You're listening to cubicle to CEO episode 204. What is it actually like to build a company that gets acquired, sharing her firsthand experience today is tech founder Teri Yu who sold her community based software viably to the $2 billion online business platform Kajabi, where her product became Kajabi communities. After raising $2.5 million in funding, Teri eventually scaled viably to a $6 million annual run rate and hundreds of thousands of users served through the communities hosted by creators on Vibely. Recognized by BlogHer as the Innovator of the Year, Teri's path from cubicle to CEO and then back to employee as Kajabi is now director of product is anything but conventional. Teri spills the beans on the key factors that made her company and attractive by two interested parties like Google, Patreon and of course Kajabi, the pivotal moments that shaped her decision to sell and why she ultimately chose Kajabi, and how she navigated the roller coaster of post exit emotions as a founder.
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Hello, everyone. I have someone really special here with us today. Teri Yu is an amazing human being who I met a couple months ago now she is part of Team Kajabi and one of my favorite brands that we partner with long term and Teri recently joined their team after selling her company, Vibely, to Kajabi and it is now branded as Kajabi communities, which if you've been part of our community for a while you know that our membership our newest membership that we soft launched earlier this year is hosted on Kajabi communities. It's incredible it's like a replacement for Facebook groups for honestly you could replace zoom with it discord circle, a lot of the community oriented type of channels Kajabi communities is a great solution that can help you house everything in one place. So Teri, I'm super excited to have you on today to talk about your acquisition and what that's like. Welcome.
Thank you, Ellen. And I gotta say your voice is so soothing. Oh my gosh, perfect for the podcast.
Oh, thank you. And Teri's mic is the cutest, actually for our YouTube watchers can you just like pull up your mic for a sec
It's a little embarrassing, but this is my hack together setup until I get a better one from Kajabi.
it's amazing. It's a mini mic like clipped onto a blanket and it is the cutest thing I've ever seen. Anyways. Okay, so Teri, I give a quick introduction into you know, what Kajabi communities is but obviously for today's case, Today we're really going to be looking more at, you know, when it was still your company that you built Vibely and how that acquisition came to be, I think you might actually be one of the first entrepreneurs on here. I mean, we've had maybe a couple, a handful of others who have sold their companies. But I'm really interested to kind of get into your brain and understand the process behind this. And what motivated you to do it how others can think about building their companies to be sold eventually. Before we get into the nitty gritty of the case study, though, the first question we always ask our guests is, what's your cubicle, the CEO story? What was that catalyst that launched you into entrepreneurship? And I know for you, your story's a little unique, because after you sold it, you're back working on a team. But what's, what's your story there?
Yes, the ironic part is I'm actually the opposite CEO to cubicle. However, it's been such an amazing and wild ride, so lots of to share there. So I did actually start out in corporate. So I worked at a company called Asana as early pm there worked on the growth product side. And what I saw was that when we were running a lot of AB tests, and just the larger tech industry, there was just so much focus on dwell time, session time, like getting people to come back to the app. And so it was no wonder that a lot of these big tech companies like Facebook, Snapchat, they were creating more of an addictive cycle than they weren't creating like meaning and fulfillment and life. So that was something that didn't sit well with me at the time.
I wanted to create something that was meaningful, truly socially fulfilling, like something that brings real value to your life and you're happy with after years after, you know you've had that experience. So that was a mission coming out of Asana was I wanted to create something so meaningful that people could become more connected than ever in a really, truly impactful way. So with that mission, we started viably, and it became a way for creators to host intimate communities. So think of like a photography community or a wellness community, they could have a place where people accomplish their goals together, learn challenges to events together, how lives together.
And one of my favorite creators that we worked with then was Nihongo Dekita. She had 300k followers at the time on Instagram, and she taught Japanese. So their community got together with practice Japanese together, like do very cute like Japanese exercises together where they would like speak certain phrases like give each other feedback challenge each other. And it's just so exciting to see like people actually, you know, progressing in their own lives and their careers and their skill sets because of the platform itself. So that's kind of how we like got to where we were, ultimately, we ended up joining forces with Kajabi. And that is how I am now working remotely from a cubicle.
I mean, if you're, if you're watching this, instead of listening, if you're watching on YouTube, Teri's cubicle is obviously not really a cubicle, but it's gorgeous. I was just complimenting her on the background and her design taste. It's gorgeous,
style house, so not a bad cubicle to be in.
That's not and not a bad team to be on either. I love that your story is representing a different journey than most of the guests that we bring on the show because like I said, not a whole lot of guests that we've featured have necessarily sold their companies. And I think understanding like what it's like to go back to working on a team after you have been the person in charge for so long will be a really interesting discussion that we can get into as we move through this case. And
I could talk about that forever.
Okay, well, I definitely want to hear your thoughts on that. Let's first start though with a little bit of context going into this acquisition case study. And I think the first question I really want to get a clearer understanding of when you built viably originally, did you always build it with the end intention of selling it? Or was that kind of just a natural, I guess event that happened as you were growing.
So the style company that we built when your platform is meant to be a venture backed style company where your ultimate goal is to scale to millions to billions you want to IPO. When I started it, I wasn't exactly sure which path I wanted to head towards. But I knew I wanted to make the biggest impact and splash possible. So when we started to build a team when we started to raise money, and we raised over 2.5 million from people like the cofounders of YouTube, meetup.com. Asana, like lean startup, like people are getting like big names in the industry. Like they all want to join a mission that's going to have a huge dent in the world. And so I very much wanted to build a company to that level, and really magnify our impact.
But along the way, of course, like we ran into challenges I became really like, super burned out at certain points. I mean, I grinded for five years. And so these kinds of events you come across naturally. And so when we received our series A term sheet, that was when, like, I started to think about like, we were getting acquisition interest as well, from like, I think Patreon had reached out, Google I reached out. And so it was a deliberate action at that point for me to figure out like, what is the risk reward of us continuing, given, like my energy level, given, like the challenges I had, but also given like the amazing impact that we could have if we partnered with a company that did already have a ton of users and a ton of creators. So it was all part of that decision making process. But I knew that it was all about impact for me.
Yeah, I can definitely see that being a driver from the inception through where it is now, which I can totally see the value even just as a user myself of the product that you've created, I'm so grateful, because it is such a breath of fresh air to be able to connect with people off of social and within our own app, which is what communities has really allowed us to do without having to hire a developer to create something of our own. And I think it is just such a great way to utilize the platform to create real connection, both online and offline. I think that's what's really inspiring about the way you've set up your product. Like one of my favorite features, this seems so simple, but I actually love that when people sign in to create their profile for the first time when they're joining our community, they're able to share where they live, they're able to connect their other accounts, they're able to answer these fun questions about like, you know, what countries have you traveled to? Or like, What's your favorite thing about XYZ? It's, in a way, it kind of feels almost like you know, when you sign up for like a dating app, and you're answering, you know, questions, but like, getting to have a holistic view of who a person is, from the moment that you join your community, I think is so powerful for connection.
So we really wanted to make that super intimate, and I'm so glad you're getting a lot of utility for you and your community. We also really want to maintain like that psychological security for creators to because as you mentioned, like social media is such a blessing to be able to build an audience on, but it's not necessarily the place you want to put your business and livelihood on. Right. So that's what Kajabi is, mission has always been just to power, the business and livelihood for entrepreneurs all across the world. And that really resonated with me when we're thinking about which company do we join? How can we help creators and our community members get the most out of something like this? And so it was just like a perfect match at the time.
That makes complete sense, the ownership of the community, I think, is that missing aspect for so many people like like you said, you can build a thriving community, on YouTube, on social and whatnot. But ultimately, you don't own that asset. And it can, I mean, that can really be taken away from you.
Every month, it feels like there's a new piece of news that may cause like the social platforms to disappear. So tik tok was gonna get banned at some point, you know, who knows what's gonna happen with Twitter now that threads is the new platform. So while it's great engines, it's just not something that you should completely depend on to build a business
100%. And I will say, just from an entrepreneurs perspective, and again, as a user of communities, I think what I really love is in the same way, that when you send an email to your email list, you know, unless there's a deliverability issue, you know, you're able to reach 100% of your audience. Of course, whether or not they choose to engage with you to open your email to respond, whatever it may be, is up to them. But in the same way, I know when I post a post in my Kajabi communities app, I know 100% of the members inside that community will be notified will be able to see my message. And whether or not they choose to engage is of course up to them. But having that peace of mind and knowing that I have control over the delivery, and distribution of whatever I'm creating is, again, just something that really cannot be stated. I think enough. And you referenced just a moment ago, you grinded for five years. So just to clarify, from the moment you had this startup to when you sold it, was that a five year window? Or was it actually longer than that?
It was approximately five years I did work on it little bit as like a side thing at the beginning and then I dove headfirst into it. So it could have been a little bit longer. But yeah, five years of pure grind pounding the pavement like I had no life. I asked all my hobbies, I had no time for friends. I didn't prioritize anything. So it was a lot of grinding and it was worth it in the end. But I don't necessarily recommend that path for everyone.
Yeah, no, I appreciate the truth in that. And I think that's why I love interviewing entrepreneurs from diverse industries on the show because I think oftentimes, you know when you read about On the type of acquisitions, like the role you've played in and we read about, you know, the richest people on a, you know, Forbes billionaire list or whatever these things are, we tend to glamorize that. But we forget that the sacrifice it took for someone to reach that level of business is not necessarily what everyone actually wants to execute on to get to the end results.
True. So true, like the multimillionaires of like Jeff Bezos, Mark Zuckerberg, Elon, like we tend to criticize them sometimes of like, how much more they're making than everyone else. And I think there's some truth to that. But at the same time, they've worked their asses off for decades, most of their life, like they're always on, overloaded with emotions, like drama emergencies, like getting little or bad sleep, there's constant buyers and 1000s of employees, or depending on their every move, like you can see some of their marriages and relationships are broken, maybe because of their absence and lack of focus on that. And so everyone has to ask yourself like, is that the life you want to live? Like, not everyone is cut out for that. I clearly could only handle it for five years of that intensity. Some people take it more an unbalanced approach, which is probably better in the long term. But yeah, there's a certain amount of resilience that you have to accept to take this path.
No, I do appreciate you sharing your honest experience and what you had to essentially give up in order to achieve something like this, because it allows our listeners who may be thinking about going down a similar path to go in with eyes wide open, right, no illusions about what that path could look like. And in getting your company to a place where it was even, I guess, able to be considered for acquisition by another company. I want to talk about that a little bit. Because I do think that context matters, before we get into the actual details of like the acquisition process. So you achieve something remarkable. I mean, you were getting 59% month over month growth, I wanted to clarify is that in users specifically, or revenue,
it was revenue that we're growing month over month, we had a total membership revenue, because of our creators, were charging a x dollars a month to have access to like their pay communities of around 2 million that year. And at the run rate that we're growing out, we were going to exceed 6 million that year. So it was like 16 times growth within seven months. And you know, we're definitely hitting an inflection point there. We did have about 175,000 members on the platform. But it wasn't necessarily like that, that a lot of the VCs and companies cared about because it was more about like the growth potential from the revenue side.
Interesting. So your business model, did you act in a similar way as Patreon where you were taking a cut of the revenue your creators were making?
Yeah, so originally, in Vibely days, we were rev sharing around anywhere from 10-20%. With our creators charge access for their pay communities or memberships and Masterminds, we changed that once we joined Kajabi. Because Kajabi is mission is to empower the creators and entrepreneurs in a way that, you know, scales with their business. And we did see that you know, as a creator grew with that take rate model, it just didn't seem fair anymore. Like it equates to taking like 10-20% of someone's business at that level of success. And so while rev share is very friendly for entry level creators, it's not necessarily good, longer term for our business. So we wanted to just aligned with the values that Kajabi had there.
Oh, you make such a great point. I didn't think about it that way until you phrased it. But you're so right. It's really appealing for early level creators, like you said to do rev share, because it's no risk to them. Like if they don't sell anything, they're not out of pocket, any sort of cost, right. But to your point, if you're an established entrepreneur, or creator, at some point, if you're doing rev share, it is like almost giving equity to right an external partner, because they are taking that cut every single time. I guess I never thought about it that way. But you're so right. And I think that's what's broken about the model for so many rev share based companies like Etsy and Patreon and whatnot, is that that model is inflexible. Like, as you scale, you get diminishing returns, and it almost punishes you for growth, which I'm really glad that
Just not me. Yeah. Entrepreneur friendly. And you see all these, like investment deals being made, whether on Shark Tank or just, you know, with your personal investors, people will pay for 10 to 20% of your business like millions, you know, sometimes rounds are 100 million plus type of deals to for that kind. So it's just not worth it to give up that amount of your business when it's a software at the end of the day that you're using. And they're not investing that much money that much time into your personal business. So you shouldn't be giving too much equity.
Yeah, no, that's such a great point. And I hope if you're listening to this, and you play more in the Creator world, then perhaps the entrepreneur identity, that you're paying close attention to what Teri has to say, because I'm glad that you switched to just that flat subscription software costs once you join forces with Kajabi. And one more thought I wanted to get your insight on when you were emailing us beforehand, you made a quick note that says something like 3.5x monthly spend versus Patreon. What did you mean by that?
So when we were at the peak of before we sold, we were helping creators charge for access to their communities. And what we saw was like when creators are giving valuable insights and connection within their community, it is actually worth a lot more than like donation release platforms like Patreon. So Patreon can gate things behind it, of course, but for the most part, they were like a payment processor at the beginning where, you know, people would donate as a patron and try to support your business. But what we saw was that creators were making 3.5 times the amount that they were making for their creators. And so so that was something that we were quite proud of.
Interesting. Okay, so that's another nugget to consider and how you're monetizing your community, which is a whole other conversation that we could spend hours talking about, let's get into the actual acquisition phase of this. So like you said, you got to a certain point in your business, I'm assuming towards the end of that five year run, where you were growing month over month by 59% of revenue, you were on track to hit $6 million dollars in revenue that year, did the first offers or people who are interested in buying do they come calling? Or did you decide I'm going to put this up, you know, for sale in the marketplace hired a broker put the asking price on like, how did that all come about?
Yeah, I think of everything in life like a funnel. So whether it's you know, reaching new customers, or even dating or fundraising, recruiting all this is just a funneling, you want as much top of funnel volume, so that your end result becomes as compatible or as valuable as possible. So when we first got our series, a term sheet, that was a trigger for me to really think about, like what our business is worth, what our challenges were, what we needed to do to make this even bigger. And because there were other options coming in, which was like some of the acquisitive interest. I fully explored that path and created a spreadsheet, you know, created a list, sent out emails asked for intros, this industry in general for m&a.
And fundraising is very driven by referrals. And so I didn't necessarily, like send a cold email to like Snapchat and say, like, Hey, we should talk or whatever it was finding a intro or a referral that, you know, could speak highly of us that like, knew someone who knew someone. And so with that funnel, we ended up with about five m&a offers woman's a crypto company, three more major social media companies. And then at the end of the day, you know, we had the most compatible deal, which was Kajabi. So that was how we kind of made the decision. And I'm glad that we had multiple options, because that gave us leverage and negotiation. If we didn't have that, then the deal would have been much worse, it may not even have happened because there was no urgency created. And so everything I do always think about in funnels.
That's a really great visual to give. And that makes complete sense. I of course, have never personally sold a company, but I've watched you know, people in my life, do it. And you're right, having more hands in the in the pile who want you know, a piece of the pie that you've created, definitely creates that environment where you have more leverage, just for our listeners, and for myself, so m&a, mergers and acquisitions, in case you missed that acronym, a series a term sheet, I'm not familiar with the world of venture capital. So tell us real quick, why a series a term sheet would trigger a buying opportunity?
Yes, so startups have different phases and milestones. So it can be as early as a precede, sometimes the second precede, it could be a seed round, there could be a seed to round series A is next series B, Series C, Series C, and so forth until the IPO, it's split like that based off of fundraising rounds. So you know, we had a precede round, we raised 500k, we had a seed round, that was around 2 million. And then the Series A, you know, that was an offer from an investor, venture capital firm, to get a substantial chunk of equity around 20% In our business for the money that they were infusing in.
So at that time, your company gets priced in terms of like they're looking at other companies in your segment. They're looking at like the potential multiple that the company could be worth once you IPO, assuming you IPO. They're looking at the risks that your business has, whether that's like legal risk or talent risk or Aren't you know, founder Market Fit risk, like just assessing all the different types of ways that you could potentially fail, but also, you know, evaluating your successes as well. And then once they put a price on that, you now have a valuation of your company in terms of saying like, this is what your business is worth.
So with that, I started to think about what is our business worth? And what would it be worth if we sold now versus like later with this kind of like priced in understanding of where we would be as a company. So that is why I started the acquisitive process. A lot of founders don't necessarily do that. Like they will just raise their series a have a lot of venture capital firms like give them term sheets, close that, then raise a series B continue forward. But my personal journey and the one we chose for viably was joining forces ultimately at that stage.
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I have two questions that come out of this first is, ultimately, is the reason you decided to start the inquisitive process at this point solely due to the fact that like what you said earlier, you were really burnt out and thinking I'm not sure I want to continue scaling this on my own even with, you know, a capital infusion? Or was it actually something else entirely that ultimately made that decision for you? So that's my first question. The second piece is are you able to share what your company was valued at or give us at least some insight into like you shared your your company was, you know, about to hit a $6 million annual revenue run rate. So if you're not able to share the actual valuation, perhaps giving some insight into like, the multiples, like, how do you look at a, you know, a software company like yours, and what's like the general multiple, that would be assigned to a business like yours?
Yeah, so I chose to sell for two reasons. One was personal. I was very burned out, as I mentioned, like, I had no life for those five years. My husband was sick and tired of it as well, because he has been like, therapists over the years. And you know, it's such an emotional roller coaster. He really is like, the silent co founder in some ways. And yeah, I just, I needed some relief and some break at some point. So my decision process was like, do I take this term sheet, and then hire new leaders to potentially carry the torch forward. But you know, it's not necessarily the right thing to do from the venture capitalist perspective to like, ticket and then hire someone else and kind of like sit back, right, they would want you to continue to grow to work like for, like they're putting the money in, in many situations, like on the founder. And so if the founder isn't able to be at 100%, like, it's not good for the VC firm.
So, considering I like valued the relationship, and I knew where my like energy level was at plus, like, you know, my relationship at home was like, I knew that there wasn't something that I could continue to grow at 100 with, but the second reason was also just the challenges that I was honest in assessing with the business, right, like as much as we were growing It required me to still push the boulder uphill. Like I think we'll talk about this in the case study aspect of this. But we did do a lot of like outreach, we, you know, personally talk to creators personally was in their inbox personally sold them. And it wasn't like it was just this, like lift off that, you know, when you've hit total product market fit, everything, just like, naturally rolls downhill. And you can't even stop it. If you tried. It was not that feeling yet. It's not to say we couldn't have gotten there. But we had tried almost everything we could.
And we had also just turned over every rock to the point where I was trying to figure out what is, you know, the valuation we can get now, versus valuation we could get later, what is the right thing to do for our team for myself, for our investors, for our stakeholders, and you know, at the end of the day, partnering with a company like Kajabi, that has over 100k businesses, they power over 5 billion and create a revenue, like creators are making, on average, 5 million a day, on the platform. And so they have product market fit. And so do we want to partner with a company that like, actually has that and has a deep need for the platform that we built? So we can have impact on, you know, millions, 75 million plus students across the world? Or do we continue to operate independently and then continue to push forward, you know, hoping that like the risks that we take on is worth the weight? I don't know if it was the right answer, there could have been a world where we continued, and we like overtook Kajabi, even. But I took the best calculated risk and decision that I could with the information had,
thank you for walking us through your thought process. I love getting to peek inside your brain because you're such a smart person. And I really admire that you recognize the potential of something. But also, at the same time, you're able to have, I think the wisdom to prioritize perhaps what's more important to you in the grand view of life itself, not just, you know, what is the what is the capital opportunity here? And so I think that's really admirable. To the second piece of my question is the valuation of your business, something you are able to publicly disclose.
So we can't disclose the terms of the deal legally. But what I can say is that Kajabi is a $2 billion company, they have raised 550 million from top VCs, including Tiger Global, they didn't need to be the for the offers that we got. And it was a very life changing experience. For our team myself. The timing was a little tricky environment, be honest, like they was on the cusp of the 2022, market jitters. And there was a little bit of like downturn happening at that point. So we did feel some pressure from our end to like, pull the trigger on one of our deals. But it was such a gratifying experience like even outside of the financial life success of it, it's more than networking. And the connections that I built are above and beyond what I could have even imagined, we have created something that people are actually using and like their customers are using. And I think I would have regretted this forever. If I didn't start the business and didn't try to give myself a chance as entrepreneur
100%. You mentioned that, you know, 75 million students are served essentially by the creators on Kajabi, who produce $5 million a day in generated income from the platform. So that adaption of placing your product in front of those students, did you find that to be an easy transition? Or were there some challenges there that you weren't anticipating?
Well, I'm so curious to hear your perspective, because you've been using it when we launched it was January of this year. And so we were just overwhelmed by the response, like people really needed communities within Kajabi. And there was so much love and positivity, there was also so much area for improvement where people were giving us feedback about eating this and that and our backlog was no joke. Like there was a lot of stuff in there. And we had a lot of ranked things in terms of requests. So I think the challenge was figuring out for Kajabi heroes, specifically, we call them heroes, as you know, because they're entrepreneurs that are powering the next era of business. But they needed specific things that were very tailored to Kajabi. So like Kajabi itself is really powerful because it's customizable. And that was an element that we hadn't necessarily embedded natively into the community platform.
But something we started to build really rapidly on top of our existing engagement that we were seeing in the communities like what we had already proven out could work really well for communities and add that customization layer. So now we're pretty much there. We still have more to do as you know, like we're building things like more custom look and feels of the community Although we also have a branded like community, and of course experienced in the future, to look forward to to, but we also just released like custom emails that you can send out, just things like that are very much things that we're heading towards. And it'll become even more powerful as it integrates directly into like courses and your email newsletter and your landing pages. And you can add, like automations, and segmentation and all that. So we're really excited for what's to come.
Yeah. And as a user, myself, I'm really appreciative of just how receptive and open you are to feedback and really taking action on that feedback, which is huge. I want to direct our attention back to the negotiations piece real quick, you said you felt some pressure at the end of 2022, with the uncertainty of the market to pull the trigger, essentially, on one of the offers that you know, you were considering? What was that negotiation process like in thinking about this from the perspective of someone listening to our show today, who might find themselves at a negotiation table someday deciding to sell their company, whether it's on the scale that you were at, or a much smaller scale or bigger scale? What are some of the things that you learn from that negotiation process that you either wish you could have done differently? Or that you found were real winning strategies that you want to make sure our listeners know about?
So acquisitions are decide to be suffered three major inputs. So the first is team, like, how talented is your team? How much are those leaders? Are those contributors at the company going to like change the trajectory of the acquirer? The second is product. So how much can this product accelerate the growth or the expansion stream of the company? The third is traction. So this holds the most weight in every deal, but it's like how much revenue how much users you have as a company. It's one of the reasons why the WhatsApp acquisition was an $18 billion. It posed a real competitive threat to Instagram, the meta, there were millions of users, maybe billion, I need to look at the actual numbers. But it was a lot of traction, right. And so the more of those inputs that you hit in acquisition, the higher the deal you get.
So for Vibely, it was team and it was product, it was not traction, because although we were breaking out at that point, like it was just so little compared to what Kajabi already has, right? Like you've heard some of the numbers like Kajabi is one of the leaders in the crater economy at this point. So I think it for anyone who's listening and wanting to get acquired, I would consider those inputs and preparing yourself for that the deal. So like, if you need to bring in better talent, so that you can make yourself look better. Like that could be a way to prepare, if you want to build a acquirable product, like think about like what the market needs and what who could be your acquirer and like kind of tailor your product experience to that, you could do that as well. Or you can hold off on a deal until your attraction becomes explosive. And it's compounding because every acquire would love to see those like signals before they buy.
But in general, I'd say like, don't think about trying to exit as your like starting goal. Like you can think about it in terms of a possibility. But the best deals happen when you're not trying to get acquired. You're just trying to build the biggest business you can. And then the opportunity arises that you could get acquired. Because no acquire no venture capitalist. No Ambassador wants to hear like you're just trying to build to get acquired, like if you're shooting for, you know, just the sky, you're going to land somewhere beneath and so you want to shoot for the moon and like maybe you'll land on the clouds or something.
Yeah, no, that's a that's a great piece of insight that I'm kind of curious, like, when you talk about traction and that momentum and that growth. Do you think that from a company who's acquiring you? Do you think they care more about explosive revenue growth or maintaining healthy profit? Because like, if you look at some of the biggest case studies in the world, right, like Uber or even Amazon, right, they were not profitable for so long, because they reinvested everything back into aggressive growth. But at what cost? Right. So I think in having gone through this process yourself, were you more focused? If you could go back and make your traction piece more attractive to your buyers? Would you have more focused on that aggressive revenue and user growth? Or would you have still been more conservative on that in to maintain healthy profit?
So there's two types of companies. I think the kinda I built was more the venture style company where there's like these large rounds put into it, you're expected to IPO. There's also a sec. Can type of company that is more like you self start, and there's less pressure. And I assume it's something that like the guests that you have on your podcast, generally have, it is like what we call lifestyle company on the venture. So, you know, it is revenue generating is is often profitable, the attraction often looks good, but it's not necessarily grow at all costs like scale fast and quick blade scale to the point where you become the next Uber and Amazon. So the acquisitions or each probably look very different.
Like I can only speak to the acquisition types of the first, I'm guessing, like for the more lifestyle kind of acquisitions, traction probably does matter more in the acquires minds. Like, let's say there's a bagel shop, you know, they're like thinking about potentially acquiring like a cream cheese company. Yeah, they would think about, like, how much more can I sell? Or how much revenue will I get? How much profit will I get? If we were to acquire the cream cheese company or store, they don't think about as much as like, oh is the person that created the cream cheese, like gonna be game changing for our store and like, have all these like ideas and new frameworks and paradigms that are going to change the trajectory of it? It's like a different type of model.
So I think team matters less product still matters a lot. Like I'm sure the cream cheese in this case will matter quite a bit. But yeah, I think anyone thinking about how to sell in the lifestyle siege, I think would want to focus more on like revenue would want to focus more on product and probably less on team like, you don't need to hire like the VP of Instagram's, like engineering team in order to make yourself look more attractive.
Totally. Yeah, I get that night and appreciate the discernment and how you might approach it. Depending on what type of business you have, I guess, in relation to your case study, in your specific instance, were you prioritizing growth at all costs over maintaining a healthy profit margin, or in the lead up to the acquisition where you still trying to keep healthy profit. And even if it might stunt growth?
The mantra or the venture back company is to grow at all costs. So just a peek behind how VCs think, out of the 10 investments that they make, two of them will get acquired, one of them will become the next IPO big business like Uber, Airbnb, and then the rest will fail. Right. So it's a very hits driven business for them, where they just want that one unicorn to make it up for all the others. So the pressure they put on us founders is to grow at all costs, is to scale at all costs, like Kajabi is so different, because it was started out as a lifestyle company, and then it took on venture capital. And so it had the opportunity to like, you know, turn away investors that would have put that kind of pressure. But as a result, it's like, we're now nearly profitable, right? So it's a good model to like not necessarily have that pressure sometimes. But for some obviously, like Amazon, it worked out really well like not having to think about profitability, like continuing to just take on more money take on more equity distribution, like that was their model. And they're one of the biggest companies as a result.
Right? Now, that makes a lot of sense. And all of these models, by the way that you're sharing, like the traction and product team piece, I really like the way you explain it, because it's so simple for anyone to understand. And it really kind of forces all of us, myself and anyone listening to evaluate those elements in our business and think how strong are we in each of these areas? In which one do we care about really investing our resources in optimizing right? To wrap up your case study, Teri, pivoting more toward your own role in the acquisition? And then beyond? Did you intentionally negotiate your continuation with Kajabi? As part of the deal? I mean, currently, you're serving the role of director of product was your salary negotiation or contract part of that deal? And why did you choose to go that route versus say, just, you know, exiting the company and either taking a break completely or starting a new business?
Yeah, so it was part of the deal because Kajabi acquired us horrible team on product. I negotiated our salary or equity deals like our compensation, even though like cash versus equity split. I think the reason why I'm still here is not because I have to like it does make sense for me financially, but it's more that I really enjoy what I do a Kajabi like, it has such an amazing culture. We're very mission driven to help the next era entrepreneurs. Like I feel very empowered. There's a lot of collaboration on every touchpoint I have with like my colleagues is very positive and my team is still with us. As like we're still working very closely together. So it's something that I choose to at the moment in time.
But that's not to say like, there's not an opportunity cost. I'm always thinking about, like, you know, what makes sense for me short term long term. I think that's something that I'll continue to think about. And there's many times where I have felt an inch, but I've just channeled it into different ways like to help Kajabi or I started writing a book, like, there's different ways for you to do it that aren't necessarily your own venture, per se. But I yeah, I'm very happy with the situation right now.
I love hearing that. And I can attest to what a wonderful group of humans team Kajabi really is. I love working with everyone at your company. I'm curious at the beginning, you did mention there are, of course, some hardships and in transitioning from being the leader, the CEO to stepping back into a team role. What would you say to someone who may be considering doing the same?
So I was surprised post exit how different you'd expect to feel after. So everyone thinks, alright, if I just get to this point, like, I just want to sell, I'll be so happy, I can retire, I will just be on a yacht like partying wildly fun, I think it's actually you lose your identity, and you start to feel like lost and what the meaning of life is. And it's very common, actually, for founders to feel post exit depression. So you'll see a lot of these cases like some, you know, exits, where it's like multibillion dollars, like the founders are like, suddenly stifled suddenly have like no feeling of meaning or ownership or fulfillment, like drops.
And so it's hard to feel sorry for these people I know because it's like, well, you know, you've accomplished something, and that a lot of people would want, but at the same time, like, I guess my advice to people is like, appreciate the journey and appreciate every step of building and the joy that comes with it. Because as humans, we're never permanently happy. It's just part of our biology to always want more to always grow to always like try to survive and get more. That's why if you buy something, you're happy for like, a day, maybe a week, and then it goes away and you want something else. It's the same thing. So even when you reach that milestone of exit, you'll be happy, maybe for a day, maybe for a week, hopefully for months, but it doesn't always last and so just appreciate the journey because that's what life's about.
Oh, what a wonderful and encouraging note to wrap up on thank you so so much, Teri, for sharing your journey with us and giving us a peek into the process of what that looks like to get acquired by a company and you know, make that transition from CEO like you said, not quite like to cubicle maybe but like to being a team member. I really, really appreciate you. Where can our listeners further connect with you after this interview.
So my Instagram is very professional. I've had multiple publicists telling me to change the handles can message me on @teriyakichicken, I refuse to change it. So I hope everyone out there can validate my choice to continue having this handle and follow me there.
It is honestly the best. Thank you so much, Teri.
Thank you so much. It was so much fun.
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