June 1, 2020

Acquired in 9 months after starting a company - how to speed up the acquisition process by Wesam Mikhail co-founder and CEO at Leamingtun Industries.

Acquired in 9 months after starting a company - how to speed up the acquisition process by Wesam Mikhail co-founder and CEO at Leamingtun Industries.

In this episode of Fundraising Radio, Wesam Mikhail the co-founder and CTO of TradeDash explains how he manages to build and sell his companies so fast - for example TradeDash was acquired in 9 months after its inception by the second largest cryptocurrency exchange in the US! How to accelerate the acquisition process, how to find buyers, how to hire team members faster and much more in this episode!

In this episode of Fundraising Radio, Wesam Mikhail the co-founder and CTO of TradeDash explains how he manages to build and sell his companies so fast - for example TradeDash was acquired in 9 months after its inception by the second largest cryptocurrency exchange in the US! How to accelerate the acquisition process, how to find buyers, how to hire team members faster and much more in this episode!

Wesam's LinkedIn: linkedin.com/in/wesammikhail

Invest in your host through an IPO: https://humanipo.app/id/konstantin.dubovitskiy


Transcript

This is Fundraising Radio and today as a guest speaker we have Mikhail Wesam the co-founder and CTO of TradeDash that was recently acquired by the second largest crypto exchange in the United States.

 

In this episode we'll talk about, unique approach to building companies since Mikhail is focusing on creating companies and selling them really fast.

 

for example, Trey dash was acquired in less than nine months after it was started.

 

in this episode we'll focus on accelerating this process of acquisition, how you can influence that, how we can prepare yourself for acquisition and how to make sure you don't have any deals that prevent you from getting acquired.

 

that sound Alaska called by huge, giving us some background on yourself and on trade Daesh.

 

Well first of all, let me say thank you for having me.

 

I have been a software engineer and basically have been working with startups for about 15 years now.

 

Basically give or take.

 

Trey dash was one of the latest projects that was acquired that I was a cofounder for.

 

the project as you mentioned, was acquired by Beatrix LLC, two years ago at this point.

 

we basically started my cofounder and I, after researching the crypto space for quite some times, some time and decided that basically there was a need for some type of mechanism, some trading platform that extends exchanges with extra functionality that currently exists, all over the place in the stock trading world basically, but did not exist for cryptocurrencies.

 

what we wanted to do is basically take, a lot of the existing exchanges, plug a bunch of features and functionality on top of the exchanges and focus on delivering a good financial service to the end customer rather than, having to worry about being exchange and sorta deal with those issues.

 

We want to focus more on the service layer basically.

 

that's how trade dash came about and we just develop it, develop that from there.

 

it was acquired in about nine months time from the initial inception of the project.

 

we'll talk about that super extra fast acquisition in just a few minutes.

 

first I was curious, why should foundries try to choose, there's no fast access.

 

What's the, what are the pros and cons of that strategy?

 

Well, there are multiple approaches.

 

I mean, there is no right way or wrong.

 

I mean it really depends on you as a founder, right? Well, what are the things that you value? What are the things you want to work on? do you, want to work on the same idea for five years perfected or are you more of the exploring type that likes to initialize a project, mature, it's stable and it's growing and then perhaps exit that and then move on to the next project that you find exciting.

 

it's more of a personal choice somewhat.

 

also we got a pretty decent offer.

 

we had business model planned, to take hold of the entire network.

 

Basically.

 

We had, there was a lot of interest from the exchanges.

 

They used to reach out to us all the time and tell us about how much they like our, project.

 

we got multiple basically offers and we evaluated them on their merit and said, what, were aiming for a fast exit.

 

Our initial plan was a two year, long, process after which we would exit.

 

that just, we happened to accelerate it so much that it actually happened in nine months instead of two years.

 

basically where my cofounder and I were the type of people that like to basically initiate projects, work on them for a some period of time, not a super long period of time and exit those.

 

that's somewhat of a personal thing mixed with a bunch of, business model related things that led to us exiting in that short of a period.

 

Got it.

 

And that's super interesting.

 

how exactly were you able to exit so fast? So did you re have a strategy planned out that was enriching to an exit where you like slowly approaching this, acquire this B trucks or do you just happen? No, actually we had a strategy from the.

 

get go.

 

I mean really when you start companies you have two ways to go about things.

 

Either you start a business for yourself and grow it and make it into cash generating business for a long period of time and you own it and together with your investors, whoever else you have in your cap table and you basically run it as a regular business or you can from the get go as we did decide to build something that would be attractive for other stuff, acquire.

 

if you're thinking about that in con in the context of let's say you want to build something related to social media as an example, then you probably should from the get go, at least gay met up.

 

I'm not saying you should aim for, but at least gaming out that there is a possibility for you to be acquired by one other large social media platform.

 

Okay, well if that is the case, how do you go about building your feature sets? how do you go about acquiring customers that they already don't have? So there are all these questions that you have to ask yourself if you're gearing for a quick exit and you should have a game plan for that, at least in my opinion, even if you're planning on doing a five to 10 year long run with a company.

 

these are some of the things we did.

 

We sat down, we ask ourselves, okay, what are some things that exchanges would be interested in acquiring? What are some features that currently don't exist that they might be able to utilize internally? what services can we provide that they themselves as exchanges, cannot currently provide to their customers? there'll be value add for them to basically acquire us and implement into their existing platforms.

 

So that was sort of our approach.

 

if I were to do it all over again, I'd do it the exact same way.

 

Basically I ask myself these questions and orient the product and the entire company in that direction.

 

That's for sure.

 

Very very interesting approach.

 

I'm not even sure if I've heard that one before.

 

I'm trying to think of anything related to that approach, but do you think Pacific acquire or do you to just, digging for all the crypto exchanges?

 

Well, okay, let me just tackle the first part of that, which is, that it's an a non, what should we say, a non typical approach.

 

The thing about it is that you have to ask yourself as a founder, what is the end goal of business is obviously to generate money.

 

I mean, you can generate money over a 10 year period or you can generate an extreme amount of money over a short period of time, but you have to gear your company correctly in order to be able to haul, to do, to put yourself in that position.

 

You cannot, it's not the same strategy.

 

Basically.

 

If you want to have a longterm 10 year tedious process versus a two year accelerated process, these are two completely different processes and you have to decide from the get go, which one of the two you want to chase and basically orient your company based on what the end goal is.

 

For us, the end goal was exiting because we did not want to make a cash generating business over a long period of time.

 

We wanted to take that capital from that acquisition and invested into other projects that we also had in mind prior.

 

it just a brunch and move for us? That was the first part of your question.

 

The second part.

 

Can you remind me what that was?

 

I wish I remembered that one.

 

No I'm just kidding.

 

I actually remember that it's you and for a specific acquires.

 

So do you aim to be acquired.

 

by Beatrix specifically or is it no one wants to be acquired by some crypto exchange.

 

We figured out that there are two exit possibilities.

 

One is getting acquired by a crypto exchange.

 

The other is a financial firm that deals with crypto trading in general because the product that we have was a trading platform.

 

Obviously a social media, like Facebook would an acquire us.

 

I mean, what will Facebook do with a trading platform, right? It's not within their core mission statement.

 

for us it was more geared toward a, a specific subset of potential acquirers, which is, be it, name all the exchanges, metrics by announcement mix, whichever, all of these were potential acquirers at the end of the day.

 

For us, the way we structured our business and we just happened to go with Bittrex because we felt that was the best fit, basically, both in terms of culture but also in terms of product among many other things.

 

Got it.

 

I assume that before, I mean the or quarterly company, and did he raise any money through an ICO? We actually considered first raising, regular, via venture capital or angel investors.

 

We discussed the possibility with a couple, but we, at the end of the day, they all asked for a too much equity and B, we realize that actually our running cost is very low.

 

I mean, the way I usually build my businesses, just to give you an idea, we handled billions of transactions or rather billions of dollars worth of transactions in terms of crypto trading and that nine months spirit and the whole platform was running on a couple hundred dollars worth of rented hardware basically.

 

the running cost for the organization was very small.

 

The only, the big ticket items where, salaries and stuff like that.

 

even those were not that expensive because the way we work internally was, we put in a lot of sweat equity, me and my cofounder, and we also hired for the specific parts, a soda on contract or a certain things.

 

You have to basically such a security consultation, you want to have proper security audits and stuff like that.

 

Those are external third party services.

 

Those were some running costs.

 

But in general, we stayed very lean.

 

We stayed very cost efficient, which allowed us in a sense to basically not need any VC money or any money in general.

 

Now we consider doing an ICO, but at the end of the day, we came to the conclusion that unless the coin you're issuing has some level of functionality inherent within it's going to be more like a gimmick than an actual product type thing.

 

this was back in 2017 during the ICO craze.

 

even though we could have raised millions and millions of dollars doing an ICO, we decided not to do it because an ICO in general would have put us in some murky waters when it comes to banking, transacting conversion to dollars.

 

A lot of banks didn't even want touch us.

 

I mean, we asked about all these things beforehand and we decided that, what, raising the money is not worth it for us to be an ICO because it will put us on a path that we perhaps shouldn't take.

 

we ended up settling on not doing it, even though we had the ability to do so easily within a, another month time.

 

It just, it just wasn't needed considering that we exited so fast.

 

Right right.

 

So.

 

here I want to get distracted from this major topic of, accelerating this acquisition process and ask you about something that you mentioned earlier, which is you decided to, rather than building a cash generating business, you decide to get this capital and invest into some ideas that you had prior to trade dash.

 

How do you do any annual investments in other projects?

 

from time to time? Yes.

 

although I was considering starting on basically not angel investment fund of sort together with a couple of, friends and acquaintances, ex colleagues of mine.

 

We wanted to pull together our money and start investing at, appropriately as we basically, let me put it this way.

 

Instead we look at companies very differently from the traditional VC type of mindset because is again, a lot of their value for their investments based on markups.

 

basically, you get some money, some seed money or some series a money from a VC firm and when you get a series B, that VC firm basically gets a markup on its initial investment.

 

Now for the VC firm that works, because they're basically marking up their deals and they can really secondary funds and invest further.

 

For us, me and my ex colleagues and friends and the people that I work with usually, we look at companies very differently.

 

We look at companies, as a function of one of two things.

 

Either you want to have a company that exits really quickly such as trade dash to an exchange in order to basically make it a one time deal.

 

it's a really, you know, well-paying deal.

 

Alternatively you want to have a business that is a cash positive from day one or at the initial stages, you don't want to invest in businesses that will bear fruit 15 years from now because various is very high.

 

You don't know what's going to happen.

 

Problems get arise at any moment.

 

these are not the type of businesses I'm attracted to.

 

I do angel investment, I mostly look at companies that already have revenue, actually have profits even.

 

even if they're small profit, but I can see some room for those profits to scale up by basically some injection of capital.

 

at that point it would be interesting for me to invest in.

 

There are very few of these ideas at the moment out there that I find to be extremely lucrative.

 

That's why even though I've done of angel investing, it's not something I full time or it's not something I actively chase at the moment.

 

I mentioned that he said that you actually will look for those, ideas and the projects that are feed for you.

 

Where do you find most of them? Is it Crunchbase? Is it some other software that you're using?

 

Weirdly enough, I, I've used Crunchbase for quite some time.

 

It wasn't really that fruitful.

 

I mean out of a hundred companies you're looking to maybe one or two will be interesting enough and when you contact the founders and talk to them, perhaps the company is not profitable or perhaps the company is not taking as much risk as I would like cause I'm an extremely risk tolerant person.

 

I like ideas that, go big or go home type ideas.

 

a lot of these companies don't usually have that.

 

Maybe they have a 10 year plan and they're structured in a very different way than how I think about startups generally.

 

For that reason.

 

When I researched startup, it's mostly so that I, as an example, you take something like hacker news.

 

I'm not sure if you frequent tech or news, the Y Combinator, news dot Y combinator.com.

 

usually they have some threads up there, what is your side project that you're working on currently as an example? And you scroll through it and there may be hundreds of submissions, people talking about their projects and then they're on Mike find a project or two that are interesting.

 

I reach out to the founder and talk to them about, Hey, so what's the status of the project, what are you looking for? And we have just a basic biologic to figure out if the investment opportunity is worth it or not.

 

if so is the case, you proceed, otherwise you basically wait for the next opportunity to show up.

 

It's an extremely tedious process.

 

I'm unfortunately, there is no quick way, a lot of people reach out to me from time to time pitching me their startups.

 

like I said, most of them don't fall within my parameters and the way I look at risk and profits.

 

I tend to say no to most of those that come my way.

 

every once in a while something good shows up and that's what I usually, proceed with.

 

Right.

 

I want to follow up on what you just said, which is that scrolling through Hucker and hacker news, going through Crunchbase, et cetera, and reaching out for yourself to founders.

 

I mean it's one of the most frequently asked questions for me as a BI founders is like, how do I get myself out there in front of investors specifically now during this Corona virus, what would be your condition to those founders? Should they go on hacker news or should they try to get published in a tech crunch or what's the advice?

 

Actually it depends on the type of product you have.

 

if it's a tech product or actual a physical product, like a hardware related product or a, it's very different depending on the nature of the product.

 

That's it.

 

However I found one thing to be true throughout my career, which is if you create good products, even if they're just in the prototype stage and they have a couple hundred users, if you have a decent product that people like, they will help you get whatever it is you need.

 

for instance, for crave dash, some days I used to sit down and just, my head down into my keyboard and coding and suddenly I get a message out of nowhere saying, Hey, I'm one of your users.

 

Your app is really interesting.

 

Are you guys looking to raise money?

 

I worked for a venture capital firm.

 

I would like to, chip in if you have an opening in your cap table, et cetera.

 

if you make products that people like in general, the money will flow to you.

 

Now obviously that's not always true.

 

There are always exceptions and it's not that easy.

 

However it's generally the case that if your product is providing value, venture capitalists will find you.

 

I mean, that's after all their job.

 

They're scouring every possible company you can think of looking for value.

 

if you can present an application or a product that provides value, they will find you eventually.

 

I also have to do a couple of things.

 

You have to set up your LinkedIn page.

 

I get on social media, do some Reddit posts or stuff like that just to get some exposure.

 

once you start building your user base, these things will come and fall into place.

 

Just make sure you're lean enough and cost effective enough to be able to withstand all that, time and money.

 

Pressure until said opportunity presents itself.

 

That's, that's perfect advice as it's great.

 

here we're moving on to discussing the MVP.

 

the MVP building is not the most, not the hardest part of course of the travel it's probably going to be is parts but still may specifically early stage founders struggle with the MVP.

 

Often they build too many features, sometimes they build too few features and don't provide this value in this may have a viable product.

 

what's your condition? How do you find this soft? I mean nice spot.

 

Is there like a formula for that?

 

This is a great question.

 

I mean there is no formula.

 

Unfortunately it's a form of art more than it is a form of science, right? It's, there is no way to know a priority.

 

What will work and what won't.

 

But let's take an example.

 

Let's say you want to build a, I don't know, let's say a an email client such as Gmail as an example.

 

Let's say you want to build that and make that into a business.

 

Now you have to ask yourself, what are generally when people ask themselves the question, well, what are the minimum amount of features I need to have in my applications application for my MVP? They, make a list and go ahead and develop all these products.

 

you have to keep in mind that the minimum required, features is that you're able to compose an email, send it, receive it, a couple of handful of features like that.

 

However, in order for you to V so that's on the low end, on the top end, let's say you can have a full fledged system with life scheduling and categorization and all these other things.

 

So that's on the extreme end.

 

Your job as a founder is to basically find a balance.

 

The minimum and the value.

 

the way I see it is, for instance, the email application you're building is going to be completely useless as an example.

 

If it doesn't have a spam filter because people are going to get spammed, they will never use your application.

 

They won't like it, anyone grow.

 

it's your job to find the balance between the value part and the minimum part.

 

generally what I see founders do is that they focus on either providing the minimum Bart and at that stage basically someone signs up for your application and basically there is nothing in there.

 

They're getting no value out of it.

 

Alternatively they focus on the value part and keep adding more and more features mindlessly, just basically these feature creeping.

 

it's your job actually to balance these two things out.

 

the hardest thing, and I know this from experience is to be to say no, like it's really hard to say no.

 

Oh here's this cool new features we thought of.

 

I mean my first one is always let's go ahead and do it.

 

I always fight that urge and go, no, let's not do it unless it's necessary.

 

In the initial stages, once you have your financing secured, once you have, your, company organization is flowing at that point, you can take on these additional things that provide more value.

 

when you're in the MVP stage, you want to keep that under check, under control and not basically become a feature creep or on the other hand become, type of application that provides no value.

 

yeah, that's a perfect example on that.

 

Jamil client.

 

let's talk about the other part that really interests me in this, accelerate acquisition person work at Workday impact.

 

the main discussion of today's episode, which is accelerating your acquisition process.

 

So hiring is hard.

 

It requires some legal advice from professionals.

 

It takes months sometimes.

 

How do you manage to hire new people? if you want to get corn in less than a year?

 

Oh boy.

 

I mean, this is a topic I could talk about for days, not hours, actual days.

 

it's really hard to distill it down.

 

what we know from research is that in most organizations there is a Purina distribution or something close to burrito distribution and where the most amount of productivity gain in your organization comes from a few a select people and most other people provide some value but not an extraordinary amount of value.

 

for me, when I hire, I always ask myself, is this person going to be an extreme value contributor or a non extreme value contributor? Is it someone I need crucially or is it someone that I need because there's some stuff that needs to be done for the next three months.

 

that person will sit down and do basically nothing.

 

if the case is that, it's a short term thing I need, I mostly hire, as a or a contractor or something like that for these types of gigs.

 

Meanwhile, if you need something more robust than permanent and longterm, you obviously have to do the actual hiring longterm.

 

That said, I mostly don't hire based on coding.

 

Like if you look at large tech firms, what they do is they bring you in and give you some coding exercise.

 

If you're working in tech and they ask you some questions and they get you back again and keep filtering.

 

I do things differently.

 

first the first thing I do is basically a gut check, an instinct check, which is okay, can I sit down and talk ideas with this person openly and can this person provide me with valuable creative ideas that I can implement into the organization and into the product? If the answer to that is yes, then this person will always provide you with more value than just code.

 

Meanwhile, if the answer to that is no, that means the most this person can provide you with is code.

 

for me personally, being a software engineer 15 years, I know that I can train a monkey to code.

 

Obviously he won't be a world class coder, but it's like coders are, everywhere.

 

getting coders is not the tough part.

 

The tough part is getting someone who's going to add extra value to your organization that will enable you to grow even faster, more than just product oriented type coding.

 

Things could be things like in terms of organizational skills, can this person be creative enough to find solutions to problems that I can't even think of because I don't have the experience in a particular domain.

 

Does this person have maybe a PhD in some area or a master's degree in some areas that I'm unfamiliar with, such as let's say visual design or what have you.

 

These are some stuff that I look at it initially just to get a gut check and afterwards I asked myself the one question I think every founder has to ask themselves, which has, well the one metric I follow is what is the revenue or profit per employee? I think that's one metric everyone has to look.

 

It's not something religious you follow, but it's something to keep in mind because basically for every employee you add, the revenue per employee is obviously reduced.

 

If you have a million dollars in 10 employees, you divide a million by 10 if you have 11 million by 11.

 

for me, I tried to keep that number as high as possible.

 

Not for some, superstitious reason, but because I found that one organization turned into 40 50 people, in the range of 40 to 50 employees that when things start to break down, now you need suddenly middle management and you need to hire HR and all these other areas start to creep in.

 

you want to always keep your organization lean less than 40 people set up, everybody's aligned on board with the mission and if there is no crucial or nonessential staff, don't hire them on full time.

 

Just basically use consultant or something of that nature for those particular tasks.

 

Again this is a topic we can talk about for days, but I'm trying to distill it down.

 

I'm not sure if I'm doing a good job of it, but these are,

 

you are, I think that was a really good answer.

 

It was big enough but also short enough for this episode.

 

So it was great.

 

Thank you for that.

 

We're moving on to the last question of today's episode, which is this thing that I started doing recently with all my speakers, which is small cultivation to the listeners of fundraising radio.

 

once this episode is over, what is one thing that you want the listener to do right now? One specific thing.

 

one specific thing.

 

can I give you a couple or does it have to be a couple works perfectly.

 

Okay.

 

Well, two things I think are very important for founders to understand, which is, I mean most founders know these things, but basically studying them a client is very beneficial, which is compounding growth and paraded distributions mainly just so that the compounding growth is basically for the sake of the financial plan and how you build your business.

 

basically business model, you need to introduce some element of compounding growth into your organization in order for it to be able to provide value in a very short period of time.

 

Otherwise it gonna take you too long.

 

the other part, burrito distribution is it is related to hiring, is related to productivity and other things to prove to distribution and component growth are two things people should probably read up on.

 

the biggest thing, the CTA I would give to everyone would be stop looking at shiny things.

 

I mean, don't try to create gimmick, don't try to force value or values, not found.

 

Instead basically focus like hyper focus on the actual thing, on the actual valuable thing you're trying to get to work and make sure that is solid and build around it.

 

Expand from there.

 

don't get sidetracked by, we have to implement, I don't know, react because it's the cool hip, new thing everyone is using.

 

Ignore all this nonsense and noise and instead focus on your users.

 

Don't care what you use.

 

It could be pure JavaScript or Ajax if you want, or it could be jQuery or use whatever technology you can.

 

Your users don't care.

 

What they care about is that you delivered to them value in a secure fashion and they want transparency and trust.

 

once you deliver these parts, I don't think anyone cares about your tech stacks.

 

Don't get attracted to shiny things just for the sake of it.

 

That that would be my take home I guess.

 

Perfect.

 

That's a perfect wrap up of this episode and on this part we will wrap it up.

 

Thank you again for coming up and for taking your time.

 

I really appreciate it.

 

I think that's a one great.

 

I think there's some new vision on the process of, getting acquired because most of my previous speakers who spoke about that usually said that, it takes five to 10 years because that's the average number and having someone who is doing a really fast version of that process is really interesting and pretty sure the listeners will love it as well.

 

So thank you for that perspective.

 

Thanks for the kind words and thanks for having me.

 

Absolutely.