Karl Jacob has now started and sold several companies. Including a $300M acquisition by AT&T. His latest venture has already raised $50M to disrupt and multiple trillion dollar market, thanks to the backing of investors like Richard Branson.
On the Dealmakers Show Jacob talked about when to sell your company, knowing when to walk away, investing in over 35 companies as an angel investor himself, raising 23 rounds of funding for his own companies, and his top tips for other entrepreneurs.
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When To Start & Sell Your Own Company
Karl Jacob was originally born in Missouri. He found his first gig shoveling manure on a farm. Which no doubt gave him some of the underlying motivation he continues to have today in building highly successful companies.
After starting out in the public school system his parents moved him to the same private school that Sam Altman attended. Then when he thought he was going to study arts and sciences in college his father dragged him into meet the dean of the engineering campus, who converted him to picking computer science in about 30 seconds.
Jacob then pursued internships at both Sun Microsystems and Apple. These eye opening experiences, including working with the team that created Java, showed him just how much was possible. It set a high bar for his future.
Still, one of his top pieces of advice for those considering starting a business today, that he got from Steve Jobs is to go for it, and don’t stop. Which he hasn’t.
Jobs told him that you’re only young, dumb, and poor enough once in your life to really go for it. Before you have a mortgage, a car payment, and a family.
So, Karl did leave to start his own thing. Even though his mother cried when he called to tell her the news. Though it’s a decision he still doesn’t regret.
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Launching His First Company
He got his landlord to install a T1 line in his apartment in San Francisco, and launched his first company from there.
Ron Conway became his first angel investor, and ultimately helped him navigate the exit when Microsoft acquired them.
Ron drew him a curve on the whiteboard. It showed where he and the company, as well as their team and shareholders were at the moment. Then, how that was contrasted with if they raised more money, dilute the ownership, and then had to spend the next five years building more in order to get back to the same amount of value.
From his time at Microsoft his big takeaway was that big companies started out as small ones at some point. It all comes from an idea, a few people working on it as a team, and then grows from there.
Next he was recruited to become an Entrepreneur In Residence with Benchmark. He thought learning about the VC aspect of things would be smart. There he was encouraged to just come up with ideas.
He brought one, and was told to put it in a drawer and go think of another. To just keep coming up with ideas, until he was sure it was the right one.
The point was that your first idea isn’t always the right one. That if you are going to spend so many years and so much effort building something, that you ought to really be sure you’ve explored plenty of options.
That was the segue into his next venture. A company that was acquired by AT&T for $300M.
Storytelling is everything which is something that Karl Jacob was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here), where the most critical slides are highlighted.
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The Importance Of Profitability
What Karl Jacob says that he did right on those first ventures was getting them to profitability. Even when it wasn’t trendy. In contrast, failing to have those strong unit economics ended up being the downfall of one of his later startups.
Sticking to his guns, and going for cash flow when others were giving it all away on freemium models, and getting profitable, was what he credits with getting them through the first dot com implosion.
He says that months or years of runway isn’t important. Your goal as a business is to build a profitable company.
When you do, then you control your own destiny. You can chart your own course, and make your own decisions, and are not at the mercy of investors.
After becoming CEO of another company, and taking them through to a successful exit as well, we joined Facebook as an advisor after the insistence of Sean Parker.
Then after another successful exit, Karl co-founded a company with Allan Carrol, who he works with to this day, where they found they were struggling to get the revenue. Then, when Facebook changed things on them, it was really the final nail in their coffin.
They had received a couple of inbound acquisitions offers. Though turned down both, following which those companies ended up performing very poorly. Ultimately, they ended up making the painful decision just to close that company down. The lessons being to be careful about relying on other companies for your business to work, and knowing when to pull the plug when the numbers just aren’t going to work.
Disrupting Big Markets
Over the years Karl has not only raised 23 rounds of funding for his own companies, but has also invested in more than 35 others as an angel.
With the individuals on the founding team, and the size of the market being two of the most important factors he saw in the successful ventures.
So, when he saw that the mortgage industry was a $13T industry that really hadn’t been disrupted yet, he had to leap at it with another startup.
That company is now Loansnap. A startup on a mission to change the mortgage industry, and give borrowers more clarity and savings.
Listen in to the full podcast episode to find out more, including:
- Fundraising for Facebook
- Picking your investors
- The future of the mortgage market