"Brian started his professional career exactly in the middle of a cyclone - late '90s, Silicon Valley. His company was in charge of few successful IPO's, including Netscape. Later on, he joined Adobe where he was leading the M&A/corporate development department. As we concluded in the discussion: he started with the endgame perspective being a witness of successful acquisitions and IPOs! No wonder that his entrepreneurial career includes few successful, multi-million exits from the companies he founded prior to the Founder Partners, which he's leading right now. FP is a pretty unique investments firm. Why they prefer to Mustangs over Unicorns and what does it actually mean? What makes the successful exit and how long it takes? Bear with us!" - Piotr Karwatka, Host.
What was your path to entrepreneurship?
Robertson Stevens - head of Software and Internet M&A. Internet Bubble. How was it?
Macromedia before the acquisition of Adobe. What stage of Macromedia development was it? How did the preparation for the Adobe acquisition impact the daily operations and decisions?
Relevad - programmatic before it was trendy. Why did you spend 11 years there? Then Admovate acquired by Yahoo
So you know a lot about enterprise software, exits, acquisitions. You are founding FounderPartners. Tell us about the company and its mission?
How is your firm different from a VC or accelerator?
What are the differences between mustangs and unicorns?
What are the most important factors for a founder to achieve great economic outcomes?
What makes a great business?
What makes a great entrepreneur?
What kind of companies and at which stage are best fit for FP? Do you invest in some kind of verticals or the criteria are more generalistic?
What kind of numbers, growth rates should they have?
How do these numbers change after partnering with FP typically?
How long does it usually take from the company foundation to an exit?
If you were to provide us with three key success factors of this coop; or 3 success factors of a great exit?
When does it make sense for a company from the CEE to go to the US? What’s the process?
You’ve got great partners - mostly serial entrepreneurs. How can you guys help the portfolio companies?
Piotr Karwatka: [00:00:43] Hello everyone! I’m super excited for Today’s episode. I’m hosting Brian Flynn of Founder Partners. His career started at the eve of the Internet Bubble Burst: end of 90ties, Silicon Valley mergers and acquisitions. Then it only got better! Now Brian is leading Founder Partners which is a very different kind of financial services firm -- where it builds and sells tech companies. He’s looking more for mustangs than unicorns. What does it mean? What makes a great exit and how long it takes to have one? Let’s begin.
Hi Brian, thank you for accepting my invitation!
Brian Flynn: [00:01:20] Hey, Patrick. Great to great to talk to you today. I'm feeling awesome. I may have had a little bit too much coffee, so bear with me.
Piotr Karwatka: [00:01:28] That's awesome. Let's start with some really basic questions. I always like to ask about it. What was your path to entrepreneurship?
Brian Flynn: [00:01:40] You know I wish I was the kid who was three years old and loves pets and knew right away that I was going to be a veterinarian. I had no clue. The only thing, that best thing I probably ever did was I was a philosophy major in college. I was always a truth seeker to try and figure out the truth. Yeah. Yeah, so that, that kind of helped me. You know, my path to entrepreneurship was circuitous. I started out on Wall Street when it was actually cool to be a banker, and then I've turned into an entrepreneur.
So in other words, I learned how to sell a business before I learned how to buy a business. And I can get into as much depth as you want about that as possible.
Piotr Karwatka: [00:02:23] Yeah. That's that's good point. I mean, you know, people starting companies without a clear vision, how it's going to end and everyone who reads books like “Built to Sell” or this kind of entrepreneurial myth and other books like this, putting the right perspective. I think that they have an advantage, right? Because they knew perfectly well why they were doing it? And what is the end game? Do you agree with me or not?
Brian Flynn: [00:02:56] No, I totally agree. I think, you know at the end of the day, and now we're getting philosophical here. People need to be authentic. They need to follow their passions, or didn't know I was actually meant to become an entrepreneur. I was just a really hard worker and I, you know, work more out of fear, probably like a lot of other people I did well in school. And you know, I tried to back in the early nineties get the best possible job. And back then it wasn't working at Google back then it was working at Goldman Sachs or Morgan Stanley in New York and the MNA department. Why? Because they, you know, they recruited from certain, certain types of schools and a certain type of personality and, you know, and they paid the boast. So I guess I was motivated by money back then and also to learn as much as I could. So that's how I entered my career, but that was a seven-year journey in Wall Street.
Piotr Karwatka: [00:03:51] So after seven years, you finally landed in Silicon Valley Robertson Stephens & Co. head of internet and software M& A's. And actually it was like, you know, the eve of the internet bubble virus, because it was the end of. 1990s. How was it? Like there are some cool stories.
Brian Flynn: [00:04:09] Yeah. So there's some great stories. Let me, yeah, let me just kind of make a quick change. So I did actually three years in banking at Morgan Stanley. I got my MBA. I came out to California. And I still had my MBA debt, so I still didn't know what I wanted to do. And I joined this firm called Robertson Stephens & Co., and I didn't know anything about the internet because when I graduated in 95 from business school this thing called IT, wasn't a thing.
It wasn't a thing. And, but this firm Robertson Stephens one of the reasons why I joined it is IT was one of the four horsemen. In Silicon Valley and they were, there were the four of them were Robbie Stephens, Montgomery Securities, Alex Brown, and Hambrecht and Quist. And these firms were out here in the Valley when Morgan Stanley Goldman all the big bulge bracket firms weren't out here and they were taking all the big, awesome tech companies public from Microsoft to Adobe that you name it.
And when I joined Robbie you know, again, I was lost. Wasn't sure what I wanted to do. Long-term I jumped in, I was like, you know, a bunch of smart people kind of pay off this debt. And three months into my job, Robbie was one of the firms taking Netscape public. Holy smokes. Yeah, it was crazy. And before I knew it, I was working really hard as part of this firm that grew close to a billion in revenues, taking all sorts of tech companies public.
I got this great opera. I kept getting promoted to run the software and internet M&A practice. And we were just doing deals after deals, after deals, small deals, big deals. Every deal was almost a good deal, as long as it paid a fee, frankly. But you know, the reality is that it was, you know, a lot of these businesses that were being taken public and being valued were not being validated based off of fundamentals. Fundamentals, meaning cash flows and revenues. Now we've got a lot of, it was just like eyeballs crazy days. Even more crazy than what we've seen during the crypto days practically. And so, so anyway, long short of it is that, you know, After doing M&A, and also at Robbie Stephens for seven years, I realized I was very good at what I did, but I wasn't super passionate.
And this always circled back to finding out who your true self is. And what was great is that by working at Robbie Stephens, as opposed to Morgan Stanley, I, my clients, I was actually helping them facilitating these big exit events. And I got to learn about entrepreneurship. I got to learn about tech and I was thinking, well, wait, maybe you know, the grass is greener.
If these guys are in their twenties and I'm in my late twenties, why the heck can’t I do this? And that was my leap into entrepreneurship. And I did a bunch of companies back to back, which we can talk about.
Piotr Karwatka: [00:07:01] Gotcha. So what do you, what you just said is that you had a great chance in your early career, because, well, look, it was, you know, early, early years of your personal career, actually to see how the end game looks like, like why do you start a new venture, a new company why you are an entrepreneur?
I mean, What does it mean to exit how it looks? What is the process of finding the acquire and so on, which will let us to the founding 500 partners, but before we land there tell, tell me a little bit about the Macromedia because it was also your, I suppose it was your next step after Robertson Stephens
Brian Flynn: [00:07:43] It wasn't actually. So I became an entrepreneur after I left Robertson Stephens company. Yeah. So I founded two companies back to back, the first company, which today is Quora, which is a huge internet company. And it was done like, I don't know, 15 years before that. And it was pretty much bootstrapped. We only raised a million bucks. We had all the same challenges of getting traffic. You know, the people would answer questions versus people that would ask questions, not to mention how to monetize the business.
Piotr Karwatka: [00:08:18] Well, it's a long before web 2.0, right. So content, it was in that thing as well.
Brian Flynn: [00:08:24] Exactly is way before the day. And, you know, we have all sorts of challenges like any business, and it was my first one that I was working with. But I was able to help the team, pivot the product from a consumer one into an enterprise one. And once we changed that product strategy I used my MNA skills. In a BD capacity and was able to get four different MNA offers. They turned into BD, but then they quickly turned into MNA offers and sold that business for 14 million. That was a two year journey. We almost ran out of capital, but Myra investors made almost seven times their money in two years, that's a huge success.
It was good, but you know, I kind of was a little bit nervous because I didn't know exactly how to build a real business. It actually wasn't until my third one, which we can talk about later. The second one I did was in the internet doldrums or like the COVID-19. Of 2001. So the internet head bust my co-founder at the first company technical guy had this idea in the security software space.
And when we looked in security, the only thing that, where there was white space was there was instant messaging. So I was growing faster than email was as a communication medium back then. And there were no security software solutions around that. We started a company called IAM secure security software for instant messaging found product market fit in the financial services world where block traders were,
Piotr Karwatka: [00:10:02] So you were doing something like Signal right now, but 20 years ago?
Brian Flynn: [00:10:07] I like your themes, I guess. That's right. Yeah. And there, you know, we got our first license from Bank of America. But then I didn't know that there's this thing called Procurement Due Diligence, which is very different from M & A Due Diligence. And they found out it was me and a few guys in Palo Alto with a dev team in the Ukraine, which was very novel back then in 2001.
Piotr Karwatka: [00:10:33] You mean the vendor assessment process where the buyer of your license is trying to figure out if it's a safe choice. Right?
Brian Flynn: [00:10:41] Exactly.
Piotr Karwatka: [00:10:44] and outsourcing was something out of your mind,
Brian Flynn: [00:10:46] out of their minds, not to mention the fact that we only had like $20,000 of cash in our balance sheet,
Piotr Karwatka: [00:10:55] sounds like a reliable partner for a Bank of America [laughs]
Brian Flynn: [00:10:58] Exactly. But here's the deal bank of America said. You know, we really liked the product. It works. We'd like to make an introduction to one of our security software vendors and me being a tech M and A guy originally, I was like, Hmm, my horse sense went up and said, Hey, this could be an M and A, and we turn it into an M and A, and we got four different MNA offers from men, you know, McAfee Symantec, and a couple of private companies.
We sold to a company called Zolan, which got bought by checkpoint software. So, that was my second journey in entrepreneurship. And my confidence was getting a little bit better, but still not great enough. Cause I'd never built something that was truly profitable. I just was getting profitable exits back then.
Piotr Karwatka: [00:11:41] Yeah. But you know, for many entrepreneurs is the ultimate goal. And you did it twice before you felt comfortable with being at the prevention. That that's what you are trying to tell me
Brian Flynn: [00:11:54] me pretty much, pretty much, but you know, I would tell you that also I was fortunate. I mean, these were quick journeys. The first one was two years. Second one was a year long,
Piotr Karwatka: [00:12:02] super quick. Super quick.
Brian Flynn: [00:12:06] Yea, lots of fun. Lots of learning. And then you asked me about how I get into Macromedia? Well, after taking a little bit of time off. On my second after my second journey I got introduced to the chairman CEO at Macromedia Macromedia at the time was an independent, publicly traded company.
And a lot of you guys around the world that were using designer developer tools like Dreamweaver building websites would know that this was built off the flash player, which was a ubiquitous piece of technology. And when I met the chairman CEO, he said, Hey, Brian you seem like a really entrepreneurial deal-making guy.
I want to get Macromedia into the mobile space. How about spending half your time on an airplane and buying companies, and then help me sell the business to either Microsoft or Adobe. And I thought, hey, that sounds cool. So that's what happened. Because that was actually one of the first times I was ever really an employer.
And fabulous experience. I love the people that got to work with companies all around the world. And yes, we did end up selling the Macromedia to Adobe for 4 billion in 2005.
Piotr Karwatka: [00:13:12] That's awesome. So you were out like you, you had the chance to Upserve the company at a totally different stage of, of, of for lifecycle.
I mean, no, in, in this classic book inside the tornado Jeffrey Morris saying that, you know, there is this bowling alley. Where the company is, is going full speed, you know, acquiring, shipping, doing everything at max. And I suppose it was that at that time studies were out at Macromedia. So, what, what have you learned during this this year?
Is that the one, one
Brian Flynn: [00:13:47] key thing? No, I learned a lot. It's a great question. The first thing, and this is maybe more personal, is that I was born an entrepreneur and I never make it in a big company environment. I don't like big politics. I'm working to the beat of my own drum. And I think that this happens with a lot of entrepreneurs, but more importantly, professionally.
I learned how companies acquire businesses. So it's one thing when you're a wall street tech M&A investment banker doing sell side work. Right. It's a completely different thing when you're on the other side and you get to understand the inner workings of how companies have a champion. And put together a business plan and ultimately work with the target company in buying and unlocking synergy.
So that was really great. And then the third thing is, you know, just, you know, how business planning and strategy, how these things work in big organizations, how sometimes companies can suffer from not invented here syndrome. There's all sorts of things. And I'm so glad I got to do it because it was at the time Macromedia was a great internet company.
And I really did love the people I work with.
Piotr Karwatka: [00:14:55] That's awesome. And you said that like let's put my Crimea away for a while. You said that the only third company was that the one you, you felt comfortable with like funding the other one. So it was after Macromedia.
Did you start it? This wasn't FounderPartners or was it before?
Brian Flynn: [00:15:16] No, Okay. So after the sale of Macromedia to Adobe, I didn't go with the deal. I didn't go along with Adobe. I started my third company and I met these two through, through my founder at my, at my, for the first two companies I've worked on these two very smart scientists, Russian scientists, scientists, they're brothers.
They had like over 60 patents between the two of them and they created. A really interesting piece of Symantec technology back in 2007. More and it was basically the Metro station of keywords that became part of a platform. And they were trying to figure out how to use that technology and where to monetize it.
And the idea that we had, we were kind of basically bootstrapping this in the background, in the evenings. I'm trying to figure out where to go. Well one of the things that happen in the internet ad ecosystem was Google bought a company called applied semantics. Which became the engine behind ad words and ad sets and this company, which was ultimately called relevant and Dr.
Yaakov came in and his brother URI came in and I said, well, shoot, maybe there can be an alternative. So I jumped in as a co-founder. I was basically the business guy and this was a platform company built on semantic technology and our first. Product on the or web service was basically an add sensitive box, like OEM in it to the 300 plus at the time internet ad networks around right.
And then we had like five other product lines. We ended up growing that business. Two 20 million in revenues. And 10 million of EBITDA. Yeah. With only like 250,000 or something like that of CA of outside capital from basically friends and family, so closely held business. And in that 20 million in revenues, we had like over 10 million, 80 with all.
So I learned in that journey, that it was an 11 year journey. I was very involved the first, like four years, getting the company to profitability. And then I started stepping the plane a little bit more of a passive role. As we built out a sales and marketing engineer, fabulous experience, we had five or six different product lines.
We had seven. Inbound MNA offers, including Google, Microsoft. I assume that these NDAs are well-paced too. And it was just basic, basically became a dividend Payne business. And it was, it was fabulous for me and for my partners and for me in per it, particularly because I then learned if you fight hard enough as an entrepreneur and you're scrappy.
You can get a company to profitability and, you know, revenues should lead costs in many ways. Which is orthogonal the way that a lot of people think here in Silicon Valley. But if you are a profitable business, you can actually have an infinite amount of time to figure out what to do with that business. So, yeah. Great experience.