Dealquest 293 - Sunny Vanderbeck - EDITED & ENHANCED AUDIO
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Corey Kupfer: Sonny Vanderbeek is an investor, entrepreneur, best selling author, and former military leader. He co founded Satori Capital, a multi strategy investment firm founded on the principles of conscious capitalism. And he previously co founded and served as CEO of technology at company Data Return. For more than a decade, Sonny led that company through all phases of growth and transformation, receiving numerous honors, including Entrepreneur of the Year finalist designation from Ernst Young.
His experiences with Data Run, along with subsequent involvement in dozens of private businesses at Satori, led Sonny to publish his first book, Selling Without Paying. Selling out, selling without selling out, how to sell your business without selling your soul. I love that. I love the conscious capitalism piece.
I love that. Not selling your soul piece. The Burke service is a roadmap for business leaders who face unique challenges and quandaries involved in selling your business or taking, on a financial partner. Welcome to the podcast, Sonny.
Sunny Vanderbeck: Thanks for having me.
Corey Kupfer: Yeah. So listen, I mean, I remember, you know, in our [00:01:00] pre call and then in your bio.
This discussion of, I mean, obviously a deals podcast buying and selling businesses, the experience you had as a, not only as a you know, as a principal, which you do now, but then also the conscious capitalism and the, and you know, the conversation of not selling out, you know, a really aligned with my heart and soul and what I believe in.
But before we get into all that, I want to take you back to when you were a little kid growing up, maybe eight, 10, 12 years old. What did you want to be? Because, I'm guessing, maybe an executive and somebody who works and buys and sells businesses and an author might not have been it back then, but
Sunny Vanderbeck: you tell me, you know, definitely not author, on the book piece.
Never had dreams of being an author, but the book had to be written. Like no one was talking about this stuff that everybody wants to talk about the money part and that's cool. But there are a lot of other things that turn out to matter to us as humans. So yeah, growing up, Lawyer, Wall Street, geneticist, which, you know, today you're like, yeah, we know what that stuff is in the, you know, 80s and it was not very widely known.
[00:02:00] So to put it another way, I had no idea what I wanted to do.
Corey Kupfer: Well, you know what? Even those of us who thought we knew what we wanted to do, thought we knew what we wanted to be, had no idea who we wanted to be because almost nobody ends up there. But, at least, you know, that's interesting.
Geneticist at that time. Yeah. I mean, how did you know even what that was?
Sunny Vanderbeck: Yeah. I had no idea. Good biology teacher somewhere. But, so I was always doing something new. If there was a pattern, it was like, Oh, he's doing that new thing now, which, you know, that's kind of played out, across my life as, as well.
You don't usually see, Ranger to technology or technology to private equity, but here I am.
Corey Kupfer: Yeah. Yeah. I love it. So, what was your first deal of any type? It could have been something small when you were a kid or maybe it's early in your career. Anything you would consider a deal. What was the first deal you can remember?
Sunny Vanderbeck: Oh, my first deal. I couldn't tell you the address, but I still remember what the house looked like. I figured out that I could sell and I just tried it. Like I didn't know it was going to work. Yeah. [00:03:00] Basically. And I would have been, I don't know, second or third grade. So I convinced this family at this house in the neighborhood, to let me, you know, mow the lawn and weed eat and all that stuff.
And it's a price. And then I went to some of the other kids in the neighborhood and I paid one kid five bucks to mow the lawn and another kid, two bucks to weed eat the lawn. And I had 3 left over and I was like, Hey, This is kind of cool.
Corey Kupfer: I love it. Leveraging. So I just want, I want to ask one follow up on that because listen, some, so many of us as kids, you know, mowed lawns and shoveled snow and did whatever.
But it didn't cross our minds, to, outsource that or hire that or subcontract that or whatever, you know, we call it, you know, like how did that idea come to you?
Sunny Vanderbeck: I really, really have no idea. I mean, it was. I think maybe, maybe it was, I wonder if I could pull this off. So I'm a curious, and so I always wonder about stuff and sometimes I'll just go see and I'll just go try it.[00:04:00]
And so I think I wondered about that. I'm like, I think it came from, you know, sometimes you'd get the job to mow, but you didn't, there wasn't a weed eating job. Like some of the houses just wanted the mowing done and I kind of put it all together and let me try it and see what happens. And it wasn't like, I wasn't, you know, sitting in front of a computer writing a business plan, it was a little just entrepreneurial hustle.
I don't know. I'll try this. One of the funding sources for my first real business. In the early, early days, so this would have been like 1996, we were broke as hell trying to start a company, no venture capital, you know, metaphorically and probably actually eating some ramen, I had a pretty good hunch they would do these technology auctions, and I had a pretty good hunch that if I bought a big giant pallet of CD ROM drives, A bunch of them would actually work.
And I kind of figured out what I thought I could sell them for. And you know, this thing was like Friday at midnight or some goofy time, I bought a few pallets of them for [00:05:00] not a lot of money because who wants to buy 300 CD ROM drives? Me apparently, and I took them to a swap meet and sold them for like 25 bucks a piece.
You know, swap meet was also in the middle of the night on the next weekend. And got some cash flow to be able to fund the next whatever thing we were doing in this tech business it takes a little bit of scrabble Sometimes this is not a well I raised 5 million and I hired sixth grade execs and like The early days are a little harder than that.
Corey Kupfer: Oh, yeah. Oh, yeah So was that you mentioned for a tech was that a business prior to data return? Well, that
Sunny Vanderbeck: was the very early days of data return. Okay, we're broke and had not figured out product market fit and we had some revenue, but kind of had rent to pay and we wanted to do more marketing.
And, I saw a good shot at a trade to be done and it worked. And so I did that a few more times cause it was, we needed revenue.
Corey Kupfer: I love it. All right, so let's talk about the deal journey on data return. Tell folks a little bit more about what data return did, but then [00:06:00] also I know that, you know, I actually don't know whether you raised any capital or did anything, but I know there was a point at which you exited that business and then I'll let you tell what happened after that.
Yeah, so I'll do it right now. So give us a little bit on data return.
Sunny Vanderbeck: Yeah. So, look we grew very quickly. We grew 40 percent every quarter for three and a half years. Wow. Which meant we doubled our head count every 120 days.
Corey Kupfer: Wow.
Sunny Vanderbeck: There's nothing I can tell you to explain what that was like.
It was a good thing. I was in my twenties cause you needed, you know, all the energy you could muster to just keep the wheels from falling off. But we had a good business customers needed what we did pretty bad. So we took it public on the NASDAQ.
Corey Kupfer: Okay. What did the company do?
Sunny Vanderbeck: It was mission critical managed hosting.
So here's what that means. H& R block online tax filing, that kind of stuff. Like, it has to work.
Yeah, yeah.
So we would, we didn't build the apps, but they would hand us these junky apps, because it was early days in the internet and everything was junky. And say, keep them running. So that was our gig.[00:07:00]
Our customers mostly didn't want the heat on themselves. They're like, yeah, let's give it. Right.
Corey Kupfer: They want to,
outside the party, they'll have the blame if things went bad. Right.
Sunny Vanderbeck: Yeah. So, I was 27 when we went public, I stayed on as CEO through that and kind of figured that out. And we had, one of our investors was a company called Compaq.
And we shared a board member. We were really close. Compaq was going to acquire my company. It was a perfect deal. Everything lined up. The cultures were aligned. Like you couldn't have asked for a better deal. And we get to the very end of the process. And when I say very end, I mean, there was one signature left from Compaq and then we were going to announce the deal and it was a Friday and it didn't show up.
Yeah. And didn't show up. And this is, as a tech company, I was waiting for a document to come over a fax machine. The irony that is not lost on me, you know, it gets to like about 11 AM and I start sending myself test faxes. Like [00:08:00] maybe the fax isn't working. Right. Right. Right. I'm looking out my office, jiggling it, the whole thing.
And
what year was this again?
Oh, I got this. This would have been, oh, old?
Okay.
I think it would have been a one.
Okay.
So, they came and went, and I was trying not to freak out and call my bankers, and I'm like, ah. I'm freaking out. And they're like, Oh, don't freak out. Everything's fine. And I'm freaking out.
Yeah.
Anyway. That weekend HP and compact announced they were going to merge. And my deal was off because they still wanted to do it, but they, both those companies had to do this merger. And I was tiny relative to, you know, ours, I think it was going to be a, like a billion dollar transaction, which is not tiny, but in the context of HP and compact merging, it's tiny.
No one cared to talk to us anymore. So we went, well, okay. It was like regroup time. And like time kills deals. Just I'll [00:09:00] put that like ruler one time kills deals. I've had acquirers plants burned to the ground. I've had the Chinese infiltrate a system in the middle of, you know, closing. I've had your acquirer get acquired.
Like, at this point of my life, like I've seen nearly all of it. I haven't had a CEO pass away in the middle of an acquisition. And I hope I never have to deal with that, but we've had about everything else. So time kills deals, hurry up, like I'm serious, hurry up. And this is buyer and seller.
Like it's funny as a seller, you're like, we need to hurry up as a buyer, you need to hurry up to lots of stuff happens. So anyway we needed to transact a longer story about sort of why it was the right choice for us to transact. Yeah. We found another company. It seemed like we were going to be a good fit.
We got a deal done with them. We had 9 11 in the middle of diligence when that, which I don't wish on anybody. No. We just kind of pretended like nothing happened and our business was [00:10:00] as usual. And it turns out actually our business was kind of business as usual, but you can imagine an acquirer being in the middle of diligence and something like that happens and they just go, Hey, I'm out.
I'll just, let's wait until the dust settles and. Oh yeah.
Corey Kupfer: Listen I don't have to imagine, I was actually practicing a lot and doing deals during that time.
Sunny Vanderbeck: So you know you get it. Yeah. So that transaction closed, I think January of 02. A year later, our acquirer filed for bankruptcy, which was weird because my business was profit.
I stayed on. I was a business unit guy. That's by the way, where I learned I'm not good at being a business unit guy, like entrepreneurs. We don't, we're not good at expense reports and dealing with HR telling us some nonsense about whatever is silly corporate rule. And like, there's a reason I'm not in big companies because I would not survive in that environment.
My inside voice and outside voice sometimes converge, especially in meetings where somebody's full of bull. I'll just say it. So anyway, I'm there, I'm like kind of destabilized. I'm like, our business is [00:11:00] profitable. We're doing well. But the parent company disintegrates and files for 11. So they ended up auctioning off the parts when I got to buy it back.
Corey Kupfer: So that was, and I'm assuming a bit of a discount from what it was sold.
Sunny Vanderbeck: It was at a bit of a discount. Yes. So that was cool. And it wasn't like I sold them a bill of goods and I got to buy it cheap. Like business was making money.
Corey Kupfer: Yeah.
Sunny Vanderbeck: Just. The corporate thing didn't work out. So bought it back with some private equity folks and had a good run.
In round two of that running as a private company, and sold it again in May of 07.
Corey Kupfer: Okay. So
Sunny Vanderbeck: kind of, you know, five year run there. And in gen two, we built the first enterprise cloud computing. So I think we launched it in 04, late 04, early 05 kind of timeframe. And a guy named Randy Eisenberg and I had been business dating.
We just liked each other. And he was a CEO and he was actually a customer of mine. And, we got to complaining. Cause the entrepreneurs do like, no one realizes like entrepreneurs complain [00:12:00] a lot. But we often do something about it. And so Genesis, we're complaining about these investor knuckleheads spending too much time in Excel and they don't understand business and blah, blah, blah.
He had also been an investor, so he had got to see both sides of this. And eventually we just said, well, let's stop complaining. Let's fix it. Let's start an investment firm that would be the kind of capital that we wish we could have had when we were CEOs. And so that was the genesis of Satori. We started in 2008.
We had three crazy ideas, and they were double crazy in 2008. So there were things like, what if you had permanent capital? Like I don't have to sell. It doesn't mean I won't, I just don't have to like, let me be a partner, not a business flipper. The second one was this idea that having done the work makes for a different kind of investor.
Like if I'm talking to one of our portfolio companies about. Growing revenue through, you know, building a direct B2B Salesforce. [00:13:00] I've done that before. It's hard. Like I get it now. I also think we can help too, but you ask different questions when you've been in the chair. And as many people know.
You've either been in the chair and made payroll or you haven't, and that experience is its own kind of unique thing. So that was the second piece. And then the third one you mentioned earlier, this idea around conscious capitalism, and that maybe we should quit chasing profit and let's chase value creation and extraordinary outcomes for our stakeholders.
What if customers are really happy and so are employees and suppliers like working with you and those kinds of things. If you can get that part right, the investor thing and the profit thing kind of works itself out. So that was crazy talk, you know, 15 years ago now. And that's what we set out to do.
Here we are.
Corey Kupfer: Well, I love it. So there's so much of that that I want to break down because there's so much value in there. So obviously, you know, you sort of came, which we do as entrepreneurs to the positive part of the thesis, like, you know, you were inspired to say, Hey, we can do this better.
What was it, [00:14:00] you don't have to mention any names, whatever. Right. And I'm sure it wasn't only your personal experience, but it was what you saw out in the marketplace. You know, what is it about PE, about, you know, your experience and others experience that was concerning or problematic to you.
And, you know, it's interesting to me because I, you I love talking about this kind of stuff because there's all kinds of views of private equity investment out there. And some of them, you know, on the mark, but some of them are really like people talking about, I have no experience and they have no idea and they blame PE for stuff that really shouldn't be blamed and vice versa.
And then, you know, there's good and there's bad and all that kind of stuff.
Corey Kupfer: So, talk to me a little bit about what was that complaint was specifically that inspired you to move forward with this, three volt philosophy.
Sunny Vanderbeck: Yeah, I would start it with a couple of things.
So the culture piece and the value of [00:15:00] talent and why culture matters to building value for investors. It, they just haven't had that experience more often than not. Right. So, Even a big P firm might have a hundred people in a large one. Well, these are companies of hundreds of thousands or 10, 000 people.
That understanding how things that aren't on the P& L create value is often tough and look, our industry has gotten better at this over time for sure. But that like everything, it was, it felt a lot like being a public company. It wasn't as bad, but everything's like, if it's not in the P& L and it's not this quarter, I don't want to hear about it.
And I'll give you an example from actually from one of our portfolio companies. So we had been an investor in this company for about 40 years. So if you're a normal private equity, you're like hiring a banker or time to get ready to sell it. And the company's largest customer came to it and said, we would like you to open a plant next door to our headquarters.
Well, like opening a plant is [00:16:00] hard. It's one of the hardest things you can do as a manufacturer. Especially if it's your second plant, your third one's a little easier if you how? Right?
Corey Kupfer: Because if you haven't replicated it before the rep, the initial replication is
Sunny Vanderbeck: Yeah. That, you know, round one of standing up a new plant, man, that's tough.
So it's gonna take a while. It cost a bunch of money. Well, if we had a normal investment horizon, we'd be like, no, let's leave that meat on the bone is what it's called on the bone for the next guy. Tell them the largest customer wants to do this, but let's not, 'cause we won't even get it to break even for three years.
Why would we do that? Well, our mindset is let's create value in the business, like on an NPD basis. If this is a good move for the business, do the move and like let the exit stuff come. Well, you know how these stories turn out. We did it anyway because it was the right thing to do for the customer and the right thing to do for the business.
And we had an extraordinary result as an investor in the business because it took us from being a regional player to a [00:17:00] national player. It put this big customer on lockdown, like it did all the stuff. And so the potential buyers for it, we're all like, yeah, yeah, no, no problem. We're not worried about that because then they could see because we had stood it up, they could see how valuable it was.
That was one of our best performing investments we've ever made. And we did the opposite of what you're supposed to do in year four.
Corey Kupfer: Yeah. So as they say, so let me go with it a little bit because with most beef, you know, firms, their, time pressure you know, it's sort of a serious thing that create that time horizon, right.
It's that they've raised the fund. That fund has a, has an end date, right. Where they've got to, you know, get returns and they'll return capital to people, right. And that sort of puts them on a clock to be able to want to exit, you know, within a particular time to show the returns and et cetera, et cetera.
So, how do you, without revealing anything confidential, but, philosophically, how do you adjust for the fact or do you do something very different in terms of your investors as well and their [00:18:00] expectations of, You know, of timing of returns and, or, you know, completion of a fund.
Sunny Vanderbeck: Yeah. So our investors have backed us to say, we will exit when it's time. And that might be two years. We added an investment. We exited in two years. That was driven by the leadership team. They saw an opportunity and they were like, Hey, we want to do this. They're like, that sounds great. Let's go. But it makes it much more challenging, challenging to raise capital because most of the capital sources in the world, when I'm like, yeah, we don't have an end date.
They're like, well, what if you don't sell it? I'm like, that means I think it's creating value at a rate at which I would be foolish to sell it. And our economics are aligned. So yeah, I'm not selling it. You mean we could be stuck in it for a decade? Really? And I'm like, look, we got to the point where we realized there was no amount of explaining we could ever do that was going to change somebody's mind.
[00:19:00] So we just found the tribe that heard our story and went, Oh my gosh, that's amazing. So the truth of it is our investors, they're us, they're business owners and people that used to own a business because when they hear our story, they're like, that's exactly what the world needs. Can I invest? And we went, yeah, sure, man, come on.
And it just, we looked up one day and realized that's our investor base. So that's cool. Cause there are a lot of fun to be around too. Cause they're us.
Corey Kupfer: Yeah. Yeah. Yeah. And it really, you know, it reinforces in another context, something I say to my clients, I've said on this podcast all the time, and that is whether it's a value proposition out there to clients or it's a value proposition, like we do a lot of M& A.
So I always talk about, you need a value proposition to M& A targets, right? Coming in. That's. You know, different than because a lot of firms don't do that. I'm like, well, why would they come to you? Right. You need a value prop for the, for the, these people you're targeting. And it's the same thing when you're raising investment capital, whether it's in a company or whether it's through a, you know, a fund or you're a PE firm or whatever.
And the great part that I always say about these situations is. Yeah, I mean, that [00:20:00] clear value proposition, which includes, in your case, let's call it patient capital, right, and the opportunity to maximize value that way, not only does that attract you to the right people, but it also, repels, right, in your case, the majority of investors out there, which is actually, some people think that's a bad thing, But that's a great thing because you don't waste time on that.
Sunny Vanderbeck: That's right. Yeah. It's a little bit, as entrepreneurs, we all have to go through this like FOMO journey. Everyone does stay like the fear of missing out. And we'll, what if that customer wanted to buy for me and all like all this stuff. And for a lot of us, one day we go, Hey, let's just have a really tight definition of who's not our customer.
Yeah.
Let's not spend any time talking to those people ever again, because the people who are, if you get your value prop, right. And the people who want to be your customer, they're like magnetically attracted to you. They're like, this is amazing. This is totally different. I wish this song, and they get excited about it instead of like trying to change somebody's mind in a meeting.
Like I'm too old for that.
Corey Kupfer: A hundred percent. [00:21:00] And it applies to customers. It applies to acquisition targets, applies to investors, it applies to every stakeholder or every constituent that you're talking about.
Sunny Vanderbeck: Yeah. I'll give you an example from Satori. A couple of them, actually. If you want to sell 100 percent of your business, we're not a good fit for it.
Cause if you're saying, Hey, I got to go cause I don't want to work on this anymore. You know, more than I do, man, I've just, I've been on the other side. It's a little bit like when guys are like, Oh yeah, you know, I'll stay around for two years for a transition. I said that stuff too. What does that really mean?
Your bankers told you you had to say that and you'll hang around for as long as you have to, to get your deal done. Now I will draw the general now, baby. That's right. And so I'll draw one exception. We had an investment where. The owner had a health issue. He just literally said, I can't run this business anymore, but I have a number two, meet my number two and you decide for yourself if they're capable.
And we met her and it was like, she's [00:22:00] amazing. We're in, but that's different than some guy handing me the keys. And it was like, yeah, I'm going to the beach. That's it. So we've learned like, Hey, that's not for us. And another one is there are some people and I make no value judgment here. They just want quiet capital.
And one thing they want to be left alone, they don't actually want a partner and that's no fun. So it's not a fit for us. Like, if you want a partner and like, let's get in there together and work on it and it's great. And if you just want somebody to like, that acts like the bank that shows up once a quarter from reporting and you really want them to just go away or it's not a good fit, I'll help you find somebody that's good at that.
But it's not us.
Corey Kupfer: Yeah. Yeah. So, I mean, it's funny cause I can hear it in your passion of obviously it goes to the background, like that strategic help, that partnered, that business partnership that, you know, working together to figure out how to create value and how this thing grow is what's, interesting and it would, and that's what's interesting to me as well.
I mean, for me, I, you know, obviously there's some things I just do passive [00:23:00] investments in, but. It's one of the reasons I love doing what I do because I help in a different way. I help businesses grow, whether that's through right acquisition strategy, you know, or any other kind of deal.
So that's, great. But you're right. I mean, some people don't, and listen, some people, you know, you hear these horror stories about, you know, overly involved PE, right. But you know, in a negative way, like they're preventing you from making these decisions, they're doing this.
So I think. I think there's some folks that, you know, that assume that if a PEA firm's involved, it's going to be only telling what they can't do as opposed to providing strategic.
Sunny Vanderbeck: Yeah. Or it's the, we call it the help that comes in air quotes. Oh boy. They're here to help again.
Right. You know, and that, so look, there's a little bit of truth in everything. And I'll remind the listeners, if you just read what the media has to say about CEOs. They're all crazy narcissists that only care about themselves. That's right. That's the opposite of my experience. Like most CEOs I know, care deeply about the people [00:24:00] around them.
So the narrative about CEOs is not very correct. I think the narrative about private equity, it all has truth. It's very dependent on the firm and their work styles and just what they're good at and what they like doing. And by the way, So if your plan is to run as an acquisition platform and like the whole thesis around the thing is like, I want to buy this company and then I'm going to do a bunch of bolt ons, you better get help from your PE.
You should expect it because it's hard and it's a lot of work and you need a bunch of people to do that. You want help to show up for that stuff because it's for real.
Corey Kupfer: No, no question. It's endless. If you study it, and I could talk about countless industries where. You know, if you look at anybody who is a serial acquirer, or roll up firm or, whatever you want to call it, right.
At whatever level, I think there's hardly any except, you know, PE backed. I mean, yeah, you know, if you're going to do one or two deals here or there, that [00:25:00] different story, you might be able to self fund that, get lending fund and get it, or just get, you know, SBV investor or whatever.
But if you're going to, if you're going to do multiple deals, not only you know, you need ongoing. Access to capital, but you also need, that strategic view and a lot of the, clients that have PE, I mean, overall, frankly, you know, a lot of folks have been very happy with their experience and it's just, you just got to know when it's appropriate and when it's for and, you're right, even, you know, the popular media will, I mean, listen, it's much more interesting to report on the CEO who is forced out by the PE firm.
Right. And the drama around that, then the hundred deals that are working, you know, and of course, usually it's from that CEO's point of view, what happened and they might even talk about how. The culture was bad or how they promised to hit certain targets and then come close or whatever it is So, you know, there's always two sides to three sides
Sunny Vanderbeck: You remind me.
I wrote an article a while back. I think it's called never say never and the point of the article was this like I meet people that say well i'll never take debt or i'll never [00:26:00] take equity Yeah. And the point I made in the article was this, it's a tool. Yeah. Think about it like a tool. My drill is not good or bad.
It's a tool. It does a thing. And it's designed to do a really specific thing. And so don't come into it with a preconceived notion. Just be aware that it's, you know, you will chop your finger off of the skill saw if you use it wrong.
Right.
So don't say you'll never take PE or you don't want to do debt or whatever.
Think about where and how it can be useful. And I do think you make a good point though. If you're going to run hard on the acquisitions, like private equity is the right kind of capital to have. It's one of the things that while I might complain about, PE may not be good at helping you figure out digital marketing or how to improve your culture.
How to do a hundred acquisitions in 10 years. That's the stuff they do. Like they're pretty good at it. As a rule, that's their comfort place. It's legal docs and Excel stuff and integration plans. And so that can [00:27:00] be. A really useful tool and it, I want to point out one other thing, just so I don't lose it.
If I had three or four pieces of advice to give to my operating company self, yeah, one of the things that would make the list is do more acquisitions. We had great flow through margins, great infrastructure. So we were built, like one of the ways I think about M& A is like, If you've got, if your next dollar revenue converts at 80 percent of it flows to the bottom line, that's a marker to say, pay attention on acquisitions.
If you're pretty organized, pay attention on that. We were organized and had high flow through margins. Look, if you're disorganized and have low margin, acquisitions like could make it a lot worse. You'll be more disorganized and have lower margin. And so that was actually one of the tools that as a young CEO was not in my toolbox, I chickened out a bunch of times.
And with the benefit of experience and [00:28:00] hindsight, I mean, we're a public company worth 3 billion. Like I use that currency that it wasn't worth 3 billion. That's when it was priced at. It wasn't worth that. I could have bought a lot of stuff and I just didn't do it. Now I'm so silly me. I know better now.
Corey Kupfer: It's interesting you say that, I want to spend a lot of time on this because I want to get back to you and a little more about the story and then the book but it's interesting timing because I just got back, I mean, at the time we're, we'll, you know, it'll be a couple months later that this gets aired, but the time we're recording this, I got back a few weeks ago from Singapore and I was at the, the Global Leadership Conference for Hashimoto's organization, I was presenting on the MyEO Deal Exchange Champion, which means I run the deals conference and the deals group, in EO.
And I did a new presentation that I put together, and really there were two focuses of it. One was. I realized, and I started talking about, that we all, as entrepreneurs, we all have a very clear understanding. We talk about it all the time, about the difference in mindset between an employee and an entrepreneur, right?
Corey Kupfer: And some of us were employees, became entrepreneurs. We talk about that transition, or [00:29:00] we certainly look at our employees versus our entrepreneurial mentality and talk about that sometimes in not so positive ways but it's very clear and there's all kinds of materials out there. But I also talk about that there's a mindset shift between a deal, an entrepreneur and a deal maker, right?
And you just illustrated that perfectly. Like you were a very highly successful entrepreneur. You had made that shift. You, you know, but there was this a, at least this aspect of deal, but any raised capital. So you had that aspect of deal making, but the m and a aspect of deal making, you didn't have at that time.
And it's just like you said about, some other stuff, you know, it is a tool in the toolbox. It's not a tool you have to use, like you don't have to use PE, you know, raising PE money, but it's a tool in the toolbox that can solve a lot of things. And the whole approach to the presentation in Singapore, that I did a few times was that, was let's, what is your challenge, issue, problem, pain point in your business?
And like there's an app for that there's a deal, doesn't mean you have to do the deal, but there is a deal for that. Great example. Having trouble hiring. A lot of people look, I look at the talent, look at the talent, [00:30:00] okay, you can recruit, you can put up, you know, job posts, you can hire recruiters, but you could also acquire companies that have talent, or you can do an acqui hire, where it's positioned like it is a hire, but you really aren't, right?
Or you can do some sort of, you know, joint venture or strategic alliance to get that talent on a contract basis, right? So I won't go into all the examples, but the point is. That there is a deal for that and switching that mindset, that mind, set to include being a dealmaker in addition to an IFBRO just gives you another set of tools.
You may or may not choose to use them to solve a particular problem. They're another potential solution.
Sunny Vanderbeck: Absolutely. I wish I would've had that in my toolbox.
Corey Kupfer: Well, listen, that's part of our evolution, right? We keep growing and learning and, you know, fortunately for the companies that you guys invest in, you now, I'm sure, you know, bring that conversation to your.
Portfolio companies, right. As a, cause now you know that there's that toolbox. So let's talk a little bit more about, some of the investments doesn't have to be particular companies, but like other particular sectors. You focus in, you know, are you, there are areas that you really like right now, you know, tell us a little bit about [00:31:00] more, on the focus of where you're investing.
Sunny Vanderbeck: Yeah. So three spaces, one is manufacturing where you've got a bunch of engineers or intellectual property.
Yeah.
So, one of our companies makes a thing, it cost a million dollars and it takes a year to build. Wow. Okay. That business is very different than Caterpillar sends me the prints to make the brake pedal for their bulldozer.
Like, very different margins, very different competitive realities. So we do well in manufacturing that's hard, complicated, there's a bunch of degrees running around. One of our companies makes a turban. That spins at 10, 000 RPM that pulls sulfur out of coal power plants. Well, you spin a turbine that fast, if it's wrong by the tiniest amount, it just disintegrates.
So that is hard to make. Well, stuff that's hard to make, it can often be a good business. If you can figure out like how to make it repeatable, you're reliably. So that's one [00:32:00] space where we do very well.
Corey Kupfer: And that was interesting to me before you got to the other ones, it didn't tell me if I'm wrong, but it seems logical that it could align because Longer, longer manufacturing cycles, right?
All that kind of stuff, which means that more patient capital, like, you know, if, the investors are looking for quarterly results on businesses that have such a much longer time horizon, maybe more of a mismatch, right?
Sunny Vanderbeck: Yeah. If you're, you know, sales cycle is a year and then a year to build it, you need to be a good planner.
But now it also means that you need to be organized and have a sales pipeline and be able to predict future, you know, revenues and a bunch of stuff That often isn't there when we get there. Which is fine, that's what we're here to do is to help on that kind of stuff. Yeah. So the second one we call white truck businesses.
Yeah.
So these are businesses where a skilled technician gets in a literally a white truck in their work boots and drives to a location to do a thing that's hard that you can't go to school for.
Okay. Yeah.
So. I'll give you two [00:33:00] examples. One was a company that we actually recently had an accident and it was machinery moving.
So you need to move a 10 ton chiller onto the top of a data center. If you drop it, what happens? Bad. Bad. You have a machine that makes silicon wafers for graphics cards. What happens if you drop it? It's bad. These things aren't like, it's not a container that's easy to move around. They're complicated and there's a bunch of moving parts and load points.
Anyway, it takes a skilled technician to figure out how to even pick this thing up.
Yeah.
That's a white truck business and it, they did, you know, data centers and chip fabs and big manufacturing, kind of like the complex manufacturing thing. Yeah. We often have big complex machines in those companies.
How do you move it to the new plant? So that's what they did. When we just completed an investment in, is a fire protection business. [00:34:00] So they engineer, design, install, and maintain fire suppression and fire alarm systems.
Corey Kupfer: Okay.
Sunny Vanderbeck: It's complicated. And the stakes are, if you get it wrong, the thing burns down.
Or everybody's stuff's wet. Or like, so high stakes. We tend to like, one of the themes that you'll see is, in these two, is kind of high stakes work. Which is not surprising given the background I had before in my other two jobs. So this white truck business, I think we're pretty good at helping these companies really scale up and be bigger versions of themselves.
Some organic, some acquisitions, and culture. This is true in both manufacturing and in the white truck business. These industries tend to not have a heavy focus on culture. That's just how they've been for most of history. And I just, as a data point on our focus on culture. This year, the best small business to work at in the state of Texas is Satori.
Like we're very serious [00:35:00] about this stuff. And so if I can make a little bit of progress in culture and have people feel like they have good jobs with, you know, leaders that care about them and they're rewarded for performance, like guess what? That talent problem you just talked about a minute ago kind of starts to go away because if everybody in your industry wants to work at your company.
Where are you? Like you're in a different place So that's the second one is this white truck and then the third one is what I would call classic brands Right companies that have been around for a while They make a consumer product and some of them make it themselves. Some of them don't yeah They haven't really unlocked the direct to consumer thing yet, right?
They're not selling on amazon They don't sell much direct to their customers. They're just used to selling through some distribution channel And it's not just, Oh, I'm going to run some digital ads. It's Hey, you used to send out truck loads or pallet loads full of your product. And now you've got to send out one in a box to somebody [00:36:00] that, by the way, it has to go out today.
Because if it takes you four days to ship it, your customers are going to lose their mind, which means it's a cultural transformation for that part of the business. So that's the third sector that, that we're good at. And then occasionally we'll see a thing that's values aligned that doesn't fit one of our sectors, but we look at and just say, man, we're a good fit here.
We, we've got a, company that provides basically schools. It's 28 schools, For the bottom 3 percent of high school kids. These are kids that are not going to graduate unless there's an intervention. And so the public schools actually give us the kids with the kids, you know, saying, or their parents ascent and say, help this kid and we can't get them all graduated.
I think the latest stats are, we take about 25 percent of them and get them graduated. We're doing lots of continuing education. We've got like training them how to be a nurse in VR while they're in school. I think the [00:37:00] emotional reward from this business of seeing kids that, look, I'm going to tell you one brief story.
We started doing interviews that the company started doing interviews with these kids after they graduated. Like, Hey, did you ever think you were going to be here? So ask this one kid, did you ever, you think you were going to make it to graduation? Deadpan looks at the camera and says, graduation. I didn't think I was going to be alive.
You're like, dude, we're making a difference. And it's for investors. It's a great business, but the impact that thing has in every community it goes into is just, you can't make it up. It's really cool. So sometimes we see something like that that just speaks to us and says yeah, we can be a good fit for this thing.
Corey Kupfer: Love it. Love it. So, before we get to the final two questions, I want to give you a chance to talk about the book a little bit.
Sunny Vanderbeck: Yeah. So the book selling without selling out, as I mentioned earlier and never wanted to be an author. Didn't have designs on it. And I started doing a little speaking on M& A and how to get your head right and [00:38:00] how to get ready for M& A.
I think the very first one, somebody asked me to come talk on M& A preparedness. And as I spent some time reflecting on it, what I realized was everybody wants to talk about the stuff that fits in Excel and nobody wants to talk about the stuff between your ears. And here's what I learned. And this was a combination of my own experiences and a bunch of CEO interviews that I did.
with people that had either raised capital or had sold their business. And it all really came back to the same thing. Most CEOs care about more than money. They just do. It's not that they don't care about money. They just also have other things they care about. And the process works a little bit like this.
Figure out who you care about. Figure out what you want for them. Write it down. Like selling to a strategic is not necessarily good or bad. What do you want for your people? Sometimes a sale to a strategic can create extraordinary growth [00:39:00] opportunities for your team. Sometimes it's bad. You just have to decide and I, in the book, I make no moral judgment on what you should care about.
I don't, that's not the issue. You just, that's a you thing. You figure out what you care about. And if all you care about is money, just do the normal, you know, lawyers and investment banker stuff and you'll be fine. But if you care about your team or your customers or your community or these other things, you've got some real questions to ask yourself and you can't outsource this stuff.
These are questions that only you can answer. You can't go to your accountant and say, who should I care about? This is, this stuff's on you. It requires some reflection. And one of the key learnings was you have to write it down. Two things happen when you write it down. One, and I see this happen for me all the time, I'll write it down, Oh, I know what I'm talking about, and I'll write it down.
And you pick it up the next day, and you go, Oh my gosh, that's not at all what I mean. And you start tuning and tweaking and poking, and eventually you actually get [00:40:00] clarity on what it is that you really want. Yes. But the other thing is if you go to your deal attorney and you say, Oh, I want XYZ and you just say it, their outside voice is going to be like, Oh, okay, cool.
Inside voices. I've seen this movie a hundred times. When the LOIs come in, they're just going to pick the top price and then, yeah.
Corey Kupfer: Right. They're saying they care about this, that, that, but. That's
Sunny Vanderbeck: right. And the bankers have the same inside voice, outside voice. Oh, yeah, yeah, we'll help you find that and they know.
They'll put all the yellow eyes in a spreadsheet and you'll pick the big number and off it goes. But when you write it down and you hand your deal team a document that says, this is who I care about and this is what I want for them. They will actually understand that you're serious about it. And it'll change how they engage with your company.
It'll change how they talk to, potential acquirers. It's transformative when you have it written down. [00:41:00] There's one other thing that happens that's kind of interesting. And I talk about this in the book. There was a story, yeah, of a particular company. I think it was Investopedia. These two owners had written down their number instead of just having the number in their head, they wrote it down and they put in an envelope and they sealed it and they got into deal mode.
And there was some nonsense and there's always nonsense in deals. Acquirers and investors are going to do stuff that'll make you crazy. And you're like, Oh, that's not fair. And you'll get all stirred up about it. And one of the two partners said, Hey man, let's get that envelope out. And they pulled the envelope out and they opened it up and like, they were already like 20 or 30 percent above what they thought was a good deal.
And they looked at it and they went, yeah, we're going to stop worrying about all this little nonsense and stop. Cause you'll, I've seen it, man, it's happened to me. You get, you feel like you're wrong and there's an adjustment. There
Corey Kupfer: you go.
Sunny Vanderbeck: Yeah. Can't believe they're doing this thing. Yeah. Hey man, do not let a fair deal [00:42:00] get in the way of a good deal.
Yeah.
Corey Kupfer: Listen, we don't have a lot of time for it, but you're talking about a lot of the stuff I talk about in my authentic negotiating book, right? You know, the top six reasons negotiations fail are all internal in my book. I don't talk about tactics and counter tactics. I talk about ego, rigidity, scarcity, fear, you know, all this stuff.
Because we're human and that's what comes up. And, yeah, I love getting that clarity. There's a process I do in there called CPR, context, purpose, results, that has, that is somebody writing down not only the results they want, but then why the purpose they want to achieve and the context they need to hold, meaning they want to be calm and, you know, whatever it is.
And it's all for those same reasons that you were talking about, right? It's, and there's a reason that I tell that has to be in writing. So he's actually reading my language. Well, this is good stuff. So, all right. So let people know. Where they can find out more about the book, find out more about your company, or anything else you want them to know.
Sunny Vanderbeck: Yeah, go to sonnyvanderbeck. com. Again, first name, last name, trying to keep it simple. You'll have contact info there, [00:43:00] more about the book. I made a couple workbooks. I was so serious about this write it down thing. I got a couple of workbooks on the site to just help you write it down. So yeah, get in touch with me through there and I'd look, I'd love to hear from anybody if I can be useful to you, I'll be happy to do it.
Corey Kupfer: That's great, Sonny. So my final question on the podcast is always about my highest value in life, which is freedom. And to me, that means everything from freedom around the world for all people from oppression to, why I've been an entrepreneur for decades and never had a boss. What does freedom mean to you and how does it impact your life and business?
Sunny Vanderbeck: Yeah. So, so freedom, you know, a bunch of overlapping meanings, especially having been in the military. Yeah. I think for me, it's very much about choice, right? Being able to live in choice and being able to live to your potential, whatever that is for a human, like, is there anything in the way of that?
Now we get in our own way sometimes. Sometimes it's like freedom from my own nonsense, that's really the [00:44:00] issue. Yeah. But being free to choose what you think is best for you and sometimes just what is best for you, even if you don't think it's best, that's a thing that I wish more people in the world have.
Every time I travel around the world, I am reminded of how special it is here. It's just special. And we don't get it on a given Tuesday. We're like, Oh, we got problems. Hey, in the States, we mostly have high rent problems, especially as entrepreneurs, like. These are not bad problems to have. The world is a pretty wild place.
A lot of people are hungry, deal with a bunch of violence and never forget the existence of a great company does have a fingerprint on the world. You're like, Hey, I want to change the world. Hey, I got thousands of people that come to work at these companies and can live their potential and grow as humans and go home.
And their spouse and their kid interact [00:45:00] with somebody that's full of passion and life about the world, not somebody who gets beat down at work. Companies may have more impact on the human experience than any other thing in the world. So be careful, like be careful with what you're building. It has more impact than you'll ever know.
I'm reminded of a comment from a friend of mine, a guy named Ran Stegen. He said, as a leader, the conversation at the dinner table for your team. Is what you did today, like never forget that, like what the offhand comment you made, the little boost you gave to somebody to cheer them on the way you showed up consistent with your company's values, whatever it is that you're doing every day is getting transmitted into all these families, customers, suppliers, vendors.
As CEOs, we have a big opportunity to create more freedom in the world, whether it's real freedom or just freedom from your own [00:46:00] mind.
Corey Kupfer: Love that. And that phrase you said about, creating a great company leaves a fingerprint on the world. I love like that's, that, that sums it up right there. What a great phrase that is.
And I really do believe that. Sunny van der Beek, thank you for being such a great guest on the DealQuest podcast.
Thanks for having me.
