Michael Carden: The stiff in a suit who built multi-million dollar SaaS exits!

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
You've got to start by getting great people and you've got to start by building a system that doesn't actually require individual people.

(00:05):
That is a system.
There was really no option to go, OK, we're just going to kind of grow as we are growing.
And so even at Joyous, we were investing very, very heavily in growth.
And then we went to a board meeting one day and suddenly everyone from the venture members of our board were like,
you know, ****, ****, ****, ****, **** is the most important thing.
I think that there's a tension, which we don't talk about often,

(00:28):
which is the tension between what entrepreneurs want and what investors want.
But the thing we wanted to do from day one is we wanted to build, we wanted to be in a ****.

(00:49):
Welcome to Two Commas, the podcast where we talk about seven figure plus exits.
I am Josh Comrie, the host of the show.
And today I'm really excited to bring to the show someone I've known for around about 20 years, I think.
Yeah, a long time. We've been around for a bit.
And so today I'm joined by Mike Cardin.
So Mike's the co-founder and CEO of Joyous, which is a live employee feedback platform.

(01:14):
He's had two direct exits, but he's actually been involved in a number more as an investor, as a chair of the board.
And so that was the capacity that he had with ProMap that was acquired by Nintex.
He's currently also the chair at Ask Nicely. So we're going to have a wide ranging conversation.
We may touch on the fact that he's crashed a plane into the sea, was something that my research had dug up.

(01:36):
But I'd like to start with a quote, and this kind of sets the scene, if I may, Mike.
So I got made redundant from a large corporate 20 years ago and decided to find something more meaningful to do with my life than being a stiff in a suit.
Mike, welcome to the show. It's a pleasure to have you here.
It's nice to be here, Josh. And I can't believe I've known you for 20 years.
Right. Crazy. It is scary.

(01:57):
I do remember meeting you, actually. I think you were a recruiter in those days.
I was in those days. Very suspicious of recruiters.
You made no bunches about that whatsoever. You were quite clear.
But we got there and here we are today. Yeah, it's nice to be here.
Yeah. Thanks for coming. So tell me about that quote, being a stiff in a suit.
That was obviously the foundational part of the journey for you with Sonar 6.

(02:21):
Yeah, look, I mean, I guess it's interesting.
I mean, I worked for a number of years for Hewlett Packard, like the large global IT company.
And I worked my way up to being a senior person in the Asia Pacific region.
And I think that kind of defined me.
You know, like that was that was who I was.
If I went to a I went to a barbecue and met some people and they asked me what I did, I was kind of proud of what I did.

(02:43):
You know, I'd say I ran the consumer business unit for Hewlett Packard.
And then at some point, Hewlett Packard went through some kind of reorganization and I had the opportunity to leave.
But I didn't want to. You know, they were offering me money to leave.
But I was like, no, this is who I am. And then at some point, it sort of suddenly dawned on me.

(03:05):
It's like, hang on, I'm getting the equivalent of half a year's salary to go.
And I'm having to think about it. What has become wrong with me?
And I guess at that point, I just I just like just my mind.
Some switch just flicked. And I was like, I'm going to go off and do something on my own.
And I've got to say, as soon as I did that, I found I had a lot more satisfaction when I when I met people and they said,

(03:29):
oh, what do you do? And I tell them, well, I've started this business at that point,
using using artificial intelligence in the early days to look at customer data.
And it was like actually the fact that I was talking about something that had grown out of me and so on was just a lot more,
I guess, purposeful and empowering. And so, you know, that's probably where that comes from.
I've got to be careful. I don't think that all people at work in large enterprises are stiffs and suits.

(03:53):
I don't think anyone wears a suit anymore.
Very rarely. Yeah. It was just the context. You did it up and yeah.
Yeah, absolutely. So that's interesting.
So I didn't know this part of your back story.
So entrepreneurship wasn't a path that you had desired to be on for most of your life, is that correct?
Yeah, look, I think that like when I was when I was young, you know,

(04:15):
you know, my my mother came to Indonesia as a sorry, came to New Zealand from Indonesia as a child.
My parents, they wanted their children to be successful and their children being successful wasn't about entrepreneurship.
It was about being an accountant or a doctor or some kind of some kind of career.
And so I might have expressed a desire to to be more entrepreneurial when I was quite young.

(04:37):
But I think my parents, you know, told me that was not a good idea,
that actually you're better off at least at the start going and getting a good job for a good corporation.
And of course, I managed to do that. I worked I worked for Panasonic and I worked for Aston and I got a job with Hewlett Packard.
And so now I'm working for a big US corporation.
That's a big tick when you come to that kind of background.

(04:58):
And so that was, I guess, the,
you know, that sort of ate up the first 10 years of my career.
And then, you know, like I mentioned before, the opportunity to leave HP and goodness gracious, like I never looked back.
You mentioned that part of your life had a degree of defining who you were working for HP.

(05:21):
And it's really interesting that I note when I had this experience myself when selling my first business.
And I've observed this with many others, that their identity is tied up inside their business.
And so for you, prior to starting your business, your identity, like a lot of folk, was tied up in the career,
the successful corporate guy that you were at HP.
Have you, did you take that learning into starting your own ventures and then making sure that your identity wasn't too tied up in the businesses that you've been found that you founded?

(05:48):
Yeah, it's interesting, isn't it? I don't think that I don't think my identity has really been tied up in anything I founded subsequently.
And it's probably because of what you describe, right, of actually getting getting kind of too connected, even at the level of, you know, like this is going to sound super simplistic.
But yeah, your email address, your work email address is not your your personal email address.

(06:13):
And I know that sounds like the most basic thing, but actually, you kind of want to create the separation, even when you find your founder business yourself,
that you want to create the separation that this is this is work and and this is my personal life.
And they're not they're not 100 percent interconnected.
Now, you're going to feel a lot more passionate about your own business than working for someone else, potentially.

(06:35):
Maybe not. I think there's plenty of people who feel very, very passionate working for for for someone else,
for large corporations or even for startups, of course.
But, you know, you might feel that you sort of have some particularly unusual connection to your work.
But your work is work. You still you still need to create separation from it and treat it as treated as as work, not life.

(07:03):
That's a interesting current observation because of the blend that people are probably struggling with post covid,
you know, work from home and then the whole kind of disruption that that's created for us.
And then, you know, what does it all mean to engage with work and how do we go about doing that?
So it's interesting. Conundrum really is a subject and I don't really have any particular answers.
I've been lucky to observe other people who I really admire their work rate at working both at Joyous and elsewhere.

(07:34):
And so in particular, I see my brother who I founded Joyous with.
He is very much he's a very hardworking person, but he's very finite.
He has a very, very finite kind of period of time he works.
Now, that finite period of time he works is is just by necessity because he's based in Europe,

(07:54):
you know, chopped up into chunks that you might be like summer in the evening and so on and so forth.
But they're very finite. He knows when they start and finish, when he's doing stuff with his kids and so on.
And and, you know, his work rate is extraordinary within that context.
Then, you know, I see someone like Ruby Koleski, who is our CEO, hugely productive.

(08:17):
But, you know, she has, I guess, a little bit more fluidity in there because she has, I think,
a younger family and she has some requirements to do that.
And she's been able to craft a world where she can be extremely productive, but also a more fluid kind of thing.
So I think that this this idea of having a line of sight to, OK, workers work and I'm going to put it in the effort

(08:38):
and I have things I need to achieve, but very, very much also, hey, I have I have a whole other life,
which is separate to that. You know, you can do the you can do the opposite.
You're only going to be an entrepreneur for four or five years.
And you're not going to be an entrepreneur for life.
You'll burn yourself out. Yeah.
So let's go back to the start of Sona 6 and the builds.

(08:59):
One of the comments that you made and one of the things that I observed from the outside is that you really nailed
how to build a SaaS company out of New Zealand in the early days when we didn't have a playbook.
It wasn't really a path that had been trodden by others because it was 06 07 that you started.
Yeah, we started in 06. Yeah. OK.
And so I think the quote was that you nailed the way to market and sell SaaS software from New Zealand.

(09:24):
Tell us more about that. How did you go about doing that? What was the formula that you hit on?
Well, I mean, look, we're just sort of naive experimenters, aren't we?
So like, I guess that there's a few things which kind of come together in that.
But, you know, we were there at the beginning of SaaS and we were building.
We were building a SaaS product. We were building something which was going to be delivered over the Internet.
In this case, we were doing performance reviews and HR kind of product delivered over the Internet.

(09:50):
And I remember when we went to look for capital, we went to Sequoia and Santal Road,
kind of one of the famous VCs. We did a pitch. Partways through the pitch,
one of the partners said, oh, so you're a SaaS company because SaaS was new, I guess, at that point.
And this is how little I knew. I was like, I'm not sure if we're a SaaS company or not.

(10:12):
But they seem to be enthusiastic about SaaS companies. So I was like, yes, we're a SaaS company.
And I remember being in the parking lot afterwards, looking it up on my Nokia N95, probably,
and going like, oh, yes, yes, we are a SaaS company because SaaS was completely new.
So I don't think we were particularly...

(10:33):
I don't think we necessarily went into this idea of, like, let's go and build a SaaS company.
SaaS is a thing. We just went and said, oh, let's build a software company.
And if you looked at that point, then there was this emergent idea of delivering stuff on the Web, effectively.
As far as building it from New Zealand went, like, yeah, we were sort of lucky in a way.

(10:55):
And what we had in our mind was that building software from New Zealand might be cheaper than building software from the US.
I mean, that was probably as much as we were thinking about. And also, I was living in New Zealand.
And so, but the thing we wanted to do from day one is we wanted to build...
We wanted to be in a big international market.

(11:17):
And so a lot of, in fact, us delivering over the Web was more about access to international customers
than it was about being a SaaS company, per se.
And, yeah, we were, I said, fortunate in that we chose a very large market.
So building a SaaS company in 2006 was about taking something which was traditionally done on-premise and doing it in the cloud.

(11:40):
And so, look, we took performance reviews, which people were doing.
They might have had some software that they ran on a computer and we were putting it in the cloud.
And Salesforce is just putting CRM in the cloud. Zero is putting accounting in the cloud, isn't it?
So that was an easy phase. And the most important part of it was we were in a huge market.
There was maybe a billion people every year that had a performance review.

(12:03):
And most of them were unhappy with the process, I think.
And so it was like this sort of, hey, really big market.
It's an international market we can deliver on the Internet. Let's do that.
So I don't think we... It's funny.
People would ask us if we were an exporter and so on. It had never even entered my mind that we wouldn't be,
that we weren't just going to sell to the world because that was the opportunity in early 2000s.

(12:27):
I was selling to the world.
Yeah. And 2012 was when the exit to the sale of the business was announced.
So that's quite a quick build and sell timeframe, five years.
These days, we kind of think about a seven to 10-year, maybe 12-year horizon when going through the investment round.
So what were some of the key inflection points that you had during that five years?

(12:47):
We were hot. You know, like we'd gone out there and worked out how to do it, right?
And we'd worked out how to acquire customers. And we were growing quickly.
And, you know, in fact, you know, we could have been acquired two or three years in.
It's just that some of our shareholders maybe got, you know,
they got wide-eyed at the fact that, like, someone was offering us a whole lot of money.

(13:10):
Well, there would be even more money if we wait longer, which I don't know if necessarily was the case.
But we were a disruptive player in the space.
And, you know, we were successfully selling to SMBs, which most of the large cloud vendors weren't doing.
And, you know, also, by the time you got to 2012, there was just a lot of consolidation.

(13:31):
And so sometimes the cycle actually will dictate the events.
And so what happens there is, in fact, that software as a service is huge.
You know, it starts in 2006.
By 2012, some of the hottest companies on the Nasdaq and in the DOW are SaaS companies already.

(13:52):
But interestingly enough, human resources was one of the categories which was strongest.
It had companies like, I guess, SuccessFactors and PeopleSoft and so on and Cornerstone on demand,
these big companies. And all of a sudden, they were getting acquired.
So Taleo got acquired by Oracle.

(14:14):
SuccessFactors got acquired by SAP.
And they were getting acquired at sort of 12, 13 times revs, which was extraordinary at that time.
Yeah.
Like, it really was.
And what it meant is that suddenly money just flooded into the startup human resources SaaS space.
And that meant that you had two options, basically.

(14:36):
You either raise more money yourself because all of your competitors suddenly had a whole lot more money,
or you took advantage of the acquisitive behavior and you got acquired.
There was really no option to go, OK, we're just going to kind of grow as we are growing.
And of course, at that point in 2012, your access to capital New Zealand wasn't great.
Our register had a bit of shareholder debt and a few other complexities and so on.

(15:03):
So it was actually one of these things where you probably had no option other than to be acquired.
Unusual, right? But often the environment takes over.
Yeah, of course.
Kind of if you think about what you're referring to there, the HR space as being hot and all of this
acquisitive behavior that was going on and therefore probably inflating the valuations in a positive way for being someone wanting to sell.

(15:29):
Did you, when you set out to start Sonar 6, did you look at the HR space and go,
there's a mega trend that's coming or was it more fortuitous and likely?
I mean, it's 100% fortuitous.
I mean, look, I've said this even to yourself before.
We do tend to—we post-rationalize so much in startup businesses, right?
We make out the decisions which we made under duress or randomly had some kind of strategic thought.

(15:57):
And it's just not true. Like, we just—like, I don't know.
I've got no idea why we were in the HR space.
Like, myself and my co-founder, Mark, we were tossing up between online gambling or performance reviews at one point.
Yeah, like, we just wanted to build a business.
And I think that, you know, did we look at the mega trends? No, other than that, yeah, we wanted to be internet millionaires, you know?

(16:22):
Like, sort of like that, that sort of thing.
I mean, and I was relatively young at that point.
So it was like a—I think that, you know—
Now, as soon as you got knee-deep in it, you kind of understood where the opportunities were and so on.
And we definitely understood the opportunity for us was in the SMB space,
that we weren't going to tackle large enterprise and those sort of things.

(16:44):
We understood some of that. And we also understood that others weren't being successful in SMB.
So that created a space where people wanted—you know, the core dev teams of the large listed companies wanted to talk to us.
And then we became very, very aware, too, at some point, that multiples had gone high.
And, you know, so, you know, Sunr6 was acquired at a multiple of about eight times ARR, I think,

(17:11):
by a company which was trading on the NASDAQ at 12 times ARR.
So it's sort of like, you know, you don't have to be a brilliant, brilliant core dev guy to go, OK—
To work out the math behind that 50% increase in the stock run.
Yeah, I hate to say it, but literally, the money I spend will be worth more money the next day.
Yeah. So when you were kind of establishing whether or not you would head down the sale path,

(17:34):
you mentioned that I know that you had raised some capital for the business, I think, out of New Zealand.
I don't think you were successful with the Sand Hill Road kind of play.
Yeah.
You mentioned that there was either the we take this asset out to sell or we conduct another fundraise.
What was it ultimately that pushed you down the path of going, well, let's consider seriously selling?
Yeah, I reckon the main thing that actually—I mean, I can tell you the sort of version which we told the press

(17:59):
which was like, hey, look, this was a great deal and we needed to do it and that the other options of raising capital were so strong.
But I think that a lot of it was just I was getting tired of doing it,
but more tired of the fact that I was effectively wealthy, but I had absolutely zero liquidity.

(18:20):
And it was very binary. It was like, you know what, if we grow this and we get an exit, then I'm going to get some cash.
But we were running out of cash, too. We were very thinly balanced.
Pete Weaver, who is CFO or COO, in fact, he was managing the intramonth cash at that point.

(18:42):
So we've got to get this in so we can pay our bills and so on.
Now, we were kind of at break even, but we were very, very, very, very finely balanced.
And so to me, it was like there was this huge risk that we can continue to grow this and so on.
And I had some shareholders that wanted us to continue to try and grow it and so on.
But personally, it was like, no, I need some liquidity.

(19:03):
And so I think personal liquidity probably drove that.
Also, we had some convertible debt on the register and I didn't want to have to convert it and a few other things.
But mainly it was like the window opened. The window doesn't open that often.
So it was an opportunity that was probably going to last about 18 months to get acquired.

(19:25):
So let's take advantage of it. Yeah, makes sense.
And so talk us through the deal structure itself.
You mentioned it was eight times revenue, but I'm curious about how the conversation was initiated with Cornerstone,
what that process looked like for them, the D&D process, how you went through the navigating of the negotiations and that sort of stuff.
So if you could unpack some bits and pieces for that.

(19:45):
Yeah, look, they were recently IPO'd.
They were about two years post IPO and they hadn't done any acquisitions.
And so we were their first acquisition.
They were keen to do acquisitions to show both, bring some innovation into the business as well as add some revenue and add some markets.

(20:05):
And we'd been talking to most of the potential acquirers in the space.
We'd probably been talking to six or seven different companies.
Directly or did you have an investment banker?
We were talking to them directly at this point.
Just like just chatting to them via meetings at trade shows and those sorts of things and being kind of active in discussions.

(20:28):
At some point, I think we decided that we were going to, I think we went to the board and said, look, there's acquisitions going on.
Let's see if we can take advantage of them.
And at that point, we appointed a bank, effectively appointed or an adviser.
We appointed Harbour View advisors out of Boston.

(20:50):
And they kind of ran a process and that process had a few.
They went out to the people we'd already talked to.
They added a few in, just the normal sort of stuff.
And over a period of about a month, like it, I guess, coagulated into a deal.
We had two people fighting it out at the end, which was what he wants.

(21:14):
Although what I've discovered with bankers subsequently is that the impression of two people fighting it out is equally the same as two people fighting it out.
But, you know, like it was very much a fairly straightforward process at that point.
You know, we then had to structure the deal and, you know, it was a cash deal, effectively.

(21:37):
But then there was a lot of restricted stock offered to keep some of the key employees like myself, I mentioned Pete Weaver, Mark Hellyer, to keep a few people involved.
And so there was a little bit of asymmetry in that deal.
You know, so there was some kind of complex stuff that happens in deals when you try and try and lock people in,

(22:01):
but you don't want to create a tax impact for them and those sorts of things.
So, you know, but I think that that process, you know, to get from sort of agreeing to do a deal to actually getting through the diligence,
structuring the deal, getting that done, you know, the first part of that's about a month.
The next part of it was about six weeks. I was reasonably quick.
That's fast.
That went to announcement, you know, NASDAQ listed.

(22:22):
So it's like from, you know, it's like a continuous disclosure.
Like, you know, then there was a bunch of work after that.
I mean, the actual I think that the amount of money they spent on us versus the amount of money they spent on their lawyers, probably equivalent amounts in the end.
Like it was just, you know, the sale and purchase agreement was dictionary thick.

(22:43):
Yeah, wow.
I've heard from folk that end up dealing with super experienced corporate M&A teams that the process can feel a little bit like you're getting put through a washing machine
and the dry cleaner and then taking out and getting water blasted out in the backyard.
I don't know why with the cleaning analogy, but here we are.
So it sounds pretty intense, whereas this was perhaps an inexperienced crew that was finding their feet,

(23:04):
but they relied upon a super expensive group of advisors in behind them to kind of maybe shepherd that thing through.
I think you're probably right. I mean, to be fair, the person who was leading their corporate M&A strategy was a guy they'd bought in who was super smart.
Like, you know, one of the people I really admire, a guy called Jason Corsello.

(23:25):
And he was like really, he was really navigating this deal.
The other part of it, too, is that the founder of Cornerstone, Adam, CEO, founder, Adam Miller, he was involved.
He wanted it to happen.

(23:46):
It was such that I wanted to work there.
I wanted to I wanted the deal to be successful so I can go and spend time with Adam.
And you know, you meet the CEO of most NASDAQ listed companies and they're sort of borderline sociopathic, aren't they?
And this guy was just like a lovely person that wanted to see people develop and grow.
And so it was very much the sense of like, oh, this guy is actually an entrepreneur, not that dissimilar to myself,

(24:11):
just a few years ahead on the curve, managed to pull off an extraordinary IPO.
I just want to be involved.
Yeah, well, it's been said that if you take the psychometric profile of an entrepreneur and then take that of a sociopath,
then there's a lot of overlap.
So it's interesting that you say that.
I'm not like that at all.
No, no, no, in my experience is that you're definitely not.

(24:33):
But, you know, complete doggedness in the face of all evidence that things aren't going your way.
A bit of narcissism.
Don't hear no when there's many of those that are going on around you.
You can list about half a dozen to eight percent of those.
It's interesting though, isn't it?
I see I see a lot of a lot of that kind of goes in and out of fashion, some of the stuff.
Right. So so the founder mode, BS I've seen recently, it's just an excuse for people to behave badly.

(24:57):
No one wants to work in a business where they're micromanaged by a founder.
You know, and you can kind of give yourself like, you know, Steve Jobs speech, which most people kind of give.
But I actually think that like the businesses, so many of the businesses which are which are hugely interesting
and entertaining and, you know, and contribute a bunch to to to the country and to to individual wealth and new technology are run by quite nice people.

(25:22):
I think it's it's just unfortunate that people like Elon Musk get get kind of, you know,
airtime because you'd hope they're the exception.
Yeah, they get glamourised. And to give the Steve Jobs Steve Jobs speech, you first must be Steve Jobs.
Yeah. And there's not many Steve Jobs in the world.
Very unusual person.
Yeah, yeah, that's right.

(25:43):
So is there anything else you wanted to talk about with the Sonar 6 deal?
Look, I mean, I think that it was it was.
To me, it was kind of easy, you know, like it just wasn't I mean, it was stress and it was deals.
Deals are just it's just selling. If you're used to selling, it's just suddenly I'm selling the company rather than selling, you know, selling the software.

(26:04):
And, you know, I guess the only bit which is a little bit difficult to manage just to get your head round is like you're actually impacting a whole lot of people's lives.
And the people who work at Sonar 6 get impacted.
And and it was it was maybe a little difficult to to kind of figure out how that goes and how that works.
And of course, you're doing this in a very kind of closeted fashion, too, right?

(26:26):
Because you're you can't be open to everyone that you're looking at being acquired.
But I don't I don't think I have.
Yeah, it was just taking advantage of of the situation that was available to us.
Yeah. And I think that the one thing I did learn is that the world is extremely cyclical.
We've just been through the GFC and made our way through that.

(26:49):
And suddenly we are a few years later, like and everything is on the boom.
And things on the up and up and people are being acquired and like I think that, yes, we're at the tail end of a kind of pre recessionary environment at the moment.
It's not the GFC, but it's still pretty recessionary.
But, you know, like the world will recover.
Like people will start acquiring things again.

(27:10):
Yeah, I was just reading the NBR today that I knew they had a reader.
Yeah, they did. Yeah, I'm that last person that sticks around.
I know I was, but I've got rid of all the other media on my phone.
So that's the one that I do consume.
So the point being that they were talking about GDP per capita, you know, that being a critical measure.
But interestingly, we've had six periods of negative GDP per capita growth, and that's longer than the GFC.

(27:37):
GFC was five and then it stopped.
And so, you know, we're struggling with the whole productivity thing and, you know, whatever that means for us in the world, the whole Western world struggling with it typically.
But let's not get sidetracked into that conversation because this is the exit podcast.
My apologies.
So taking what you learned from Sona 6, you then kind of hit it off and did a couple of other bits and pieces before starting Joyus.

(28:00):
But I'm curious about the lessons that you were able to apply from that experience of having successfully built and scaled and then sold a great tech company.
So what did you take into Joyus as a consequence of that?
Yeah, look, I think that, like, the first thing I've just got to—
Yeah, it's a disclaimer, and I sort of started mentioning it before, right, which is that, you know, I've said it before that most kind of advice is just nostalgia, right?

(28:28):
The problem is that, like, you think you did things well, but actually you did lots of things badly and you've sort of forgotten about them.
The things which you did well, you've kind of glammed up a bit now, haven't you?
Like, that was really smart of us, you know?
And I've used this example for one of the things that Sona 6 was so known for was that we were one of the first real factory marketers.

(28:48):
You know, we built a way of selling to SMBs which didn't involve salespeople or had a very light salesperson involvement.
They're very much driven on factory marketing, I think you call it these days.
And you know what?
We're in the GFC.
Like, we've got a finite amount of cash.

(29:09):
Yeah, our burn is too high.
You look at it and go like, OK, what's the most expensive part of the business?
Sales seems expensive.
OK, we'll just have to get rid of that.
And then try and figure out what you're going to do, which turns out that you need to build an automated marketing approach.
But I don't think we sat there with, like, some kind of, like, you know, deep strategic thinking.

(29:30):
We were just reacting to, like, a horrible environment.
Yeah, we were rolling with the punches.
And one of the things we did was, like, OK, we have to allow salespeople.
Right.
And so, yeah, that's a good example of the way we kind of tend to post rationalise the way we think about things.
So I think one of the things which we learnt was that the world changes very, very quickly and that everything you know is out of date.
And that when you think you think you've got something which is like a super successful, repeatable formula, most likely it's not.

(29:56):
And sometimes it is, but most likely it's not.
One thing I did learn, though, was that there was probably two really important things.
The first one was just the importance of people.
I know that seems obvious, but actually getting your culture right at the very start,
who you employ as your first engineer will impact what your next engineer looks like.

(30:17):
Getting all of those things right.
Yeah.
Trying to attract people into the business who will challenge the way you think about things and develop ideas and original IP that otherwise wouldn't be developed.
That is crucial.
And so I think we bought a big handful of that.
And part of it for me is I really wanted to have a great tech co-founder that could go all the way, could go to build a big business.

(30:47):
And that's really for me, it was like, OK.
I looked around for a while and eventually landed on my brother.
And, you know, he's no slouch when it comes to engineering.
He was running the consulting team for Bell Labs, for Alcatel-Luson, he was based in Paris at that point.
And it was like convincing to come back to New Zealand, do that, because people is the most important thing.

(31:09):
And at this point, it's kind of co-founder level.
But then if you look at some of the folk that joined the team over time, and I mentioned Ruby Kolesky before, who's CEO now.
It's like about being able to identify this person who's going to stretch and push you kind of further and so on.
And I think that any startup is based on people.

(31:29):
So that's number one. The second part of it is just really codifying everything.
Just take it, take a mindset that is, hey, look, we're going to we're going to like run experiments.
We're going to learn from those experiments.
We're going to grow. If we develop a process, let's just put it in a wiki or something so that it's like there, that people can repeat it.

(31:49):
So make a business that is not people dependent.
And so this might seem slightly counter to what I said, but you've got to start by getting great people and you got to start by building a system that doesn't actually require individual people.
That is a system. And so I think that's probably those are the only things which I really took.
Maybe I developed this view, too, which is that we have this idea as part of our ethos, pathos, one of those Osworths in New Zealand, mythos.

(32:20):
That is that we're great at innovation and we'll think of something that other people haven't thought of and we'll do that.
And those things are all nice and probably true. But most of these businesses are quite executional.
If you look at the businesses which tend to win, they tend to be the ones that spent the most money on tech and the most money on customer acquisition.

(32:41):
That tends to be what happens. Sometimes you can break that curve, but generally that's what happens.
And so if you think about that, what that will tell you is that, OK, it's the companies that raise the most money often win, but not just raise the most money, raise the money most efficiently.
And so cap raising actually becomes part of the competitive landscape.
Actually, if you want to be competitive in your space, you've got to do effectively a better job of raising capital than your competitors.

(33:07):
And I think that's something that was kind of missing from the way that a lot of New Zealanders thought about things at that point.
So that was probably that. But that's that. I don't think I mean, if I relied on lessons I learned in 2006, I'd be an idiot, wouldn't I?
Yeah, it's interesting because some things are enduring and they hold true over time, over and over again.

(33:31):
You've been quoted on a few occasions as saying that execution trumps strategy every single time, which I definitely agree with.
You know, a wonderful strategy, poorly executed, will be beaten every time by a poor strategy, wonderfully executed, in my opinion.
And then you've got Peter Drucker leading into the other area saying culture eats strategy for breakfast.
Yeah. Yeah. So it's an interesting kind of conundrum moving those various things around.

(33:53):
Drucker is right, though. Culture does eat strategy for breakfast because you don't really have strategy without culture.
And I think that like, you know, and I think you can boil culture down to make it much more simple as well.
I think that people kind of misinterpreted culture as sort of the expression of culture of like, you know, we're going to have flexible work.
We're going to have fruit bowls and values on the wall.

(34:14):
Whereas actually, really, and this is this is certainly my brother, Philip, speaking, but really the most important thing is psychological safety.
People have to feel that they can contribute without without fear of being shut down or anything like that.
And I think that, like, you know, one of the things which I love about about Joyless,

(34:36):
which we really didn't do so well at Sonar 6, is that we share unfinished work.
We share stuff early. We let people kind of critique it and so on.
And we've kind of built an environment where most of the time, you know, it doesn't always work.
You definitely I'm sure you can find lots of cases where we haven't been able to be true to this.
But most of the time, you want to be in an environment where people feel feel safe just to contribute however they want.

(34:59):
And to me, that's I mean, I know it's an element of culture and you can we've got cultural values on the wall,
a lot of them to do with speed of execution, all those sorts of things.
But actually, to me, it's like you really just have to make people feel that they can contribute their ideas.
A question for you. I've had when serving as a chair of a business instance where I fundamentally agree with the notion of psychological safety to a point in the business.

(35:27):
And so I've had challenges when dealing with CEOs on a couple of occasions where they've kind of played that as a card
because they've been addressed about something in a direct way that they started to feel uncomfortable about because it was calling out their behaviour.
Now, I'm sure incorrect. So they were calling out that I'm not feeling psychologically safe.
Do you think that extends to the top to the bottom of the organisation?

(35:49):
And how do you the further up an organisation you are, the more you earn, the tougher you need to to be on some level.
Yeah, right. I mean, it's it's a bit like high performance sport and stuff, isn't it?
The rules of HR don't really apply to the All Blacks, do they?
Yes. So I think that there is an element of that.
I think that using something like culture as an excuse can be quite quite dangerous in certain circumstances.

(36:16):
So I think that we talk about culture, trumping, trumping strategy, etc.
Let's not forget, though, that ultimately, culture is a tool to create shareholder returns in the traditional structure of business.
Now, that sounds awful, right?
But actually, if you think about it, like you're trying to create an environment where people feel they're able to contribute and work well and so on,

(36:42):
because you're trying to create a successful business. You're not doing it out of altruistic means.
You might be doing it altruistic means, and that's cool.
But most venture led businesses, I can tell you, the VCs are sitting there going,
yeah, we want to come to a great culture because that will attract people and it'll get best out of them, etc, etc.
They're not sitting there going, we want something of great culture because people will feel good.

(37:03):
Now, brutal as that may sound, I think that as soon as you create a culture where the culture itself can be used as an excuse to for poor behaviour.
Now, I'm not sure if that's what you're alluding to and what you're describing.
But then that's something wrong with the culture, isn't it?
That's a cultural red flag.

(37:24):
Yeah, yeah. Great.
Let's jump back and talk about these exits, but move on from Sona 6.
And I'm curious about expanding out to your role as chair.
And there's a couple of instances where you've been through a full exit and a partial exit.
So Promap and Ask Nicely.
So which of those did you want to talk about first?

(37:45):
Oh, let's talk about Promap. I love that business.
Yeah, great.
Promap's just, you know, Ivan Cecil and Richard Holmes.
Wonderful people.
Yeah. I think they probably met at high school.
I don't know. It feels like they should have.
Maybe at university or in their first jobs.
And they kind of built this business, which saw, you know, did process mapping software in the cloud.
And it was a bootstrap business.

(38:07):
You know, like it took nearly a decade to kind of crack the million dollars in revenue mark and then it started to kind of grow quickly.
And I got involved when they were in the sort of beginning of the growth curve.
And a lot of that was just an opportunity for me to take, I guess, some of the things which were very, very, very, very fresh in my mind from Sona 6.

(38:27):
I would literally just exit it to say, OK, how can we apply this to Promap?
And, you know, there's a bunch of, you know, like, I think things which kind of went on in that business.
But it was just a well managed business, which was well driven.
You know, they understood their sales process and understood how to build software.

(38:48):
And because it had like a long, a reasonable period of time to, I'm saying a decade, I hope that number is correct, but like about a decade to really fine tune that.
And so when they started to grow, they really started to grow.
And, you know, so from my perspective, it was just, I guess, if anything, just applying the structures and strategies which we're working for SaaS businesses

(39:13):
and trying to understand what the latest of those were to that and then also helping them get some liquidity at some point.
Because it was a hard slog.
Yeah, you talked earlier about like your founders who are sort of defined by their businesses.
I think that Ivan and Rich were very much defined by that business.

(39:33):
It was kind of a difficult thing for them to depart with it.
At the same time, they wanted to take what they did and take it out to a much larger, much larger world audience.
And the way to do that was through an acquisition.
The thing which is interesting about that acquisition, though, is that you look at it and it's a company called Nintex acquiring ProMap.

(39:57):
Whereas, you know, the details of it are really more, it's a East Coast private equity firm at that point.
Private equity, you know, I think someone told me that private equity at that point was invest at a trillion dollars to invest in software businesses.
The private equity was a driving force of kind of consolidation at that point, and you had a lot of these kind of roll ups.

(40:18):
And so, you know, someone at Toma Brava decided that they were going to roll up process mapping, process automation, that category of software.
And so that acquired Nintex as initially the vehicle, and then they were going about acquiring more.
So ProMap were involved in that, involved in that kind of roll up.

(40:40):
And ultimately, do you know what was done with the asset?
Was it kind of floated or was it then collated and sold to another...
Yeah. Well, it's just the big circular nature of that space, right?
So, effectively, they consolidated a bunch of different people, probably did a bit of restructuring, cost remodelling, sort of exercises that PEs do.

(41:07):
But, you know, kept lots of it intact and then ultimately sold the bundle to another private equity firm, right?
Yeah. I didn't really follow that transaction, but it happened fairly recently.
And so what was different about that process than your first experience with Sonar 6?
Well, I mean, I think to your earlier point, it was a very, very experienced acquisition team because they'd been put together to acquire things.

(41:35):
But I've got to say that there was more similarities and differences.
It was very much still, you know, the personalities were important.
You know, the CEO of Nintex, Eric, was very much, you know, he was a lovely person that wanted to get folk from ProMap,

(41:58):
including, you know, like the senior folk, to join his team.
Now, you know, that was not that dissimilar than what we experienced at Sonar 6.
I think that, like, you know, what I would say is that the, you know, there was a dynamic between effectively the PE and the acquiring company.

(42:20):
That was, you know, it was different.
You know, when we got into the into the closing call, you know, there's a private equity firm and then there's the bank because it's a leverage deal.
And then there's like, you know, in this Nintex and then there's, you know, ProMap and there's the shareholders.
The ProMap is quite a different kind of stack than just Sonar 6, which was a bit more simplistic.

(42:44):
Yeah. And from a Nintex and the private equity firm standpoint, how did they go about kind of seeing the value and you build the value of that asset
so that you realised a price that everyone was happy with?
Yeah, look, this was again driven by, you know, there was advisers involved in the deal very early on who kind of went out there and said,

(43:05):
hey, look, there's a company out there that's looking at rolling these assets up in this space.
They could be interested in what you're doing. So it was almost like the deal came to us.
We had an adviser engaged, but we weren't particularly active.
You know, that took a long time, like from that kind of initial thing to actually something happening.

(43:27):
It was such a long time that in fact the tail ran out with the adviser.
And so, you know, at that point, it was, you know, I think, you know, pretty much a contact directly with the acquirer and, you know, it ran through there.
So, you know, it didn't it wasn't like a thing where there was a bunch of a bunch of different competitive offers.

(43:54):
I mean, there was a little bit of competition, but it was more like they knew what they wanted to do.
They knew what they knew. They knew they wanted this asset.
They knew that it was not going to be, you know, wasn't going to be sold if the deal wasn't there.
Yeah, it was just because it was a good profitable business.
There was no reason to. There was no reason to sell it at that point.
So the kind of competitive tension was more like we want to get this.

(44:18):
We want to get the jewel in the ground. Yes.
We want to get it. And the competitive tension was like, well, we don't have to sell it.
Yeah, OK. So the leverage was achieved from the ability to kind of be separate from the deal and not pursuing the deal.
Yeah, exactly. James McCarthy from Spider Tracks and a couple of weeks ago.
And he was talking about the experience that he had selling that business and that when you're dealing with an experienced M&A team,

(44:42):
which they were, he made the comment that you've got to remember that those people are there to do the deal.
They're not trying to, you know, not get the thing done or to screw you over to kind of, you know, get one over you,
because one of their key measures is about being able to pull together these deals and actually make things happen.
And so to what extent do you think that your stance was able to influence the value that the price that was ultimately paid for the company, if at all?

(45:09):
Look, I think absolutely. If you don't you don't have to sell it. In fact, you almost don't want to sell it.
I mentioned that the you know, Ivan and Rich were very, very emotionally tied to this was been their life for a long time.
It was hugely successful at that point. Yeah. You know, like, it's almost like they didn't want to sell it.
So that's that was a tension to me. Now, I might be overplaying that slightly, but that's that was, you know,

(45:33):
there was a lot of work from, I guess, you know, the Nintex acquisition team to to convince them that, like, hey, this is you want to do this.
And one of the big parts of that was the was the was the number.
Yes. And I think also the way that they handled the New Zealand business post acquisition as well was an important part of how that deal was done.

(45:54):
Yeah, yeah, certainly. I mean, look, I'll say this out loud.
You've got to take some of that stuff off a grain of salt, right? You've got to like you've got to kind of swallow some of that because you just don't know when you're no longer in control.
Yeah. But like, you know, that was certainly a critical thing for for for the founders of ProMap.

(46:15):
We've talked about two 100 per cent deal transactions with potentially a little bit of earn out there.
Yeah. But some off camera on the way, and we were talking about us nicely.
Is it OK if we talk about that being one of the ways that you can go about seeing some return for either investment or the effort that you put into a company?
So give us a bit of insight there. Yeah, look, I was I was the chair of us nicely for a while.
I finished up there at the time we did this deal, in fact.

(46:37):
And that was we were we'd done a seed round with Blackbird Ventures.
We'd done a we'd done a series A with Blackbird and then sorry and Nexus.
Things sound similar. Nexus, you know, like the Sandal Road VC, they were going to do a series B and they did a series B with Five Elms out of Kansas City,

(47:06):
who are a growth equity company effectively. And and that was really a good example of kind of partial liquidity midway through the journey.
And so they were putting new money on the balance sheet.
They were investing to grow the business, but also they wanted to take a share of the business that was larger than they could,

(47:27):
larger than the amount of cash needed. And so they went and bought some of the secondaries.
So by that, I mean, they went and bought stock off of early investors, off the founders a little bit, etc.
I mean, so I think it's a good example of something which I wish had existed when I was at Sonar 6,
which is it would have been nice to put some growth capital on the table.
Would have been nice to actually get some liquidity in my own investment rather than it being a very binary kind of thing, which it was in those days.

(47:54):
And so, you know, I think this is kind of was in fashion maybe three years ago, went out of fashion in 2020, like, well, 2022, when everything went out of fashion.
Yeah. Including fashion.
And so like it's kind of come back into fashion now again, because if you've got a very large fund, growth equity funds typically are pretty large.

(48:17):
You know, they're not out there doing small investments, right? They want to make as big an investment as possible. And it often means like.
Let's leave enough skin in the game for the founders and so on that they want to continue.
But let's also make sure that they can kind of have a decent life.

(48:38):
And I think that that's one of the great options now.
The other thing, too, which you'll find as well now, which is that you have, you know, venture firms so much more active in New Zealand than they were maybe a decade ago.
They started investing and they all have finite life. Well, not all of them. Most of them have a finite lifetime on their fund.

(48:58):
And so at some point, they'll want liquidity. And the best thing for the business is often not a trade sale or it's not in a position to IPO or something.
The way they get liquidity is to do a secondary round effect. We sell some of their stock to others.
So I think that that was a nice outcome. You know, like a good sort of midterm liquidity option.

(49:23):
There are other midterm liquidity options. There are folk like Second Quarter out of Australia that just buy secondaries.
But partial exit is an interesting one.
Yeah, it's the Cami, which was a deal that I was involved in from the very outset as an early stage investor and then kind of alongside with them along the journey.

(49:44):
And that represents kind of a not dissimilar approach that had been taken by that group.
So all of the original investors and shareholders were bought out.
The founders decided to flip 50 percent, but take some cash off the table.
And so it was a great outcome for really everybody. And it was a wonderful, wonderful multiple on money that was invested, no matter what stage you really came in as well.

(50:05):
And so if you're a founder that's watching this, which is the audience of this podcast, and you're kind of going, I'd like to learn more about this because this might be a notion or a concept that's unfamiliar to them.
What would be some markers or some things that would be present inside a business?
Like for me, I think about scale is one of them. You're probably not going to be doing half a million bucks. And look, this is being an option, but you're probably going to be doing more like, you know, two, three, four, five, you know, kind of range, maybe some more.

(50:32):
But what else challenge me on that if you think that there's something else that could be more important, but what are some things that would be present inside a business that would enable them to tap into growth capital?
Yeah, look, the biggest single thing is kind of growth and revenue.
I mean, it's like so I always think that like a business which is doing $10 million has kind of so many options because it starts to have sort of rarity value because it's quite hard to get to 10 million of recurring revenue.

(50:59):
Yeah, less than 1% of companies do.
Yeah. So once you get there, you kind of have rarity value, which means that because venture investors that you're used to dealing with, maybe, or early stage investors are looking at the promise of something interesting, something that could create a category or could change a category or could do something important.

(51:20):
The growth equity investors tend to be looking more to something where they go, OK, if I invest in this, what's the predictable return? And so, you know, if something's crossed that barrier to being a sort of $10 million plus thing, it's obviously just a lot.
It's a lot more easy to sit there going, OK, we can see as an investor how this will make the right kind of return for our portfolio. And that return might actually be relatively modest, but the risk is also quite low in comparison to venture investing.

(51:51):
So I think that you have, you know, you certainly, you know, I tend to put a stake in the ground and like say it's $10 million in revenue because it's an easy thing to think about. Certainly, if you look at a—if you're going to utilise a firm that just bought secondaries, they just don't entertain stuff below 10.

(52:11):
Yeah.
So, you know, I think that the other thing about this is, you know, for any of the stuff is just evidence of undeniable product market fit, right?
So if anything is going to happen, which is outside of that sort of, well, we got to $10 million, it's because you've got something which people look at and go, oh, yeah, this is, you know, the customers that use this cannot live without it.

(52:39):
You know, it's got the growth that goes with that sort of PMF, et cetera, et cetera. But that's that's kind of breaking the curve to me.
Yeah, it's interesting. I talk about the outsize weight that scale. So, you know, the sheer size of the company and the rate of growth over the last few years is on a company's valuation, because, you know, I'm personally, and I'm no doubt you're the same, very, very interested in the trend over time because you talk to futurists.

(53:07):
And what they're very good at doing is understanding trends and looking at the long term cycle behind things.
And so it's very difficult if something's been kind of going on this curve to see how it might all of a sudden go like that, unless there's a bigger trend that's getting involved or there's been some massive disruptive play or that sector's changed.
But you'll probably start to see it pretty quickly in the sales results and in the renewals and the other tune of customers as well.

(53:30):
So putting a different lens across that, and you may not have a view on this, but I'm curious if you look at a company and you see that it has had a really, really steep growth rate, but it's kind of plateaued or it's come back the other way.
Do you think that that company has kind of, you know, has lost its way or it might be a bit of a basket case or it's probably also a degree of it depends.

(53:52):
But I'm curious as to how you view a company that might have been on that trajectory, but then completely changed.
Look, I mean, they're on that trajectory to start with for some kind of reason.
Right now, it might have been incredible capability in sales or something, right?
That kind of did that. But whatever caused it was something valuable.

(54:14):
You know, whatever has caused it to stop is either some kind of macro that's going to last forever or some kind of macro that's not going to last forever.
That's typically the case.
So if it's a macro that's not going to last forever, then now I'll just give you an example of a macro that's not going to last forever.
Enterprise sales and SaaS businesses slowed down over the last two years because enterprises were laying off people and doing their stuff.

(54:39):
Did that require, is that going to recover subsequently? Of course it is.
So if you had strong growth before and then it's gone flat for two years and you're starting to see the signs of growth again, then I would say, oh, yeah, that's just someone was able to weather the storm.
And let's not forget, too, that we were in an environment only three years ago where we were growth at all costs.

(55:01):
And so even at Joyous, we were investing very, very heavily in growth.
And then we went to a board meeting one day and suddenly everyone from the venture members of our board were like, you know, capital efficiency is the most important thing.
Burn rates, what we were interested in. We want to get to break even optionality.

(55:21):
And so, yeah, we just changed the nature of our investment instead of like over investing in sales.
We started to get into a much more defensive stance because we knew that we needed to make the capital last effectively forever.
So I think that that's now if the macro is something that's really not going to change, then it's not coming back.

(55:47):
And some of the things which happened post Covid or some of the business models which just turned out not to be that great a business model.
Yeah, then that's a different thing.
I think one of the ones which I just find, I guess, amusing, maybe this is Schodenfreude or something, but it's the whole, you know, all the companies which were in the what is it called?
The millennial lifestyle subsidy space, which is these companies which were effectively going, OK, you can get everything online.

(56:16):
If you live in a big city, you can get someone to wash your sheets and you can get all these, you know, get an Uber, all these dog walkings, it's all online.
And all of those companies were like, we want to win at this. They're all putting money into it.
And so they're all losing money. And that money was like effectively a subsidy from maybe the pension funds to the lifestyle of millennials, wasn't it?

(56:44):
It's a millennial lifestyle subsidy.
And then you kind of got into the cost of living crisis and you're like, OK, well, that's actually a good example of the macro has changed.
So it's not coming back. So that stuff will, you know, where they flattened off.
Now, of course, some companies through force of capital might continue to survive like Uber Eats or something, but the million competitors Uber Eats.

(57:09):
Yeah, the macro is not good, is it?
Yeah, yeah.
I think of those subscription boxes that very much fell into that category that kind of exploded in the late mid to late teens.
And they were definitely doing the, you know, acquire customers at all costs and really buying market share for something that was really just a fancy retail B2C business model.

(57:29):
Nothing, nothing particularly special about it.
And there certainly wasn't any IP. It was just a customer acquisition engine.
So it was fascinating.
The one that entertains me and someone will have to explain this to me, but if you play phone games, games on your mobile phone, most of them these days are free and they're funded by ads in the game.

(57:53):
So you have to watch some ads to grind out something.
So that's how they make money, right? They make money by selling those ads.
Universally, those ads are for other games. Right. And when you go into those games, their revenue model is to sell ads for other games.
Yes. I just can't figure that out at all.
Yeah. It's like, is that just some giant house of cards that's yet to topple?

(58:16):
Yes. I would liken it to I'm not a gamer. So I understand the principle, but I'd liken it to terrestrial television advertising.
And so, you know, when you travel, you go to a hotel and you might flick on the tally.
It's certainly never long. Me too. Just terrestrial. To see what's on whatever country.
If it's in Chinese, I don't care. Russian, haven't been there, but I don't care.
Just to see what they kind of play. But you'll see if you travel in New Zealand and you stay at a hotel, you'll see that the terrestrial televisions are still playing, you know, Toyota and Ford Rangers and a bunch of other products.

(58:48):
And I think to myself, who's watching these ads?
Because, you know, most of us these days have got a set top box. And so it's the unemployed or under employed, I presume, that don't have the ability to fund one of the streaming services and therefore can't push fast forward or, you know, get rid of the ads through their skybox even, which is a pretty cheap kind of subscription model.

(59:09):
And so I think it's habit. I think it's habit for these companies. That's what I've made it mean. Where they've gone. We're used to doing big TVCs. We spend a couple of million bucks on production.
That makes the creatives feel amazing. You know, the executives get to see something in the boardroom they can talk about and we roll this thing out because we've always done it for 35 years and telecom used to own it with those little meerkats kind of ads.

(59:30):
And we need the meerkat ad or whatever it is. That's what I've made it mean.
But you would expect that the world of agencies is gets impacted by AI and all sorts of things.
100% got to, right?
Just saying set top box, I think, ages you as well.
Oh my gosh. You know what I'm talking about. So it's both of us.
I've heard about this.

(59:51):
Used to have one.
So you've been heard to say, so we're talking about exits, but you've been heard to say that there's a strong case to not sell a company and to keep something kind of growing in New Zealand, something meaningful in New Zealand.
There's a quote as Kiwis, we can sell ourselves short. We sell out too early for too few dollars too soon.

(01:00:16):
So I'm curious about that stance. I understand the notion of it. But what does that mean to you?
Is it your quote? My research has dug it up. So I'm guessing it is.
Maybe I said that. I mean, it sounds like GPT said I said that.
So I would I would think that you've just got to be ambitious at exit, right?
And not sell yourself short. And probably that's just the provocation to do that.

(01:00:39):
You know, like I am I.
You know, I love this idea that you go, OK, well, no, you think of some number that you might be worth and then double it or triple it.
Or, you know, because the biggest challenge you have in any transaction like this is that the floor becomes the ceiling.
You know, like as soon as you sit there going like, well, you know, we'd be we'd be happy to accept 100 million. You're never going to get more than 100 million.

(01:01:05):
And so I think that if you kind of are way more ambitious, if you think of numbers which are 20 or 30 times ARR,
think about like what what you would have to look like for that to be a reality and so on and so forth.
That's really where you should be striving. But you'd have to have something which was showing extraordinary growth and had like ridiculous PMF
and had a had a basically a fan base of loyal supporters and so on.

(01:01:28):
And I think that we need to we need to be provocative in that regard.
You know, but but do I believe that Kiwi companies generally sell themselves short? Definitely not.
I think we're we're in a little bit of a purple patch over the last few months of some very, very nice acquisitions, which are which, you know,
if you just take it at a straight metrics level, are showing that we're still building really great companies and achieving achieving

(01:01:53):
liquidity events that are world class. Yeah, yeah, I agree.
OK, so interesting quote for you here.
So you've spoken about timing through the exit process. So with Sonar 6, with ProMap,
how did you get the sense that timing was right for those things to kind of go up into the market?

(01:02:14):
You talked about the entire trend a little bit in Sonar 6, but I think that timing trumps almost everything else.
Yeah. And so how do you get a strong kind of finger on the top of the top? Isn't it funny?
I feel at Sonar 6, I had a sort of sense of panic almost that like, hey, here's the opportunity and it's not going to come along again.
Let's just let's take advantage of that opportunity.
I'm not sure if that's necessarily correct, but it felt to me like that we were sort of at the.

(01:02:40):
Yeah, we were at the peak of our popularity almost like everyone.
Everyone wanted a piece of Sonar 6 and that wasn't going to exist forever.
Right. Yeah, eventually that wasn't going to exist. And so I think that that was driving me at the time to go,
OK, I think we're going to get a better multiplier now than we'll ever otherwise get.
You know, I think that that. A lot of these things are not necessarily 100 percent driven by the entrepreneur.

(01:03:06):
You know, like things will happen in the environment that will like that will suggest that, OK, now's the right time to do something.
So, you know, someone someone sniffing around, you know, interested in interested in acquiring from a competitor or something might trigger you to go,
oh, actually, is now the right time. And then when you start to look into it,

(01:03:27):
you start to be a little bit less emotional and look at the macros and go, oh, yeah, maybe now is the right time to do something.
Maybe maybe we don't have the strength on the balance sheet to to compete as the environment changes.
Or maybe there's a lot of well-funded competitors coming or so, which you wouldn't necessarily start to do if that that offer hadn't come over the bow to start with.

(01:03:48):
But I don't know. I think it's like a lot of things like it's I can post rationalise it easily.
But I think that Sonar 6 for some reason, that was just the right time to do it.
Promat, that was just the right time to do it. Yeah. Yeah.
Got it. When we spoke on the phone to arrange this conversation today, this is the alternative career question.

(01:04:11):
You mentioned that you've been in the SAS founder role now for 20 odd years.
Yeah, two decades. And so you mentioned that you may have other things or more things that you could offer the world.
So have you pondered or do you want to share what those things are?
So there's kind of two answers to that. There's the there's the gifts or the things that you'd like to be able to share.
Maybe a rock star in the in the waiting.

(01:04:34):
But then there's also the alternative career path that you believe could have given you deep satisfaction that you might have excelled at.
Right. Yeah. Look, you know, you do most things in your life because you're good at them.
That's a necessity of life.
So if you've got a mortgage and a family and so on, like you're going to have to choose the thing you're best at if you're a smart person,

(01:04:56):
because that's how you'll pay for your life.
Yeah, I guess I've reached the the agent stage maybe now where I get the opportunity to not just have to choose things because I'm good at them.
And I would like to potentially break that habit.
That said, though, I've got I've got plenty still to give at Atroas.

(01:05:17):
And, you know, and so there's plenty still to to do there.
Yeah. Would I would I ultimately like to do something else other than being a SaaS entrepreneur? I mean, hell yeah, I can't be a SaaS entrepreneur in my entire life.
Sure. It's like that's that's I mean, what am I trying to prove after some point?

(01:05:37):
Like, yeah, you tend to get into lots of these kind of things where they're all encompassing because you have something to prove.
I don't really have a lot. I'm not trying to show off to mates from intermediate anymore, am I?
So, yeah. So I think that like, yeah, I will eventually do something different.
I have lots of lots of passions in my life. I do lots of stuff outside of entrepreneurship, certainly, which kind of keeps me keeps me sane.

(01:06:02):
You know, I play the piano, I paint.
And I'm interested in those topics.
Yeah. I think of a couple of things there.
There's the hedonic treadmill, which is a part of the hedonic adaptation.
I'm not calling you a hedonist, but rather it's the principle that sits in behind it.
Right. In really simple terms, you've never heard of it.
It's the bigger boat concept.

(01:06:22):
So in other words, you know, you dream about getting a certain size boat.
I'm not a boat guy, but you dream about getting a certain size boat until you get it.
And then you see the guy with a 20 metre bigger boat than that.
And all of a sudden, that's the thing that you need to make you happy.
And so we adapt to the state that we have put ourselves in, which we believed would have made us happy up until a certain point.
And so I think one of the great gifts of self-awareness should you get it,

(01:06:44):
I know that you do have it, is that you can realise that that's what's going on for you and kind of go, you know, enough might actually be enough.
The other thing I was thinking about there was the Andre Agassi effect.
Not sure if you've read his book, Open. Great read, by the way.
And so he talks about being incredible at tennis, but hating it.
And so he got to the stage and he had that comeback.

(01:07:05):
And the comeback was because he found something in the game that he could love, as he did when he was a kid.
He had a very overbearing father who really wanted his kid to succeed, an immigrant father, into the United States and really wanted him to do incredibly well.
So he ended up just absolutely hating this game that he was exceptional at.
The Americans have bastardised a Japanese principle, which they've turned into Ikigai,

(01:07:30):
which is the mix of what you excel at in the world, how you can make money, what the world needs from you and where you can make a difference,
I think, is the fourth circle, but awkward as a Venn diagram, but a helpful model to view the world.
And the last thing I was thinking about was Winston Churchill. I don't know why I did.
But, you know, Winston had a pretty unsuccessful military career by all accounts.

(01:07:54):
So he was responsible for putting the Anzacs on the beach at Gallipoli.
And there was another couple of screw ups that he made as well, which saw him go back to being an infantryman,
which he chose to do to develop some humility and some kind of battlefront skills.
He was a pretty average politician through the start of his career, but then timing was just right to have a very strong person.
But when he was ousted and directly after the Second World War, he went off and picked up his passion for painting.

(01:08:21):
Oh, you're actually right. Of course. Yeah.
And so he is, I think, now the second most published man of all time behind L. Ron Hubbard,
the founder of the Church of Scientology. And also he was a prolific painter.
So there's about 2000 canvases that he has in the world.
And so, you know, I think it's testament to the fact that people can reinvent themselves and go off and do more and more and,

(01:08:42):
you know, better and better in different things, provided you've got a prolific consumption of whiskey.
Have it daily, maybe is the case of pickling yourself when you just keep going.
But yeah, incredible story.
The bigger car thing's fascinating to me, and one of my favourite stories of that relates to Jim Clark,
who was the guy that founded Netscape, et cetera.
And he wanted to build the world's tallest yacht, right?

(01:09:07):
And the limiting factor on the world's tallest yacht is the height limit on the Panama Canal.
OK. So he built a yacht which just hit the height limit of the Panama Canal,
because then he knew that no one else would ever ever have a taller yacht than him.
What he didn't realise—and I forget the person's name, but another billionaire basically went

(01:09:27):
and did a deal with the Panamanian government that he would be able to exceed the height limit by two feet for eternity,
and they would never give that opportunity to anyone else.
And so he spent millions of dollars on this actual ability to have a taller yacht than anyone else could ever have.
I love it. Yeah, definitely the bigger boats.

(01:09:48):
Reaching absolutes, yes. Yes.
Last question for you. What's a couple of three businesses—this is an opportunity to pitch, Joyce, on the one hand.
But a couple of three businesses, preferably out of New Zealand, that you're really excited about at the moment.
Well, obviously, I'm excited about Joyce. I mean, like, yeah, Joyce is—we just—we formed Joyce, actually,

(01:10:09):
because when we started Sonar 6, that was when you took an on-premise software and you put it in the cloud.
I mentioned that. Yeah, that was the big thing that was happening.
Suddenly, about five years ago, it became evident that you were going to be able to utilise this new world of artificial intelligence
that was actually useful and meaningful—integrations, microtransactions—to build something that changed the way that people worked.

(01:10:35):
And it's quite fascinating to me, with Joyce, we've unlocked this thing, which is that you can talk to employees, chat with them,
not survey them, chat with them. That's either by humans assisted by AI or just by AI.
Talk to them about their jobs and unlock real efficiencies in the business, ways of doing things.

(01:10:59):
And so we typically work with very large, often unionised workforces in these large telcos or electric utilities,
those sorts of companies, and we will ask the people doing the work what they would do to make things more efficient or proofread.
So it's a very different consulting model as well. Yeah, just sort of automated and everyday. I love it.
And it's phenomenal, the impact we make. One of our clients I was talking to recently, they've figured out over three years of using Joyce

(01:11:28):
just in a division of 25,000 people, so a reasonably large division, but they've saved $200 million in annualised costs just by talking to people doing the work.
We've started to reach this point where the story can be understood and the impact is obvious. And so that's Joyce.
I think the other business I'm excited about at the moment is narrative, which is James Broadbent's business,

(01:11:50):
which effectively is applying AI into the workflow of professional photographers.
So it does a number of things, but the two big important ones it does is it helps you colour and select photos after a photo shoot
by effectively applying AI to people's faces, the right expression and those sorts of things.

(01:12:12):
And then it does a lot of the work of editing photos for you by using AI to learn about how you edit photos.
And so you basically train a model on that. And that's just a fascinating space to me.
But the thing I love about it is that the actual fans of this product in the professional photography space,

(01:12:34):
the passion they show for utilising narrative. And it turns out in a—you do a wedding photo shoot,
you think about it as a client of a photographer that, like, oh, they've got to take the photos.
That's a big chunk of it. But it's actually colouring and editing the photos. That's a big chunk of it.
And they've trained a machine to do so much of that work, which I think is fascinating.

(01:12:57):
Yeah, great. I've been guiding the questions today.
And so we've kind of talked around things that I find of interest for the people that are paying attention to the show.
Is there anything else you'd like to kind of finalise, close out with in relation to exits,
you know, building value, creating meaningful companies, you know, whatever's on your mind, if anything?
Look, I think that there's a tension which we don't talk about often,

(01:13:18):
which is the tension between what entrepreneurs want and what investors want.
And I think that the way that I can easiest describe it is that if someone was to say to you as an entrepreneur—
and you'll just feel this immediately. I know you will, Josh. It's like, here's a coin toss,

(01:13:40):
and you can either have $10 million or you have nothing. That's a coin toss, right?
Or here's a one in a hundred chance of having $10 billion, right?
Would you choose the coin toss for $10 million or the one in a hundred chance of $10 billion?

(01:14:04):
And I'm not sure where you land on that, but most entrepreneurs, particularly ones who are in their first cycle,
will always choose a coin toss for $10 million.
But if you actually run the maths on that and you're a VC,
you'd much rather have a one in a hundred chance of $10 billion, wouldn't you?

(01:14:24):
Yes. And that's the natural tension between entrepreneurs and investors I see a lot of the time,
particularly portfolio investors. Portfolio investors are, like, basically looking at large returns.
They're rolling that up. They're thinking about that at a portfolio level,
whereas in, you know, individual entrepreneur, you're thinking about, like—
It's one company. Yeah, you're one company and what your life is going to look like.

(01:14:47):
And I think that the most important thing you can do as an entrepreneur is structure your boards,
structure your investment structure, whatever you can, so that you never get that ability taken away from you
of being able to go, you know what, I want to take the coin toss on $10 million of personal wealth.
Because I think that that's what went wrong for me at Sunr6 is that I mentioned that we had an early opportunity to exit.

(01:15:11):
And I remember one of our investors, and I won't say the person's name, but he said to me quite specifically,
well, you know, turning $1 million into $5 million is immaterial to me.
Well, it wasn't immaterial to me. Yeah. Yeah.
Like, yeah, and that's the problem, right? It's like, you know, you actually have this thing where you become
so much more oriented towards the kind of mid-level reward that you can see

(01:15:37):
than some distant reward that you may never get. Yes.
And I think that that's an important thing to think about as an entrepreneur.
It's really insightful. I'll enter that.
So that's a mathematical model that's been woven into some philosophy around startups.
I forget the name of it. It's kind of like Schrodinger's cat, you know, the whole, is there a dead cat in the box?

(01:15:57):
Well, if you don't open the box, you won't know that he's there, and so therefore he's not there if you don't open the box.
And, you know, that kind of thing, it's along the same kind of principle.
And so I think about the world of entrepreneurship as a life cycle, start, scale, sell, and then stake.
And so what I've observed, and this has been experienced, but also observation of others,

(01:16:18):
is that for a lot of founders, their great returns come actually more from being an effective investor
than from actually necessarily being a one-time founder.
If they go second, third, fourth time, then those things can end up having some compounding ability,
some influence on what they know and the networks they've built and their understanding of how to scale something rapidly, etc., etc.

(01:16:40):
But I've noticed with a lot of people that they tend to do better from that last phase than they have done from the third phase,
you know, the selling of their own company.
And so I think of it being very much a critical part of the life cycle of a founder,
is developing your capability, returning some capital back into the system.
And I think that's something that we've both done and are very passionate about as being investors in the tech scene in New Zealand,

(01:17:05):
and then both providing that, you know, not pulling the ladder up behind you,
so ensuring that others can kind of go on that journey, offering some insight if that's what they want from you as well,
but also getting a return on your capital too.
I think you start to understand, you get a combination of understanding what a good investment looks like and you get access to those investments.
Yeah.
That's really what happens, right?
That's the important thing to take advantage of.

(01:17:27):
Yeah.
And that requires you to get through the first three steps.
Yeah, of course, successfully.
Yeah.
Which is harder than it might seem.
Yes, it is. Yeah.
We're talking about percentages before.
One percent make it to 10 million, but it's less than that for SaaS companies.
And only 10% of companies make it over $1 million per annum.

(01:17:49):
So it's a markedly small amount.
So, you know, the whole most companies fail within the first two years.
That's not true.
They fail within the first four years.
But the failure rate is much, much higher than I think people from the outside think.
Interesting. Yeah.
Mike, really, really enjoyable conversation, as I hoped and as I imagined it would be today.
Appreciate you coming on the show and can't wait to follow your success with Joas.

(01:18:12):
Awesome. Hey, lovely to be here.
Thanks for taking the time.
Thanks, Mike.

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