything, lots of networking and letting people know what you’re looking for starts to bring lots of interesting ideas to the table. Ironically, my first company was founded because I went ice climbing with a good friend of mine in New Hampshire. That’s when you strap on ice axes and metal points to your feet and climb up frozen waterfalls. It doesn’t seem very related to entrepreneurship, but this friend of mine is another entrepreneur. He started a company that had some really cool concepts related to inflatable tents. He had been contacted by an inventor who had wanted to put inflatable bubbles on the back of semitrailers. I ended up contacting this guy, and it turned out this guy wasn’t alone. There were dozens of frustrated aerodynamicists around the world who pointed out that the worst shape to pull down the highway at 60 miles an hour is a big rectangular box. If you do some very minor modifications to the big rectangular boxes that we ship things in, you can save billions of dollars annually for the long-haul trucking industry. Literally, just putting these things called trailer skirts, which are aerodynamic panels to keep air from curling under the trailer. By putting this tail, which is called a trailer tail on the back of the trailer, you can improve fuel economy by 8%+, and this results in 4 to 5 billion annually to the long-haul trucking industry. I did some simple math on that, and I realized that there was a big opportunity there and locked our sites on addressing it.
Alejandro: So how did you go about addressing it and bringing the company to life?
Andrew Smith: Well, that’s the fun part. My number one advice for entrepreneurs is when you see an opportunity that you think you can redefine the new normal. So, when I say redefine the new normal when I look at thousands of trucks on a daily basis or on an annual day basis, billions of dollars out the window just because of the shape of their trailer, it’s clear to me that the new normal is going to be aerodynamic trailers. With the current company, which we’ll talk about a little bit later, Outrider, when we think about how distribution yards operate and a whole bunch of diesel trucks inefficiently moving trailers around, it’s very possible to visualize the new normal. Once you feel like you can see the new normal, the next step is putting a stake in the ground and saying you’re going to fix it no matter what. That’s exactly what we did. We declared ATDynamics to be focused on addressing aerodynamic drag of the long-haul trucking industry, and we put a business plan together and started the hard work of building a company.
Alejandro: Got it. Obviously, you guys did quite a good run here. You built it to 75 employees, and then the company ended up getting acquired, and that was a nice outcome for you – investors to 5x return on the investment. There’s one thing I want to ask you. I know that for you, it was quite important the way that you viewed intellectual property, and how you were able to avoid being hurt by competitors copying your technology. Tell us about this.
Andrew Smith: Intellectual property is one of those key areas for entrepreneurs to understand, and it’s a critical part of how we promote innovation in this country and around the world. It will not build you a business by itself, so just the fact that somebody has a patent or you have a patent, that doesn’t mean anything. But at certain times in a company lifecycle, that intellectual property and trade secrets become very important. In the beginning of ATDynamics, we got advice there, and certainly, on the current company, as well, we got advice there. But essentially, the key thing is to not just patent the way that you are thinking about pursuing an opportunity but thinking about all the other modifications. If you have three or four ways you could solve the problem, and you think there’s a best way, you don’t want to leave yourself open to someone copying you. So, in the case of ATDynamics, we learned a big lesson there. We got good advice. We filed patents around our technology early on. And sure enough, just when everything was starting to go really well, and we were starting to deploy our systems with hundreds of trucking companies, and things were taking off, we had this fly-by-night company all of a sudden go to all of our customers and say, “We can do exactly the same thing, but we can do it for 30% cheaper.” They avoided all the upfront development, and they developed essentially a replica of what we were doing. It was an amazing thing to see in a very cost-conscious industry a lot of companies all of a sudden, delaying orders, slowing down sales processes because you had a company coming in and essentially stealing your technology. We went through the process of enforcing that, and that was a great lesson that I really – by the way, we won that lawsuit. That was a lesson that I hope most entrepreneurs don’t have to face, but the reality is that once you go through that really hard work of building a business, you need to have all the tools at your disposal, not only the best product and the best service to defend your situation, but for people that are truly just replicating what you’re doing, that intellectual property can be a great stick to protect what you built. That learning is certainly passed on to what we’re doing with Outrider. As we’ve invested millions of dollars and tens of thousands of hours in the current company, we made sure we had a very strong intellectual property field behind what we’re doing as we invested and build this new industry for our customers.
Alejandro: Very cool. By the way, how long was the acquisition process from beginning to end? Was it a quick thing, or did it take some time?
Andrew Smith: That’s a great story. My other advice is from real experience. The absolute best way to get acquired is not plan on getting acquired. We were building the company. We were defining the market. We had our core team in place, and the company was on a great growth trajectory, and as soon as you’re doing that, as soon as the world starts to see that, that’s when the potential acquirers get hungry. The process did go on for a while because you will tend to get a lot of inquiries early on. My advice for people building and for other entrepreneurs is, expect it to be a long drag-on process, and for the best acquisition outcomes, there will be lots of people interested in you. It won’t be the first opportunity that comes across the plate. I will say realistically, we had people reaching out to us for one to two years beforehand, and then it came down to a couple of people getting serious at the end of it. Then, from a first-time entrepreneur standpoint, it’s critical to have the right counsel and bankers on your side so that you can continue to focus on having the business be strong, all the way through the close of a deal because there are lots of things that can throw off a deal at the last few minutes in time.
Alejandro: Absolutely. And after this, once it got done, then you spent some time advising companies. You were spending time on, for example, tech, trucking, and also thinking about automation. Certainly, as they say, once an entrepreneur, always an entrepreneur, but this time around, it took you a couple of years to go at it again. So, why did it take you so long?
Andrew Smith: It was a really fascinating thing. With the first company, I spent 9½ years bringing that company from a cardboard box and tape prototype we built early on to, as you mentioned, 75 employees, 40,000 of these aerodynamic tails on the road with 500 companies. Certainly, at the end of this process, when we got acquired, it seemed like a dream come true. Then, I did move into that phase of advising and being on the board of a number of companies. At the end of the day, though, it goes back to that consultant versus entrepreneur standpoint. Certainly, the entrepreneurial drive is to see all the pieces come together and building something. I had spent a bunch of time. I got approached by several autonomous vehicle companies. I had been on the board of a robotics company, so I was closely following all of the technology advancements in the world. The learning from the first company was all the technology in the world is great, but it doesn’t build a business. You have to figure out how it can be deployed efficiently and effectively with customers. I realized there were a lot of people doing autonomous vehicles, but a huge opportunity to put autonomous vehicles into a package that made sense to the end customer. Again, it was a great period of time to catch my breath, but certainly, the itch to build something again was right there, and there were a lot of lessons learned to apply to the new company.
Alejandro: What was that this time around, because after a couple of years of sitting on the sideline’s kind of thing, even though you were still involved as an advisor – we were talking about opportunities and jumping into opportunities and taking over the pilot seat and taking over the plane. At what point do you turn this around, and “I’m going to jump on this pilot seat again, and make it happen”?
Andrew Smith: Our family moved out to Bend, Oregon, after selling the last business. Bend, Oregon is a fantastic mountain town, and a pretty great entrepreneurial community, actually. There’s a great story. We have a ski mountain about 25 minutes from our home, and we took our kids there, and the youngest child, who was a couple of years old at the time, fell asleep in the car, and so I decided to stay back in the car. My wife was going to go skiing with the other children. I looked at my wife, and I said, “I’ve been thinking about this new company a lot, and I know we’ve had a couple of great years here taking a break from the entrepreneurial chaos, I’m really excited to start this new company. My wife, who was excited to get skiing and was appreciative of me staying in the car with the child that had stayed asleep, looked at me in the eye and said, “You know what? You’ve been talking about this now for several months. You’re really excited about it. I support you.” So, sitting in the car waiting for the child to wake up, I hammered the cellphone for a bit and brought in our first checks and got a couple of employees I used to work with to quit jobs and join the new company, Outrider. The next morning, I woke up next to my wife, and she rolled over, and she said, “I’ve been thinking. Why don’t we wait one more year until you start the new company?” But, of course, by that point, it was too late.
Alejandro: By the way, what a productive snooze from your child. You get everything in a little nap. So, very cool stuff. How did you go about finding the team? Was it a tough process of like getting the band together here for this next round?
Andrew Smith: Yeah. That expression is very relevant. One of my biggest learnings from building the last company, and this is classic, this is an unknown, but it’s incredible how important it is. In my last company, I spent 10% of my time building out the team, which is still a lot of time. I spent 90% of time doing everything else. The best CEOs in the world spend 90% of their time on building the team, and 10% of the time on everything else. That was the key thing in how I thought about building this new company. So every time I needed to figure something out in the last company, I went and tried to figure it out, and you just cannot build at the same speed as finding people that have done it before, and bringing those people together with a clear strategy and vision guiding them. All of my work in those early days was bringing in the fantastic people I had previously worked with or looking for more fantastic experts in the field. So, again, there had been a lot of hype about autonomous vehicles out there. I pounded the pavement and spent time with a bunch of different people in California and some groups in Texas. I got introduced to a co-founder of a company, which had been focused in robotics and automation for over 15 years. It has been acquired by Lockheed Martin and led every ground vehicle, heavy vehicle automation program for the Department of Defense over the last decade, so big autonomous trucks. This group that had worked together, some had departed Lockheed Martin. They had spread apart a little bit, but when we met these engineers, they said, “You know what? This autonomous yard application that Outriders focused on – this is where autonomous vehicles will be highly successful first. Let’s bring the band back together.” In about six weeks, we had 12 of the best autonomous vehicle engineers in the world joining Outrider to build this company and make this new reality. That upfront time building a team, it would have taken us years to get that team together, and that networking upfront makes all the difference in the world. We do that across all departments, not just engineering. We brought in the best commercial experience. We brought in the best legal IP experience. We brought in the best robotics and automation experience. You get those fundamental pillars in place for your team, and you can move mountains as a company.
Alejandro: Very cool. For the folks that are listening, what ended up being the business model of Outrider?
Andrew Smith: Not everybody spends their days on distribution yards, but it’s incredibly relevant to everything that people eat, use, buy, order online, etc. In the United States, there are over 10 billion tons of freight that’s moved by truck annually. The majority of that passes through one type of a distribution yard or another – the distribution yard, picture a big warehouse or production facility, and a big parking lot outside. You have over the road trucks, the trucks you see on the highway, bringing trailers into those distribution yards to drop off product, and you have trucks coming to pick up product on the other end. So every trailer that gets delivered to a grocery store, every trailer that comes from a factory, all these things pass through these distribution yards. When they get to distribution yards, there are certain trucks that are called either yard trucks or shifters. They have funny names like yard goats or yard dogs, but they are these specialized trucks that are manned on a daily basis. There are literally over 50,000 of these operating on a daily basis in the U.S. as we talk right now. These yard trucks shuffle those trailers around the yard. You can picture you’re inside a warehouse, and you need the trailer full of toilet paper brought to the loading bay. Somebody calls out on a radio or through a tablet, and these yard truck drivers move these trailers a couple of hundred feet from parking lots to loading bays. Right now, these trailers in these yards get misplaced a lot. Right now, these over the road truckers have to spend a lot of time navigating in confined environments doing backups of their trailers in these environments. It creates a lot of congestion. It reduces the daily pay that a truck driver can make because they’re stuck in traffic at these distribution yards. It’s a really hazardous environment. You have 80,000-pound pieces of equipment with people jumping in and out of them 24 hours a day, so there’s a real safety issue. Then inside the warehouse, if the right trailer isn’t at the right place at the right time, it can create real backlogs in the velocity of how product moves through the supply chain. It’s a really unsafe, inefficient area that’s been doing the same thing for the last several decades, and it’s been doing it with big idling diesel trucks that on an annual basis are spitting out the fuel equivalent to a coal-fired power plant across the country on a daily basis just to move trailer just a few hundred feet. What Outrider has done is address all these issues with an autonomous zero-emission system that can be simply controlled through a management software interface and linked to the other supply chain operations of Fortune 500 companies. Essentially, we’ve redefined what a modern yard looks like, and have an opportunity to dramatically enhance safety efficiency and sustainability of how we move freight.
Alejandro: Very cool. I know that you guys have raised quite a bit of money for the business. How much money have you guys raised so far?
Andrew Smith: We came out of stealth mode in February 2020. There are over 53 million dollars in the company from top tier investors.
Alejandro: Very nice. You’ve learned quite a bit when it comes to raising money and also dealing with investors. You’ve been able to really differentiate, and I’m sure that people listening are really going to learn from this, learn to differentiate those that are interested in pursuing an investment in your business from those we see that are just pursuing information either from the market to place an investment or from competitors of portfolio companies. How do you differentiate the ones that are for real from the ones that are just playing their part?
Andrew Smith: I certainly have a lot of experience now and a lot of advice when it comes to fundraising. I think at its core, 1) you do have to have a phenomenal business that makes sense and to have a phenomenal business that makes sense, you have to understand your customers’ problems and come up with very unique and differentiated ways to solve those problems. Certainly, that is core to having a business. But then, there really is an art to raising money, as well. I think that for a lot of first-time entrepreneurs, there’s this idea that “I’ve got to take this idea around, and people are going to jump all over the idea, and it’s always about me pitching the investors. I think there’s a screening process that’s critical, and that will save entrepreneurs a lot of time to make sure that the investors that you’re talking to fit what you’re looking to do, as well. The consequence of not doing that is there are a lot of investors where it is zero cost to them, and all benefit to them to have every company out there to tell them all the secrets of their business models, and share that information. There is sort of a code among professional investors that that information isn’t shared. However, in practice, a lot of information gets disseminated. My advice is, have a fantastic business, and if you have a fantastic business, there are a lot of investors out there that should be focused in your industry area. Then when engaging with those investors, the first call should always be a screening call of the investor before it’s a screening call of your business. That will save you and the investor a lot of time and will allow you to protect your information. Now, one thing that is also a rookie mistake from an entrepreneur is thinking that they shouldn’t be sharing their information with anyone. That’s not true either. You should have a business model that’s strong enough and an elevator pitch that’s strong enough to be able to give a high-level overview of your business and not go around asking people for NDAs in order to have a first conversation. But, in general, screening those investors will save hundreds if not thousands of hours for a first-time entrepreneur.
Alejandro: When you’re screening investors, and engaging, and understanding who is going to be in it for the long run, and who is going to potentially behave when times are not as great. Ups and downs are the journey of entrepreneurship and building and scaling a business. During that screening process, is there one question that you typically ask the investor where you’re really paying attention to what kind of answer they’re going to be giving you?
Andrew Smith: Yeah. Absolutely. I think just turning around and asking the investor after doing a very short elevator pitch – turning around and asking the investor early in the process, “Does this fit with your thesis? Who are the partners that are specifically building their portfolio of companies in this space, and why would you invest in us versus someone else at this time?” This will shed insight on how the investor is thinking as opposed to you having to go through every detail of your company before getting the most common answer of “Hey, this is nice, but we’d like to keep watching you for a while before we do anything.”
Alejandro: Understood. Imagine, Andrew, that you go to sleep tonight, and it seems that in your family, when one is sleeping, good things happen. So, imagine you go to sleep, and you wake up in five years, like an unbelievable snooze, and you wake up in a world where the vision of Outrider is fully realized. What does that world look like?
Andrew Smith: That’s absolutely core to our focus going forward. Our objective is to provide the software platform upon which the future supply chain yard operations operate. Our objective is to have thousands of autonomous electric trucks operating on our software platform, creating safer work environments allowing our customers to allocate employees to higher-value tasks and repetitive dangerous tasks. With that, creating a much more resilient supply chain that isn’t as negatively affected when there are global pandemics, that isn’t as negatively affected when there are surges up and down in energy markets, and that isn’t negatively affected or causing problems for our customers as there are surges in demand in their supply chain. So, that resilient supply chain based on our software is our objective going forward.
Alejandro: Very cool. One of the questions that I typically ask the guests that come on the show is if you had the opportunity to go back in time and let’s say you have a chat with that younger Andrew that is coming out of business school, exploring what idea or what company is going to make sense. If you were able to go back in time and have a chat with that younger Andrew, where you’re able to bring all this incredible wealth of knowledge that you’ve built with Uprider or with ATDynamics, and give that younger Andrew one piece of advice before launching a business, what would that be and why knowing what you know now?
Andrew Smith: The advice I will share – I will turn it into one piece of advice, but it comes from two early advisors that I had. One of those advisors was what I always defined as the swing for the fences, take no prisoners, go big advisor. I had another advisor who early in my career, with ATDymamics especially, he was about getting your hands dirty, and going and sitting with that truck driver, and getting out of the truck with the truck driver, and seeing how that end-user of your product interacts with your product, and getting really hands-on, and getting your hands dirty, and digging deep into it. My advice to myself really is a result of getting that advice and then applying it, which is the opportunities for entrepreneurship are massive, and you should go for things that will have the potential to completely change how we ship product, for example – completely change how we produce energy, completely change how we grow our food, etc. These big-picture items because a lot of persistence and good people together can do amazing things. At the same time, to be successful, you can’t get to the end of that vision without being incredibly hands-on in the early days. So, get your hands dirty, understand the customer needs. In the case of Outrider, we have people that are on the ground using our systems to operate people’s yards and understanding exactly what has to happen in that product to make it an exceptional experience for the users and the customers. Those two pieces of advice create a very powerful entrepreneurial path for anyone going forward.
Alejandro: Very profound. So, Andrew, for the folks that are listening, what is the best way for them to reach out and say hi?
Andrew Smith: Fantastic. Definitely, go to our website, outrider.ai. We have a lot of information there and contact us for information. We hope that our path, not only bringing new automation solutions to market, but creating a new sustainable planet, will inspire lots of people, and we would love to hear from folks.
Alejandro: Amazing. Well, Andrew, thank you so much for being on the DealMakers show today.
Andrew Smith: Thanks so much for your time.
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