alright i've been chasing this guest today for six months begging him to come on the podcast because i heard him on a podcast last year and as as much as this breaks my heart to say it that was my favorite business podcast of the year and it wasn't even our own but he was so good that i asked him to come on his name is jeremy gif he is he was the first employee at tiny which ever listened to the podcast we've had andrew wilkins on many many times they basically turned five million dollars of starting money into about five hundred million dollars of equity just by buying businesses that cash flow so they bought you know small businesses that cash flow kept recycling recycling recycling over ten years turned into five hundred million so i wanted to ask him what was it like in the early days what were those first deals like he was there before they even had a name before they were we've even called tiny so we ask him about his best deals is worst deals the weirdest deals he's ever done negotiating tech tactics he learned this episode is amazing it's a ten out of ten for me enjoy this episode which you're yeah i feel like i could rule to world to know why i could be what i want to from at all then it like a day's off on a road travel never looking back jeremy welcome to the show we figure we've we've had your mentor on enough times now andrew he's probably the the most popular guest on the show enough of andrew we gotta go to his pro we gotta go to the young gun who was there from the beginning and and have you on welcome to the welcome to the show man thanks for having me guys let's put tiny into context because i think maybe somebody listened to this doesn't doesn't actually appreciate what we're talking about tiny the simple story of tiny is they had a services business an agency and then they had excess profits and i think you could correct me if wrong but i think the numbers are something like they took five or six million dollars of initial initial equity and they put that into tiny and we're like we're gonna go try to buy a business with this and they've ended up turning five or six million of initial startup capital into roughly a five hundred six hundred million dollar public company where they own you know tiny owns maybe a portfolio of thirty businesses or something like that over over roughly ten eight years years yeah eight year period so kind of amazing in eight years turned five million dollars to five hundred million dollars like okay i'm i'm doing round math here for fuzzy fuzzy numbers but first of all is that the is that the right math is that roughly the right story and and then you know walk us through the beginning days of that because you were there at the very beginning at nineteen twenty years old employee kinda number one there walk us through that yeah so i i knew andrew because when he was starting meta lab and i was working on another startup we shared the same studio apartment our office was in a studio apartment and he was in like the bedroom area and we were in the the kitchen and we would keep a keep a blow up mattress in case the fire guy came around and we would just say oh you know andrew lives here but i just have a lot of friends over you know working on stuff and yeah i mean effectively like meta lab the store the short version is meta lab you know we're throwing off a fair amount of free cash flow i think it was in that range of you know low millions a year and the idea was just to go use that free cash flow to buy buy a business and you know that's the thing with agencies right like there's not a lot of reinvestment so you gotta do something with the cash and if you're not gonna put in the and p like that's too boring or whatever then you gotta figure out something to do with it and so that's that's kinda what we did it's funny like people a lot of people hold codes and stuff are really popular now and people you know a lot of people will ask how do i build tiny effectively and the first step is like well you know bootstrap a business that makes millions of dollars free cash flow and then like get back to me the the rest is like pretty easy and that's the first thought and you said it took eight years in reality i think meta lab of the agency that was already eight years older i don't i don't know what it was but yeah that's right meta lab is probably fifteen sixteen years old now so it was a long a long alongside i mean andrew just started really young it was also one thing that's really helpful is andrew and chris and myself i mean we were all big users and fans of dr and and we andrew really had that company in mind for a long time which i think is another really nice thing to have like it's very good to start with a deal even when like even you're fundraising or whatever to to actually have a concrete thing that you wanna go do and use that as the jumping off point for you know building whatever it is i think it's always so much better to have that than to kind of be like abstract oh i'm gonna start fund i'm gonna start a holding company or whatever and so it was like triple is really cool we would love to we would be the right owners for that andrew renew the c founders there and maybe we could buy that and that would be a starting off point and it's all very like real and concrete versus the we're gonna build a holding company of technology businesses or something like that now you're three guys who've never bought a business before take me back to you're sitting in the the the kitchen or whatever of your apartment slash office slash hangout lounge are you guys like hey can we like buy like buying businesses for dummies like how did you even figure out how to do it and also if this is a good idea because it's a big risk right i think you know probably four or five million bucks of equity went into that deal that's like kind of like that's a big deal that's not like a couple hundred grand at that stage so like were those conversations like at the as much as best as you can remember yeah i mean it was you know like anything there's generally one way that you can categorize sellers it's people who care about what happens to the business after they sell it and people who don't and certainly for people who care it's a lot about it's this huge trust exercise of you know are you gonna screw up my baby like in their case they've been working on it for a really long time their names are very attached to it there's a big community community businesses are really cult you know the community can really turn on you fast and so yeah there's that whole piece and then mechanically yeah it was literally like i don't think we've even had a book we just looked it up online like i would literally go on legal depot and like get a lo off there and edit it and you know for the first few deals is like you know i was nineteen twenty and andrew be like can you go get a lo for this and i didn't know what that was so we just go download one and write it up and it's interesting because one thing that we didn't like this an example of just the benefit of not having a lot of experience typically when you do an lo it's pretty far along in the process and we would just fire them out because we read them and in an lo the only thing that's binding usually is the exclusivity and nothing else not the price or anything else and so we thought okay like this is a totally non binding thing so let's just like check it out there it's nice to have something on a piece of paper it's kinda like a term sheet although even term sheets like socially or more binding and we didn't realize that oh private equity and lo lois is like a pretty sturdy commitment or whatever and you know that was for better and for worse on one hand it let us move really fast on the other hand we learn quite quickly that okay you're not supposed to go back on like what you changed in an and and that kind of stuff and we're and and so there's all those little things we're just not being familiar with the process really kinda let us move fast it let us be friend and that was the whole point like we had both had these kind of bad experiences with with with buyers and we thought you know there's gotta be like a better service to be done there basically i had a handyman come over yesterday and he comes to my front door and he's like tell me what you need done whatever and i said great that's what i need done and he goes here before we start i need you to do something and he pulls out a notebook and he wrote he writes my rate is fifty dollars one hour per one hour and he handed it to me goes sign this for me and i just i go okay cool i'm aware that that that that's awesome much he's like that way just spits in his hand shakes it he's like this is official and i was like i i appreciate i i appreciate your style that that's that that was like the tiny lo yeah at least is understandable so at the time was dr like an obviously good business because it turned out to be an amazing investment probably like a i don't know what is it like a fifty f on your money there right like yeah more than that more than a fifty x amazing what did you guys like try to under write the deal were you're like an excel like dragging some like you know ten percent growth like dragging it over twenty columns like how you guys what what did the deal look like and what did what did you expect again it was it was pretty obvious that it was a great business and i think andrew's told the story before but there was some immediate day one levers around like a big part of business was advertising and we could find better advertising providers and things like that so there was levers you could pull on day one that were improve the business but yeah it just felt like this big opportunity it was a top one thousand website and had millions of active users it was very important you know when it launched like i think i bought my dr invite on ebay or something like that it was really hot for a while and it it was just this kind of like cool thing that didn't really exist you know there's not a lot of independent social networks that have millions of users and you know we we we negotiated a pretty fair deal i think like you know the the other buffet line is prices my due diligence and that helps a lot but no we never thought we never thought any of the deals could be you know fifty plus x's we're it's just like you know can we make twenty or thirty percent cash per year from this business and that would be great and anything after that is just kind of kind of upside you know i i think and and yet regarding models you know andrew used to make me do discounted of cash flows because it was kinda like the thing that you felt investors ought to do and then at some point i was like here is your spreadsheet but i'm just making up all the assumptions in the spreadsheet and i think it was like so many of these things are just like comfort blankets or whatever you just like it makes it's be this big scary thing that you're doing and it makes you feel better that you have it so you can look at it and be like yeah like we've modeled this out you know but it's like it's bullshit you just you you're just making it up you also had a great quote you were like you you said something to me go the more quantitative analysis so the more numbers number a numerical analysis you're doing about a business the more you're comm in your analysis what does that what does that mean unpack that one yeah my my favorite anecdote here is in the facebook ipo barclays put up this research report where you know they say what they think the business is gonna be worth and the way they do that is to a discounted of cash flow and and a part of that calculation is like what is the terminal growth what is the thing gonna grow out forever and they put it at three percent which is what most companies are and so that got them to do a two hundred billion dollar valuation now the next ten years it grew thirty percent a year and it's a two trillion dollar company and it's just an example of like you know you do all this modeling in this research report and you're just so off like you you you earn an order of magnitude off and so like what was the point of doing any of that it would have been better to think really hard about how actually how much can facebook but grow like just kind of this first principle stuff right of what percentage of the planet it could use this like a lot more basic and yeah that's a lot of the quantitative of stuff also a lot of the quantum stuff is totally comm modified right so people like know how to do this you can learn how to do this in school and therefore maybe it's like a useful table stakes thing but you're not gonna get any the edge that way because everyone can do it and where the edge is in quantity stuff is you know in the two sigma and jane street and the mit phds issues and you're not gonna be doing that either and so you're not gonna like do a better model on a company than than the next guy and somehow get some edge there so then when you're looking at a deal when you're trying to for like a small bootstrap business a business doing anywhere from a million to thirty million in revenue what are you looking at to spot the opportunity if it's not the if it i mean are you how much do the financials and the the cash flow statements actually even factor into that or you just thinking i can make this bigger i mean what what part of the numbers actually matter to you yeah it's pretty basic right it's like okay let's you know let's make up numbers it's doing five million dollars year revenue a million dollars of earnings and you think okay on day one i could you know raise the prices by thirty percent i could reduce head count i could launch this new product to whatever would you pay you know would you pay a million dollars for that yeah of course would you pay three million dollars yeah probably and then you you can just kinda go and i think we're modeling gets important is when you're like at the very edge of that you're like would you pay ten million dollars for that and then it's like well a lot of things would have to go right maybe or whatever but there's some number there where it's like yeah you know i'd paid three million dollars for business making a million dollars and so then the trick becomes okay can you get the business for three million dollars and that's where it's like you know tiny is in a lot of bids with other other folks and i don't think we were ever the highest actual price but we often won deals because we could offer other things so that comes back to like why you on the deal you know because like a the very common thing that would happen is we'd get pretty far with the seller and then they'd say hey you know we like you guys but we've got this offer twenty five percent more so we're gonna go take it and you know very often be like great like go explore that and then turns out that offer was not as real as you thought or it was six months of whatever there's more debt or they didn't have the financing and then you actually figure out that oh there there is like other things in the deal that are important like the ability to get it done the ability to be honest to be trustworthy to do things fast like all those other soft things and so it's more like are you able to get a price that's really a no brainer or at least that's how i look at it versus i really think i'm smarter than everyone else and i can pay slightly more i mean be that works for people people do do that but it's just a totally different game i'm what was fascinated by the people behind these businesses what can i learn you know tiny is a great business but it was created by people it was great andrew by chris by you and i'm like what are how do they think about things what do they know about what they're doing what worked for them what are there ultimately what are their superpower and i asked you what's chris superpower because forget andrew everybody knows andrew he's popular he's out there he's talks he's got a big following almost nobody knows chris i had dinner with chris and i was like i fucking love this guy this guy's he's dynamic he's really engaging yes great questions and so i've only known him for a couple hours in my life you've known him for a lot longer than that what is chris superpower that that he brought to tiny i mean chris is superpower is just being able to andrew is so high pace and so high energy that chris is just able to modulate that and kind of be the sober second thought you know we're not gonna do this or that's way too much or or whatever you know a very interesting piece of the tiny partnership at least at the beginning that i thought was really quite unique and interesting is that you know chris and andrew had tiny as this vehicle that they would share together but then they could also do things on their own you know investments businesses and that actually like i don't even even know if it was intentional but that provides this great release valve of okay like all the time you know andrew android would come up with some you know cock emotion about some restaurant or whatever and he would just say okay i'm gonna go do that on my own and chris could have the same thing like chris was great investing in public equities and he could go do that on his own and i i know it doesn't directly answer about chris superpower but it is this like interesting structure i think one thing that can really go wrong in partnerships is if it's like you're dedicating your whole life to this thing and everything you do is gonna be be through it it can really turn into this prison if you don't share the same taste as as your c founder and so having this like release valve and being aware of that is is really nice people normally pick partners who are like them right but the but andrew and chris are not like that what you know i guess what is that a what what did you learn from that yeah i mean i would also say like andrew is really good at sales and kind of creating this new vision and then chris is really good at being kind of the negotiator and actually like getting a good deal and structuring it well and everything you know there's all kinds of things about about negotiation like one thing that would be like structurally another interesting thing is you know i would i would be kind of the the front guy on a lot of deals and would come back to them and they would kinda be quarterback it and what was nice is like i would throw out an offer that i thought was really aggressive and it was kind of the most that i could like emotionally stomach aggressively high aggressively high low feel really low really low and so this is i i i wanna be clear this is back like in the early days and we had no money and we were really trying to like the scrappy tiny it's not really like this anymore but and then i was say okay like i've really got this down you know and then they would just look at me in because they never talk to the the the seller and just say i think you can do like twenty five percent at less and like sometimes i feel like i wanna throw up you know talk do that when you have to present a shit offer to someone i i imagine some a lot of times maybe not a lot ten fifteen percent of times they're like okay yeah well more than that and actually what's even rare is at least i i always have this fear that they're just gonna lose it you know like just scary and that almost never happens it happens sometimes but it almost never happens and another nice dynamic there is you can always say well hey like i'm on your side like i you know it's the old car salesman game of like my manager's killing me it's the same exact setup right and that's that's super helpful and you know chris shared all kinds of tricks with me like one great one is it's it's always best to just kind of when you float and off or to just not say anything else people will immediately start negotiating against themselves and so one trick that you can use if you're on i i guess it probably doesn't work on zoom but if you're on just call is you can like say your offer and then hit mute and then you can like be like you can start saying oh you know whatever but they'll just hear the science silence and that's a big thing as well because oftentimes you just need to let it float and sit out there but it's like too uncomfortable for you to actually do that dude i've got this friend who works in the cia and i was talking to him and he has to negotiate with people you know basically his job is to convince people to become spies so if he goes the middle east he's has to convince a a guy who's loyal to some country in the middle east to be commit treason and when he like goes to these negotiations his tactic because he said the same thing he goes i say what i want and when i want to happen and then i shut up and i we his other coworker was there and he like who's not who's not part of that he's like dude they do this to me all the time just at work i'll notice they say something and i just wanna fill the silence and i wanna keep talking and it because it makes me uncomfortable i end up just talking talking talking and they sit back not saying a thing and they always get their way yeah totally i mean one one very cynical way of looking at negotiation is that it's just who can bear to be uncomfortable longer and and like that's certainly true you can do that in a retail setting you know sean does that all the time sean i think we would he negotiate the king of the awkward silence yeah he's the he's very have a condo on awkward island yeah he's he's the mayor of of that area where he's just very comfortable being uncomfortable in the conversation jeremy you you told me something else that christ taught that is less about kind of the the kind of the games shipped i think when we when we think about negotiation we often think about the games shipped what do i say i think you already said one inch interesting thing is which is a lot of times what you don't say it's to stop talking and let them talk but another piece you you you had mentioned to me was like it's not u verse them can you explain that like how chris taught you it's not u verse them the the way that i like to frame it the more kind of mature the way that you can they do i think for your entire life and not kind of get you know be known as this like bastard it it's just relentless and get negotiate against it's kind of i love this idea of an attrition negotiation you're sitting across the table from one other and the way that i really like to reframe it is you're both sitting on the same side and what's on the other side of the table is the problem and the problem can be you want fifty million for the business i wanna pay twenty but it's still this like okay this is a problem let's work together to figure this out and it's this very subtle thing but it makes a huge difference and that's i think that's how you start to une earth okay maybe like it's actually not it's cash and something else that's more important for you why do you want fifty what is it this fifty that's so important and why can i feel like i only can pay twenty or whatever and that works really well i use that every day you can use it in like a relationship problems and everything of kind of like making the problem other and then putting it out there and being like let's work together on solving this thing and there's just something so much better about that than the kind of like i'm gonna hit mute and stare at you and like break you you like well see jeremy the problem that we're trying to solve is i want the money in your bank account to be in my bank account yeah exactly i want that i want that chase i to say five zero yeah no it it is true though you know one of the things my dad taught me one of the best things my dad ever taught me is like when you go into a negotiation it's not in the same it's not us for them it you guys make a table of your needs and your like basically your needs and then your gives so like do you have to offer and then what do you what do you need back and then what do they have to offer what do you need back and they're never like perfectly symmetrical it's not like and so for example some of the things they need are very easy for me to give to cost me nothing or i'm totally comfortable giving that and it's actually their fear or their their big sticking point was something that's not so hard for me to to to give on or maybe i could go out of my way to give more even than they're than their they're expecting in that area and in this other area i need something and then they they're happy to give it and so that's usually the the better way to do it my my favorite question is what would need to be true it's like okay you wanna sell your business for a hundred million dollars what would need to be true for me to pay a hundred million dollars for it and you can just lay it out like like what would make this a no brainer and you can do that in any situation and you know sometimes it's impossible but oftentimes it's far more possible than you think when everyone actually lays that out because usually there's some sticking point that you don't realize or or you know it's something that is kinda outside of the scope of things you've already talked about and i'm always amazed by how much that works that works like as i've been fundraising it works there like what would need to be true for you to be like oh it's easy for to give you money or you know for for a trip like what would need to be true for everyone to be excited about going on this trip like it's just such a good question and it it really sets that up as like let's collaborate on this that was my pickup line what's a guy like me gotta do to be with a girl like you and then she was like do you have a friend yeah what's his name you have this other thing on here where you talk about how what do you say a cold email is the most asymmetrical trade and that you've actually cold emailed a bunch of people there's one guy in particular who you listed that i wanna ask you about but it sounds like the cold email has done well for you explain more yeah i think it's funny i've been saying this a lot more like publicly into groups and stuff and it's still like if everyone called emailed the ar would go away but i think it's just too scary or whatever that people don't do it it's still a huge opportunity i will say like the the addendum to that advice is you gotta have the goods when you show up for the meeting or the call or whatever i think like i think i don't know maybe it's just like anecdotally because i talk about this a lot i get a lot of cold outreach and you also like the second part is you gotta be really good when you show you show up but if you're good when you show up like it's just this incredible incredible kind of hidden secret which is there's always a scarcity of talent like no matter who you are and you know how much money you're worth or whatever there's a scarcity of really awesome people and so everyone has an infinite appetite to meet people who are interesting talented have a unique view on things whatever and if you can present that like you you will really kind of go a long way and and the downside i can't even remember i'm sure i've sent hundreds that have never been responded to i've never got a bad response it's usually just no response i don't even remember the non responses but the ones that i've got responses from have been amazing you know and so i think i definitely think more people should do it especially if you're young or your student that that alone can be f of a hook that like most people will meet with a student if they seem switched on and and interested and yeah i i'm still amazed that people people don't do it but i've started to see people do it and then they show up and like they don't have anything to say or they don't have questions for barrett or whatever and that can be really bad we already know your first deal but that was the first one but i wanna know first deal worst deal best deal weirdest deal it's like the fuck murder mary of what did for we did first deal dr which might also be best deal what's what's the worst deal like i'm sorry what's the big mistake you made the worst deal and name names and list their email address and social media handles yeah the the worst deal actually the one that i can say the least about which should indicate how bad of a deal was would give out the abstract the the worst one was just that the person was dishonest and i should've have known and i didn't and i ignored it for for greed reasons because i i was just thought this is such a good deal i could look past these things when you say i should've have known and i ignored it what what are some things people could look out for what can i learn from that yeah it was it was not this deal but there was a a friend of mine who buys similar types of companies did a did a deal where they flew in the the founders to meet them in person and the first night the founders wanted to know where they could get drugs and you know that is like in and of itself is not a strong signal but in that context in that situation it's like kinda what more do you need to know and it turned out that they were doing a bunch of stuff that they didn't disclose or whatever it's always stuff like that like someone who's really flashy is almost always a bad sign all these little things and you know even like in the case of this deal i introduced the person to a bunch of different friends and and you know experts and they're all like this guy is really something you know like you i i don't really know why you're dealing with this person and it's it is funny how you just get the blind on when something is so good and i think we've all all made that mistake and so yeah that that one it just turned out that there was bunch of things that we didn't know about and it went went very badly and we lost all all our money it was a really small check fortunately that was like the one upside but that one was was pretty pretty rough what's the most unique or weird deal the the best one i mean it's kinda too early to tell one one one that i really i really really love is this company called meal lime it's a meal planning app that tiny bought in twenty eighteen meal planning made easy so four four four and a half million people it says on the website use this app and what do you do you say what ingredients you have and it gives you like a bunch of recipes of cook and lines them out for breakfast lunch and dinner but it was just this really awesome app and it was made by this really amazing technical guy who had just built this really great product like i remember the the moment that sold me is like they you know how the iphone turns off when you put it close to your head he realized that you could use that sensor if your hands are dirty while you're cooking you could wave your hands over that sensor to like go to the next part of the recipe of your stuff all these just these little things and they have these huge butterfly flex like turns out when you do that apple thinks that's really cool and then they feature you in the app store and like you there's all these small details and we bought that business and it grew a lot got all of our money back in the first couple of years and then this was the only business tiny as as sold to date that we thought we two major grocery retailers came along and i guess like in a boardroom somewhere they had just decided you know we need an app and so they both became interested and it was kinda funny because i you know the company that i was up before tiny we had sold the company to workday and it was a pretty difficult experience and so i kind of viewed it as like my chance to get another go at selling a company to a public business and really kind of it was gonna be my turn like get a good deal and and then we sold it we sold it for you know a a huge revenue multiple made a lot of money you know up excess of twenty five times of our money and and it's still today it's like if you look it up it's still used it's a great thing i think the original team is still there they were very happy with the outcome i just love that because it was like it was this kind of perfect little situation and this great little almost like like craft app like just someone who cared a lot about making great product and and i love those and the weirdest deal it was basically this company a big fortune five hundred tech company bought a business and the business had two business units and the big fortune five hundred only wanted one of those units and they basically had to dives a bit very quickly and so we were able to buy it for it was doing ten million dollars of recurring revenue and it was shrinking the business was shrinking because it was built on top of another platform that was becoming less popular over time and and we were basically able to buy it for so little that we borrowed all the money and then paid back the loan in like three or four months and so we basically got it for free we were able to we bought this out of the tiny fund and we we were we could write this great update to our investors saying hey you know we didn't call any capital but you know now own this new business we're gonna do a distribution scene and it was like small dollars but it's cool to pay nothing for a business and then the interesting part is like we also got a domain that's probably worth a million or two million dollars depending on how fast we wanted to sell it and so it was kind this like fun little deal of like can you actually do a business for or can you buy a company for no money down and you know it won't be a business it will not be a twenty x and it's not gonna grow for ten years but we'll make many multiples of our money on it and it's fun like in the actual fund statement that like k g does they have to list the cost and so that the accountants listed as like a thirty six dollar cost basis which is like guess like the actual money that went into the deal and those are cool like you can be really really creative you don't have to put a lot of money down how did they find you or are you them we in that case we knew a board member and it was the situation where again we made a bid there and they didn't like the bid and they went and try and shopped it around and turns out like there's a very limited set of buyers for that kind of thing and especially ones who can do a deal really really fast and so it was kind of this we understood why we had the right to win this this deal we understood that money was not the most important thing here and so we were able to get it for this this great price that's it for part one we actually kept talking to jeremy and it was so good that we're gonna turn it into a two part the second part is actually all about what he would do today so the first part was kinda like how they how they built tiny the deals the list lessons learned that was the past and now i asked basically if i was gonna do tiny today what would i do what deals would you be looking at what businesses do you think are great buys what opportunities do you see and he tells us the single best investment opportunity he sees today in this next part enjoy that's coming out tomorrow yeah i feel like i could rude where i know i could be what i want to put at all in it like a days on a road less travel never looking back