Max Simkoff has taken on a really big industry with his latest startup. One that most of us will encounter in our lifetimes.
During our interview on the DealMakers podcast, Max Simkoff shared his journey so far, some of the things you only learn and recognize once you are on to your second or third startup, the art of buying big companies, what time of day you should stop negotiating deals, the thing about making mistakes and how to scale a company really fast.
Listen to the full podcast episode and review the transcript here.
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Born in Portland
Simkoff grew up in Portland, Oregon. Although his grandparents pushed his father into being a doctor, Max says he saw his dad enjoying building a business far more than the part of practicing medicine.
Both of his younger brothers also happen to be entrepreneurs as well. So, maybe entrepreneurship is just in his DNA. Or it could be his father’s spirit of just proving it is possible when others try to say that something can’t be done.
From Living In A Trailer To Buying $20M Companies
After studying modern Asian history in college Max found himself living in a trailer park in Santa Cruz, California.
At just $110 a month, the rent was cheap. The surfing was great. He and his two roommates would be up at five in the morning hitting the waves and carpooling to the beach to get on the water until dark after work.
The downside was that they had to rotate sleeping on the one bed. The others would get the choice of the floor or a desk.
Then a Craigslist ad in San Francisco changed everything. It was a job posting for a new private equity search fund. The idea was to research companies to buy and take over. Most of these ventures fail. They managed to pull it off. They found a business, negotiated a term sheet, and then managed to raise the $20M price tag by the time the closing date came up 45 days later.
As they started operating this healthcare business they acquired Max quickly learned some of the challenges of hiring. They had 200 to 300 employees, and an enormous turnover rate of as much as 150% a year or more.
They started applying some data analytics to improve these dynamics. Evolv built a software platform with predictive analytics aiming to determine which hires will be successful and how long they might stay with a company.
Companies like Xerox, eBay, and AT&T began using their software to hire thousands of people each year.
They brought in VC investors including Vantage Point, Lightspeed, and Khosla Ventures.
They were eventually approached by Cornerstone with a merger proposition. In the middle of the process, the stock market took a big hit. Public companies began trading at half their multiples of just a few weeks before when they entered due diligence.
Cornerstone tried to bail until Max and his co-founder Jim found other interest buyers and they finally came back to the table to close the deal.
Top Lessons From Taking A Startup Full Cycle
1) Don’t Invent A New Market
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Max says one of his top lessons from his experience with Evolv was not to try to create a new market. It may be exciting, and he may have even pulled it off, but it is not the easiest or most predictable way to start a business. Trying to invent a new space is going to be hard work all the way. You have to convince potential customers of a need and problem and need to create a budget for something which they don’t see the importance of yet. Then once you’ve done that, then sell them your product or service.
Instead, he says that entrepreneurs should be embracing spaces with the competition. Where there is competition, there is proof of an existing problem, market, and demand. Then if you can bring something which is better, cheaper, faster and offers a better customer experience everything can be much easier.
2) Your Real Job As The CEO
One of the top insights he says he gained from a partner with Khosla Ventures is what your real number one job as a CEO is. If you look at the top reason for business failure it should be pretty obvious. Yet, when you watch how most founders and new business owners spend their time most are doing everything but this.
Your one real job is to make sure the company doesn’t run out of money. Nothing else matters unless you master this. Not sharing your vision, trying to motivate staff or advertising or product design.
Whether it is through revenues or raising capital, your time needs to be focused on bringing in the money. If you have any slack after that, then you can engage in those other things in your spare time.
The $21B Industry He’s Taking On Now
After selling his previous company Max said he never thought he was going to start another business. Yet, after buying a home and going through the mortgage and closing process he discovered another big pain point.
If you’ve bought a home in the past you’ve probably encountered the stacks of documents to sign, the confusing terms, and the thousands of dollars in fees above and beyond your down payment.
Max said he found out the residential title closing business was worth $21B a year. An antiquated inefficient industry that could definitely benefit from modernization, and a cheaper, faster, and more user-friendly alternative.
His machine intelligence startup States Title is now able to do instantly what used to take weeks of manual labor. When they still had just 25 people on the team, States Title managed to purchase a much larger incumbent with $170M in revenue and bring their technology to that venture. To date, they’ve raised over $220M and are now operating in 40 of the 50 US states.
Storytelling is everything which is something that Max 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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Listen in to the full podcast episode to find out more, including:
- Why stop negotiating deals after 10 pm
- Hacking scale
- Fundraising during a crisis
- What Max would tell his younger self before starting a business