Neil Patel

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Dane Madsen has proven to be an incredible deal maker. He not only built one of the most famous companies twice, but sold his startup for $100M. Here’s what it took, and his essential advice for today’s entrepreneurs.

Co-founder of Dane Madsen recently appeared as a special guest on the DealMakers podcast. In this exclusive interview he revealed the process of building and exiting one of the most famous companies ever built, as well as how new startups can future proof their ventures and create better profitability and sustainability.

In this episode you will learn:

  • How to compete with the bigger players and still win the fight
  • Structuring an all cash deal
  • The importance of picking the right cofounders
  • The role of great branding
  • How product market fit looks like
  • Corporate governance and the real duty of the CEO
  • The best way to prepare for the next crash


For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.


The Ultimate Guide To Pitch Decks

    Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

    Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

    About Dane Madsen:

    Dane Madsen is one of the cofounders behind Dane is an experienced operating leader with a primary focus on start-ups in marketplaces and technology based media, Industrial Internet of Things and sensor data, and fresh water technologies spaces.

    Dane led multi-national, cross-functional, distributed workforce teams in leading edge technologies and development. He has deep experience in product/market fit, product development, sales and marketing team strategy, with extensive financial, IP, and operational strategy development.

    Connect with Dane Madsen:

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    Intro music playing….   

    Female:            Welcome back to the DealMakers Podcast Show with serial entrepreneur, Alejandro Cremades, bestselling author of The Art of Startup Fundraising and cofounder at Panthera Advisors. In this podcast, we ask our guest about their successful acquisitions and financing rounds.

    Alejandro:        Alright. Well, hello, everyone to the DealMakers Show. So today, we have someone very special. We have a special guest and I think that this guest is going to be able to provide a ton of value to our listeners today. And based on the background experience, I mean we have another cofounder of Yellow Pages and I think that is going to be very interesting to understand what that process was and then also to get some valuable information as to what are some of the dynamics behind the early stage companies, no, in terms of product market fit and other important issues that the startups really need to nail it. So with that being said, Dane, thank you so much for being on the show today.

    Dane Madsen:               Hey, thanks for having me. I appreciate the time.

    Alejandro:        So I wanted to ask you just to get started here, how did you get started with Yellow Pages? What was the story behind?

    Dane Madsen:               Well, it jumps a lot of time. I was raised in small business. My dad ran a small business. I ran small businesses. When I decide to get a suit and tie job which was my start was with Shearson Lehman Brothers, I was in the retail side and what was important, talking time expansion from the 60s through the 80s, the issue was that the Wall Street side or the big company side had big budgets for advertising and little businesses had Yellow Pages. When I was with Merrill Lynch, the ball and the tiny shop without out of Wall Street and we had Yellow Pages. And it really sort of focused where in fact the Yellow Pages became at the time it was like a credit runner. If you weren’t in Yellow Pages often consumers didn’t even think that you were a real deal.

    Alejandro:        Right.

    Dane Madsen:               That rolled in to the mid 90s when I was opening a new division for Sutro & Co based in San Francisco, another New York Stock Exchange firm and Sprint came to me who was the dominant Yellow Pages, the incumbent Yellow Pages provider in the Las Vegas area and told me, “Well, we need your ad copy by Friday,” and I was unable to do that because we didn’t have a commitment on our lease and I told them, “Well, we’ll just get it next time.” And they said, “No, no, it will be a year from now.” Well, that was going to be a problem for us. So we did go at risk. We were able to close that up but that was the moment when I was on the phone with a friend of mine who became my cofounder and just said, “This is crazy.” It was a month after Yahoo had gone public. We still have yet eBay but Amazon was still a glimmer in everybody’s eye. There’s such thing as Google or Facebook or any of that. I said this is a great use for the internet and I had AOL at the time on this. I slipped around and searched and there was no This is one of the greatest brand, a 120 years old. The telcos had just burned that in to everybody’s mind. They thought they had brand but what the users and the advertisers thought it was was Yellow Pages. So a third person who was a cofounder that exited pretty quickly actually got on the phone, came back to us and said, “Look, I found a secret organization. They control all the URLs.” What he had found was this then network solutions or the internet and his great value is that he was willing to stay on hold for seven hours to get the registration. The URL had actually been registered before but somebody went in default on it so we picked it up. We were in the business for $132 and we had no idea what we were doing. So we built the first search engines by hand by working at night. We all kept our day jobs. We worked at night. We called. We sold. And about two years later, I was able to attract an outside investor. We’ve gone to all the telcos and the telcos themselves have said, “Yeah, no, we got our own brand. The internet will never be anything,” and I always find that laughing.

    Alejandro:        Right.

    Dane Madsen:               But in 1998, we were able to attract a serious investment. Well, I wasn’t interested in leaving Sutro so we hired a CEO and then another company, a newly formed entity who was trying to be like an internet capital group or a CMGI approached us and acquired a controlling interest in Yellow Pages. They did it for paper, notes to be paid within three years. We had it valued by I believe it was PWC and they came up with a value of 98. It was just anybody’s guess.

    Alejandro:        Right.

    Dane Madsen:               So we have sort of modelled along. I left Sutro about a year later and actually joined other company, joined the incubator as the managing director of corporate development. So I did all the M&A work. And then everything hit the fan in 2000. Nobody could get any money. The incubator was out of money and Yellow Pages was sitting there as its most valuable asset but then they owed the original founders significant amount of money. So we went to them, tore up the paper, took the company back and we were–you know this was June of 2000. The original 5 million we had raised was gone. There was another 2 million in outstanding debt and we weren’t going to be able to make payroll.

    Alejandro:        Right.

    Dane Madsen:               And then we would get another, shut our servers off. So I went to my original investor and again high net worth individual in Las Vegas and he agreed to recapitalize the company with us, and that was really the turning point obviously. Pretty simple business model at the get go at the phase and that was you got, it was an ad. It was just like the Yellow Pages. It was you pay for placement. You pay for priority. You pay for other categories. And then the underline we had is we were starting some of the first ecommerce at the very local level so we had store builders and shopping carts and the like built in. We had diversified it to include travel because we saw users were using it to find travel. At the same time, Expedia was just getting started. So we had a lot of different opportunities that we were choosing through there.

    Alejandro:        Got it. Got it. I mean at the time obviously there was none of the helpful resources that we see now like Yelp or even Expedia the one that you were mentioning, I mean those companies are massive today so yeah, no, very, very interesting. So you were mentioning at the beginning you guys were three cofounders, is that right?

    Dane Madsen:               Yeah, three cofounders. Two of us were there from the beginning to the end. The third one, we, you know, it was painful but we have to exit him about 18 months in to the original entity. It is what it is. This is picking your cofounders very, very carefully is important.

    Alejandro:        Of course. I mean I know that well. You know after building CofoundersLab, we were very much present to the fact that 64% of companies of fail because of cofounder issues. So you know unfortunately, many people have to deal with it. Many people go to business for the wrong reasons with the wrong people and it’s just part of the journey.

    Dane Madsen:               Yeah, exactly. I mean I find this where companies are reaching out to people they don’t know and say, “Would you be a cofounder?” is very difficult for me to understand. They don’t know them well. You’ve got to understand who the cofounder is and why they’re there, and the investors have to understand because if you get hit by a truck, your cofounders need to be able to pick up the ball and run with it.

    Alejandro:        Yeah. So I imagine that for Yellow Pages at the time that you guys that you went through your investor and you were looking at the possibility of recapitalizing the company, there had already been quite a fair amount of money that was say invested in the business. So I guess like what was the process of being able to buy that back and convince some of the folks that were already in the equity tool to be able to make that transaction happen?

    Dane Madsen:               We were pretty closely held. There were about six of us that held equity at the time. The original investors still held direct equity and then held equity in the entity that it acquired, the 50% ownership. So we didn’t—it was as complicated to get it recapitalized. It just was somewhat painful because like I said we originally raised 5 million. It went away under this other entity. They burned through 2 more million which was outstanding viabilities and we needed another 5 million to put on so now we went from 5 million to 12 million in some of the worst valuation opportunity times of the internet days, you know, the whole dot bond thing. Even today, today you’d be treated much better in that situation than any entity could in 2000.

    Alejandro:        Got it. So I guess what was the total amount that was raised during the entire life of the company?

    Dane Madsen:               We raised 32.5 million total and used about 27.5 million.

    Alejandro:        Got it. So walk us through the cap table. Was that a blend of strategic institutions or how did you structure that?

    Dane Madsen:               Well, so we spent a lot of time out pitching. Our best opportunity actually was with Kleiner Perkins and then the entity that acquired the 50% got involved and screwed things up. Kleiner was the first one that didn’t have the, “Well, Yahoo is going to put you out of business.” Once we got tired of that one, they started with, “Google is going to put you out of business,” so at the end of the day, Yellow Pages just wasn’t sexy. So Silicon Valley was not our source. We were using very high net worth people and by very high net worth people our investor was a billionaire before anybody knew what a billionaire really was. So we would go out. We would put together the plan. We would go see Silicon Valley. We would go see people not Silicon Valley, New York and in Boston as well. We would bring back a couple of term sheets and my investor would look at me and say, “Okay, I’ll cover to those terms.” What he was really doing was forcing us to go out and get the evaluation validation so that he was comfortable that he wasn’t overpaying because it wasn’t his area of expertise. He was in real estate. So as it ended up, at the time we sold, he was the only outside investor.

    Alejandro:        Got it. I mean that seems like quite a big of an amount of money back then. I mean now we’re seeing that rounds are becoming bigger and bigger but back then I mean that was a really, really big amount so I guess say, Dane, from doing that specific kind of capital raised, what was your biggest learning?

    Dane Madsen:               To address that, because here’s the luxury that particularly heavy tech related companies do is our first 5 million, a million and a half of that went in to technology. We need to buy servers. Oracle was charging $80,000 a year. Microsoft was charging us 32,000 per server. We had four, we had quad processor servers on the front end. I mean this was a day when you just hoard money into keeping the site running. And today with AWS and with [0:13:35] and with anything, with Google cloud, businesses that are starting today just don’t grasp exactly how capital efficient those things are. Our biggest learning in those days was I didn’t have, and I really have no excuse to this, but I didn’t have the best execution plan in place and among those things I should hired my CFO first.

    Alejandro:        Yeah.

    Dane Madsen:               This is something I ran in to a lot of in my practice and that companies that are out there that are tech heavy, they’ve got a lot of brilliant minds who have written some incredible software but they’ve got no financial comptrollers. They don’t understand accounting. There has been no corporate governance put in to place. And those are things that will eat you alive. I’ve watched those things kill finances. So first level there. Second is make sure that the person that you’re in the trench with, your cofounder, is a real cofounder. Bill Povandra, he was subsequently retired, lives in Havasu, Arizona, buys and sells exotic cars, loving life as it is, he and I had each other’s back but we had each other’s back before we started Yellow Pages, before we were involved with it. So being a cofounder is something more than here’s a title and here’s a few points of potential equity. This is, I can’t say enough about it, if what you are doing is hiring a cofounder because you think somebody wants you to have a cofounder and you’re giving them nothing to the extent that it makes it look like they’re just an employee, don’t waste your time, because the investors aren’t going to look at them as a cofounder either. And I think the third thing is getting out of your own head. We made some strategic revenue errors and by we I mean me. I had a vision, mission, ambition for Yellow Pages. We learned to brand like crazy. Branding isn’t the logo. Branding is not advertising. Branding is the DNA of how you operate a company. The errors we made was we stuck to our model when the market was saying you could do something different. And we gave up a ton of revenue. We should have been an affiliate with every one of the telcos because they were paying everybody for traffic. I could have given them traffic, generated revenue. We had customers who were telling us they wanted to look up residential. And I’m going, “Yeah, no, that’s White Pages. That’s not Yellow Pages.” And finally reaching out to them, they said, “Look, you’re stupid. It isn’t about White Pages, Yellow Pages. We want to go one place and find the stuff.” So those are really the three key issues that I’ve learned.

    Alejandro:        Got it. So I guess obviously when you were raising all that big of an amount of money, I guess there was some expectations to retouch from point the liquidity event, so my question is were you always, was it always the plan to really sell the business down the line and what were really the triggers to go after an acquisition here?

    Dane Madsen:               No. The answer was we were pretty open on an exit. We built the company so—one of the mistakes that I see is that people build a company to be acquired. If there’s nobody acquiring, then your company is going to fail. But if you build it to be profitable and it can be acquired or it doesn’t have to be. So we built a company to be profitable and in our last year of operation we were doing around $13 million, $14 million revenue. We were profitable. We would have grown pretty rapidly at that point because we were finally generating cash and the exit came as a total surprise to us. Now timing was probably pretty good. It’s 2004. A little company over a mountain view, Google, was getting ready to take the cover off the ball on local and local search. So I’d like to say that it was brilliance on our part but it wasn’t. It was just being in the right place at the right time. AT&T finally got really scared of Google and so they came and brought their checkbook with them.

    Alejandro:        Got it. So I guess what was that process look like? I mean walk us through how it happened?

    Dane Madsen:               Good. The process was AT&T, it’s what became AT&T. It was actually fronted by BellSouth who—I have great relationships with all of the telcos, but the BellSouth guy and I have the closest relationship. And he called and asked if we would be interested in having a conversation. Yeah, of course, you never turn that down. We then engaged a sell side banker who I had worked with Sutro & Co and we started contacting the other competitors in the space. There were about six at that time and we started an auction. The board has elected that this is probably the right time to do this. We started an auction process and we gave everyone 90 days to do diligence. We were able to keep that incredibly close to the vest so it didn’t upset all the people and in the end it was BellSouth and AT&T who just said – we actually called BellSouth guy and we were telling him, “You didn’t win,” and he said, “That’s not acceptable answer,” and stayed on the phone with us until we got a price we can live with.

    Alejandro:        So I guess during this process, how many of them were very serious about really acquiring the company?

    Dane Madsen:               Seven of them.

    Alejandro:        Seven of them. Got it. And how did you keep with the investors that you already had in the cap table, like how did you keep them in the loop because I’m sure that many times investors have their own interests, so what was your experience with that?

    Dane:               That was pretty simple because the CFO for my outside investor sat on my board so he was part of the process.

    Alejandro:        Okay.

    Dane Madsen:               It was good timing for him as well. Again, he had 27.5 million in because he stuck with us during the really ugly 2000s, dug us out the hole, he had the overwhelming amount of the equity. So however this was going to work, he was going to—it was going to work for him first. And he had all preferred equity and we had common.

    Alejandro:        So when you were receiving all these say different term sheets in, in interested parties, I mean promote these seven guys, I mean were you like how did you like come down to that alignment in terms of valuation? I mean was there like minimum price that you guys internally were shooting for? What was driving that? I mean what was behind valuation for you guys?

    Dane Madsen:               Yeah. We had just been out trying to raise another round in face of the Google threat. And we had some pretty good feedback from the Street on it. Our pre-money evaluation at that round was a hundred and we were looking to raise between 20 and 30, and we were getting very positive response. When we started looking at the numbers and what the dilution was going to be to the management team and the founding team and realizing just how deep that hole would go for us to come back even was part of the decision that maybe it was time to not raise that capital and instead look for an acquisition or look to be acquired. So we knew from the Street about what we were worth. We knew from the Street because of some pretty well understood metrics about our traffic. Ninety six percent of all of our users were primary and organic. We didn’t pay for traffic. There was no SEO, SEM in those days. We had an incredibly loyal use base that grew between 6 and 10% a month and we did that only because we were rabidly and violently user focused. And so that’s how the valuations came in.  When you’re running 20 million users in any given month and you’re the number one on everybody’s mobile bet even before smart phones, it was a pretty good valuation metrics involved.

    Alejandro:        So what was the timeline from beginning to end? And also at the end, how many users did you have?

    Dane Madsen:               So we started the process in April. We concluded and accepted a deal in September. We still had to keep it quiet because we had to go through trust certification to make sure that the acquiring entity wasn’t going to get in trouble there. And at the end, so we closed the deal middle of November of 2004. At the end, we had 22 million users of which 10% were off mobile.

    Alejandro:        Okay.

    Dane Madsen:               And we were doing roughly 40 million searches per month all against local.

    Alejandro:        Got it. Got it. So I guess if you could go back in time and give advice to your younger self right before heading in to the M&A process, what would you say to yourself?

    Dane Madsen:               I would, so I’ve had this conversation a number of times with myself. Part of the issue with the M&A process, we were doing extremely well. But we were doing well after a trigger event sometimes in 2003. So the first advice to myself was stop being intimidated by big multinational companies with huge checkbooks particularly when the last innovator died there a hundred years before. I for whatever reason because of that I guess was, for the first two and a half years that I was actually the CEO after we reacquired the company, I was pandering to the telcos because you just pandered at the telcos. These guys were doing 30 billion a year in revenue on an aggregate basis in just Yellow Pages of which it was 90% profit margin. So they had to do something right, right? At the end of the day, no, that wasn’t true. It wasn’t until mid-2000 and I can’t even recall what triggered it when I finally said you know what, stop this. And we started calling them out. We started calling them out, getting under their face, not rudely, not obnoxiously, but we started pointing out to the Street that we were getting because of our user experience what they were paying 50 million a year for, we were getting for free. So we were smarter about it and we understood and they didn’t. And today, they still don’t.

    Alejandro:        Right.

    Dane Madsen:               The second is that I should have been more militant in the acquisition process. My board really good, well intentioned people, none of them did the day to day work, none of them understood the difficulty in doing this and I let them handle that whole process and I should have been more active in that. So those are my two pieces.

    Alejandro:        Got it. So the total amount of the transaction was 100 million.

    Dane Madsen:               Yeah.

    Alejandro:        So was that a cash or was there any vesting in there earn out, so what was that?

    Dane Madsen:               It was all cash and they acquired the company which was one of the things I did push. First they wanted to do an assets sale but an asset sale would have just beat us up on taxes. So by forcing them to acquire the company, we got the most favourable tax treatment. They did hold back 10% of the proceeds for two years in an escrow fund against undisclosed liabilities but that’s pretty normal. But it was all cash. We even offered to let them pay in stock and AT&T had no interest in that.

    Alejandro:        Got it. So I guess once the sale was done you know you have been very much active with other boards and there’s a lot of people that are listening probably right now and they are in the process of really putting together their corporate structures so I guess from what you’ve seen and what you have experienced, what makes a good board of directors for an early stage company?

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    Dane Madsen:               So it’s not a group of people that think just like you. In fact, it’s a group of people that doesn’t think like you but we all need to have some level of understanding of the business. And what I mean by that is I’ve seen boards, I actually took a CEO role much like you where after a “retirement” after 90 days, I finally said, “I can’t do this anymore,” and so I took a CEO role where the five-member board were all founders. They were all technologists. I wasn’t on the board and so we had no diversity. I was going in to assist them to converts and device driven stuff to local advertising, directly driven advertising, none of them have that experience but the board was people with the technology background and they didn’t understand that. So from a board perspective, you got to have diversity. I also believe that the CEO crucially must always be on the board. If you bring in an outside CEO, curve a set for him. And you know some of them is absolutely just the math but it bears mention. Boards always need to be an odd number of people, not an odd number of odd people but an odd number of people. I tried to help a company as a consultant about a year, a year and a half ago, they had a four person board, and that’s crazy. So my best advice when you get, if a startup wants is to get with somebody who’s got a corporate governance understanding and have them guide you through the process, have them help you find the right board members, have them help you understand where you’ve got strengths but you’ve got some weaknesses. Often the weaknesses are sales and marketing. Again, in this day and age, we see so many companies that are started by really, really smart technologists but they’re not sales and marketing guys. Get somebody on your board who understands that process.

    Alejandro:        Got it. Yeah, that makes total sense. I guess that one of the other things, Dane, you’re probably seeing at a board level when you’re providing that strategic perspective either as a director or perhaps as an advisor. I’m sure you see a lot of these companies struggling to really achieve a product market fit either because the market is turning around on them or because maybe like they’re doing something that the market is not ready for or doesn’t really want or need or what does really product market fit look like, Dane?

    Dane Madsen:               Again, I wanted to refer to some incredible people who write a lot of really cool code because I couldn’t do that if my life depended on it. So I’m giving them the credit but the issue is product market fit starts before you do a line of code. Just because you think there’s a problem to solve the problem doesn’t mean the market thinks there’s a problem to solve. Yellow Pages was easy for us because it had been around for 125 years for god’s sakes so I didn’t have to create a market there. So I can say that with perfectly aligned self interest there. The issue though, in line of self interest, the issue with today is you can build an app. You can build a SaaS. You can do this. The product market fit is not just who is it you — “what’s the problem I’m trying to solve? Is it big enough to solve?” before you spend any time on the code. It’s pushing the rope uphill is not going to work. Just because you’ve created something doesn’t mean there is fit. Second is being smart enough to understand or being on top of it, not smart enough, but being aware enough of who you’re solving it for. Hate to be this way because it’s the easy answer but if you don’t have an enterprise auction to you, you’re going to have a tough time. You might start out at a B to C level on software or as an app but there needs to be an enterprise version because these are the people who make professional investors really excited.

    Alejandro:        Yeah. They’re very interesting. I mean you know there is this individual poll, Sean Ellis, he’s the founder of this thing called Growth Hackers and basically he did a presentation where he said that a good way to understand if you have product market fit or not is to survey your users and see if at least 60% or more would be very disappointed if they could no longer use your product. And if that is not the case, then you need to go back to the white board. What do you think about that?

    Dane Madsen:               You know I think is it 60—yeah, probably. I guess that’s sort of how big the samples size. If I’ve got a hundred thousand users and 30,000 want to use, I’m probably okay. But the issue and is it—but early on, I think that’s exactly the way you have to do it. And you have to talk to these people.

    Alejandro:        Yeah.

    Dane Madsen:               We didn’t let that go at Yellow Pages. We actually had our user group. We had advertiser group. We had a user group. And they were people what we would rotate through and we would ask them what they wanted, what they thought about. If you don’t have enough—and I don’t care if you are an enterprise or on a B to C, you need to have a user group.

    Alejandro:        Got it. Got it. Makes sense. And one of the things that you have this expertise on that it’s something very complex and very difficult when it comes to building companies is really building a marketplace. I mean I remember at least from my experience during this past 10 years that I have been building marketplace is it’s really like launching two companies at the same time but what would be your piece of advice to all the listeners that are in the process of launching a marketplace?

    Dane Madsen:               You mean once I laugh and say, “God, I’m glad I’m not having to do that again,” I mean I’m sitting here…

    Alejandro:        Got it.

    Dane Madsen:               … it’s one of the—you’re absolutely right. It’s two businesses and the businesses are in direct conflict with each other. One side wants the most for the least and the other one wants the least for the most. And so up shot of it is you’ve got to vote with the users. We did this with Yellow Pages. I did it a couple of more times and the issue is this, advertisers will always show up where users are. Users will not always show up where advertisers are. So take that and change it to a tangible marketplace. Buyers show up—sellers will show up where buyers are and buyers will not always show up where sellers are. We’ve had that time and time and time again. Big marketplaces, lots of product and nobody shows up to party. And you’ve got to have advocates inside for both sides, and that’s what we did. We have the user advocate. We had the advertiser advocate. And they’ve got to be at ads with each other. And then when it comes to you, the CEO, you must always decide what’s in the best interest of the user because they’re the user to your point earlier about 60%, if they can live without you, they’re going to find some place else.

    Alejandro:        Yeah. I mean I do agree, Dane. I think liquidity is king when it comes to marketplaces and being able to find what you’re looking for in a very short period of time. So I completely agree there. I can say you know like we see like a ton of marketplaces that are burning through tons of cash. So do you have any thoughts around growth versus profit?

    Dane Madsen:               Yeah, grow but don’t be stupid about growth. And what I mean by that is I would have called this market different, the financial market is different two years ago after the election and I’ve been nothing but wrong but eventually I’m going to be right. I lived through two really black swan events, that crash in 2000 and 9/11. I watched more companies with incredible business models get written off because when people fly airplanes into buildings all the term sheets get pulled. So grow, use what I would call the Amazon model which is grow at all cost but understand where you can cut if you have to get profitable fast. People are criticizing Amazon’s growth or their narrow profit line as long as it’s been around but the reality is if they tomorrow stopped their R&D, they’ll be putting 20 billion on the bottom line. That’s the kind of growth they have to do. But if your growth model is absolutely dependent on getting the next round of financing in and you have no way to get profitable, I think you’re asking for trouble under this sort of economic scenario. We’re going to eventually hit a recession. The VCs that are out there as you and I both know, they’re doing bigger rounds, not smaller rounds but that’s not what the profile of the smaller—the new startups are. VCs sitting on a ton of cash aren’t going to come to the rescue of a million dollar investment if things go sideways. So the answer is I think you do both. You build for growth but have your plan on how to be profitable or at least break even so you should weather the storm because bad times don’t last that long.

    Alejandro:        Yeah. I mean I think that we’ve gone with growth, the issue is that just like you say I mean you’re always one round of financing away from going out of the business and that is very, very risky and unfortunately you don’t get to control your own destiny and you’re always controlled by investors either existing ones or the ones that are potentially going to finance you on your next round. So Dane, this has all been very… go ahead, Dane.

    Dane Madsen:               I’m going to say just one other thought and this is something I ran in to a lot with the companies that I tried to deal with or I tried to work with and that is I hear a lot of, I see a lot of people who have crowned themselves CEO because either they were the first in or all of that but the one thing that the people that I’ve seen companies not grasp when it goes to this issue of financing is the CEO has one job and that’s to make sure nobody runs out money. Think again as the parents in the house who’s responsible to make sure that there’s a paycheck. So if you wake up one morning and you think you want to be CEO but you don’t think you’re really good at raising money, you better find somebody who’s good at raising money because that’s your job – never let people run out of money. And that’s going to be either constantly on the road, constantly on the road show and on top of that understanding the business so that you can build the break even model that you can move to quickly. So anyway, that was my hot buttons, my CEO hot button.

    Alejandro:        Got it. Got it. Well, thank you for all of these, Dane. It has been an absolute pleasure and Dane, what is the best way for folks that are listening to reach out to you if they want to say hi.

    Dane Madsen:               It’s really easy. I’m on LinkedIn, Dane Madsen, or you can just send me an email at [email protected] or my personal favourite is CofoundersLab.

    Alejandro:        Well, wonderful. I’m very glad to hear that, Dane. Well, thank you so much for being on the show today, Dane. I really appreciate it.

    Dane Madsen:               Alright. Appreciate it. Thanks very much. Have a great day.

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    Female:            You’ve reached the end of another episode of the DealMakers Podcast. For free resources and materials, head over to Thank you for listening and see you at the next episode.

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