Latest / Success Story with Scott Clary / Lessons - When Survival Creates Success | Ariana Pareja - 3x Serial Entrepreneur

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Lessons - When Survival Creates Success | Ariana Pareja - 3x Serial Entrepreneur · Success Story with Scott Clary

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  In this lessons episode, explore the mindset behind building, scaling, and exiting a business
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  without sacrificing control or fulfillment. Discover how to evaluate the real reasons for selling,
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  understand how funding choices shape ownership and exit outcomes,
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  and uncover the hidden trade-offs of venture capital that redefine entrepreneurial freedom.
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  The last thing that you sort of spoke about is exiting your last business, and I think that's a,
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  and we can talk about the growth and all the different things that you sort of teach over to
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  people now. But I mean, that was the most relevant point in your life that you've dealt with
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  more or less recently. So let's talk about your own personal journey in like growing,
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  scaling, exiting a business. What are just some thoughts on how to prep your business for an
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  exit? What are the things you should think about when you're exiting? Are you even happy with how
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  you've gone through your various exits are the things that you would like do differently if you
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  had the chance with any of the business you sold? Yeah, I think when it comes to selling your
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  business, you really have to ask yourself three major questions. And the first one is,
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  why? Why are you really selling your company? Is it because you're burnt out? Is it because you're
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  bleeding money? Is it because your co-founders pushing you out? Is it because your investor wants
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  you out? Is it because your biggest customer is basically saying, I'm tired of paying this
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  invoice every month. You're too expensive. I just want to buy you and just own your tech.
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  So figure out the why. And I know you've interviewed a lot of entrepreneurs, and I'm sure there have
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  been entrepreneurs on this show that have said, you know, I regretted selling my company,
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  because now I'm bored and I don't know what to do with myself. And after the event? Yeah, for sure.
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  After the event. Exactly. Because the reality of it is you don't know what you're going to do after,
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  and in that moment, you're so burnt out that you just start like, I just want to sell it. But
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  if you have a good operating business and it is cash flowing and you're burnt out,
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  that's not a good reason to sell your business. That's a good reason to take a break. That's a good
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  reason to go. Maybe, I don't know, vacation for five, six months, find someone to run the day
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  to day of it, add it to your, just think of it as your investment portfolio, give them whoever
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  you hire, some equity. And that's a good reason. But the second thing that you want to think about
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  is who, right? Who are you selling your company to? You need to always think about if you're
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  going to exit. What makes the most sense strategically? A lot of people, especially with service
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  based businesses, they'll get purchased by a competitor. And that's hard for an entrepreneur
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  because the last 10 years they've been at war with this person. But if they look at
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  who makes sense to purchase them, it's probably going to be a competitor. And that's hard to
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  deal with your ego, but it could be. And then the other question of who is if you're going,
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  like for example, you have a tech startup and now you want to exit, finding the right investment
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  banker makes all the difference, right? Because you want to go after and find out and start to build a
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  relationship with investment banker way before you even start to think to sell so that when you get
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  to that process, they have your best interest. I mean, obviously, they're always going to have
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  your best interest. They're professional. But you want to go after and find that investment banker
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  that has sold companies like yours on a multiple that you want. That's smart. Now. And then when?
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  Yes. And then, well, I was going to say one other point too because it's good advice, but it's
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  counterintuitive to what a lot of people teach entrepreneurs, which is when you're building something
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  build it to sell, right? And then have some sort of strategy in mind so that if you're taking on
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  money at any point, an investor understands where your vision for the company is. So does that
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  advice change if you're taking on investor money? No, that that. I mean, yes and no. Yes. I mean,
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  obviously, if you're taking on investor money that and you have a growth-based business,
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  your plan is to sell. Yeah, I'm of the mentality that I've done service-based and growth-based
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  businesses, you know, small SMBs. It's a different kind of exit. But it plays into, it actually plays
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  into your mindset about taking on money as well. Yeah. You're not even taking on money unless you are
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  trying to transition into a growth-based business for your hitting monumental milestones. So that's
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  the whole difference between everyone who there's it's so confusing because there's so much conflicting
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  advice. Yeah. There's people, I mean, you listen to like the sharps on Shark Tank, which are all very
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  successful entrepreneurs. They're on right. And I think Damon John is always about OPM like other
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  people's money, other people's money, never use your own money. So you hear that and then you're
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  like, shit, well, I have to find other people's money because I don't want to burn my own money.
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  And then there's another there's another way to build the business. So I think it's it's it's hard
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  because there's so much and entrepreneurship is already hard as hell like already and there's
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  all these different conflicting ideas because you're right and he's right in different circumstances.
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  And it's up to the entrepreneur to sort of figure out who's right when and who's right for them.
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  And that is the most confusing thing. So if if you were going to if I was an entrepreneur and I was
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  looking at all these different pieces of advice and you know Damon John on Shark Tank saying use OPM
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  and then you're saying actually build an MVP and then take on money if you have to grow but don't
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  take on money. How does that entrepreneur understand what what they need to do like what it was
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  here at their goals? It depends on on on their industry depends on their business right. So for
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  example, if you're going after consumers, you need to raise one because going after consumers is
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  really, really hard, especially on a like a national scale, you're not going to be able to bootstrap
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  that. I mean, you could, but it would be really, really hard. And then, you know, if you're going
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  up against publicly traded companies, for example, like in our case, we could not we didn't have
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  the luxury to bootstrap, remind like our competitors were publicly traded companies that were
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  coming after us every single day saying that they're going to squander us. And so the only thing
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  that set us apart was speed was just pure speed. That was the only thing that could really set us
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  apart at that time. And so we needed to raise capital that we could hire the best of the best in
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  the country and just deploy quicker and faster than everybody else. And, and what did you learn? That
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  was the only business you ever raised for. Correct. Outside of outside of literally buying properties.
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  Yeah. Okay. So what did you learn raising money? Oh gosh. That's the first thing that even like
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  before we reported, I was saying how we met was at attack conference. And that's the first thing
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  that you mentioned to me because I was going to raise myself, which I'm literally still going through
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  and that like it's a testament to how long some of this shit can take because that was what like
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  almost here and I was about. Yeah, that was an e-merge last year. Yeah, so it's been like an
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  ongoing thing in my life. But then you mentioned like don't take on money if you don't have to.
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  So obviously that comes from stress. Trauma. Yeah. It does 100%. So so what happened or what or
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  what would you do differently? Oh gosh. Um don't take such a high valuation. Um the thing about
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  VCs. Well, let me rephrase that. So the thing about taking capital just in general is that once
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  you take on other people's money, um it's no longer your company. It's everyone's company now.
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  You don't get to act like a dictator anymore. And and and and it's it's a democracy and I'm just
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  um yeah. So taking on VC capital as well is is really tricky, especially if you've never done
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  it before because you don't understand how things work yet. And a lot of times not all VCs,
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  but a lot of times VCs what they'll do is they'll give you this ridiculously high valuation and
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  they'll give you X amount of runway and they'll give you these milestones and they'll say okay well
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  if you hit these milestones by this time then we'll fund you again. Yeah. Yeah. But they know
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  that you probably won't hit those milestones. And so now it becomes this dependency that they've
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  built, right? So you as the entrepreneur, you don't hit these milestones and then you have this
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  value then then they're like oh well okay we'll give you money again, but we're going to take
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  preferred shares. And by the way we want all the board seats and we want this and we want to end
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  there in this position of power to negotiate whatever they want. And what are you going to do?
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  What's your choice? You're either going to say no I'm not taking that term sheet and then you
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  your lights go out then you go bankrupt or you just say okay I guess this is what we're doing
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  and you just sign on the dotted line and you just move forward. So my suggestion would be if you
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  have to raise capital, angel investors the way to go definitely angel investors because the
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  thing about VCs they have so many people in their portfolio company and unless you're that one
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  unicorn they're not going to pay attention to you and they're not going to care to help you and
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  you know a lot of times founders think that oh if I raise venture capital the second I do it
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  I'll be replaced and they'll get into CEO and they'll get really involved actually no that's not
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  the case at all they don't really get involved at all. That's more growth and private equity they
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  get more involved. And so you know if you're going to be doing it all on your own anyways you might
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  as well just figure it out with the angel investors that will play friendly when it comes to raising
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  again and yeah and and not everyone's experiences that but that was fine. No but yeah you have to
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  be you have to be very careful because some like venture capitalists are professional investors yeah
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  and I think the one thing that I pulled out of front you just said is they'll they'll play onto
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  your emotions about a high valuation because you'll think as an entrepreneur I want to get a
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  high valuation so I give up less than my company like that's that's the immediate entrepreneur
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  mindset when it comes to raising money but then that screws you in the future because if you
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  think about how much money you actually have to make to make those investors happy exactly so
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  especially at I mean if you look at the different rounds right so I these are all like
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  these are all guesstimates but I think for like a seed it's like they're looking for like 100x
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  and then like a series a maybe like a 30x and then like a series BCD it could be like a 5x 6x 10x
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  whatever it is but if you think about raising at you know if you want to make a 100x on on
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  10 million dollars like your company has to be like wildly successful yeah you have to be very very
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  very you have to be like very very successful right so you have to be careful what you raise that
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  and then there's then you have to do down rounds in the future and you have to have a huge total
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  adjustable brackets yeah that's just to know the tam and then also if you think about it
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  if you are raising that much and then like that that second term sheet is not as favorable
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  well it's super time consuming to go raise money so yeah they're putting money right in front of
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  you with shit terms but like if you are a founder and you're raising more money from new people
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  that you think are gonna give you better terms it's like a full-time job oh it is and if you don't
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  have money for an investment banker because you're trying to keep the lights on and pay salaries
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  for another three months you don't have the 10 or 15k retainer for the investment banker
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  they can go help you with at the same time right so it's just all around very stressful
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  I've never I mean raising money has a place but the entrepreneurs that I know they're the happiest
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  have never taken on money because they have all their equity yeah and they don't have the stress
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  and they don't have the stress and they didn't feel like an employee in their own company that they
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  built thanks for tuning in if you found this valuable don't forget to hit that subscribe button
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  so you never miss an episode and if you want to dive deeper into this conversation check out the
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  links in the description to watch the full episode see you in the next one